Hidden Costs of Toll Roads

An editorial by the Independence Institute, a free-market think tank that advocates toll roads, says, “A new traffic signal that hastens traffic flow produces economic benefits. Similarly, one that hinders more than hastens, cause[s] economic damage.”

Free-market think tanks also argue that toll roads benefit everyone because they reduce traffic on existing roads, causing traffic on existing roads to flow more efficiently.

It is therefore no small irony that local governments in Colorado have agreed to deliberately impede traffic on existing highways near a toll road in order to protect the toll roads’ investors.

The toll road is E-470. Here is a map. Here is a brief history of E-470.

When E-470 opened in 2002, some people thought it was a strange coincidence that, about the same time, the speed limit on nearby Tower Road, a paved, 2-lane, rural highway, dropped from 55 MPH to 40 MPH. Several apparently unnecessary traffic signals also appeared. This, in spite of the fact that after the toll road opened, Tower Road would have even less traffic than it did before.

Well, it was no coincidence.

The lower speed limit and extra traffic signals, which make Tower Road slower and less convenient to use, are required by a “non-compete” clause in an agreement between the E-470 Public Highway Authority and nearby Commerce City.

The goal is to impede traffic on Tower Road so drivers will decide they are better off using the toll road. This protects the revenue stream from the tolls, thereby protecting the interests of the toll road’s investors.

The non-compete clause between the highway authority and Commerce City provides that the speed limit on Tower Road be lowered from 55 MPH to 40 MPH, and that stop lights be installed on Tower Road at 96th, 104th, and 112th Avenues. Also, the City must limit future improvements on Tower Road to shoulder work, turning lanes at intersections, development-specific widening, and normal maintenance. These requirements must remain in effect until January 1, 2008. After that, the speed limit can be raised, the stop lights can be removed, and the City is again free to make improvements to Tower Road.

The other non-compete clause is in an agreement with the Cities of Aurora, Brighton, and Thornton, the Town of Parker, and Adams and Douglas Counties. It provides that, for at least fifteen years, these entities will not construct or improve any road (with certain pre-approved exceptions) that competes with E-470 “in a way that the amount of toll revenues projected by the Approved Plan of Finance to be collected from the users of E-470 would be materially impaired or reduced.”

If future toll roads are built in Colorado, they might have non-compete clauses, too. The Colorado Tolling Enterprise, a branch of the state’s Department of Transportation whose job is to evaluate future toll road projects, says :

“In many cases, the financial markets require assurances as part of the bonding agreement that competing facilities within the same travel corridor will not be built until the financial obligations are met.”

A Lexis-Nexis search failed to find any newspaper articles mentioning E-470′s non-compete agreements. It’s also likely that most people in Colorado don’t know these agreements exist.

Non-compete agreements aren’t unique to Colorado.

The most notorious example of a non-compete agreement is SR 91 in California. The State entered into a non-compete agreement with a private toll road company, agreeing not to improve or add capacity to the adjacent State highway until 2030. When the non-compete agreement became publicly known, a public outcry ensued. In the end, the State agreed to buy back the toll road. There’s more info on this here .

Sometimes, non-compete agreements aren’t even written down. In Virginia, the Dulles Greenway consortium didn’t have a written non-compete agreement, but “understood” that Virginia would not build a competing road (page 13) or make improvements to competing roads ahead of schedule (page 39).

So, here we have public officials agreeing to impede traffic on public highways in order to protect the private interests of toll road investors. Not only are people who use toll roads having to pay to use them, but the rest of the public is being inconvenienced as well.

I wonder: if people knew that this would be one of the costs of toll roads, would they agree to pay this price? And isn’t government supposed to be working in the public’s interest?