Is a private toll highway rural Maine’s road to prosperity?
8/10/2012 12:45 PM
By Tom Groening, BDN Staff
Posted Aug. 10, 2012, at 1:12 p.m.
PITTSFIELD, Maine — When it comes to the east-west highway he has touted for more than a decade, Peter Vigue talks more in the terms of a missionary than a businessman.
It becomes clear in a two-plus-hour interview at his Pittsfield office that the proposed highway is not merely another large-scale construction project. His mission, the 64-year-old CEO said, is to save what might be described as the heartland of Maine.
“How much more time do I have to do something like this?” he responds when asked the inevitable “what’s in it for you?” about his ambitious plans to build a private, east-west highway. His response is just short of seething anger.
“Take a drive from Millinocket to Brownville, to Milo, Ripley, Dover,” he said, “and count the for sale signs. It appalls me.”
He may need that missionary zeal, because there is no American precedent for building a private toll highway from scratch.
The east-west highway concept in Maine, as Vigue envisions it, is unprecedented in North America, said Neil Gray, director of government affairs for the International Bridge, Tunnel and Turnpike Association, a Washington, D.C.-based surface transportation advocacy group.
“You might be on the front end of the curve,” Gray said, when told of the concept of building a new, private road of such proportions.
Most of the highways in the U.S. and Canada that are now private were built and maintained by the government before being taken over by businesses, he said, though “there’s not a huge universe of them yet.” But there may be more such deals in the coming years, Gray said, as declining gas tax revenues and flat federal funding become the norm.
“The writing’s on the wall,” he said.
Although there aren’t many in the United States, privately run toll highways are on the rise. Over the last decade, the share of interstate highway miles with tolls has grown, according to data from the Federal Highway Administration. Between 2001 and 2010, the number of interstate highway miles with tolls grew nearly 10 percent, while the overall number of interstate highway miles grew by about 1 percent.
In transportation jargon, they’re called concession agreements, in which a private firm is granted a contract to operate the road by a state in exchange for money. The private firm then recoups its investment by collecting tolls. Private businesses like them as investments because they are tangible assets and have a steady source of revenue in the form of tolls.
If Maine and other states want to enter into public-private partnerships, he recommends the state negotiate specific benefits, including that the road revert to state control at the end of the contract period or if the operator fails to meet standards.
“You can have anything in the contract you want,” he said, including such details as how soon dead animals must be removed from the road.
One of the more high-profile private highways is in Indiana, where in 2006 the Spanish firm Cintra and the Australian company Macquarie Infrastructure Group took over a 157-mile road. The consortium of private firms bid $3.8 billion to operate the road for 75 years.
Bloomberg’s Businessweek magazine reported in July 2011 that the highway had yet to turn a profit, five years after it opened. Projections showed 11 million trucks would use the road, but only about half that actually did, Businessweek reported. Annual operating losses are at $200 million.
The firms’ bid was much higher than competing bids, Gray said, and the recession may explain some of the poor return on investment.
Texas has allowed some concession agreements, and “Pennsylvania has looked at this heavily, too,” Gray said. In Pennsylvania, Interstate 80, a highway that runs parallel to the Pennsylvania Turnpike, had fallen into disrepair, and the state hoped to get a lucrative offer from a private firm. But federal officials ruled that a private company could not collect tolls on a highway that had been built and maintained largely with federal money.
There are a few trucks-only private roads in the U.S., Gray said, but they tend to be short spurs that connect highways to shipping ports. Vigue’s proposal, with six exits planned for its 225 miles, is a different animal, according to Gray.
One private road proponents point to as a success is the Dulles Greenway, a 13.6-mile road which links Leesburg, Va., with Dulles International Airport. The road runs alongside other roads and is an alternative for those in a hurry. In exchange for paying a toll, drivers avoid seven traffic lights and save up to 37 minutes in travel time commuting to and from the airport.
Built in 1984 by the Virginia Transportation Department, it was sold to private investors in 2006. Though use is down in the post-recession years, increased tolls have sustained revenues.
A cautionary tale Gray tells concerns what happened with Highway 407 in Toronto in the late 1980s. The province of Ontario built the new road and then sold it to the Spanish firm Cintra for $3.1 billion in 1999. The new owner raised tolls to levels unanticipated by the provincial government, which found it had no control over the rates. Between 1999 and 2004, tolls were raised seven times.
Gray said the province three times challenged the private road owner’s right to charge high tolls in the nation’s highest court, but did not prevail.
A 2009 report published by the U.S. Public Interest Research Group supports Gray’s assertions, outlining the pitfalls of private roads.
Private companies have proven comparative advantages over government in such endeavors, and that such initiatives, when well-defined with clear criteria for evaluating success can work, PIRG wrote. Nonetheless, the report recommends proceeding “with great caution.”
“First, any new roads … must be consistent with long-term transportation plans,” the report said. “Public officials should not prioritize projects based on the availability of private capital. Instead, they should focus on projects that meet true public needs, regardless of whether private investors see those projects as potential profit opportunities.”
Between 1994 and early 2006, $21 billion was spent in the U.S. for 43 highway projects that fell into the private-public partnership category, PIRG reported. By 2009, 15 roads in 10 states had been privatized either through leases on existing highways or the construction of new private toll roads, according to the report.
And as of the publication of the report, “79 roads in 25 states were under consideration for some form of privatization,” the report states.
Despite the warnings, the IBTTA’s Gray readily agrees that transportation infrastructure generally brings economic development to the regions it serves. A traffic and revenue study, which the Maine Legislature has agreed to fund for Vigue’s proposal, is “the initial big lift,” he said. Vigue’s plan, as currently proposed, would not require any state assistance, using private funds and land purchased with those funds.
In Maine, law exists to allow public-private partnerships. Sen. Doug Thomas, R-Ripley, a longtime member of the Legislature’s Transportation Committee, said the law was created to help build a highway bypass around Wiscasset’s Route 1 bottleneck, a project that still languishes on the drawing board. Each private-public proposal would need approval by the Legislature.
Thomas was a co-sponsor of the bill, he said, “because I thought it might enable us to fund much-needed highway improvements like the I-95 north extension in Aroostook County without raising taxes. It put another option on the table, but requires approval of each project before it could proceed.”
Thomas said despite rumblings about Vigue’s project gaining state-sanctioned property seizures under power of eminent domain, such a proposal would not pass the Legislature. He attributed those rumors to opponents trying to turn public opinion against the road.
“Low cost transportation is a key ingredient to a strong economy,” Thomas said.
“We need better rail service, our ports need to be better, especially Searsport and Eastport, and poor east-west roads restrict our access to markets in the central parts of the U.S. and Canada. This project isn’t going to cure all our problems, but it’s an important part of a plan that improves Maine’s economy,” he said.
Benefit to shippers
John Melrose, a transportation consultant who was Maine’s transportation commissioner under Gov. Angus King, argues the benefits of an east-west highway are not abstract or in the distant future.
“If it’s a private road, it has the potential of carrying weights and dimensions not allowed on the public roads,” Melrose said, thereby helping existing Maine businesses. If customs officials allow loads to pass through Maine without having to be cleared in both New Brunswick and Quebec, the time savings would be substantial, he said.
Manufacturing firms would see savings in shipping their products to large markets in the Midwest, Melrose said.
And building the road would create “hundreds of jobs, millions of dollars of payroll and benefits,” he said, while maintaining it also would create “a huge payroll.”
Keith Van Scotter, president and CEO of Lincoln Tissue and Paper, can point to exact costs in his company’s budget that would be reduced by an east-west highway.
“We ship essentially all of our product by truck,” he said. “Everything we sell goes out of state; most of it goes a long way out of state.” Specifically, the tissue paper is shipped to plants in the upper Midwest which turn them into party streamers and other retail products.
Hartt Transportation Systems, based in Bangor, carries the tissue from Lincoln south to Massachusetts, before heading west.
“The driver has no choice, really,” Van Scotter said. Hartt’s price for delivering the product is based in part on mileage, he said.
“For anybody in our type of business — manufacturing — transportation is one of our largest costs,” he said.
Dan Touchie of Moncton, New Brunswick, drives an 18-wheeler all over the Canadian Maritime provinces, Quebec and New England, hauling for General Freight of St. John. He has been a truck driver for 36 years.
During a stop at Dysart’s in Hermon, Touchie explained that he often drives Route 9 when he is delivering loads like sheetrock made in St. John, N.B., and bound for New Hampshire. “They fixed it up a lot. It’s actually not that bad,” especially since passing lanes were added several years ago.
But when he is traveling to Quebec on Route 201, a road that has seen marked improvements in the last decade, a private highway is appealing. Even though Route 201 has been widened, small hills have been leveled and drainage has been improved, Touchie finds the road less than desirable.
“That road is made for cars, not trucks,” he said, and complains that there are too many hills, too many curves and too many animals.
A private road connecting I-95 to Quebec would save him lots of fuel, he said, and lots of time.
“It’s every little town, with 25 mph,” that aggravates drivers, Touchie said. “A highway like that [proposed by Vigue] would definitely help.”
Since U.S. law was amended to allow trucks carrying up to 100,000 pounds on I-95 north of Augusta, Touchie often enters Maine from Woodstock, N.B., east of Houlton. That change was the most important improvement in trucking in many years, he said.
While taking a break at Dysart’s, Touchie bumped into another company driver, Joel Russon of Frederickton, N.B. Russon began his day picking up dimensional lumber in Rexton, N.B., and hauled it to Springfield, Mass. On a large Maine map hanging on the wall of Dysart’s lobby, the two drivers are shown the approximate route Vigue’s east-west road would follow, and they agree it would make their jobs easier.
“I guess it would save a lot of time,” Touchie said.
Even if the toll were $150, it would be worthwhile. “One ticket costs more than that,” he said.
The men say they sometimes drive around Maine when they are hauling from New Brunswick to Montreal.
If an east-west highway were to work, the drivers said, trucks passing through Maine from New Brunswick to Quebec would need to have one stop at customs, with some kind of seal indicating that the load had been checked.
On this June day, Touchie was hauling rough-sawn lumber milled in Truro, Nova Scotia, and traveling to Dover, N.H., where it would be pressure treated. He often drops off lumber in New England, picks up another load nearby and hauls it back to New Brunswick.
“The lumber seems to be going in circles,” he observed.
If Vigue succeeds in building his highway, those circles may turn into straight lines.