Word: road
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Pennsylvanians had been clamoring for a new road between Philadelphia and Lancaster for years, but the government just couldn't afford it. So in 1792 the state chartered a company that would build the nation's first private turnpike--62 miles (100 km) of stone and gravel--in exchange for the right to collect tolls. Today Pennsylvania finds itself in a similar bind, with the money it needs for roads and bridges far outstripping the money it gets from the gas tax and other revenue streams. So Governor Ed Rendell is turning back the clock, proposing a slew of deals...
...deals, common in Europe for decades, got jump-started in the U.S. in 2005 when Chicago enriched its treasury by $1.8 billion by selling a 99-year lease of the Chicago Skyway to Spanish roads operator Cintra and Australian bank Macquarie. At about the same time, Texas bagged $1.2 billion to let a Cintra-led consortium build the first part of the Trans-Texas Corridor and collect tolls on it for 50 years. In 2006 Indiana signed a 75-year lease for the 157-mile (253 km) Indiana Toll Road in exchange for $3.8 billion, funding the state's transportation...
Money from the private sector could help fill that gap, but there is more than one way to get it. Deals like the Chicago Skyway and Indiana Toll Road, which lease existing assets, may tap the private sector's operating prowess and political immunity in raising tolls, but critics see them as long-term mortgages to solve short-term fiscal problems. "People are giving public-private partnership a bad name by running around the countryside trying to entice cash-strapped states and municipalities to participate in these monetizations," says Tim Carson, vice chairman of the Pennsylvania Turnpike commission...
Carson argues that the public sector can wring plenty of cash out of toll roads by essentially behaving like the private sector and charging market rates for usage. The express lanes of State Road 91 in Southern California, for example, carry some of the highest tolls in the nation--at peak hours, nearly a dollar a mile--which may annoy drivers but help pay for the state's transportation needs. The Pennsylvania Turnpike commission has produced a plan to raise turnpike tolls and attach tolls to other roads in the state...
...some states are getting savvy about how to structure the terms. The 50-year lease for Texas' State Highway 130, for example, includes a revenue-sharing clause that nets the state 4.6% of gross receipts at first and up to 50% as traffic increases--just in case the road proves more valuable than predicted...