But who will build the roads? A case for privatization

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Posted by Sven Werner on Friday, March 20th, 2015, 1:05 PM PERMALINK

If a state owned road is closed, why not build your own? That’s exactly what English businessman Mike Watts did. But just how is that possible, without the government?

In August 2014 Watts built a private toll road across a field in a matter of 10 days after the government-controlled road was closed due to a mudslide. To avoid the 14 mile detour on government roads, people were ready to pay a small toll for using the road. Watts spent a total of around 300,000 pounds on the 365 meter road. In the two months, that his toll road was open, and the government road was closed, Watts nearly broke even on his investment. If the English government had been any slower in clearing the mudslide and repairing their road, Watts would have assuredly made a profit.

That the government and the government only, has the special knowledge and abilities to build roads is often a myth peddled by lawmakers and special interests when the suggestion of privatizing transportation comes up. But this is just a myth - one used by those afraid of budget efficiencies and innovation. 

Private toll roads already exist in the US. Former Indiana Gov. Mitch Daniels decided to lease Indiana’s toll road to private developers after Indiana had been losing money on it for years. Because private companies, opposed to the state, have an interest in efficiency and cutting wasteful spending, the private developers implemented electronic tolling. This investment in making the process more efficient led to saving more than 55% on toll collection. And that’s only one example how they figured out how to save money and make the toll road more cost effective.

France, in terms of privately run highways, takes it to a whole other level: 8000 kilometers of 11000 kilometers of highway are under by private concession. More than half of Italy’s highways are run by private companies who implemented electronic tolling in 1998 - unthinkable for state-run highways back then. The customers of the private run highways are billed by the distance they travel on the roads, maximizing the "user pays" philosophy many lawmakers seek when it comes to transportation funding.

These examples emphasize how drivers and taxpayers can benefit from private-run roads and how governments can work with private industry to ensure that transportation is truly funded on a "user pays" basis. 

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