RAISING TOLLS

Tuesday, April 3, 2007 | 7:13 a.m.

Carson City

As a barometer for forecasting Nevada's future, Dick Gephardt might do nicely. When the former majority leader of the U.S. House of Representatives showed up here last week, he signaled that toll roads might well be in the state's future.

With two nearly identical bills pending in the state Legislature to legalize the construction and operation of toll roads - and with the state facing a $3.8 billion highway construction shortfall over the next eight to 10 years - Gephardt came to extol the virtues of toll roads, especially those operated by private companies.

Gephardt is a lobbyist for Goldman Sachs. To complete the circle of his involvement: Goldman Sachs is an international investment bank that has become deeply involved with privately operated, sometimes privately built, toll roads.

Toll roads are big business. Mother Jones magazine reported this year that a few short years after a 2005 bill changed the tax code to let private companies raise tax-exempt dollars for road projects, Goldman Sachs has an infrastructure fund worth more than $3 billion. The reason is simple. The need is everywhere and investors are seeing the possibility of profits from toll roads.

Across the country, roadways are choked with traffic and desperate for repair. But with road-building costs far outpacing inflation - road construction costs in some cases have risen 300 percent in 15 years - public funds are lacking.

Though it's still unclear how or where toll roads could be used in Nevada, Gephardt pointed to Interstate 15 between Las Vegas and Los Angeles, Interstate 80, which stretches east and west across Northern Nevada, and for some highways in Las Vegas or those that go around the city.

In other words, most everywhere with high traffic volume.

Like it or not, toll roads are once again gaining steam in the United States. Support for the pay-as-you-go system is growing even as the public disdains increases in gasoline taxes, which are used to build and maintain roads. State lawmakers are also seeing toll roads as a politically safe way for cash-strapped states to get huge infusions of money to build and maintain roadways or for any other purpose - without raising taxes.

Which, of course, is a dodge. Tolls are a form of taxation and a regressive one at that. Drivers pay flat fees, regardless of their financial means.

Susan Martinovich, director of Nevada's Transportation Department, said public-private partnerships give states huge infusions of cash to build roads or for most any other purpose. In return, governments grant tax exemptions and long-term contracts to companies to operate toll roads and get to keep the cash.

Illinois, for instance, signed a 99-year lease in 2004 to let a private company operate and collect tolls on the Chicago Skyway in return for $1.8 billion , most of which Chicago plans to use for basic operating costs.

Indiana leased operations of 157 miles of toll roads for 75 years to a private consortium in return for $3.8 billion. After the Chicago deal, fares on the Skyway immediately rose by 50 cents. By contract, the company can double the fare to $5 by 2017 and tie future increases to the rate of inflation for the length of the contract.

As Gephardt and Martinovich noted, 23 other states now allow public-private partnerships for creating toll roads.

If they are doing it, why isn't every state?

One answer comes from Oregon Congressman Peter DeFazio: "If you assume that the taxpayers are stupid, you can temporarily look like a hero for getting a pile of money for something."

What he means is that public-private partnerships seem good in the short term. But DeFazio, who was the ranking Democrat on the House Subcommittee on Highways, Transit and Pipelines, which last year debated highway privatization, points to those two prominent partnerships in Illinois and Indiana as examples of dumb and dumber.

Though the partnership was hailed by Indiana lawmakers as something of a miracle deal, a Notre Dame University economist estimated for Mother Jones that had Indiana kept the toll road for itself, its revenue in 75 years would have totaled more than $11 billion, which is nearly three times as much as Indiana is getting.

DeFazio says the Indiana deal also gave the private operators a toll floor, but no ceiling. How high will tolls go?

He similarly criticized the Chicago Skyway deal privatizing a 7.8-mile freeway that connects to the western edge of the Indiana Toll Road. Again, DeFazio said, the worry is that the fare structure was set up with a floor, but no ceiling. One infrastructure analyst told Mother Jones that if New York's Holland Tunnel had a similar fare structure for the past 70 years, "the toll would stand at $185 rather than the current $6."

Even DeFazio, however, isn't 100 percent against a public-private partnership for roads. He talked about a highway in Virginia, where the state worked out a contract for a new road that included profit-sharing with the state as one way to make the deals more savory to taxpayers.

In his own Oregon, state leaders already rejected one proposal to build a bypass, he said, because the private company wanted to toll existing roads as part of the deal. "That's dead as a doornail," he said. More promising is a project to work with the same private group to build a much-needed bridge over the Columbia River.

One potential problem: Oregon has had two toll roads in its history. In both cases, when the debt was paid, the tolls were eliminated.

Today? "I doubt any private company will have an interest in that kind of deal," DeFazio said.

A question: Does the arrival of someone as powerful as Gephardt mean toll roads are in the state's future no matter what? The idea has support from Senate Majority Leader Bill Raggio, R-Reno, who told Gephardt he was eager to do something about the state's highway funding problems.

Whether Nevadans go for the idea depends largely on how voters view tolls. Are they taxes? And if they are, and if the governor supports them, does that mean the governor will have broken his promise of no new taxes?

Assemblyman Kelvin Atkinson, D-North Las Vegas, who chairs the Assembly's Transportation Committee, said he considers tolls as taxes.

"I think citizens have an issue about no new taxes, something the governor has made clear," Atkinson said. "And what people tell me is, (with toll roads) they've got to pay for it coming and going."

After Assembly Speaker Barbara Buckley, D-Las Vegas, listened to Gephardt, then took in the state transportation department's pitch, she bristled that , before the state has even voted to legalize toll roads, the department had spent $290,000 to look at how best to put them in place.

She warned that, though she would listen and welcome debate, she wasn't so sure politicians would have the stomach for tolls, public or private.

"I think there's going to be a lot of skepticism in the Legislature with toll roads - or franchises or concessions or whatever you call toll roads," she said. "Quite frankly, I don't have the sense that it will be successful."

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