Executive Briefings

Logistics Logjam? Let Private Enterprise Build Us More Highways.

About 18 months ago, a delegation representing America's largest retailers paid a visit to the Office of the Secretary of Transportation and the White House. Their message was simple: The U.S. surface transportation system is failing to meet their needs. With trucks carrying three-fourths of all goods (by value), congestion at and near ports and in major urban areas is disrupting our highly orchestrated logistics systems, based on just-in-time delivery. And sheer lack of capacity on key Interstate highway routes threatens to make these problems much worse in coming decades, as truck traffic increases faster than car traffic.
The U.S. system of funding highways out of centralized trust funds based on fuel taxes, however, is not the only model for building additional roadways. In the 1960s and '70s, much of Continental Europe's equivalent of our Interstate system was developed as toll motorways. France and Italy led the way, with both state-owned and investor-owned companies developing and operating major elements of the motorway system under a scheme called Build-Operate-Transfer. In exchange for a 30- or 40-year franchise from the state, the company could raise the needed funds in the capital markets, build the toll road, operate and maintain it for the length of the term, collect the tolls to pay back investors and earn a profit, and then hand it back in good condition. The same model, now called "long-term concessions," was adopted in Spain and Portugal--and more recently for urban toll motorways in Australia, Argentina and elsewhere.
Source: Chief Executive, http://chiefexecutive.net

About 18 months ago, a delegation representing America's largest retailers paid a visit to the Office of the Secretary of Transportation and the White House. Their message was simple: The U.S. surface transportation system is failing to meet their needs. With trucks carrying three-fourths of all goods (by value), congestion at and near ports and in major urban areas is disrupting our highly orchestrated logistics systems, based on just-in-time delivery. And sheer lack of capacity on key Interstate highway routes threatens to make these problems much worse in coming decades, as truck traffic increases faster than car traffic.
The U.S. system of funding highways out of centralized trust funds based on fuel taxes, however, is not the only model for building additional roadways. In the 1960s and '70s, much of Continental Europe's equivalent of our Interstate system was developed as toll motorways. France and Italy led the way, with both state-owned and investor-owned companies developing and operating major elements of the motorway system under a scheme called Build-Operate-Transfer. In exchange for a 30- or 40-year franchise from the state, the company could raise the needed funds in the capital markets, build the toll road, operate and maintain it for the length of the term, collect the tolls to pay back investors and earn a profit, and then hand it back in good condition. The same model, now called "long-term concessions," was adopted in Spain and Portugal--and more recently for urban toll motorways in Australia, Argentina and elsewhere.
Source: Chief Executive, http://chiefexecutive.net