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Public-private partnerships provide piece of the funding puzzle for new roads

Public-private partnerships provide piece of the funding puzzle for new roadsIt is Arizona’s freeway of the future, and seemingly everyone wants to see it built.

Gov. Jan Brewer has advocated the construction of Interstate 11 between Phoenix and Las Vegas, calling it essential to commerce, tourism and trade throughout the West.

Arizona’s congressional delegation is behind it. So are assorted business groups in Arizona and Nevada. In June, Congress passed a law authorizing the construction of the highway, which would replace one of the most dangerous stretches of road in the country. The goal is to connect the two largest cities in America that aren’t linked by an Interstate highway.

So why is Interstate 11 still many years — or perhaps decades — away from becoming a reality?

The highway’s uncertain fate illustrates how difficult it is to build roads in Arizona and throughout much of the country. Traditional sources of money for highway projects have dwindled, forcing planners to come up with new approaches. And the new methods often turn out to be easier in theory than in practice.

The Phoenix-Las Vegas proposal also demonstrates the challenges facing a law passed by the Arizona Legislature in 2009 to encourage  highway construction through public-private partnerships, or P3s.  

House Bill 2396 authorized the Arizona Department of Transportation to sign contracts with private companies to design, build and operate toll roads, toll lanes, rest stops and other projects. In exchange, the companies would get future revenues, usually provided by tolls.

“At its heart, a P3 is a way of project delivery….to design, build and carry out a project,” said John Halikowski, ADOT’s director.

Since HB2396 became law, ADOT has been preparing to create such partnerships. Staffers have been holding community meetings to let people know how the law might work and why it is needed.

But anyone who hoped new roads would be built quickly has been disappointed.

“Everybody thought when the law was passed, we were going to go out and do a project right away,” said Halikowski, noting that’s not the way the law was designed to work. “We have spent the last three years setting up the system, working with the community.”

Bigger hurdles lie ahead, including engineering studies, environmental impact reports, studies of potential funding sources, examinations of whether the interstate highway could be built as a toll road and efforts to ease public opposition to toll roads.

“It’s a long-term effort. We’ve been at it for a while, and we’re going to be at it for a while,” said Gail Lewis, ADOT’s director of the Office of P3 Initiatives.

Some advocates of road construction understand the complexities facing new highway projects, but would like to see more progress.

“They haven’t been happening fast enough,” said David Martin, president of the Arizona Chapter of the Associated General Contractors.

The Legislature tweaked the toll road law this year, fixing flaws that included a lack of a way to enforce toll payments. The bill also removed a provision allowing drivers to apply for refunds for fees and taxes paid while driving on toll roads. That will encourage private investment, Martin said, helping to clear the way for projects such as Interstate 11.

“We agree with the governor. This is a critical piece of the system,”  he said.

• • •

So far, the only ADOT P3 project underway in Arizona is the proposed construction of a new building for ADOT’s Flagstaff operations, including the regional Department of Motor Vehicles.

Interstate 11 is listed as the top conceptual project, deemed essential because of rapid growth in Arizona and Nevada and because Phoenix and Las Vegas “are the only two major metropolitan areas in the United States with populations in excess of one million that do not have a direct Interstate highway connection.”

But building it is not nearly as simple as finding a company willing to work with ADOT in return for money from tolls. It’s likely the project will need several sources of funding, with a public private partnership merely being one tool to help with the construction, Halikowski said. One stretch of the highway, the 50 miles between Phoenix and Wickenburg, probably will cost more than $1 billion. So far, no one knows where all that money would come from.

And despite the high-level support for the highway, toll roads have been an extremely tough sell in Arizona. A plan to put a toll on a relatively short stretch of Interstate 15 through northwestern Arizona went nowhere. Halikowski said that was partly because of antiquated ideas about the way toll roads work, such as motorists thinking they would have to stop and deposit coins the way they did on the toll roads of the 1950s and 1960s.

ADOT’s second P3 priority is a 45-mile long “North-South Corridor” between U.S. 60 near Apache Junction and Interstate 10 between Marana and Eloy. The plan is to connect rapidly growing sections of Maricopa, Pinal and Pima counties. So far, no funding has been identified for the project.

A third priority involves State Route 189 in southern Arizona, also known as Mariposa Road, a 3-mile urban roadway next to the Mexican border in Nogales.

Perhaps most importantly to Phoenix-area residents, the Maricopa County Association of Governments is studying the possibility of building high occupancy toll (HOT) lanes on existing freeways.  Such HOT lanes have been appearing throughout urban America, becoming popular ways to ease congestion in cities from San Diego to Atlanta. 

But such lanes are still in the early stages of development in Maricopa County.

MAG recently completed a phase one feasibility study of building such lanes in the Phoenix area, said Eric Anderson, the planning agency’s transportation director. Phase two could take another year or two, and then an environmental analysis could take another three-to- five years. Under the best circumstances, the HOT lanes could be nearly a decade away.

They could provide a solution to congestion on such highways as Interstate 17 through Phoenix and Interstate 10 through Phoenix, Tempe and Mesa, Anderson said, keeping traffic moving steadily at speeds of 40 mph or more even during rush hour.  Motorists who purchase electronic passes could move into the lanes as soon as traffic begins to back up in free lanes. Tolls would change according to the time of day, with rates the highest during peak hours of congestion.

The approach was introduced on the Riverside Freeway in Southern California in the mid-1990s and has become increasingly popular in recent years.

• • •

Much of P3 Initiatives Office Director Lewis’ job is to travel from civic group to civic group explaining the ins and outs of public- private partnerships and the plight of transportation in Arizona.

What usually attracts her audience’s attention is how little money is available to meet the state’s highway needs. The state has experienced the erosion of traditional revenue sources such as the gasoline tax and vehicle license tax. Arizona used to spend about 65 percent of its highway money on building new roads and about 35 percent on maintaining them. Now, that ratio has been flipped, Lewis said.

“Our philosophy has changed from where it was several years ago, where the drive was to put lots of capacity out there,” Halikowski said. 

“We’re not able to do a lot of capacity as we have done in the past. A greater percent of money goes to preservation, maintenance. We can’t let the existing system fall apart and go out and do more capacity.”

So the state is looking for solutions that don’t necessarily involve building new highways. That includes using technological advances to improve the flow of traffic or making use of traffic signs and signals — approaches that can only go so far in meeting transportation needs.

P3s can be another important tool, but they can only do so much without adequate sources of money, Lewis observed.

Whatever the source, Arizona is going to need a lot of money to maintain its aging system while meeting needs related to population growth. ADOT reported in its Long-Range Transportation Plan last November that it “faces a daunting challenge: prioritizing nearly $89 billion of transportation needs over the next 25 years with only $26 billion of expected revenue.”

• • •

Arizona appears to have taken the correct approach to developing public private partnerships of transportation, said Leonard Gilroy, director of government reform for the Reason Foundation, which has been an advocate for toll roads.

“Other states have followed a similar process,” he said. “It looks to me that what they’re doing is getting their feet wet, getting a feel for the process. It makes sense to solicit ideas, use the market as a sounding board and to get feedback from the private sector.”

Eventually, though, Arizona is going to have to turn to toll roads, he said. Funding for highway construction is not going to improve, he predicted.

“Toll roads in Arizona will be built,” he said flatly.

Not everyone agrees. A “No Toll Roads in Arizona” rally already has been scheduled for next Jan. 9 at the state Capitol, sponsored by groups hoping to prevent further action on what they describe as unwelcome new taxes on the state’s motorists.

For Interstate 11, it will be at least several years before Arizona officials work their way through preliminary studies. Sources of funding need to be found.  Planners need to determine whether a public private partnership could be a part of the equation, and whether a toll road would work.

Whatever the outcome, Halikowski believes the legislation to create P3s will bear fruit.

“I still believe it’s a viable tool,” he said. “It will not close the funding gap. It will help. It’s not a silver bullet to solve the problems.”

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