Florida Trend | Florida's Business Authority

For Whom the Tolls Swell

From the Miami-Dade Expressway Authority to the new North Florida Transportation Corridor Authority in the fastgrowing Panhandle, Florida has turned to toll roads to hoist itself from the muck of transportation policies that haven't kept pace with growth. Virtually all of the state's new limited-access roads built from scratch in the last 15 years have been toll roads, says Bob Hartnett, a former state legislator who now heads an alliance of toll authorities called TEAMFL (Transportation and Expressway Authority Membership of Florida).

And more toll roads are coming, ranging from variable-priced tolls on new highspeed lanes on the Dolphin Expressway in Miami to a new east-west corridor in the Panhandle. A toll expressway now seems to be the consensus choice for the sensitive Wekiva area north of Orlando. Further into the future, possibilities such as cross-Florida and north-south expressways in lower-peninsula counties like Hardee, De Soto and Highlands, may also rely on tolls as the population grows inland to cheaper, vacant land away from the coasts.

"There's no other way to come up with funding to make up the shortfall," says Marcos R. Marchena, an Orlando lawyer appointed by Gov. Jeb Bush to the Florida Transportation Commission in 2004.

"We're not going to be able to just throw tax dollars at this." At least with tolls, he adds, "If you don't use it, you don't pay for it."

Marchena's hometown is something of a poster child for toll roads. With fast growth and below-average gas taxes -- 24 cents a gallon in state and local gas tax vs. 26 cents on average statewide and an allowable maximum of 30 cents -- Orlando has had little choice but to build toll roads to manage its nationally ranked congestion. Imagine trying to drive in Orange County -- which has one free limited-access highway, Interstate 4 -- without Florida's Turnpike, the Beach Line Expressway (formerly the Bee Line), the GreeneWay, the East-West Expressway and the rest of its network of toll roads created by Florida's Turnpike Enterprise and the Orlando-Orange County Expressway Authority (OOCEA). The OOCEA network has grown over the last decade from $83 million in toll revenue to $189 million this year.

Tolls aren't universally popular, of course. Republican U.S. Rep. John L. Mica of Winter Park, wanting to bolster plans for commuter rail, championed a provision in the latest federal highway legislation to block tolls on I-4 express lanes through central Florida.

And as local policy-makers resist new taxes even as growth continues, the toll trend has become relentless. "We're constantly playing catch-up on the (existing) infrastructure," says Bush's transportation secretary, Denver Stutler. "There's simply no money to start getting ahead of development and population growth."

Consider the smorgasbord of toll roads around the state: The Miami-Dade Expressway Authority, Florida's third-largest toll entity, has its own growing network. The Tampa-Hillsborough Authority is opening reversible express lanes over the Crosstown Expressway, and Florida's Turnpike Enterprise is already talking about expanding the new Veterans Expressway in western Hillsborough, where traffic is up by half in five years. The Legislature last year authorized a new Southwest Florida Expressway Authority, for Lee and Collier counties and possibly Charlotte County, and a new North Florida Transportation Corridor Authority. Jacksonville, resisting the trend, got rid of bridge tolls in 1988, raised local gas taxes and merged its toll entity into a transportation authority, but there is early talk of an outer bypass west of the city that could be a toll road.

» "There's simply no money to start getting ahead of development and population growth."
-- Transportation Secretary Denver Stutler

Many future toll projects will likely resemble the Suncoast Parkway, which runs roughly parallel to U.S. 19 for 42 miles from northwest Hillsborough to northern Hernando with a planned extension to Crystal River. That $530-million toll road was built by the Turnpike Enterprise, relying partly on borrowed mone and partly on cash built up from tolls on Florida's Turnpike itself, which will mark its 50th anniversary in January.

The Turnpike Enterprise, the quasiindependent arm of Florida DOT that runs the turnpike system, also developed the Polk Parkway and has joined with the Orange County Expressway Authority on sections of other toll roads in central Florida. The OOCEA itself has been approached by adjoining counties about building toll roads in those counties, says Chairman Allan E. Keen.

One measure of the growing reliance on toll roads is a comparison of the road building budgets of OOCEA and the Orange County local government. While the county's five-year road building budget is $180 million, says Keen, OOCEA's is $1.1 billion, nearly seven times as much, with $400 million of that coming from toll revenue in excess of operating costs.

Some of the toll money, of course, is used to maintain and expand the existing toll roads, which boast higher maintenance and safety standards than DOT's free interstates. The rest supports new projects, like the Western Beltway in Orange County. "People say, 'When will the tolls be paid off?' " says Keen. "The answer is, 'Never.' "

Changing attitudes

Toll roads used to be thought of as favoritism toward people who can afford to pay. But thinking has changed. Every car on a toll road eases congestion on the free roads. Tolls also put more burden on people who choose long commutes, often from new developments in the suburbs.

Tolls also seem to generate less political resistance than higher gas taxes, which run afoul of the Republican no-new-tax mantra. People just keep tossing quarters in the basket or zipping through the electronic SunPass lanes. More roads get built, politicians are off the hook and people pay if they choose the convenience.

What makes toll roads even more compelling to policy-makers now is a double whammy of flattening gas-tax revenue and huge increases in road-building costs. Florida's gas tax has some indexing for inflation, but not for what Stutler says is a 25% increase in the cost of materials, labor and rights of way.

All around the state, traditional road projects are being pushed off into a more distant future as DOT copes with the cost increases. Stutler offers a sort of Yogi Berra truism: "By the time we're able to afford them, they won't be affordable."

DOT can't even buy rights of way until a route is justified, mapped and approved through environmental processes. By that time, of course, land costs have risen. The state spends roughly $700 million a year on rights of way. What if, muses Stutler, the state could do deals with landowners now, finance the purchases and then pay off the financing when the road makes it onto the work list? Stutler now hopes to do just that by working with private landowners and bankers like J.P. Morgan or Goldman Sachs, which recently created divisions to invest in infrastructure projects, to create short-term financing for rights of way even for projects that won't begin for several years. With land costs rising 11% a year, as Stutler says they have recently, borrowing money at 5% makes a lot of sense.

Drooling

Stutler also expects to see Florida landowners and developers proposing their own private roads. DOT would work with those to plan connections to the state system. Stutler says at least three such projects are under discussion. Walt Disney Co. has already been a major funder of road projects in central Florida. The company contributed nearly $75 million toward the $152-million cost of building the so-called Southern Connector near Kissimmee a decade ago and was able to build its Celebration community as a result.

Private interest in roadways doesn't stop there. Florida's once-troubled, now-thriving toll enterprises expect to collect more than $1 billion in tolls during 2006, equivalent to 10 or 11 cents of gas tax. And all that cash flow has some outsiders drooling.

In other states, private companies are beginning to purchase long-term leases (known as "concessions") on existing roads in expectation of making money by operating roads more efficiently and raising the tolls. The pioneers and most prominent players are foreign firms. The best known is Macquarie Bank of Australia, operating as the Macquarie Infrastructure Trust, which has acquired rights to the Dulles toll roads in northern Virginia. Two other important players are Cintra Concesiones and Abertis Infraestructuras, both based in Spain.

A Macquarie-Cintra partnership successfully bid $1.8 billion for a 99-year lease of the Chicago Skyway, a 7.8-mile elevated stretch of Interstate 90 across the south side of Chicago. The city says it will use the money to pay down old debts and create a "reserve" fund; it won't necessarily use the money for transportation. Indiana, Ohio and Texas are among other states actively working with private entities.

Would Florida ever consider cashing out of attractive chunks of highway like the Sunshine Skyway Bridge over Tampa Bay? "A lot of people are talking to Florida," says Stutler. "Most of them have come to us about wanting to take an existing proven roadway and make it a concession. ... But Florida would be slower to move in that particular model because I think we have demonstrated a history of some success on toll roads. We know a lot."

"We should be using the private sector to help us build something, not to buy something that we've spent a lot of blood, sweat and tears on," adds James L. Ely, executive director of the Turnpike Enterprise. Unlike other states desperate for cash and greater efficiency, "We are the envy of many places around the world."

But the state still might turn to the private sector for some joint-venture road projects. "We might not sell it to them," says OOCEA's Keen, "but what we could do, if we need $200 million or $500 million for our (expanded) work plan, we could work out a business model that makes them money," probably through toll increases over time. "We're just beginning to explore that."

Seizing the initiative

Half a century ago, when both the national interstate system and Florida's Turnpike began, superhighways were thought of as a way to move people across great distances. The turnpike ran 309 miles through sparsely populated central Florida to deliver tourists to bustling, cosmopolitan Miami. Today, however, even interstate "bypasses" are clogged with commuters. And on the turnpike, says Executive Director Ely, 90% of the tolls are by commuters, not tourists.

One thing nobody has figured out is how to plan ahead on roads without encouraging sprawl. "Does growth bring roads, or do roads bring growth?" asks OOCEA's Keen. "The answer is yes."

Ely says there's a story that Walt Disney himself, flying over Florida looking for a place to put Disney World, spotted the intersection of I-4 and Florida's Turnpike and picked that as his site. At about the same time, the Apollo moon program was in full swing at Cape Canaveral. The state didn't have the money to pay for the roads those two huge ventures would need, but the toll authorities could get it done.

As the state grows and coastal areas are built out, the population is going to grow inland. State and local governments have a chance to plan where big developments and even new cities will go. One way to influence those decisions is via choices about where roads will go. That's why possibilities like a coast-to-coast road well south of Orlando but north of Lake Okeechobee are important decisions for growth, environmental
and economic reasons.

DOT says every dollar invested in transportation produces $5.50 in "user benefits." The state isn't raising taxes, though. Bush has not-too-subtly noted the unused taxing authority in local option sales and gas taxes and suggested local governments ought to be the ones building more road capacity. But the Legislature has pressed for more state money, like last year's addition of $1.5 billion more for infrastructure expansion, ranging from roads to water and sewer systems. It's a lot of money, but it is a single-digit percentage against what some say is a $25-billion backlog just in the state road system, before counting congestion on local streets.

For both private industry and the toll authorities, with their large, predictable free cash flows, Florida's congestion problem looks like a huge opportunity.