Awaiting the Johnson Commission report - Public-private partnerships and tolls can finance highway renewal



    MONTREAL, Oct. 11 /CNW Telbec/ - Public-private partnerships (PPP),
financed by tolls, can provide an advantageous way of carrying out a
substantial number of highway renewal projects.
    In a series of three Economic Notes published by the Montreal Economic
Institute, economist Mathieu Laberge says this could enable the Quebec
government to save public funds in future reconstruction work on the Turcot
interchange, the Metropolitan highway or, eventually, the
Louis-Hippolyte-Lafontaine bridge and tunnel.
    "International experience shows that PPPs can help finance not only the
construction but also the renewal of highways and other road infrastructure,"
Mr. Laberge states.

    The PPP approach for stable financing

    With the scope of the highway rebuilding challenges the Quebec government
faces over the next few years, it could consider setting up PPPs. Experience
in other countries indicates they would provide for more stable and more ample
financing. Currently, government investment in roads is subject to the
vagaries of political compromises between competing priorities involving
various departments and more highly publicized needs. This works to the
detriment of investments whose effects may be less apparent but will be felt
over the longer term, such as maintaining the quality of the highway network.
    Road infrastructure is a major determinant of economic growth, and it is
crucial not to stint on its maintenance and improvement. Low investment levels
produced by the public financing mode have led to a continuous decline in the
value of the expressway network, found in 2005 to have just 55% of its 1975
value. In this regard, the author recommends making the budget process more
responsible by asking the Auditor General of Quebec to clarify the accounting
practices governing how spending on road maintenance is accounted for.
    The Department of Finance is planning to allocate several billion dollars
over the next few years to catch up on road upkeep. It would be desirable to
depoliticize the process and, by means of PPPs, to implement an independent,
responsible, transparent and rigorous approach to reducing costs and bringing
in additional funds. This method aims to share responsibilities and benefits
between the private and public sectors and to impose tight discipline, with
penalties and bonuses to promote compliance with timelines and to punish cost
overruns. Private partners will have an interest in providing services within
the required time and in maintaining the infrastructure concerned in good
condition since they will be responsible for its subsequent management. They
will have to offer quality service if they wish to maintain an adequate
revenue flow from tolls. They will also provide benefits to the public sector
through their capacity for innovation and adaptation.

    Modulated electronic tolls are an advantageous solution

    The gradual establishment of permanent tolls could be considered as a way
to finance all rebuilding work on the main highways without relying on
government financing and without increasing the public debt. Most countries
apply the user-pay principle to finance their highway networks, in addition to
general taxation. A Léger Marketing poll published today indicates that a
majority of people in Quebec support this approach and a return of tolls (see
the attached press release).
    Most of the funds spent on the road network come from revenue sources
that respect the user-pay principle. This is true of the fuel tax and of
licence and registration fees. But not all forms of collection are equal.
Tolls represent the best means, because they link the amounts paid directly to
road use, whereas licence and registration fees represent lump sums that
guarantee unlimited access to the service. Tolls are also superior to fuel
taxes because they can be modulated to bill different amounts based on the
time of day, thereby helping alleviate traffic congestion. For all these
reasons, electronic tolls are the way of the future.
    The three following Economic Notes were prepared by Mathieu Laberge, an
economist at the Montreal Economic Institute and holder of a master's degree
in international economics and econometrics from the University of Nottingham:

    - Relying on the private sector to ensure stability in highway
    maintenance
    - Road repairs and public-private partnerships
    - Tolls as a solution for financing the road network

    The Notes are available at www.iedm.org

    The Montreal Economic Institute is an independent, non-partisan,
non-profit body that takes part in public policy debate in Quebec and across
Canada, offering wealth creation solutions on matters of taxation, regulation,
and reform of health and education systems. Its publications since 2000 have
included the Report Card on Quebec's Secondary Schools. In 2004 it won a
Templeton Freedom Award for Institute Excellence for the quality of its
management and public relations.




For further information:

For further information: and interview requests: André Valiquette,
Director of Communications, Montreal Economic Institute, (514) 273-0969 ext.
2225, Cell: (514) 574-0969, avaliquette@iedm.org


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