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The Private Provision of Surface Transportation Infrastructure in the United States

Private sector involvement in surface transportation infrastructure is not new. Public and private turnpikes—roads that require the payment of a toll for passage—have existed for hundreds, if not thousands, of years.  In the United States, turnpikes enjoyed limited success in the 18th century into the 19th century, before being virtually eliminated at the beginning of the 20th century.  Renewed interest in tolls occurred just prior to the Second World War and continued until the passage of the National Interstate and Defense Highways Act in 1956.  Only in the last couple decades have toll roads again become politically palatable, with many taxpayers now preferring tolls to increases in fuel taxes as means to fund road construction and upkeep.  This is important not only in terms of getting road financing right, but also because tolls are the most efficient cost recovery mechanism for private firms.

Private roads serving residential areas have also enjoyed limited historical and contemporary success in the U.S. These are typically financed and managed by local property developers and owners’ associations, many of which allow public traffic. The advantage of these private roads is that investment and use decisions are made in close consult with the affected stakeholders (i.e., adjacent property owners).  Roads controlled by private developers and owners' associations can accommodate owners’ preferences which may be at odds with one-size-fits-all government regulation, such as preferences for narrower roads and smaller building setbacks.

During the 19th century, private streets were famously constructed in St. Louis. The so-called “private-place model” was successful for several decades, until new city ordinances granted the city the exclusive right to install and maintain “sewers, sewer inlets, water mains, gas mains, underground conduits for electric wires, fire plugs, lamp posts and other conveniences.”  Essentially, owners of private streets lost the ability to control their properties, and many gave up and lobbied the city to take over ownership and management. But with the recent rise of common interest housing developments (often referred to as “gated communities” or “private communities”), private streets have been making a slow comeback as an important component of the overall transportation system.

Private involvement in surface transportation was not limited to roads. Prior to the middle of the 20th century, passenger rail infrastructure in the United States—including track used for intercity service, commuter service, and urban mass transit—had been privately built, owned, and operated. New York City’s subway and commuter rail systems, Chicago’s El, and the nation’s cross-country intercity rail network were all owned and managed by private firms.

The poor state of private mass rail transit following World War II was in part a consequence of the massive economic distortions and dislocations caused by the federal government’s annexation of industry to support its war economy.  However, rail transit had been losing its market share for years following the first auto-driven suburban expansion after World War I. The street car industry, for example, was in a financial death spiral long before the outbreak of World War II.  Unfortunately, these inefficient and unpopular (at least in terms of ridership) transit networks were put on government-funded life support for decades—or worse, continue to limp along to this day.

Around the world and in the United States, private sector involvement in transit infrastructure has increased dramatically in recent years. While not all public-private partnerships are created equal—and those which promote private ownership of infrastructure in the long-run should certainly be preferred over those which merely lease public infrastructure to private managers—they should be seen as a step in the right direction.