Why are highways so important?
Highways are vitally important to a country’s economic development. The construction of a high quality road network directly increases a nation’s economic output by reducing journey times and costs, making a region more attractive economically. The actual construction process will have the added effect of stimulating the construction market.
The administration of highway schemes
The administration of highway projects differs from one country to another, depending upon social, political and economic factors. The design, construction and maintenance of major national primary routes such as motorways or dual carriageways are generally the responsibility of a designated government department or an agency of it, with funding, in the main, coming from central government. Those of secondary importance, feeding into the national routes, together with local roads, tend to be the responsibility of local authorities. Central government or an agency of it will usually take responsibility for the development of national standards.
The Highways Agency is an executive organisation charged within England with responsibility for the maintenance and improvement of the motorway/trunk road network. (In Ireland, the National Roads Authority has a similar function.) It operates on behalf of the relevant government minister who still retains responsibility for overall policy, determines the framework within which the Agency is permitted to operate and establishes its goals and objectives and the time frame within which these should take place. In the United States, the US Federal Highways Agency has responsibility at federal level for formulating national transportation policy and for funding major projects that are subsequently constructed, operated and maintained at state level. It is one of nine primary organisational units within the US Department of Transportation (USDOT). The Secretary of Transportation, a member of the President’s cabinet, is the USDOT’s principal.
Each state government has a department of transportation that occupies a pivotal position in the development of road projects. Each has responsibility for the planning, design, construction, maintenance and operation of its federally funded highway system. In most states, its highway agency has responsibility for developing routes within the state-designated system. These involve roads of both primary and secondary state-wide importance. The state department also allocates funds to local government. At city/county level, the local government in question sets design standards for local roadways as well as having responsibility for maintaining and operating them.
Sources of funding
Obtaining adequate sources of funding for highways projects has been an ongoing problem throughout the world. Highway construction has been funded in the main by public monies. However, increasing competition for government funds from the health and education sector has led to an increasing desire to remove the financing of major highway projects from competition for government funds by the introduction of user or toll charges.
Within the United Kingdom, the New Roads and Streetworks Act 1991 gave the Secretary of State for Transport the power to create highways using private funds, where access to the facility is limited to those who have paid a toll charge. In most cases, however, the private sector has been unwilling to take on substantial responsibility for expanding the road network within the UK. Roads tend still to be financed from the public purse, with central government fully responsible for the capital funding of major trunk road schemes. For roads of lesser importance, each local authority receives a block grant from central government that can be utilised to support a maintenance programme at local level or to aid in the financing of a capital works programme. These funds will supplement monies raised by the authority through local taxation. A local authority is also permitted to borrow money for highway projects, but only with central government’s approval.
Within the US, fuel taxes have financed a significant proportion of the highway system, with road tolls being charged for use of some of the more expensive highway facilities. Tolling declined between 1960 and 1990, partly because of the introduction of the Interstate and Defense Highway Act in 1956 which prohibited the charging of tolls on newly constructed sections of the interstate highways system, but also because of the wide availability of federal funding at the time for such projects. Within the last ten years, however, use of toll charges as a method of highway funding has returned.
The question of whether public or private funding should be used to construct a highway facility is a complex political issue. Some feel that public ownership of all infrastructure is a central role of government, and under no circumstances should it be constructed and operated by private interests. Others take the view that any measure which reduces taxes and encourages private enterprise should be encouraged. Both arguments have some validity, and any responsible government must strive to strike the appropriate balance between these two distinct forms of infrastructure funding.
Within the UK, the concept of design-build-finance-operate (DBFO) is gaining credence for large-scale infrastructure projects formerly financed by government. Within this arrangement, the developer is responsible for formulating the scheme, raising the finance, constructing the facility and then operating it for its entire useful life. Such a package is well suited to a highway project where the imposition of tolls provides a clear revenue-raising opportunity during its period of operation. Such revenue will generate a return on the developer’s original investment.
Increasingly, highway projects utilising this procedure do so within the Private Finance Initiative (PFI) framework. Within the UK, PFI can involve the developer undertaking to share with the government the risk associated with the proposal before approval is given. From the government’s perspective, unless the developer is willing to take on most of this risk, the PFI format may be inappropriate and normal procedures for the awarding of major infrastructure projects may be adopted.
