Toll Road Warrior : Will Californians Pay to Avoid Snarled Freeways? Libertarian Bob Poole Is Fighting to Give Them the Chance

IT’S A WARM, humid August morning at the Sacramento headquarters of Caltrans, where a small group is meeting in a utilitarian conference room to discuss what for California is a drastic idea: abandoning the state’s exclusive reliance on freeways in favor of a mix that includes private toll roads. Caltrans assistant director Carl Williams, who is chairing this meeting, introduces Bob Poole to his fellow committee members as the man who “fired my imagination on this.”

By “this,” Williams means a radical--though as yet almost entirely unpublicized--plan passed by the California Legislature in June as part of the governor’s $18.5 billion transportation bill. It would authorize private companies to build four demonstration tollways in the state: one in northern California, one in the south and two up for grabs. Unlike conventional toll roads of the sort seen for decades back East, or even three Orange County public toll roads scheduled for completion in the mid ‘90s, these would be financed entirely with private funds and operated by private corporations. According to what investors are telling Williams in preliminary conversations, charges would run around 20 cents per mile for roads and perhaps 75 cents per mile for tunnels and bridges.

Wherever feasible, these tollways would also take advantage of new technology that would allow drivers to attach a vehicle identification card the size of a credit card to the inside of their windshields, where they could be read by radio transmitter/receivers as the cars sailed up the on-ramps. Users might then get a monthly toll bill (not unlike a utility bill) or have the fees charged to to their credit cards.

Investors would have up to 35 years to recoup their investment and anticipated profits, then the state would take over the toll facilities.

As Bob Poole sees it, such toll roads could eventually cover the most congested areas of California, much as they have in Italy, France and Spain where, according to Poole, some 5,000 miles of privately financed toll roads have been built since WWII. Although the plan is still in its infancy, Caltrans expects consortiums of investment bankers and construction firms to submit 30 to 100 proposals in the next year, including ones for a toll tunnel under Laurel Canyon; a cars-only second deck on critical sections of the Ventura and San Diego freeways; and a new bridge across San Francisco Bay near the Oakland airport, with office buildings on its suspension towers. Construction on the projects won’t begin for another three years.

Not everyone is impressed by the tollway idea. Some see the unrestricted use of freeways as an egalitarian issue, and feel that when it comes to freedom of mobility, no one should have more of it than anyone else. And then there are the practical objections. “We are overbuilt in highways already,” says Stanley Hart, a spokesman on transportation issues for the Sierra Club. “And anyone investing in such a project ought to have his head examined.” Why would anyone pay to use a toll road if there was a freeway alternative? If it was up to him, says Hart, “I’d put my money in CDs and say the hell with it.”

SITTING BEHIND his desk at the Reason Foundation in Santa Monica, Bob Poole has the straightforward honest rectitude of a graduate student in engineering. Which is fitting, since he spends a good part of each day taking phone calls from people asking advice on everything from contracting out municipal street-sweeping services to privatizing the Tennessee Valley Authority.

For Poole, who takes credit for coining the word “privatization” in his 1980 book, “Cutting Back City Hall,” all this is heady stuff. Back in the ‘70s, libertarians like Poole were widely regarded as free-market fanatics who went around wearing “Taxation is theft!” buttons and for whom life held no greater joy than sitting up all night debating such matters as whether their free-market philosophy gave them the moral right to oppose private ownership of nuclear weapons.

But times have changed. The tax revolt of the ‘80s left many politicians so traumatized by the shortage of tax dollars that they are now more open to free-market alternatives. As a result, Poole, 45, who is both president of the Reason Foundation and publisher of Reason magazine, gets calls from the White House, federal transportation officials, assorted legislators, investment bankers, former Drexel Burnham Wunderkind and alleged crook Michael Milken (the featured speaker at the foundation’s annual banquet this fall), and, most satisfying of all, from the awkwardly named Caltrans Privatization Advisory Steering Committee.

“It’s a kind of vindication,” says Poole, who presents his ideas in a low-key, non-threatening manner. “Ten or 15 years ago, we felt like a voice crying in the wilderness . . . And these days, we are saying basically the same kinds of things and now we seem to be part of a worldwide trend.”

FOR SOMEONE who hopes to fundamentally change the way the government conducts its business, Poole is a reserved, private sort of guy. He builds model trains in his spare time (there’s a hand- lettered “Keep Out” sign on the door to his train room in his Beverlywood home). When the master of ceremonies for the 20th anniversary of Reason magazine went around last year trying to collect funny anecdotes about Poole, he didn’t come up with a single one--which is not surprising to Poole’s colleagues. “Bob is not a warm fuzzy person,” says former Reason editor Marty Zupan. “He’s the kind of person who gets excited by ideas.”

And the most exciting idea he ever heard was the philosophy advanced by Ayn Rand in the novel “Atlas Shrugged.” Reading it during the early ‘60s while studying mechanical engineering at MIT, Poole discovered a world that to him seemed brilliantly clear, moral and above all, based on reason. After receiving his master’s degree in 1967, he got a job as a weapons-systems analyst at Sikorsky Aircraft in Stratford, Conn., where he was dismayed to discover that aerospace companies “were large bureaucracies and very dependent on government contracts.” Declining to spend the rest of his life in a room with 500 other engineers “learning more and more about less and less,” in 1969 Poole put his money where his free-market ideology was and decided to try writing, submitting an article on airline deregulation for a fledgling libertarian magazine called Reason. Seeing it published “was very exciting,” says Poole. “I said to myself, ‘This beats the hell out of engineering.’ ”

Deciding on a new career in public policy, Poole applied to such think tanks as the RAND Corp., the Hoover Institution and finally the General Research Corp. of Santa Barbara, where he studied private alternatives to public services. “What really got me,” says Poole, “was the private fire department in Scottsdale, Ariz. My God! That was damn impressive.”

Poole took a first step toward founding his own think tank in the fall of 1970, when with five other investors he bought Reason magazine from its founder, a Boston College journalism student named Lanny Friedlander. Poole then spent the next eight years publishing it out of his bedroom.

Despite the magazine’s unwavering commitment to the free market, in the early days the owners didn’t know enough about marketing to run ads on the back cover. And for a magazine aimed at a popular audience, their article titles tended toward the arcane: “Counterintuitive Behavior of Social Systems” and “Chicago Monetary Tradition in the Light of Austrian Theory.”

Even so, circulation inched upward. Color was introduced. And in 1978, Reason was incorporated into a nonprofit educational foundation. The only problem was, by the mid-’80s, the foundation seemed to be floundering--for a think tank with national pretensions, Santa Barbara was too small.

There was an obvious alternative. In 1986, Poole brought Reason to Los Angeles. Despite some initial misgivings about living in a purported intellectual black hole, Poole and his wife (a budget analyst in the UCLA chancellor’s office), quickly discovered that Los Angeles was the place to be.

The foundation’s budget increased from $1.2 million to $1.9 million. The media began asking Poole for quotes. And all the while, the foundation continued a steady drumbeat of reports and articles on the advantages of selling off the airports, jails, fire departments, garbage collection, the Postal Service and the Tennessee Valley Authority. Then in May, 1988, Poole published his landmark transportation report: “Private Tollways: Resolving Gridlock in Southern California.”

UNLIKE SO MANY other transit planners who long ago gave up on automobiles in favor of heavy-rail transit, Poole rather admires freeways. They made a great contribution to California. They opened up the state. Not only did they permit a kind of untrammeled mobility never before possible, they were a concrete metaphor for the open-ended, soaring spirit of Southern California.

Unfortunately, Poole felt, they were a metaphor that didn’t work anymore. How could anyone look at a freeway and feel his spirit soaring when, by 1986, 40% of California’s urban roads were operating at a stop-and-go pace. By the year 2010, argued Poole, the population of Southern California was expected to increase 36%. Average freeway speeds would drop from 35 to 11 mph. Billions of dollars’ worth of fuel and time would be wasted annually in freeway gridlock, even as exhaust fumes poisoned the drivers. If there was a solution, it was clear to many that it wasn’t just building more freeways.

“You can’t build your way out of congestion,” argues Peter Gordon, assistant dean of Urban and Regional Planning at USC. “When you add (freeway) capacity, you’re simply inviting back all the people that congestion had driven away before.” The freeway is filled to capacity practically from the day the ribbon is cut, and in no time at all you’re back to where you started, except now there’s more congestion, more pollution, a huge new debt and no net gain in the quality of life, he says.

But by using toll roads with new automatic vehicle identification technology and congestion pricing, one could, argued Poole, raise the tolls enough during rush hours to divert non-essential traffic to cheaper off-peak hours.

Although politicians tend to be a bit leery of an idea like congestion pricing, to economists it makes perfect sense: When you undercharge for anything, the product gets overconsumed at certain peak times and underused at others, which is why movie theaters charge less for matinees and phone companies cut the rates at night.

And the problem with not charging for a scarce commodity like freeway space, argues USC’s Peter Gordon, is that it encourages people for whom time is not an issue, like shoppers and other casual users, to drive the freeways at peak hours, thereby penalizing people who have no choice.

To Poole, private toll roads with congestion pricing were a “win-win” proposition for everyone concerned. And in May, 1988, the Reason Foundation sent hundreds of copies of his report to public officials and private firms.

The time was right. As a result of the federal budget deficit and rapidly approaching end of the federal interstate highway program, says Bruce Nestande, a member of the California Transportation Commission and former Orange County assemblyman, there was no more federal aid in the pipeline for building new freeways. In the meantime, says Nestande, the state was so far behind in upgrading 20- and 25-year-old freeways that just to keep them from further deterioration would require “a 15-cent-per-gallon gasoline tax tomorrow morning.”

To try to hold back the tide, Gov. Deukmejian pushed for a $1 billion stopgap highway bond issue on the June 7, 1988, ballot. When it was narrowly defeated, Bob Poole wrote an Op-Ed piece for the Los Angeles Times, pointing out that privately funded toll roads were already in widespread use in Europe, Asia and Australia. Even the $12 billion tunnel under the English Channel was being financed by private sources. Given the fact that nothing else seemed to be working, Poole argued, maybe it was time to look at this alternative.

As soon as Poole’s article appeared, he got calls from both the governor’s office and Caltrans assistant director Williams, who asked Poole to send him his private tollways report. “We were impressed,” says Williams. And Caltrans promptly drafted a bill that Danville Republican Bill Baker gladly agreed to sponsor.

As it turned out, the Baker bill became a bargaining chip in the governor’s $18.5 billion gas tax compromise. Some Republicans agreed to accept the gas tax if they could get these demonstration tollways as part of the compromise package. And while some Democrats resisted the idea of making drivers pay to use highways, they were willing to swallow the plan if they could get a 9-cents-a-gallon gas tax. At the same time, lots of other legislators from both parties didn’t care one way or the other about the ideology--they just wanted to do something about congestion. As a result, the bill made it through the legislative process virtually unchanged.

Which is not to say that private tollways might not face opposition somewhere down the road. Despite having voted for the gas tax compromise, David Roberti (D-Los Angeles), President ProTem of the Senate, calls toll roads “foreign to our way of life.” “There are certain functions the government is responsible for,” he says, “and every time privatization comes up there should be strong opposition.” Why, ask other critics, should wealthy people have the right to whiz to work on uncluttered expressways, while the rest of us fume and suffer on the freeways?

In response, Poole contends that critics should remember that he is not proposing to take anything away--he is merely offering a choice. No one will be forced to use toll roads if he doesn’t want to and, in any case, the projects won’t involve any public money. Under the circumstances, asks Poole, what’s so awful about letting “fat cats in their BMWs willingly pay a bunch of extra money to use their cars?” To the extent that they draw traffic off the freeways, everyone has better mobility. “And I think that is a hell of a good deal for everyone concerned.”

As for objections that private toll roads will never be built because no one will risk their money in such a wild-eyed plan, Poole points to a long and growing list of major investment banking and construction firms that have already expressed interest in the projects, including a consortium of Japanese banks and insurance firms that recently wrote to Caltrans: “We understand you are considering a southern (San Francisco Bay) crossing. Do you think it would be possible for any of this financing to be Japanese?”

In fact, says Kenneth Olson, vice president for public finance at Goldman Sachs, which is both the underwriter and an equity investor in a $150 million Dulles airport toll road extension in Virginia, he would be very surprised if all the major investment banking firms weren’t taking a close look at private tollways: “The competition to participate in financing will be intense.”

Some people may ridicule privately financed toll roads now, says Poole, but wait until the first project goes into operation and everyone sees how profitable it is. Then, he says, the arguments will shift overnight from “They’re going to go broke” to “What right do they have to get so rich?”

As for Poole, he doesn’t expect to spend all his life preaching the toll road gospel. Once the projects are launched, he intends to shift his focus to such matters as privatizing airports and the Postal Service, building private energy companies and selling the Tennessee Valley Authority.

All over the world, he says, governments are discovering the advantages of selling off bloated bureaucracies to private enterprise: “Why should the TVA be off limits?”