Rest Stop Privatization More About Ideology Than Infrastructure

Reproduced with permission from Daily Report for Executives, 35 DER (Feb. 21, 2018). Copyright 2018 by The Bureau of National Affairs, Inc. (800-372-1033) <http://www.bna.com>

By Shaun Courtney, Bloomberg Government

A move to commercialize interstate rest areas under the Trump administration infrastructure plan could prove costly for restaurants and gas stations clustered along exits, without raising much additional revenue for states.

Rest stop commercialization was listed as a financing mechanism in the Trump administration’s full infrastructure proposal released Feb. 12. Commercial rest stops existed in 15 states prior to the creation of the Interstate Highway System and were allowed to continue operating.

More states have been clamoring in recent years to be able to move the cost of maintenance and upgrades off their balance sheets through partnerships with private companies that build, operate and maintain facilities like those found in Maryland or Delaware along I-95.

Giving more states the option to allow commercial activity along the interstate is less a way to generate new revenue than it is a fulfillment of the conservative principles of groups like the Heritage Foundation: devolving decision-making to states and shifting public costs to private contracts.

"Right now [noncommercial rest stops] are essentially money pits, so if you are coming at it from the fiscal standpoint, it definitely makes sense to at least allow trying to allow for that rather than just completely blanket prohibiting it," said Michael Sargent, transportation and infrastructure policy analyst at the Heritage Foundation.

Where Sargent sees a money pit, groups like the National Association of Truck Stop Owners see economic drivers for franchises—and revenue for localities—at interchanges along the interstate system.

“What concerns me is that while it may solve one problem, it’s creating a much, much larger problem,” said Lisa Mullings, president and CEO of NATSO.

What Is There to Lose?
Groups including the Society of Independent Gasoline Marketers of America, the National Association of Convenience Stores, NATSO, Pilot Travel Centers LLC, and the National Automatic Merchandising Association filed lobbying disclosures in 2017 citing activity on commercial rest areas, according to Bloomberg Government lobbying data.

Prohibiting commercial activities at interstate rest stops is good public policy that prevents a monopoly on the highway and supports jobs off the highway, said NATSO’s Mullings.

Privatization could have "grave consequences" for businesses, their employees and local governments that depend on property taxes from those businesses, said Mullings.

A Virginia Tech Transportation Institute study on rest stop commercialization from 2011 found that if the prohibition was lifted, interchange businesses in the 611 counties with existing noncommercial rest areas would lose more than $55 billion in annual sales.

“By commercializing rest areas, cities and towns stand to lose critical revenue used for funding road maintenance, potentially impacting the hundreds of small cities and rural communities whose economies depend on highway travelers,” the study said.

Another group that stands to lose out is blind vending machine operators. The Randolph-Sheppard Act (Public Law 74-732) gives blind merchants the priority to operate vending machines at federal buildings and highway rest areas.

The National Association of Blind Merchants passed a resolution in July 2017 opposing commercialization because of the impact it would have on the nearly 400 blind merchants who have vending machines at interstate rest stops.

"The result of commercialization of interstate rest areas would be directly felt by blind entrepreneurs, who would then be forced to compete with well-established and well-recognized franchises, essentially putting these blind entrepreneurs out of work almost overnight," the group wrote.

Infrastructure Ideals
States that lack the authorization to commercialize their rest areas struggle to maintain and upgrade their existing facilities, forcing some like South Dakota to close some rest areas entirely.

Many states see commercialization as a win because it takes maintenance and upgrades off of their balance sheets. The loss in receipts from the off-interstate businesses can be replaced or augmented by contracts with commercial operators that remit a share of profits back to the state.

Arizona Gov. Doug Ducey (R) asked in a December letter that Transportation Secretary Elaine Chao allow his state to act as a pilot program for rest area commercialization. Arizona has spent historically about $4 million annually to maintain its 28 interstate rest areas. He called the federal prohibition "archaic and nonsensical."

"You are freeing up resources that are currently being dumped into these money pits, but also then you’re getting some sort of revenue stream back to the state that can also be reinvested elsewhere. And you’re getting capital improvements on the existing rest areas," Sargent said.

The Heritage Foundation explored a range of ways the administration could achieve a $1 trillion infrastructure plan in a May 2017 white paper co-authored by Sargent. It included expanding commercial activity at interstate rest stops.

Sargent didn’t quantify the effects of commercialization to include in his $1 trillion figure and said there is little data available to make an accurate estimate.

His "back of the envelope" calculation—making what he admitted were broad generalizations and noting the unrealistic assumption that every rest stop could be privatized and perform like the Maryland House along I-95 -- would have privatization yielding about $12 billion over a 10-year period. That’s about 1 percent of the administration’s proposal.

"You’re really not going to milk that for all that much money. I think it’s just one of the ideas to stop the bleeding when it comes to the capital needs of the states," he said.

It might not be "profitable or prudent" to privatize every single rest stop, but states should be allowed to decide for themselves, Sargent said.

Politically Possible?
Ideas like commercialization as well as allowing new tolls on existing roads are seen as positive elements of the infrastructure plan by groups like the American Association of State Highway and Transportation Officials (AASHTO). Their political feasibility is another thing entirely.

"[The plan] does provide additional flexibility to states in areas like having the ability to toll interstates or commercialize rest areas, but, I’m going to put a big caveat with that, that’s a pretty difficult political proposition in and of itself," Bud Wright, executive director of AASHTO, said during a phone call with reporters Jan. 22 when details of the White House plan leaked.

The concept hasn’t gained much traction. Building America’s Future Educational Fund, a bipartisan group focused on infrastructure, has no official position on the matter, according to the group’s president, Marcia Hale.

"There are quicker and probably more productive ways to raise funds," she said.

NATSO and other affected groups successfully lobbied in 2012 to defeat 86-12 Sen. Rob Portman’s (R-Ohio) amendment to a surface transportation bill (S. 1813) that would have allowed commercialization along interstates.

They say they are ready to do it again.

"We’re taking the threat very seriously," Mullings said.