Concessions, tolls, maintenance….Who pays?

Julián Arenas Illa - Director of Innovation and Transport / Logistics– Institut Cerdà

It is well known that many of the contracts (concessions) for the operation of motorways are coming to the end of their term. Apparently, the public administration does not intend to extend or renew these concessions although, to date no justifications or more detailed explanations have been made public. In any case, whatever decision is made, this situation requires considerable preparation and planning and there is no place or time for improvisation. In order to be sure to be secure, administrative processes, especially complexes ones that require legal and financial work, always take a long time. It is understand that the public administration is already planning the necessary actions to apply the solutions in the required time, actions that must, necessarily, achieve a broad social consensus.

The terms “extend” or “renew” seem to have been banned in this context, possibly without much solid argumentation. It certainly does not help that historically the public administration has resorted to extending concessions in order to facilitate new, necessary and essential investments as the infrastructures matures (to finance additional lanes, extra junctions, etc.). This has simplified the administrative proceedings, and, it has to be said, kept the financing issues out of the public eye because any financing provided by the concessionaire does not count as public debt. Furthermore, it conveniently resolves a complex conflictive situation: how the public sector should administer an infrastructure, the operation of which has been conceded to the private sector. The drawback is that the conditions are pre-established in the existing contract, some of which date back many years, with the result that this type of action does not always turn out to be the particularly advantageous for the public administration.

But, what is really the problem? When our politicians state that the concessions will not be renewed, the immense majority of the public thinks that the existing tolls will be abolished. This may be true but we must take into account a fundamental aspect: the tolls cover not only the repayments of the original investment, but also the costs of maintenance and upkeep that guarantee the users’ safety. This means that, if existing tolls are abolished once the concession is finished, someone will have to finance those costs and, if the toll-free solution is chosen, that someone will be the public sector. In other words, the public administrations must dedicate additional budget for this, to the detriment of other budgetary items, which are also deemed to be high priorities. This is clearly not an optimal solution from a social or an economic perspective, regardless of current state of the public sector finances.

Perhaps the most reasonable and sustainable solution, although it has not been subject to much debate, would be to maintain the current concession system, because its effectiveness and contribution to the development of the country is beyond doubt. The tolls would remain but would be less as they would only have to cover maintenance and replacement. In this way, public budgets would not be affected and the infrastructure would be paid for by those who use it. However, this solution, like any other, also requires preparation and broad consensus by the administration.

There is an endemic problem on the horizon that remains to be solved and seems likely to remain unsolved due to a lack of courage. This is the need to harmonise the toll system. That is, establish “soft” tolls uniformly, across all high-capacity roads, so that they generate enough resources to cover the costs of the system, without having to resort to public funds, as is done currently. This is a challenge for our leaders, which will have to be addressed sooner or later.

In any case, to guarantee the necessary continuity of the service, we hope that the different administrations are already planning and preparing alternatives for this new stage of the concession system of the motorway network.

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Concessions, tolls, maintenance….Who pays?

It is well known that many of the contracts (concessions) for the operation of motorways are coming to the end of their term. Apparently, the public administration does not intend to extend or renew these concessions although, to date no justifications or more detailed explanations have been made public. In any case, whatever decision is made, this situation requires considerable preparation and planning and there is no place or time for improvisation.

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