Bob Poole, a longtime advocate for highway user fees, in a recent Reason Foundation article, questioned the growing trend of public-private partnership (P3) procurements that include significant concession fees paid by private developers for the right to design, build, finance, operate, and maintain managed lane facilities. He argues that these concession fees ultimately lead to higher tolls and risk reinforcing the perception that managed lanes are "Lexus Lanes."
Given Bob’s background and knowledge in this area, his perspective deserves thoughtful consideration. Public agencies should always ask whether procurement decisions maximize value for taxpayers and improve outcomes for the traveling public. But the issue is more complex than simply equating a concession fee with higher tolls.
First, it is important to recognize that concessionaires do not establish the procurement model - they compete within it. Traffic and revenue risk procurements are fundamentally integrated technical and financial competitions. The financial proposal, including any concession value offered to the public owner, is the product of the team's technical solution, lifecycle efficiencies, financing strategy, operational approach, and willingness to assume decades of traffic and revenue risk. Those elements cannot be separated because each directly influences the others.
Equally important is understanding why public agencies have increasingly embraced this procurement model. In our experience, every agency we've worked with has had the same fundamental objective: deliver a needed transportation project and get it open to serve the traveling public. If that project can be financed without requiring a public subsidy, even better. And if a competitive procurement creates additional value that can be reinvested in other transportation priorities, that represents an even greater public benefit. The objective has never been to collect an upfront payment for its own sake. The objective is to maximize the long-term value of a public asset.
Transportation agencies today face an enormous funding challenge. Traditional fuel taxes and vehicle registration fees are becoming less effective as vehicles become more fuel efficient and increasingly electric, while infrastructure needs continue to grow. Every state has more transportation priorities than available funding and the gap is ever increasing. In that environment, agencies have a responsibility to consider every available funding option.
When a competitive procurement reveals that the private sector is willing not only to finance, design, construct, operate, and maintain a facility, but also return substantial value to the public owner, those proceeds become an additional source of transportation funding. Rather than relying on additional public funding, those proceeds can be reinvested in other corridor improvements, bridge replacements, safety projects, transit investments, or entirely new transportation initiatives that otherwise might wait years for funding. The concession fee is not an end in itself; it is another mechanism for accelerating transportation investment.
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And, it’s also important to remember that the public benefit in a revenue-risk P3 is rarely limited to the initial concession payment. All contemporary concession agreements include revenue-sharing provisions that allow the public owner to participate in any future upside if traffic and revenues exceed agreed upon thresholds. In other words, these procurements often provide both immediate capital that can be reinvested in today's transportation priorities and a continuing revenue stream that can support future investments over the life of the concession. Viewed in that context, the value proposition extends well beyond a single upfront payment.
The underlying economics are also more nuanced than they often appear. Concessionaires are not simply adding a concession fee to future toll rates. Their investment decisions reflect expectations regarding lifecycle performance, financing efficiencies, operating innovations, construction strategies, long-term asset management, and traffic demand over concession periods that commonly extend 50 years. The concession fee is one outcome of that broader business case—not necessarily the driver of future toll levels.
In fact, the greatest commercial risk in these projects is rarely construction. It is traffic and revenue performance. The private partner assumes the risk that actual traffic demand may not materialize as forecast over decades of operation. That risk fundamentally shapes both the technical and financial proposal and is one of the principal reasons these procurements are so competitive.
It is also worth remembering the purpose of managed lanes. Dynamic tolling is designed to manage demand and preserve reliable travel times – not generally to maximize revenue. The balance of throughput versus revenue maximization is a toll policy decision made by the governing agency based on overall project considerations. If tolls are set so high that drivers avoid the facility, revenue declines, congestion relief diminishes, and the project fails to achieve its transportation objectives. Successful managed lane operators seek the balance that maximizes corridor performance, customer use, and long-term revenue together. Those objectives are aligned, not contradictory.
Public agencies also do not accept concession proposals without question. They rigorously evaluate traffic and revenue forecasts, financial assumptions, lifecycle costs, operational plans, and long-term maintenance commitments before awarding a concession. A concession fee should never come at the expense of long-term mobility or sound public policy.
Maybe we need to consider a broader question here: “what do public agencies really want and expect from transportation partnerships”?
The objective of a revenue-risk P3 is not simply to deliver the lowest initial construction cost. It is to maximize the long-term value of a transportation asset by integrating design, construction, financing, operations, maintenance, and decades of traffic and revenue risk within a single accountable private sector partner. That integrated approach encourages innovation, lifecycle optimization, and better customer outcomes - capabilities that often create value beyond what can be achieved through a traditional delivery model.
When that additional value is realized, it may be reflected in a concession payment to the public owner. But the concession fee is the result of the value created – not the objective of the procurement. Limiting the private sector's ability to optimize the project in pursuit of maximizing long-term value risks leaving public value on the table. More importantly, it may also mean delivering a facility with less operational flexibility, fewer lifecycle efficiencies, and ultimately a lower level of service for the traveling public.
Reasonable people can disagree about where that balance should be. But it would be a mistake to conclude that every concession fee necessarily results in "Lexus Lanes." The relationship among concession value, toll policy, traffic demand, corridor performance, and public benefit is considerably more sophisticated than that.
Ultimately, the measure of success should not be whether a concession fee exists. It should be whether the procurement delivers better mobility, stronger stewardship of public infrastructure, sustainable funding for future transportation investments, and greater long-term value for taxpayers. If it does, then the public has been well served.
Steven DeWitt is the Chief Executive Officer of ACS Infrastructure and the former Chief Engineer of the North Carolina Turnpike Authority.