Free Markets – part II (Tolls)

This week I first watched Republican Congressman Frank Wolf, next Independent Scott York, chairman of the Board of Supervisors, Democrat Steve Miller candidate for the Board of Supervisors, and a parade of other politicians from all parties chastise the owners of the Greenway for proposing a toll increase which they characterized as “highway robbery”. All the while 3 or 4 television cameras were rolling, and a larger group of reporters were busily scribbling notes. No one should be surprised at the position every politician took – it’s an election year! The politicians were followed by some of the same activist “ANNs” that are regular speakers at public hearings and other such meetings. (This word has become an acronym for Against, Never, No. I have never heard this group speak in favor of anything.)

As I watched this show, finally a speaker who I thought I could relate to spoke. This man impressed me with his education and knowledge of business and economics. He discussed rates of return, various benchmarks like the S&P 500. But soon he lost me. I usually can follow this kind of logic as that’s what I do for a living, and I have a long-ago degree in economics. He seemed to draw the conclusion that a 15% return on investment was excessive and more than you can get investing in the S&P 500. He is right on the last point. But if everyone just invested in stocks and bonds, we would have no risk capital, and no Microsoft’s, Apple’s, or the zillion small start up companies that make Loudoun County what some call the Silicon Valley of the east.

Maggie Bryant took a huge risk when she invested in the Greenway, almost 20 years ago. So did every investor since then. I heard that TRIP II, the company that owns the Greenway made its first profit in 2005, over ten year after the road opened. That sounds like risk to me - a risk for which any sophisticated investor would expect double digit returns well above 15%. “Return on investment”, or ROI in geek speak, is based on three variables, what you invest, the amount you receive when you sell, and the time in between. If you double your money in two to three years, the ROI is very attractive. If you double your money in 15 years, you should have invested in a government bond. The Greenway investors have never doubled their money or come close to it.

Having said that, I don’t believe anyone, private citizen or government, can say what the right price should be. However, as my hero Warren Buffet would say, Mr. Market can and will. In a free market, prices will adjust to the law of supply and demand. Our roads are a free market, not a monopoly. If one road is crowded or dangerous, we use other roads. When I lived in Maryland in the 1980’s I drove to work in Leesburg on Georgetown Pike. When I saw several bad accidents, I opted for Rt. 7. Now I use the Greenway most of the time because it is safer and faster. Would I use it if the toll was $4? I don’t know, but I would have a choice.

Remember that the Greenway is a private road. The owners pay for everything – police patrols, snow removal, mowing grass, new lanes, and toll plazas. Notice the two new bridges and exits at Shreve Mill Road/Crosstrail Boulevard and at Battlefield Parkway. These exits will be completed and opened long before our governments build the roads to the bridges. And that is exactly what happened with the Greenway – a road before its time, and the finest road in Loudoun County, and probably all of Virginia.