What do public-private partnerships add to priced managed lanes?

Priced managed lanes, otherwise known as express toll lanes, are separate lanes on urban highways that charge their users variable-rate tolls. The tolls are designed to limit use just enough so the managed lanes remain free-flowing, even during peak travel times when the general-purpose lanes are congested.

Priced managed lanes based on new capacity (e.g., adding new lanes to highways) are generally financed by the developer, which may be either the state department of transportation (DOT) or a concessionaire via a public-private partnership (P3). The transportation department typically issues long-term tax-exempt bonds to finance the project, while the public-private partnership entity uses a combination of tax-exempt private activity bonds (PABs) and an equity investment (on which it hopes to make a return).

Bond rating agency Fitch Ratings did a careful comparison of both ways of developing and financing priced MLs. In a 2026 report titled “U.S. Managed Lanes Poised for Growth with Strong Credit Fundamentals,” Fitch compared and contrasted 13 such projects: six government ML projects and seven P3 ML projects. 

Fitch Ratings uses two separate teams for this type of analysis. Its Municipal Infrastructure team analyzes and rates government-owned and operated managed lanes, while Fitch’s Infrastructure and Public Finance team analyzes and rates managed lanes developed and operated as long-term public-private partnerships.

Since Fitch has been doing these annual assessments for many years, its teams are well-positioned to identify and discuss changing trends. In its 2026 report, Fitch’s teams found that priced managed lanes (MLs) have earned somewhat higher ratings as they have matured and become more widely used. Fitch noted that, of the 13 ML projects that it rates, the median rating has changed from BBB- in 2016 to BBB+ today.

This positive shift is reflected in the median debt service coverage ratio. In 2021, they generated 2.6 times cash flow for every $1 in debt. By 2025, that rate increased to 4.3 times cash flow for every $1.

Another finding was that a significant fraction of managed lane customers use priced lanes even when the general-purpose lanes are not congested. Evidently, those customers appreciate the value of reliability in addition to the value of saving time.

The report includes a brief summary table comparing attributes of government ownership and public-private partnership ownership, including:

• Who the issuer is;
• The typical kinds of financing; and
• Individual project data.

The report also notes that the current expansion of priced managed lanes (MLs) into new states, such as North Carolina and Tennessee, is taking the form of public-private partnership projects. The report suggests that “P3s enable faster delivery of ML infrastructure while transferring or sharing financial risk to private partners.” This reduces the risk to state DOTs that have not previously implemented priced MLs.

Two important trends discussed in this 2026 report are the growth of the regional ML network and more government MLs shifting to dynamic pricing.

Some regional networks are government-owned, such as lanes in Southern California, the San Francisco Bay Area, and Denver. But other projects, including in Northern Virginia, are largely privately owned. And a few projects, such as Atlanta, are a mix.

As noted above, another trend is that government-managed lanes are switching to dynamic pricing (which the P3 projects use) instead of time-of-day pricing.

The Fitch data also show that while the P3 projects seek to maximize revenue, the government projects aim to strike a balance between maximizing throughput and maximizing revenue. The report notes, “Private developers have become extremely sophisticated at building revenue-maximizing facilities, incorporating design, pricing, and configuration expertise to deliver a world-class driving experience.” 

This latest Fitch annual report is a gold mine of data on the six government ML and seven P3 ML projects that Fitch rates. That is enough data to enable some interesting comparisons.

A small spreadsheet compares the six government and seven P3 projects. Most of the P3s have BBB or BBB+ ratings, while the government ones range from A- to BBB+. The length of the corridors averages 22.3 miles for P3s versus 17.9 miles for government projects. Significantly, the number of priced lane-miles averages 77.7 for P3s versus 38.1 for the government ones. Hence, the average P3 project has 3.5 priced lanes (which means some portions have four and others have two). The government-run projects average 2.2 priced lanes, which suggests that most are one lane in each direction.

The P3 projects’ larger size (more lanes and longer distance) suggests that building them costs significantly more than government projects, and the data support this. On annual revenue, the P3s average 3.8 times the government projects’ average revenue. The P3 projects’ considerably larger size requires significantly more revenue.

So what is the difference between the P3 and the government-managed lanes projects?

First, the public-private partnership projects are larger (in length and number of lanes), so their cost to construct is larger, but so are their benefits.

Second, the public-private partnerships design their projects to maximize revenue, while the government projects tend to maximize throughput or a combination of throughput and revenue.

Third, the P3 model finances larger projects, likely because P3 entities are willing to accept higher levels of risk.

The post What do public-private partnerships add to priced managed lanes? appeared first on Reason Foundation.

Source: https://reason.org/commentary/what-do-public-private-partnerships-add-to-priced-managed-lanes/