American Roads Can’t Match French Highways Paved by TollsFrancois de Beaupuy
For seven weeks this fall, asphalt pavers worked nights and weekends to renovate the motorway between Paris’ Charles de Gaulle airport and an amusement park devoted to Asterix, the Gallic comic-book rebel beloved by generations of French children. By Oct. 31, they had wrapped up the work on schedule, and traffic now flows along the four-mile stretch of highway.
A few miles to the north lies the source of funding for the project -- and the reason France’s autoroutes are in better shape than most of the U.S. network: a toll booth. Drivers must pay to use 78 percent of major French highways, compared with about 3 percent of the National Highway System in the U.S.
“It’s no secret that the key to the battle is money, and French highways are well funded with tolls,” said Arnaud Ayme, in charge of transport infrastructure at Sia Partners, a management consultancy in Paris. “The quality of U.S. highways is clearly lower.”
France -- perceived by many Americans as a redoubt of baguettes, berets, and left-leaning bureaucrats -- ranked No. 4 globally for the quality of its highways, according to the World Economic Forum’s latest Global Competitiveness Report. Only the United Arab Emirates, Portugal and Austria rank higher as France is a dozen places ahead of the U.S., where the debate over financing has undermined efforts to rebuild crumbling roads and bridges.
Most French motorways are tolled at a cost per mile that’s roughly double the U.S. average. And their operators can raise fees each year, giving them ample money for upkeep. Maintenance of American highways, by contrast, is funded primarily by taxes such as a per-gallon levy on gasoline that hasn’t kept up with rising costs.
With tolls, French highway authorities “don’t have to fight for money each year by going to elected officials,” said Robert Poole, director of transportation policy at the Reason Foundation, a non-profit in Los Angeles that advocates free markets. It’s “what the United States should have done with the interstate highway system.”
The other key to France’s success is effective oversight, according to Sylvain Duranton, a Boston Consulting Group partner in Paris. When the government sold most of its highway operators in 2006, the contracts called for rigorous inspections and swift fixes when those checks uncovered flaws with tunnels, bridges or roadways.
“Highway concessions are a French political success, with strong and very detailed regulations,” Duranton said.
Good roads don’t come cheap -- and French drivers have bristled at rising tolls. The main highway operators are allowed to increase prices by 0.7 times inflation per year, but can raise rates even faster if they agree to invest more than initially planned to upgrade the network. As a result, while inflation since 2006 has been 13.6 percent, tolls have gone up by 16.9 percent, according to French anti-trust regulators.
“We could easily cut tolls by 20 percent while maintaining quality and a satisfactory return for shareholders,” said Pierre Chasseray of French motorist lobby 40 Millions d’Automobilistes. “What bothers me is that we’re in a system designed by the state that doesn’t benefit drivers.”
Road operators say toll increases have gone toward new highways, improved safety, electronic-payment systems and better rest areas. They say that government approves all their toll increases, and they say prices for trains and urban transit have risen even faster.
“Company management is more efficient than the public system,” said Pierre Coppey, chief operating officer of Vinci SA, France’s largest toll-road operator, with 4,386 kilometers (2,725 miles) of highways.
Coppey said his company’s tolls are fair, given that Vinci is investing hundreds of million euros on motorways that are far safer than smaller national roads. He also said tolls are preferable to taxes because they’re paid by truckers and foreign drivers, and not just French taxpayers.
Tolls in France average 10.5 euro cents per kilometer ($0.21 per mile), versus 6.5 euro cents for Italy’s largest tollroad company, according to Sia Partners. U.S. tolls average less than $0.10 per mile in most states, according to a 2013 report by the National Conference of State Legislatures.
10 KM = 10 Euros
Due to regulatory changes introduced in 2000, which banned subsidizing new highways with tolls from older ones, some French roads are far more expensive than the national average. The 150-kilometer A65, opened in 2010 in the southwest, costs 22 euros, or almost 15 euro cents per kilometer. And 10 kilometers on the A86 Duplex underground motorway west of Paris, completed in 2011, can be as much as 10 euros at peak times -- which builder Vinci is betting drivers will pay to save 35 minutes at rush hour.
Operators say they deserve to be rewarded for the risks of declining traffic, rising construction and maintenance costs, and potential trouble refinancing their combined 31 billion euros of debt, representing about 15 times their net income. Last year, truck traffic on motorways was still 7.7 percent lower than in 2008 as France has yet to recover from the global economic crisis. Car traffic, by contrast, is 7.2 percent above its 2008 level, helped by a growing population.
Bruno Lasserre, chairman of the French competition authority, says rising tolls have far outstripped operators’ costs as they have cut jobs, benefited from lower interest rates, and may have pared maintenance spending.
The combined net income of the seven biggest toll-road companies operated by Vinci, Eiffage SA and Spain’s Abertis Infraestructuras SA has risen 47 percent since 2006, and the net margins of their highway operations ranged from 20 percent to 24 percent, according to Lasserre’s office.
“There are no serious risks that justify such profitability,” whether it’s traffic, tolls or debt, Lasserre said on Sept. 18 as he presented a 154-page report about the highway sector.
The government considered a tax increase on highway operators, an order requiring them to lower tolls, and even a proposal to make highways free on weekends. Those were rejected because they would be difficult to achieve without compensating the companies. Instead, the government is seeking to renegotiate its contracts with the operators, giving them longer leases in exchange for more investment.
The financing debate heated up after shipping companies and small business owners rebelled against a planned trucking tax on 15,000 kilometers of smaller national roads. Protesters earlier this year vandalized equipment such as video cameras at automatic checkpoints intended to assess the new tolls.
The system, based on beacons installed in trucks and satellite tracking, had been expected to raise 940 million euros a year, and was supposed to help finance renovation of smaller public roads, railroads and harbors. Faced with the protests, the government dropped the idea in favor of higher taxes on diesel.
Soon, the debate may turn to smaller regional roads, which local governments are responsible for maintaining. As the central government cuts back subsidies, towns and regions may soon run short of cash for road maintenance, according to consultancy PwC. Vinci and Eiffage -- both also leading construction companies -- have said cash-strapped local governments are paring road works.
“We’re going to have a growing difference between leased and state-run highways,” Philippe Nourry, the head of Eiffage’s toll-road operations, said at the group’s earnings presentation in August. Without sufficient funding for smaller roads, “we’ll end up with a two-speed network” in terms of quality.