Two schools of thought dominate discussion of urban development. Central planners favor confined urban development and greater reliance on public transit, which will lead to less energy consumption and emission of pollutants. Planners want less new highway construction (or even none at all), more funding for public transportation and more government restrictions on land use. In contrast, conservatives generally argue that most Americans prefer low-density living with bigger lots and other suburban amenities. Conservatives generally favor more government spending for highways in the name of "economic development" and don't generally complain about urban sprawl or the economic decline of central cities.
But this debate skips over an important point. The vast majority of America's urban population prefers to live in the suburbs. Indeed, suburban development predates urban expressway construction; urban growth followed the paths of new trolley and interurban train lines. There's little reason for policymakers to be concerned about suburban sprawl or use government power to discourage it.
Taxpayers, however, shouldn't have to pick up the tab for other people's preferences for suburban living, yet that has been the effect of the federal interstate highway program since the mid-1950s. The construction of free beltways and expressways has subsidized suburban development. The "correct" or efficient amount of suburban development is the amount that consumers are willing to pay for so long as they bear the incremental costs of land acquisition and expressway construction.
To be sure, user charges and gasoline taxes approximately equal the construction and maintenance costs of major highways. But the financing of urban beltways and radial expressways from the Federal Highway Trust Fund represents a subsidy to suburban sprawl -- because all highway users pay taxes in proportion to their gasoline usage, but urban beltways and expressways are the most expensive to build and maintain. And because the number of lanes of urban highways is based on peak-period rather than off-peak travel needs, the cost of constructing and maintaining urban expressways should be paid by peak users only. For example, a 1975 study showed that urban interstate highway costs averaged about 1.3 cents per vehicle-mile; however, the cost of serving peak-hour users in Boston and San Francisco was as high as 10 to 30 cents per vehicle-mile. If the users of such roads during peak times had to pay for their costs, the supply of and demand for such roads would be much less.
What can be done? The evidence suggests that private highways offer better growth management than do their public counterparts and are more sensitive to local property owners. A private highway operator could buy land around an expressway interchange for later development. He could receive donations of right-of-way from real estate owners who would benefit from the highway or form joint ventures with land developers to finance highway projects. Such relationships would promote suburban development only when the cost to landowners in donated land was exceeded by the later increase in value of their remaining land. Costs would not exceed benefits. In addition, taking government out of the highway business would prevent the political manipulation of highway construction decisions, through which political donations lead to additions to highway capacity that are not cost-effective.
Two prominent examples of private highways illustrate their comparative ability to meet local values and control suburban sprawl. In California the state highway agency approved private development of the Mid-State Tollway on the eastern fringe of the San Francisco-Oakland area. Bay area residents, however, strongly opposed the tollway and favored of a Bay Area Rapid Transit line built nearby to serve the area. As a result, the highway developer abandoned the northern leg of the project. Had a public agency been building the highway, it could have invoked eminent domain authority to build the road in spite of political opposition.
In contrast to California's experience with the Mid-State Tollway, environmentalists in Virginia endorsed the private development of the Dulles Greenway toll road, which opened in 1995. Local officials believe that the tollway is essential to focusing development in the Dulles-to-Leesburg corridor, thereby easing development in the rural, western part of Loudon County. Interestingly, the same environmental group that ran a Disney theme park out of the area in 1994 -- the Piedmont Environmental Council -- supported the Dulles Greenway project because of its potential for growth management.
In short, private roads offer far more potential for managed growth than do highways owned by public agencies. Private business relationships offer better outcomes than do relationships between the government and the private sector. That is because private interests cannot alter other private owners' decisions without fully compensating them. In contrast, government can use its power to take property to force a public highway through an unwilling community without consent or full compensation.