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Report, competing letter fire up debate over full-service centers on interstates

Reason Foundation wants full centers on highways, but group led by Natso tells Buttigieg it remains opposed

The issue of allowing service areas on interstate highways that would carry a full range of amenities, long a contentious battle in the trucking industry, has been revived again by a paper issued by the Reason Foundation.

It comes at the same time Washington is focused on infrastructure, and the Reason paper, written by noted free-market transportation analyst Robert Poole, sees private money as a way of providing funding for that work.

Just about the time Poole and Reason were releasing the report earlier this month, a group led by the National Association of Truck Stop Owners weighed in with its opposition to permitting full truck stops on the interstate highway system. (Full-service stops can be found on those parts of the interstate system that are state-controlled, like in Maryland and Delaware.)

In a letter to Secretary of Transportation Pete Buttigieg, signed by 15 trade associations with NATSO at the top of the list, the groups urged Buttigieg “to protect the longstanding ban on commercializing Interstate rest areas as you consider policies to incentivize investments in America’s infrastructure and reauthorize surface transportation programs.”

The report by Poole targets the current state of the interstate highway system, referring to a 2018 study that said “most of the Interstate system is nearing the end of its useful life and needs to be reconstructed and modernized for the 21st century.” The report says that study did not mention what Poole saw as inadequate rest areas now on the interstates, which are important parking resources for trucks — with no charge — but usually have few services beyond a rest room and some vending machines.

The Reason report “suggests that a 21st-century Interstate system should have state-of-the-art service plazas in addition to new pavements, improved bridges and redesigned and rebuilt interchanges in many areas.”

Poole’s report identifies two problems specific to truck drivers under the existing system: a shortage of overnight parking and what he says is a “trend” of states closing some of their on-highway rest areas because of budget cuts. He cites Iowa’s plan, announced last year, to close eight areas.

Poole also says there is another need looming: recharging vehicles that run on alternate fuels like hydrogen and liquefied natural gas.

The report reviews several parking solutions, like apps and reservation services. But as Poole notes, they are “only seeking to make full use of existing (Poole’s emphasis) parking slots, which are mostly at truck stops and highway rest areas. That is part of the problem.”

The funding mechanism for those improvements suggested by Poole? Public-private partnerships (P3), where the right to construct a full-service plaza on an interstate highway helps provide funding for the improvements needed for the highway. Poole cites the so-called P3 contracts as already having an impact on service plazas in those states where state control of the roads allow on-highway plazas. He cited Delaware, Florida, Indiana, New York and Connecticut. 

Poole says the P3 agreement would cover 30 to 35 years, which is standard in many highway-related P3 deals. The contracting party puts up all the funds for the project, like a toll road or bridge, but collects the bulk of the revenue also, to compensate it for its costs as well as a profit on top of that. The state would receive a portion of the money as well.

P3 deals are controversial. Some states prohibit them completely. An argument against them is that since no entity can borrow at a lower interest rate than a state, except for the federal government, the cheapest way of funding them is for the state to borrow money for the long-term improvement at that cheaper rate. If there is revenue tied to the infrastructure to be built — like a service plaza — than the state can collect it.

The argument against that is that states with budget squeezes can have difficulty tack;ing those new interest payments on top of their existing financial requirements. Additionally, long-term maintenance and upkeep often fall victim to further budget problems; witness the closures in Iowa. 

The P3 is set up so that for the outside contractor to receive money, it must keep up the initial project, be it a bridge, a toll road or something like a service plaza. The argument in favor of P3 contracts is that the long-term maintenance is assured. 

“Over the past decade, many toll roads have rebuilt and modernized their service plazas, often using long-term (P3) procurements in which a competitively selected company or consortium finances the modernization based largely or entirely on the projected stream of commercial revenues,” the report said.

The list of companies that oppose any sort of growth in on-highway service centers includes several other groups that sell gasoline and diesel, such as the National Association of Convenience Stores. It also includes the National Tank Truck Carriers trade group and two lobbies considered heavyweights in Washington: the National Retail Federation and the National Restaurant Association.

The coalition’s arguments are familiar, since the possible expansion of full-service rest stops on interstate highways has been a long-simmering issue. 

With the network of existing restaurants and service centers developed near the interchanges of the highway system as a backdrop, the coalition says in a subhead: “Commercialized Rest Areas Will Hurt Private Businesses.”

Reason’s suggested P3 advocacy is not mentioned in the report, and it isn’t clear if the coalition members knew the Poole report was coming. The argument that the NATSO-led group makes is that existing businesses will get hurt by the change, but the impact is more than just a transfer from existing operations to new ones. The coalition argues that while the profits of existing businesses are revenue sources for local governments, switching a lot of that business to on-highway service centers would “redirect tax revenue from localities to state capitals,” since it would be the state that would share in the stream of revenue from the on-highway service center. 

“When the government competes with private business in this way, it results in a monopoly, undermining the free market and raising prices for consumers,” the coalition letter says. “In many rural communities located near Interstates, gas stations, restaurants, convenience stores, truckstops, and hotels represent the largest local taxpayers, contributing more than $22.5 billion in state and local taxes.” 

The letter also takes on two of Reason’s issues — parking and alternative fuel supplies — arguing the existing truck stop sector is better equipped to meet those needs. It says the existing network of parking spots will not be fully replaced by parking spots at the full-service centers, though it doesn’t spell out the math used to reach that conclusion. 

As far as alternate fueling capabilities, the coalition says its members have made a significant investment in providing those services, but “if such alternative fuels were made available at rest areas on the Interstate right-of-way, it would discourage the private sector and these off-highway business from making such investment and ultimately hinder growth in these alternative fuels.”

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John Kingston

John has an almost 40-year career covering commodities, most of the time at S&P Global Platts. He created the Dated Brent benchmark, now the world’s most important crude oil marker. He was Director of Oil, Director of News, the editor in chief of Platts Oilgram News and the “talking head” for Platts on numerous media outlets, including CNBC, Fox Business and Canada’s BNN. He covered metals before joining Platts and then spent a year running Platts’ metals business as well. He was awarded the International Association of Energy Economics Award for Excellence in Written Journalism in 2015. In 2010, he won two Corporate Achievement Awards from McGraw-Hill, an extremely rare accomplishment, one for steering coverage of the BP Deepwater Horizon disaster and the other for the launch of a public affairs television show, Platts Energy Week.