When Michigan’s snow and cold give way to summer, people from across the state and nation take to state roads hoping to enjoy a few months of comfortable outdoor recreation. Along the roads they travel from Southeast Michigan to the Tahquamenon Falls — and everywhere in between — are restroom areas owned and run by the state. Michigan could reap great benefits from selling or leasing these rest areas to for-profit firms. Either route would require a change in the law, which currently prohibits such sales.
The best solution would be to sell off all 68 rest areas and 13 “Welcome Centers” owned and operated by the state. The value of the land itself may represent a gold mine for state coffers. Selling the rest areas could generate substantial one-time revenue, eliminate the $6.7 million annual cost of operating the sites and avoid repair costs. In addition, the sale would create new property tax revenue streams for local and state governments.
Selling every one of Michigan’s rest areas and welcome centers would also eliminate any “capital outlay” costs the rest areas may incur. Capital outlay is an expenditure made to improve old buildings or create new ones. This is an important factor to remember because many rest areas were built in the 1970s and 1980s and are in need of major repairs. The money otherwise spent on these facilities could be reinvested in some of Michigan’s roads.
Selling Michigan’s rest areas also could improve services. Many of these properties are in ideal locations that would be coveted by for-profit companies. A developer could bring in a Pizza Hut restaurant, Speedway gas station, and Starbucks coffee shop — and the developer would be responsible for maintaining the lavatories, lawn, parking facilities and every other component of the rest area.
There are a number of hurdles that would have to be cleared, and questions answered, before the state should and/or could proceed with such a plan.
Both federal and state statutes currently prohibit using state rest areas for commercial purposes. The one exception to this is for vending machines, and even those may be operated only by the Michigan Commission for the Blind.
Of course, some of the rest area properties are not in ideal locations, or are relatively small, and the state might have trouble finding a vendor willing to purchase such a property. The state may overcome objections to poorly located or small properties with the simplest of economic mechanisms: price. There is a price at which the state (or anyone) can sell just about anything. Unattractive, old, inconvenient rest areas could be sold if the price is right. If the state could tolerate the closing of some rest areas it could make currently unappealing sites more saleable because the new owner would have more options for employing the property.
The American Association of State Highway Transportation Officials (AASHTO), an organization of transportation officers, is currently working to see the law amended to accommodate privatization. “With the overall shortage of highway funds not meeting current needs, the AASHTO member departments have supported commercialization as a way to help rebuild and maintain the facilities in order to remove this continued expense to the public,” states Ken Kabetsky, Program Director for Engineering at AASHTO.
Rep. Frances Amos, R-Waterford, introduced House Bill 4883 into the state Legislature in 2003, which would amend the 63-year old statute that currently prohibits commercial activities at rest areas on Michigan highways. (See www.MichiganVotes.org to track progress on the bill.)
A state House Fiscal Agency (HFA) bill analysis reports that the 16 “service plazas” along the Ohio Turnpike generated $12.3 million in revenue to the state of Ohio in 2002. The Commission that operates the Ohio Turnpike bids out the right to provide services (such as food) to vendors. The vendor’s rent is, according to HFA, based on the percent of total sales generated by the vendors at each location — the higher this percentage, the lower a vendor’s rent. Ohio can engage in these commercial activities because the businesses are part of a turnpike and not a state highway. If Michigan were to commercialize its rest areas it could turn them from money losers to money winners.
As with any privatization, conditions of a sale or lease can dispose of many objections to privatization. In this case, if the state wanted to ensure a minimum number of bathrooms and parking spaces for use by the public it could do so by making these conditions of any sale or lease of the properties to the new owner or manager.
Michigan need not even relinquish management and ownership of every property to achieve savings through privatization. The state could decide the best approach is to privatize its most attractive properties, retaining the rest. Regardless of which approach lawmakers choose, privatization of Michigan’s rest areas would allow the state to save money, generate additional revenue, and concentrate more on keeping roads maintained, while leaving such ancillary duties as bathroom maintenance to others.
James Hohman is a research assistant with the Mackinac Center for Public Policy.