[photo credit: Purdue University]
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UPDATED> Per-mile tolling seen as best way to go

Sept. 13, 2013
Study argues electronic tolls could bridge massive Interstate funding gap

A new research study contends that toll revenues could cover “almost entirely” the roughly $1 trillion it will cost to reconstruct most of the deteriorating Interstate highway system over the next 20 years.

The study, conducted by the self-described libertarian and nonpartisan Reason Foundation, says that humongous construction cost would consist of nearly $600 billion in rebuilding roadways and another$400 billion to add capacity. 

“The first-generation Interstate system is wearing out,” writes study author Robert Poole, the foundation’s director of transportation policy.

“Most of the pavement has exceeded or is nearing its 50-year design life, meaning that nearly the entire system will need reconstruction over the next two decades," he continues. "In addition, more than a hundred interchanges are major bottlenecks, needing redesign and reconstruction, and about 200 corridors need additional lanes to cope with current and projected traffic.”

According to Poole, determining what to do about the crumbing Interstate must start with how it will all be funded.

“The need for massive investment… occurs just as our 20th-century highway funding system— based on fuel taxes and state and federal highway trust funds—is running out of gas," he argues. "Steady increases in vehicle fuel economy, the lack of inflation indexing of fuel tax rates, and political gridlock over increasing fuel tax rates all make it very difficult even to maintain current pavement and bridge conditions and prevent congestion from getting even worse

Poole says his study “shows that alternative financing, via all-electronic tolling [AET] is a feasible way to transform the Interstate system."

He explains that “to get a handle on the feasibility of toll financing, the study models a tolling system based on 3.5 cents per mile for cars and 14 cents per mile for trucks, indexed annually for inflation. Using state-by-state estimates of annual growth in travel by cars and by trucks, over a 35-year period, it calculates the net present value (NPV) of toll revenue and compares that with the net present value of construction and reconstruction costs.

“Overall,” he continues, “the NPV of revenue equals 99% of the NPV of cost, indicating that the overall system is likely to be toll- financeable.”

To make the transition to tolls “attractive” to highway users, the study proposes it be implemented on the principle of “value-added tolling.”

“That,” Poole writes, “means tolls would only be introduced in a corridor once it was reconstructed and modernized, designed to operate at a higher ‘level of service’ than today’s design standards call for.

“If a state has not yet replaced its per-gallon fuel taxes with a standard mileage-based user fee at the time Interstate tolls are introduced, the AET system will permit rebates of fuel taxes generated by the miles driven on the tolled Interstates, thereby avoiding ‘double taxation.’”

The study lays out numerous reasons why “per-mile tolling is a better highway user fee than per-gallon taxes”:

  • Per-mile tolls can be tailored to the cost of each road and bridge, rather than being averaged across all types of roads, from neighborhood streets to massive Interstates; this ensures adequate funding for major highway projects like Interstate reconstruction and modernization.
  • Per-mile tolling reflects greater fairness, since those who drive mostly on Interstates will pay higher rates than those who drive mostly on local streets.
  • If per-mile tolling is implemented as a true user fee, it will be self-limiting, dedicated solely to the purpose for which it was implemented (and enforceable via bond covenants with those who buy toll revenue bonds).
  • Per-mile tolling will guarantee proper ongoing maintenance of the tolled corridors, since bond-buyers and other investors legally require this as a condition of providing the funds.
  • Per-mile tolling also provides a ready source of funding for future improvements to the tolled corridor.
  • Toll financing means needed projects, such as reconstruction and widening, can be done when they are needed, and paid for over several decades as highway users enjoy the benefits of the improved facilities.
  • A per-mile tolling system using AET can easily implement variable pricing on urban expressways to reduce and manage traffic congestion.

However, Poole admits there is a major obstacle to putting in place nationwide AET: “The one needed enabler is permission from Congress to begin this transition.”

He notes that, save for a limited pilot program, federal law currently forbids using toll revenues to finance the reconstruction of Interstates.

“This situation could be changed by Congress in the 2014 reauthorization of the federal surface transportation program,” Poole advises. “The one needed step is to ‘mainstream’ the tolled-reconstruction pilot program, so that it is (1) available to all states, and (2) applicable to all of a state’s Interstate facilities.”

Speaking at a news conference this week held to announce Poole’s report, Patrick D. Jones, executive director & CEO of the International Bridge, Tunnel and Turnpike Association (IBTTA) called it a serious effort to examine the costs of reconstructing and widening our 50 year old Interstate highway system using all-electronic tolling.”

“When the Interstate highway system was first being built in the 1950s, the emphasis was on paying to get it built, creating an interconnected national system and creating immediate jobs and economic growth,” Jones remarked. “The Highway Trust Fund is one valuable tool to maintain roadways, bridge, and tunnels, but it is not funded at a level needed to address the rebuilding of our Interstate system.

“The recommendations outlined in the Reason Foundation report are critical to helping bridge the huge funding gap to fund our nation’s transportation infrastructure,” he added. “Tolling is one proven funding option to address this huge gap.”

On the other hand, the American Trucking Assns. (ATA) declared this afternoon that the reportunderstates the public opposition to tolling and plays down safety and other risks of increased tolling.” 

“Despite what toll advocates and financiers try and tell the public, tolling existing interstates is a wildly unpopular concept,” ATA president & CEO Bill Graves remarked. “Voters and lawmakers in Virginia and North Carolina have demonstrated this vividly in recent months-- the public continues to see tolls as an intrusive and inefficient tax.”

 According to ATA, the report relies on “several faulty assumptions”:

  • “It assumes 5% collection costs for the entire system based on a study of four existing urban toll roads. The vast majority of the Interstate system is rural and therefore has lower volumes, so collection costs are bound to be much higher on average.”
  • “The report claims motorists prefer tolls to higher fuel taxes, based on surveys asking about tolls only on newly built lanes, not on existing Interstates.”
  • “Despite having the authority to toll existing Interstates since 1991, no state has done so (other than HOV lanes) due to public opposition. It’s preposterous to assume that the public would ever accept tolls on the entire system when states can’t get them to go along with tolling even a single highway.”
  • “It projects diversion rates off the Interstate system of 10% for cars and 20% for trucks, yet fails to look at the additional infrastructure, safety, congestion and air quality impacts.”

Poole’s full report, titled “Interstate 2.0: Modernizing the Interstate Highway System Via Toll Finance," is available online by clicking here.

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