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Rights and Wrongs of Interstate Tolling

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Now that Congress has added use-it-or-lose-it provisions to the federal pilot program that allows three states to each replace a worn-out Interstate highway using toll finance, interest in the subject is increasing. Last fall Missouri DOT held a workshop (at which I spoke) on the potential of tolling and long-term public-private partnerships (P3s) for large-scale projects such as Interstate replacement. Missouri holds one of the slots in the pilot program (for aging I-70); the other two are held by North Carolina and Virginia, both for I-95.

I’m aware of three other states where there is serious interest in toll-financed Interstate reconstruction: Connecticut, Rhode Island, and Wisconsin.

In Wisconsin, the legislature last year appropriated funding for a year-long study of the cost and funding alternatives for reconstructing all the state’s Interstate highways over the next several decades.

Connecticut’s governor, Malloy, for the past two years has been beating the drum for increased transportation infrastructure investment, such as to widen and reconstruct most of I-95 and I-84 (especially the obsolete viaduct on I-84 through downtown Hartford). 21 century all-electronic tolling has been seriously discussed as a potential funding source, with recent discussions also now mentioning mileage-based user fees.

The most controversial is Rhode Island’s proposed proposal—a 10-year, $4.7 billion plan that would, among other things, replace or refurbish a number of important bridges, on and off the Interstate system. Part of the proposed financing would be a $600 million revenue bond issue, backed by toll revenues from heavy trucks (but from no other users). The state Senate has already passed one version of this plan, which is being strongly opposed by the Rhode Island Trucking Association.

I’m troubled by both the Connecticut and Rhode Island discussions, neither of which seems to take the interests of highway customers seriously. In Connecticut, tolling appears to be viewed by public officials as a general transportation revenue source, rather than a fee that highway users pay so as to produce improvements for those same highway users. The tolls-as-cash-cow idea, mostly confined to the Northeast, has led to open season on toll-payers to support, for example, the canal system in New York, pet “economic development” projects in New Jersey and Pennsylvania, and a multi-billion dollar heavy rail project in northern Virginia. If those projects are sensible public-sector investments, they should be paid for out of general taxation, not by the captive customers of tolled highways.

Highway user groups such as AAA and ATA (American Trucking Associations) have litigated against such pseudo-taxation, with current AAA litigation in process against the Port Authority of New York and New Jersey and the virtual certainty of ATA litigation if the truck-only-tolling measure is enacted in Rhode Island. And highway user opposition may well lead to legislative votes against such plans.

A far wiser approach would be to offer highway customers a genuine value proposition : if you want a widened I-95 with state-of-the-art bridges, here’s what it will cost to build and maintain, and if we charge tolls only high enough to cover the capital and operating costs of that project (and use all-electronic tolling to make the tolling itself customer-friendly), you will get this improved highway in the near term, not 20 or 30 years from now, if you’re lucky.

The deal could be sweetened by taking seriously highway user groups’ opposition to “double taxation”—paying both fuel taxes and tolls to use a tolled highway. With all-electronic tolling, the system knows the vehicle owner (in order to send the bill) and the type of vehicle. So in addition to calculating the toll for the miles driven on that road, the tolling software could also calculate how many gallons were used for that trip, multiply by the state fuel tax rate, and provide a fuel tax rebate. Legislators and the state DOT’s initial reaction will be to balk at giving up any fuel tax revenue. But since a per-mile toll rate high enough to cover the capital and operating costs of the rebuilt Interstate will typically be about twice the per-mile yield of the state fuel tax, the state will come out ahead, even after providing the fuel tax rebate. And this provision could well persuade highway user groups to support toll-financed Interstate replacement.Between litigation and political opposition, I don’t think the odds of expanded tolling are very high. But a genuine value proposition offered to Interstate users could turn opposition into support.

(This article first ran in the January issue ofTransportation Innovations.

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