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Tolling and P3s Get Unexpected Boost in Administration Bill

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(Publishers Comment: Let us in Virginia take full advantage of public private partnerships wherever practical to increase the transportation funding available to us for resolving our congestion relief needs and economic growth requirements.)

The Administration’s proposed surface transportation bill, released the last week of April, generally followed the outlines that were expected: a 37% increase in funding over four years, supposedly paid for out of a major tax reform that is nowhere in sight, plus much larger increases for everything other than highways. But rather than repeat the criticisms in my March issue article, I want to focus here on some good news for toll financing and long-term public-private partnership (P3) concessions.

First, the bill would continue and improve two critically important financing tools that have been used in most of the large P3 concession projects financed over the past decade. It would continue the TIFIA credit-support program at the increased MAP-21 levels, while beefing up its professional staff to address recent bottlenecks in project approval. And it would increase by $4 billion the current $15 billion cap on tax-exempt revenue bonds (private activity bonds—PABs) that provide a more-level financial playing field for P3 projects in relation to government-run projects.

And to my pleasant surprise, the bill would essentially mainstream the existing three-state pilot program that allows the use of toll financing to reconstruct aging Interstate highways. That’s critically important, despite the lack so far of political consensus being reached to actually use toll finance in any of the three states that hold slots in the pilot program (Missouri, North Carolina, and Virginia). Because getting to yes on such a major change will be difficult, allowing all states to attempt this increases the odds that at least one pathfinder state will come up with a win-win approach that can then be a model for other states.

And not limiting each state to a single Interstate corridor also makes sense. What happened in North Carolina, which selected I-95 for toll-financed reconstruction, was that people who lived along I-95 said “Why us? How come the folks in Charlotte won’t have to pay tolls on I-77 but we over here will?” With the single-project limit removed, a responsible state DOT can develop and explain a 20-year plan to reconstruct all of its Interstates, based on age and widening needs. That way, everyone will know that their Interstate is in the queue for refurbishment, plus widening, if needed.

Unfortunately, the Administration’s tolling permission is not constrained enough to make the new tolls a pure user fee, similar to an electric bill or phone bill. Section 1405 of the bill permits the toll revenues to also be used for transit within the Interstate corridor. And if the state DOT certifies annually that the rebuilt Interstate is being adequately maintained, surplus toll revenues could be used for any highway (Title 29) or transit (Title 43) project statewide.

By contrast, the Reason Foundation’s Value Added Tolling principles that I wrote about last month would limit the toll rates to the amount necessary to finance construction and/or reconstruction costs, proper maintenance, and future improvements to the Interstate corridor or set of Interstates. That would keep the toll rates lower than in the states that use toll roads as cash cows to fund other transportation and non-transportation projects. Those lower toll rates would reduce the extent of diversion of traffic from tolled Interstates to parallel non-tolled highways. In other words, eliminating revenue diversion would reduce traffic diversion.

Not surprisingly, the trucking industry’s Alliance for Toll-Free Interstates has already attacked the Administration’s tolling proposal, trotting out obsolete arguments based on 20th-century cash tolling, traffic diversion, etc., as well as calling tolling an “inefficient” means of highway funding compared with unsustainable fuel taxes. It would be far more constructive if our trucking friends put aside red herrings and focused on their shared interest with other highway users and state DOTs: coming up with a viable, fair, and user-friendly approach to reconstructing and modernizing the Interstates. We have offered Value Added Tolling principles as a way to take seriously the expressed concerns of highway user groups, including the trucking industry. I’m looking forward to serious dialog with leading companies and organizations in this industry.

(This first ran in Surface Transportation Innovations.)

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