Interstate Tolling:
Financing Reconstruction and
Shifting to Mileage-Based User
Fees
by
Robert W. Poole, Jr.
Director of Transportation Policy
Reason Foundation
http://reason.org/transportation
bob.poole@reason.org
Why the current interest in tolling?
Large and growing highway funding
shortfall;
Vehicle miles traveled have increased
10X as fast as highway lane-miles;
Little or no political will to increase fuel
tax rates;
Surveys show people prefer tolling to
tax increases, for new roadways.
Interstate funding shortfall
Current
Annual total
$20.0B
Shortfall
--
Sustain
$24.3B
$ 4.3B/yr
Improve
$43.0B
$23.0B/yr
Source: FHWA 2010 C&P Report, 2009 $
Interstate system
investment estimates
Rebuild 233 interchange bottlenecks: $128B
Add HOT networks in 19 mostcongested metro areas:
$139B
Reconstruct and modernize long-haul
Interstates, starting with key truck routes:
$1.5-2.5 trillion?
Advantages of tolls over gas taxes
Tailored to the cost of each road
Fairness: those who benefit pay
Self-limiting: roads only
Source for adding capacity when
needed
Ensures long-term maintenance
Can be used to control congestion
Advantages of gas tax
Lower cost of collection (assumed)
But
Forthcoming Reason study estimates
cost of all-electronic tolling (AET) can
be as low as 5% of revenue collected.
And . . . that real cost of fuel tax
collection approaches 5% of revenue.
21st-century tolling
Permanent funding source
No toll booths; all-electronic
Variable rates (if congestion)
Inflation-adjusted
No impact on state bond rating
Highways as network utility; tolls as
utility bills.
Value-added tolling principle
Don’t put tolls on “existing” highways.
Do use tolls where you add value for
highway customers:
New highway
Major capacity additions
Major reconstruction
A reconstructed highway is not “existing
capacity.”
Political feasibility?
NCHRP Synthesis 377, public opinion &
tolling:
Public
Public
Public
Public
Public
Public
Public
wants to see value
prefers tangible rationales
cares about use of revenues
learns from experience
uses knowledge & information
believes in equity and fairness
wants simplicity
Public favors tolls over increases in taxes, for
needed highway projects.
Wisconsin Interstates
tolling study (value-added tolling)
$26B cost to reconstruct and modernize 743mile system.
Assumed baseline toll rates of 5¢/mi. for cars
and 20¢/mi. for trucks.
Rural Interstates: NPV of revenue =110% of
NPV of costs
Urban Interstates: NPV of revenue = 71% of
NPV of costs.
Rural Typical Sections for Scenarios 3 and 4
(Also used for HPV configuration analysis)
Urban Typical Sections for Scenario 3
Interstate & expressway tolling
as first phase of MBUFs
Conventional view (Big Bang approach)
GPS box in every vehicle
Program led by federal government
Drawbacks: Big Brother, very high cost
AET for Interstates and expressways:
Use current low-cost AET
Equip on/off-ramps only; charge per mile
Fund reconstruction of most important
highway infrastructure
Role for public-private partnerships
(PPPs)
Especially suited to major projects (megaprojects)
Significant risk transfer to concession firm:
Construction risk
Completion risk
Traffic & revenue risk
Incentive to design to minimize life-cycle
cost, not initial cost
Proper maintenance assured, long-term
Growing U.S. as well as global track record.
Track record of PABs and TIFIA
loans on PPP toll projects
Four tolled mega-projects financed during
credit-crunch years:
Capital Beltway (VA):
I-595 (FL):
N. Tarrant Express (TX)
LBJ I-635 (TX)
Total:
June 2008
March 2009
Dec. 2009
June 2010
$1.9
$1.6
$2.1
$2.8
$8.4
billion
billion
billion
billion
billion
Needed reforms beyond MAP-21
Remove limits on number of reconstructed
Interstates with toll finance.
Retain current limits on use of toll revenues
(supported by highway user groups).
Retain recently expanded TIFIA loan
program.
Remove the $15B cap on tax-exempt private
activity bonds (PABs).
Facilitate true nationwide AET
interoperability.
Conclusions
Large increase in highway investment to
modernize Interstates and expressways.
Tolling is a better user fee than fuel taxes.
Value-added tolling is politically feasible.
Reconstruction is not “tolling existing
highways.”
Congress should open the door to expanded
tolling, in the reauthorization bill.
Questions?
Contact information:
http://reason.org/transportation
Bob.poole@reason.org
Frequently asked questions
1. Isn’t tolling “paying twice? Not if
project can’t be afforded via fuel taxes.
2. Isn’t a toll the same as a tax? Not if it’s
a true user fee, used only for the toll
project.
3. When do the tolls come off? Never.
Will be needed for proper maintenance
and eventual reconstruction.