Let me walk you through a simple exercise in logic. It goes as follows:
- The greatest opportunity, by far, to expand the use of P3 concessions is rebuilding and modernizing the aging Interstate highway system.
- Even if Congress modestly increases federal gasoline and diesel taxes, there is no way that an increase would support the estimated trillion-dollar cost of Interstate reconstruction.
- Therefore, toll financing is the only realistic funding mechanism for this huge expansion of P3 concessions.
- But highway user groups have a long history of opposing Interstate tolling.
Therefore . . . what follows? Aside from giving up on this great opportunity to modernize America’s most important surface transportation asset, there are only two alternatives. Either (A) engage in all-out political warfare with anti-toll groups (which means primarily the trucking industry) or (B) attempt to find common ground on a way forward.
I’ve been involved in five surface transportation reauthorization battles, and my judgment is that option A is a loser. By contrast, I think option B has a lot to recommend it. I make the case for option B in a new Reason Foundation policy brief called “Value-Added Tolling: A Better Deal for America’s Highway Users.” The draft report was peer-reviewed by a number of outside experts, including representatives of three major highway user groups. While there was not full agreement, the report has created the basis for a serious dialog which is now under way.
The key to making headway on this issue is to listen carefully to what highway user groups are saying when they express concerns about or opposition to Interstate tolling, despite them all agreeing that we need to invest major sums in rebuilding and modernization (redesigning and rebuilding bottleneck interchanges, widening where justified by up-to-date traffic projections, etc.).
The development and phase-in of today’s all-electronic tolling has removed one set of arguments that used to be made—congestion and accidents at toll plazas. In a 21st-century tolled Interstate system, there would be no toll plazas, with all toll collection being cashless, at highway speeds, with full national interoperability. What remains are four key concerns, as follows:
- Adding tolls to “existing” non-tolled highways, presumably without adding any significant value for toll-payers.
- Diverting toll revenue to other purposes—other highways, transit systems, etc.
- “Double taxation” meaning paying both tolls and fuel taxes for the same stretch of highway.
- Diverting traffic to parallel routes, creating negative impacts along those routes.
These points all have a basis in fact, in the current practices of at least some toll agencies. But “legacy” toll agencies that divert revenue, for example, account for only 25% of the 5,000 route-miles of toll roads (including tolled Interstates) in America today. A newly tolled Interstate system would consist of about 47,000 miles, so assuming that the existing 1,250 miles of toll-diversion Interstates were grandfathered in (as is politically realistic), the new tolling principles would apply to over 97% of that system. In my view, that’s the kind of conversation we should be having with the people who would be the customers of a modernized Interstate system financed via all-electronic tolling.
In the study, we call the new approach “value-added tolling.” It consists of five key principles, as follows:
a) Limit the use of toll revenues to the tolled facilities. Assuming there were legally strong provisions along these lines, this would counter reasonable fears that Interstate tolling would amount to making users of those facilities cash cows to solve the whole array of transportation funding problems.
b) Charge only enough to cover the full capital and operating costs of the tolled facilities. Based on the quantitative analysis done for Reason’s Interstate 2.0 study last year, this could mean tolls somewhat lower than occur on some legacy toll roads today. Thus, eliminating diversion of toll revenue will reduce diversion of traffic to parallel routes.
c) Toll only when construction or reconstruction of a corridor is completed. Thus, a rebuilt Interstate corridor would be treated just like a new toll road or toll bridge, financed based on the future toll revenues.
d) Use tolls to replace—not supplement—existing highway taxes. With all-electronic tolling, it is simple to create a rebate system in which state DOTs would provide tolled-Interstate customers with rebates of the amount of state fuel tax revenue implied by the miles they drove on such Interstates.
e) Provide a higher level of service for rebuilt tolled Interstates—such as maintaining no lower than Level of Service (LOS) C on rural Interstates and LOS D on urban Interstates.
These provisions are all designed to create a value proposition for Interstate users, making it worth their while to use modernized, 21st-century Interstates, and therefore to embrace the five provisions as necessary conditions for expanded Interstate tolling. I don’t have space in this column to discuss these proposals in detail, but you can download the policy brief from http://reason.org/studies/show/value-added-tolling.
As I noted previously, some very positive dialog has begun between Reason and several highway user groups. It would be enormously helpful if pro-P3 groups such as AIAI, ARTBA, IBTTA, the T2 Group, and others that support “tolling flexibility” for state DOTs studied these value-added tolling principles and considered joining this dialog.
Ramming Interstate tolling down the customers’ throats is not only unlikely to prevail in Congress, it is also foolish. That’s not how any other provider of a new and better product or service approaches potential customers. You need to figure out what need the potential customer has and come up with a value proposition showing that your answer is sufficiently better than the status quo to promote acceptance.
And with Congress talking seriously of getting TEA-21 reauthorized before its Sept. 30th expiration date, there is no time to lose.
Robert W. Poole Jr. is the Searle Freedom Trust Transportation Fellow and Director of Transportation Policy at the Reason Foundation. This article first appeared in Public Works Financing.