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Public Works Financing

Pro-Market Compromise on Highway Reauthorization

Tolling expansion needed

Robert Poole
July 13, 2004

Two big issues are preventing passage of the six-year reauthorization of TEA-21, the federal surface transportation program. One is the still-large gap between the White House and the Senate on spending ($256 billion vs. $318 billion). The other is which set of (very different) tolling provisions will prevail. Both are of keen interest to proponents of user-fee-based project finance as a better way to fund major highway projects.

What's being blithely ignored in the debate over a final dollar number is the huge potential of tolling — if unleashed from restrictive federal regulations. What ought to be of relevance here is the total infrastructure investment made possible by the bill, not merely the total to be spent from the Highway Trust Fund. Thus, if changes in federal law unleash $X billion of additional investment, that number should be added to the amount of federal highway tax money committed over the six-year reauthorization period.

The White House has courageously promoted an expansive freeing up of tolling, in its original SAFETEA bill, largely adopted by the Senate. But it has failed to follow through on the highway-investment implications. I did a study last fall estimating that if every state with seriously congested Interstates took advantage of a FAST-lanes provision that permitted new tolled lanes to be added to such routes, about $50 billion in toll-funded investment could be generated. So if you add that number to the Administration's $256 billion, you exceed the $300 billion that would be a reasonable House-Senate compromise on total investment.

Alternatively, look at it from the bottom up. Two major toll truck lanes proposals are the $16 billion LA-ports-to-Barstow plan from the Southern California Association of Governments and the $7 billion Star Solutions truck lanes on I-81 in Virginia. Private-sector proposals for HOT lanes on the Washington Beltway, Virginia's I-95 and 395, and the Airport Freeway between Dallas and Ft. Worth total another $3 billion. Just those five projects add up to $26 billion in additional investment. So if the White House were to start with the House's $275 billion federal number and add the toll-funded investment in these five projects, we'd again exceed a $300 billion investment.

But (and it's a big but), the credibility of doing this depends on passing tolling provisions much closer to those in the Senate bill than in the very narrow House bill. The latter would permit tolling only new FAST lanes added to Interstates, and only on a temporary basis. No state with a large existing toll network would accept such temporary tolling, since their financial strength depends on using the revenue base from mature projects to jump-start new toll projects. By contrast, the FAST lanes defined in the Senate will could be done with permanent tolls, with surplus revenues used for other highway or transit projects, as determined locally.

The Senate bill also includes the Administration's $15 billion worth of private activity bonds; the House does not. The Senate continues a version of the very useful Value Pricing program, to help launch HOT lanes and similar projects and document their results; the House bill wipes it out. And the Senate bill continues the TEA-21 pilot program that would let three states test rebuilding aging Interstates using tolls; the House bill deletes it.

The narrow House provisions were a last-minute substitute on the floor, by Rep. Mark Kennedy, with strong support from the trucking industry and conservative, anti-tax groups. The net effect is a step backwards from the pro-tolling TEA-21, and a huge step back from what the Administration has tried to do. The big concern of House bill supporters is to prevent tolls from becoming the equivalent of a tax — a cash cow for non-highway purposes. This concern is valid, but their remedy is gross overkill.

What's needed are some further safeguards in the broad Senate bill's pro-tolling agenda. One set of changes would be to more tightly define "surplus revenue," making clear that first priority must always be paying for the capital and operating costs of the tolled facility. And the uses of surplus revenue could be limited to only Title 23 (mostly highway) projects, rather than also allowing Title 49 (transit) projects.

The truckers really want to kill the Interstate rebuild pilot program, now that several states are finally interested in using it (e.g., Virginia, for I-81). So a powerful compromise would be to substitute language allowing all states to create Toll Truckways as defined by Reason Public Policy Institute: new toll lanes for trucks only, on which long combination vehicles (LCVs) now banned from most Interstates could operate. The American Trucking Associations has endorsed this kind of value-added truck lanes, which can double the productivity of long-distance trucking, making it worthwhile to pay a toll. This is the concept upon which SCAG's Los Angeles truckway project is based, and if applied to the I-81 project, would convert current trucking industry opposition to support.

These kinds of policy changes would make a $25-50 billion toll-based highway investment credible as an addition to the amount committed from the Highway Trust Fund. And that could get us to "yes" in what otherwise will continue to be an endless debate over reauthorizing this vital infrastructure program.

Robert W. Poole Jr. is director of transportation studies and founder of the Reason Foundation.


Robert Poole is Searle Freedom Trust Transportation Fellow and Director of Transportation Policy


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