Public Works Financing

Making the Right Highway Investments for Goods Movement

The present highway system is simply unable to give truckers and shippers what they want and need

Two subjects keep coming up again and again in trucking industry circles these days. One is growing support for an increase in the diesel fuel tax, to address what everyone can see is a looming funding shortfall, at a time when truck vehicle miles of travel (VMT) are projected to increase significantly faster than car VMT. The other subject is growing concern over tolling and privatization. Yet these two subjects are related in what could and should be a positive way: tolling and privatization are the best way of giving shippers and truckers what they need but aren't getting from our 20th-century highway system.

Truckers have clearly been spooked by the 75-year lease of the Indiana Toll Road (I-80/90) and by proposals in North and South Carolina to use tolls (and perhaps PPPs) to rebuild I-95. Both are major truck routes, and it's easy for truckers to see these cases as simply forcing them to pay more to use essentially the same highways they already use and pay for. The American Trucking Associations in August issued a manifesto opposing privatization of (existing) toll facilities, and ATA president Bill Graves has stated that "ATA strongly believes highway user fees, such as fuel taxes, rather than tolls, should remain the primary means of funding highway projects."

Although nothing definitive has been released so far, it appears that various goods-movement groups are ginning up a proposal aimed at the 2009 reauthorization that would increase the diesel fuel tax. But to make this palatable to a hard-pressed industry, the proposal will call for dedicating the new revenues to a separate goods-movement trust fund to be used only for improving key trucking routes.

My response is that such a proposal is hopelessly naïve. It calls for shippers and truckers to put their trust, yet again, in a centralized system that is designed to shift funds from high-growth states (donor states) to low-growth states (donee states), and to spread funds around for maximum political benefits. Nowhere is return-on-investment used to decide which projects get funded or how the money is carved up. To paraphrase Erik Autor of the National Retail Federation (on my panel on tolling and trucking at the IBTTA Transportation Finance Summit on Dec. 5th), this is the system that chose to fund Alaska's Bridge to Nowhere rather than the Gerald Desmond Bridge in Long Beach—a crumbling link in the crucial infrastructure for getting trucks in and out of one of America's most important ports.

And the problem is worse than just the growth in earmarks. A whole series of econometric research studies over the past decade has shown that the return on investment (ROI) in the highway system has declined dramatically since the 1950s and 1960s. Chad Shirley (RAND Corp.) and Cliff Winston (Brookings Institution), in a 2003 paper, looked specifically at the return on highway investments vis a vis business logistics costs. In principle, better highway infrastructure enables firms to save money by holding smaller inventories and facilitating just-in-time logistics, a key to overall economic productivity. They found that while ROI defined in these terms was a still-high 17.6% in the 1970s, it declined to 4.9% in the 1980s and a mere 1% in the 1990s.

Most economists simply assume that since we have a mature highway system, it's no surprise that we've already reaped most of the gains, and there is little scope to improve productivity by further investments. But tell that to an Office Depot executive whose containers full of laser printers are stuck every day on the Long Beach Freeway. Or the auto parts supplier who is forced to expand his inventory facilities to meet his just-in-time delivery commitments.

What truckers and shippers want and need from the highway system are two things the present system is simply unable to give them. One is guaranteed trip times, especially in urban areas. The other is greater payloads—i.e., more ton-miles per driver and per gallon of costly fuel. Neither will come from simple expansions of the existing highway system, via any conceivable increases in the diesel tax and a centralized grant system.

But both could be delivered by toll truck lanes. Using value-priced tolling, such lanes could offer guaranteed trip times, regardless of the extent of congestion on an urban area's freeway lanes. And because they would be barrier-separated from general-purpose lanes and have their own on- and off-ramps, they would be well-matched to the double- and triple-trailer configurations known as longer combination vehicles (LCVs).

There's a long history of congressional opposition to allowing LCV operations beyond the handful of states where they are now legal—especially from Sen. Frank Lautenberg (D, NJ) and Rep. James Oberstar (D, MN). But during Mary Peters' confirmation hearing as DOT Secretary, in her discussion of LCVs with Sen. Lautenberg, Sec. Peters made a pointed exception for LCVs on dedicated truck lanes—and got no objection from Lautenberg (the author of the 1991 federal freeze on truck sizes and weights). So it seems likely that the only way the trucking industry can expand the scope for LCV operations is via dedicated truck-only lanes.

And the best way to ensure that such truck lanes are built where they will do the most good is to finance them with tolls. As the GAO's powerful June 2006 report on tolling [GAO-06-554] makes clear, one of the major benefits of toll finance is to better target transportation investments. To persuade investors to put up the funds in the first place, there has to be a reasonable likelihood of a serious return on investment.

We have two more years until the debate begins in earnest over the next federal reauthorization bill. That's time for a lot more discussions with shippers and truckers over how best to provide the goods-movement infrastructure they really need.

Robert Poole is director of transportation at Reason Foundation. He has advised the last four presidential administrations and is author of a new report on how to reduce Atlanta's traffic congestion online here. An archive of Poole's work is available here and Reason's transportation research and commentary is here.

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





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