The trucking industry’s opposition to toll-financing of the replacement I-10 bridge in Louisiana nearly killed the critically important public-private partnership Calcasieu River Bridge project last fall. Fortunately, after negotiations to revise the financing plan, the Louisiana state legislature recently rescued this $2.1 billion revenue-risk public-private partnership by agreeing to reduce toll rates for trucks and local drivers and increase the amount of state taxpayer funding in the deal.
Going forward, it’s worth examining the inaccurate claims that were used against the Louisiana public-private partnership. The trucking industry’s leading trade group and its active state chapters fund a lobbying group called the Alliance for Toll-Free Interstates. It’s somewhat ironic that long-distance trucking firms choose to use major toll roads such as Florida’s Turnpike, the New York Thruway, Ohio Turnpike, Pennsylvania Turnpike, and Indiana Toll Road to such an extent that truck tolls constitute the majority of toll revenue for at least some of these corridors (e.g., 68% on the Ohio Turnpike).
Trucking groups’ most important claim against tolls is that the cost of toll collection is much higher than the cost of collecting fuel taxes, which is done at a small number of wholesale fuel distributors. At a recent trucking conference, as reported by FleetOwner, this collection rate came up in several sessions that discussed proposals to phase out fuel taxes and replace them with per-mile charges.
The chief executive officer of the Oregon Trucking Association claimed that the cost of fuel tax collection is only 0.5% of the revenue collected. But her counterpart from the Nevada Trucking Association put it at 3%, or six times higher.
In contrast, the Alliance for Toll-Free Interstates, on its website, claims that the cost of toll collection is 33.5% of the revenue collected. That collection cost might have been true 30 years ago, before the phase-in of all-electronic tolling, which is now widespread, but the claim is far from true today.
About a decade ago, I commissioned a team of electronic tolling experts to review recent research findings on the cost of fuel-tax collection and to do original research on the collection cost with 21st-century all-electronic tolling (AET). The 2012 Reason Foundation research report showed that the actual cost of fuel-tax collection was closer to 5% of the revenue when evasion and other aspects are taken into account. And on transponder-based AET collection, the report found that tolling systems explicitly designed for AET could have collection costs as low as 5% of the revenue. That conclusion was based on empirical studies of several then-new toll projects designed to take full advantage of AET.
That 2012 study focused on toll collection costs for cars, not trucks. That makes a difference because, on U.S. toll roads, heavy over-the-road trucks pay about four times as much per vehicle mile traveled as cars, primarily due to the significantly greater wear and tear on roads and bridges from heavy trucks. The relevant measure is the cost of collection divided by the toll revenue collected. The key point to understand is that with all-electronic tolling, the cost of toll collection is the same for cars and heavy trucks. But the revenue generated by a truck is four times as much as that generated by a car for going the same distance. Thus, if the all-electronic tolling cost of collection for a car is 5% of the revenue, for a heavy truck on the same toll road going the same distance, the cost of collection would be one-fourth of that—1.25%. And if the AET cost for a car were 8% of the revenue it generated, the corresponding figure for a heavy truck would be 2%. That is very competitive with low-end estimates of the cost of fuel tax collection.
The trucking industry conference noted above focused on the potential shift from per-gallon fuel taxes to per-mile user charges. The American Trucking Associations-affiliated research organization, the American Transportation Research Institute (ATRI), has produced several studies making grossly exaggerated claims about unbelievably high costs of collecting per-mile charges from 278 million individual personal vehicles, based on extrapolation from custom-made on-board units used in several dozen state pilot projects testing mileage-based user fees. This flawed critique ignores the vast economies of scale needed if or when all motor vehicles have to transition to per-mile charges.
One promising approach, other than mass-produced in-vehicle terminals, might be to use vehicle telematics that are being phased in as standard equipment on nearly all new vehicles.
For the trucking industry in particular, two existing institutions already provide economies of scale for toll collection. One is a subscription service such as Bestpass, which provides each truck with an all-states transponder, manages a fleet-wide online toll account, seeks out all available toll discount programs, and provides monthly reports to each fleet owner about the tolls incurred by each truck in its fleet.
The second trucks-only economy of scale is an institution called IFTA—the International Fuel Tax Agreement. It operates a clearinghouse serving all states except Alaska and Hawaii, plus Canadian border provinces. IFTA records truck miles traveled in each jurisdiction to properly divvy up state fuel taxes among those jurisdictions based on each truck’s miles traveled in each jurisdiction. It could do the same for future road user charges.
When trucking organizations attack tolls as unfair and very costly to collect, they count on legislators and members of the public not knowing about the low cost of all-electronic tolling collection (especially for trucks) and the economies-of-scale institutions already in use by the trucking industry.
Advocates of increased tolling, including companies seeking approval of revenue-risk public-private partnership projects, must explain these points to legislators, business groups, and the media before debates over newly proposed tolling. Likewise, state transportation departments seeking to gain legislative approval for revenue-financed P3 megaprojects need to be well-informed on these points and communicate them to legislators, both when drafting or updating P3 enabling legislation and when presenting the case for specific tolled P3 megaprojects.
The public-private partnership for the Louisiana Calcasieu River Bridge, critical to the state and local economy, was nearly torpedoed due to misinformation about 21st-century tolling and the options available to the state. It’s an example of the battle that lies ahead as the U.S. tries to modernize, repair and replace aging highways and bridges. Transportation officials who recognize the need to tap the significant long-term benefits of doing highway megaprojects via long-term public-private partnerships should commit to proactively informing key policymakers about their benefits and preventing similar tolling opposition from prevailing with misinformation.
A version of this column first appeared in Public Works Financing.