How Will 21st Century Roads be Financed?

Battle over toll roads stalls transportation bill

It’s a good thing Congress has to pass a transportation bill only once every six years. It has been nearly nine months since the last highway bill – TEA-21 – expired, and Congress still hasn’t finished its successor.

What was supposed to be an epic battle over a gas-tax increase to fund a big expansion has petered out, partly because President Bush continually threatened to use the first veto of his presidency on any bill that increased gas taxes.

Congress and the White House are close to compromising on a transportation bill in the $300 billion neighborhood, a far cry from the $375 billion whopper the transportation lobby once dreamed of. But a new battle has been joined, in earnest, among dueling coalitions and may delay the bill further.

The fight is over how big a role tolling will have in America’s highway system.

Why is tolling holding up a $300 billion bill filled with pork for local districts in an election year? For two main reasons:

  • First, there is simply not enough money to build and maintain our highway system from today’s taxes. According to the Federal Highway Administration, current fuel-tax revenues don’t provide enough to even properly maintain the existing highway system, let alone expand it to cope with soaring growth in driving and truck shipments. More and more high-growth cities and states have turned to tolls in recent years. But the many federal restrictions on how and where tolls can be used severely limit their options.
  • Second, we have recently learned how to use market pricing to solve traffic congestion. Value-priced lanes in California and Texas flow smoothly at the speed limit, even during rush hour on some of Southern California’s busiest freeways. We need a lot more of these lanes, but federal rules again make this difficult to attain.

Last year the Bush administration’s transportation strategy included expansive tolling provisions, letting states use tolling pretty much wherever they like, consistent with conservative principles of federalism. Under the plan, states could even try rebuilding worn-out interstates with tolls, if they can make the case for tolls to their drivers. And cities would be allowed to use value pricing on new or existing lanes to control congestion (again, if they can get local support).

The Senate largely accepted this devolutionary agenda. But truckers and other groups balked. They backed a substitute House amendment wiping out almost all the toll provisions and retaining most federal restrictions on tolling and pricing.

America’s highways are at a historic juncture. Over the past decade, the technology to use true market pricing (EZ-Pass tags) has been perfected, and nearly half the states have enacted public-private partnership laws under which private enterprise can finance, develop and operate toll lanes and toll roads. At last we have a chance to begin the shift from a highly centralized (indeed, Soviet-style) highway system to one that is market-based, giving its customers what they need.

In an ironic twist, support for market pricing and devolution of decision-making from Washington to the states and cities is coming from groups you might not expect — the Hubert Humphrey Institute, Progressive Policy Institute, and Environmental Defense (all members of the Value Pricing Coalition). Meanwhile, my conservative friends at Americans for Tax Reform, Citizens for a Sound Economy, and National Taxpayers Union, seemingly oblivious to these historic shifts, now curiously support continuing the highly centralized highway status quo, dominated by decisions made in Washington D.C.

Do they have an alternative plan to adequately fund our highways? Nope. They oppose higher gas taxes and complain, legitimately, about diversion of some of our gas taxes to nonhighway uses. But instead of backing the maximum possible shift to a market-based alternative, they mainly support the centralized approach, with tolls as just a small sideshow.

Fortunately, a compromise seems possible, giving the user and taxpayer groups’ protection against open-ended diversion of toll revenues while permitting much more pricing and tolls for modernization and congestion relief. The nation’s highways are increasingly jammed and in desperate need of repair.

This six-year highway bill will either go a long way toward reducing congestion and reinvigorating our roadways or it will sentence them to a lifetime of congestion and potholes. The stakes are too high to let pre-established positions preclude a historic shift toward market-based highways.

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