A new approach to financing the reconstruction of Interstate highways
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A new approach to financing the reconstruction of Interstate highways

The majority of Intestate lane miles and numerous bridges across the country need to be replaced or reconstructed.

America’s aging Interstate highways are wearing out. The majority of Interstate lane miles and numerous bridges across the country need to be replaced or reconstructed.

In 2015’s Fixing America’s Surface Transportation Act, the FAST Act, Congress requested a report on repairing and modernizing the Interstate Highway System. But Congress has taken no action on the 596-page report, Renewing the National Commitment to the Interstate Highway System: A Foundation for the Future, published by the Transportation Research Board in 2019. Thus, it appears that repairing and upgrading the nation’s highways will be the responsibility of their owners—the 50 state governments.

In recent years, four states—Connecticut, Indiana, Michigan, and Wisconsin—have engaged private transportation firms such as CDM Smith and HNTB to carry out quantitative studies examining if toll-financed Interstate construction would be viable for them. Such toll-financed projects would be well-suited to long-term revenue-risk design-build-finance-operate-maintain (DBFOM) public-private partnership (P3) procurements, greatly expanding the U.S. transportation public-private partnership market.

Over the last several decades, Congress has gradually reduced federal restrictions on using tolls on currently non-tolled Interstates. New lanes and replacement bridges may now be toll-financed. Interstate segments with severe traffic congestion can toll all lanes as a congestion-management tool. And there’s a three-state pilot program, the Interstate System Reconstruction and Rehabilitation Pilot Program (ISRRPP), which has never been used because it allows only one toll-financed Interstate corridor per state, which is politically problematic.

In two of the most-recent state tolling studies mentioned above, HNTB’s reports on Indiana and Michigan proposed that the states use the federal bridge-replacement tolling provision to finance entire long-distance Interstate corridors since most such corridors have numerous bridges that would need either widening or replacement. In both reports, HNTB stated that the state transportation departments (DOTs) had reviewed this approach with the Federal Highway Administration (FHWA) and “received assurance from FHWA that this could be done.”

Unfortunately, a few weeks after the Michigan study was released in January 2023, new language was posted on FHWA’s Frequently Asked Questions website stating that “Section 129 regulatory guidance warns specifically that proposals to bundle highway segments together with tolled bridges ‘could create the risk of effectively tolling a Federal-aid highway that is not eligible to be tolled.'” 

That language was added to the FHWA site on January 10, 2023, within a week or two of the release of the Michigan tolling study. I contacted the FHWA staff member in charge of federal tolling policy, who told me that the revised language had been in the works for some time and that its posting was just a coincidence. She noted that the language was added to the site’s frequently asked questions section about tolling bridges to answer a question about how distant toll gantries could be from the bridge in question. But she also added, “The strategy of tolling several Interstate bridges for purpose of reconstructing such bridges is allowable under Section 129.”

In response, HNTB has stated that its interpretation of all the FHWA tolling FAQs makes clear that FHWA has no authority to set or approve toll rates. Therefore, if bridge tolls generate more revenue than needed to finance the bridge replacements, the excess revenues can be spent on the roadways leading up to the bridges. “These roadways are eligible facilities to receive funds under 23 USC and both bridges and roadways are mutually dependent on each other to function successfully,” HNTB says.

I’m not an attorney, so although I think HNTB wins on the merits if Indiana or Michigan authorizes toll-financed Interstate reconstruction using the bridge program, there might be litigation to prevent it. That’s one reason why state governments and their transportation departments might consider an alternative approach.

Over the past decade or more, Congress has repeatedly provided grants for state DOTs to carry out pilot projects to test ways of using mileage-based user fees (MBUFs), also known as road user charges (RUCs), to replace gasoline and diesel taxes. Most recently, the 2021 Infrastructure Investment and Jobs Act, or bipartisan infrastructure law, called for FHWA to carry out a national pilot project for per-mile charging. So if a state government presented a serious proposal to implement per-mile charging on highway lane-miles that handle one-third of all vehicle miles of travel (VMT) in that state, I would expect both Congress and FHWA to see this as a breakthrough and approve it.

As several Reason Foundation policy studies have suggested, the easiest way to shift from gas taxes to mileage-based user fees would be to phase in the fees by beginning with only the limited-access highway system: Interstates and freeways. We already have all-electronic tolling with prepaid transponder accounts as a widely-accepted payment method for these highways in many parts of the country. To charge per mile, each on-ramp and off-ramp would need to be equipped with gantries to record each vehicle’s number of miles driven and compute the amount charged. Doing this with well-known E-ZPass technology would help address some of the privacy concerns about having government or ‘big brother’ in your car.

The other key feature of this approach would be to take motorist and trucker concerns about MBUF/RUC being double taxation seriously, an additional charge or tax rather than a replacement for per-gallon fuel taxes. Those concerns would be addressed by providing refunds or rebates of the state fuel tax amount implied by the miles driven on the segments of the highways where mileage fees are charged. The charging system has to know the owner and vehicle type, and hence the Environmental Protection Agency’s highway miles per gallon rating. A simple calculation would generate a fuel tax refund due for each such trip. Lest you think this would be overly difficult, commercial trucks using the Massachusetts Turnpike and the New York Thruway already have such refunds calculated and applied to them if they subscribe to Bestpass’ toll-management service.

I have written elsewhere that the Michigan Interstate study by HNTB and CDM Smith is the most thorough and realistic Interstate reconstruction study done to date. The Michigan Department of Transportation should prepare two versions of an implementation plan, one relying on the study’s use of the Federal Highway Administration’s bridge program and the other being a backup plan for accomplishing the same thing as the first phase of Michigan’s conversion from fuel taxes to per-mile charges.

A version of this column first appeared in Public Works Financing.