Commentary

Taking Seriously Highway Users

Let me walk you through a simple exercise in logic. It goes as follows:

  1. The greatest opportunity, by far, to expand the use of P3 concessions is rebuilding and modernizing the aging Interstate highway system.
  2. Even if Congress modestly increases federal gasoline and diesel taxes, there is no way that an increase would support the estimated trillion-dollar cost of Interstate reconstruction.
  3. Therefore, toll financing is the only realistic funding mechanism for this huge expansion of P3 concessions.
  4. But highway user groups have a long history of opposing Interstate tolling.

Therefore . . . what follows? Aside from giving up on this great opportunity to modernize America’s most important surface transportation asset, there are only two alternatives. Either (A) engage in all-out political warfare with anti-toll groups (which means primarily the trucking industry) or (B) attempt to find common ground on a way forward.

I’ve been involved in five surface transportation reauthorization battles, and my judgment is that option A is a loser. By contrast, I think option B has a lot to recommend it. I make the case for option B in a new Reason Foundation policy brief called “Value-Added Tolling: A Better Deal for America’s Highway Users.” The draft report was peer-reviewed by a number of outside experts, including representatives of three major highway user groups. While there was not full agreement, the report has created the basis for a serious dialog which is now under way.

The key to making headway on this issue is to listen carefully to what highway user groups are saying when they express concerns about or opposition to Interstate tolling, despite them all agreeing that we need to invest major sums in rebuilding and modernization (redesigning and rebuilding bottleneck interchanges, widening where justified by up-to-date traffic projections, etc.).

The development and phase-in of today’s all-electronic tolling has removed one set of arguments that used to be made-congestion and accidents at toll plazas. In a 21st-century tolled Interstate system, there would be no toll plazas, with all toll collection being cashless, at highway speeds, with full national interoperability. What remains are four key concerns, as follows:

  1. Adding tolls to “existing” non-tolled highways, presumably without adding any significant value for toll-payers.
  2. Diverting toll revenue to other purposes-other highways, transit systems, etc.
  3. “Double taxation” meaning paying both tolls and fuel taxes for the same stretch of highway.
  4. Diverting traffic to parallel routes, creating negative impacts along those routes.

These points all have a basis in fact, in the current practices of at least some toll agencies. But “legacy” toll agencies that divert revenue, for example, account for only 25% of the 5,000 route-miles of toll roads (including tolled Interstates) in America today. A newly tolled Interstate system would consist of about 47,000 miles, so assuming that the existing 1,250 miles of toll-diversion Interstates were grandfathered in (as is politically realistic), the new tolling principles would apply to over 97% of that system. In my view, that’s the kind of conversation we should be having with the people who would be the customers of a modernized Interstate system financed via all-electronic tolling.

In the study, we call the new approach “value-added tolling.” It consists of five key principles, as follows:

a) Limit the use of toll revenues to the tolled facilities. Assuming there were legally strong provisions along these lines, this would counter reasonable fears that Interstate tolling would amount to making users of those facilities cash cows to solve the whole array of transportation funding problems.
b) Charge only enough to cover the full capital and operating costs of the tolled facilities. Based on the quantitative analysis done for Reason’s Interstate 2.0 study last year, this could mean tolls somewhat lower than occur on some legacy toll roads today. Thus, eliminating diversion of toll revenue will reduce diversion of traffic to parallel routes.
c) Toll only when construction or reconstruction of a corridor is completed. Thus, a rebuilt Interstate corridor would be treated just like a new toll road or toll bridge, financed based on the future toll revenues.
d) Use tolls to replace-not supplement-existing highway taxes. With all-electronic tolling, it is simple to create a rebate system in which state DOTs would provide tolled-Interstate customers with rebates of the amount of state fuel tax revenue implied by the miles they drove on such Interstates.
e) Provide a higher level of service for rebuilt tolled Interstates-such as maintaining no lower than Level of Service (LOS) C on rural Interstates and LOS D on urban Interstates.

These provisions are all designed to create a value proposition for Interstate users, making it worth their while to use modernized, 21st-century Interstates, and therefore to embrace the five provisions as necessary conditions for expanded Interstate tolling. I don’t have space in this column to discuss these proposals in detail, but you can download the policy brief from http://reason.org/studies/show/value-added-tolling.

As I noted previously, some very positive dialog has begun between Reason and several highway user groups. It would be enormously helpful if pro-P3 groups such as AIAI, ARTBA, IBTTA, the T2 Group, and others that support “tolling flexibility” for state DOTs studied these value-added tolling principles and considered joining this dialog.

Ramming Interstate tolling down the customers’ throats is not only unlikely to prevail in Congress, it is also foolish. That’s not how any other provider of a new and better product or service approaches potential customers. You need to figure out what need the potential customer has and come up with a value proposition showing that your answer is sufficiently better than the status quo to promote acceptance.

And with Congress talking seriously of getting TEA-21 reauthorized before its Sept. 30th expiration date, there is no time to lose.

Robert W. Poole Jr. is the Searle Freedom Trust Transportation Fellow and Director of Transportation Policy at the Reason Foundation. This article first appeared in Public Works Financing.

Robert Poole is director of transportation policy and Searle Freedom Trust Transportation Fellow at Reason Foundation. Poole, an MIT-trained engineer, has advised the Ronald Reagan, the George H.W. Bush, the Clinton, and the George W. Bush administrations.

Surface Transportation

In the field of surface transportation, Poole has advised the Federal Highway Administration, the Federal Transit Administration, the White House Office of Policy Development, National Economic Council, Government Accountability Office, and state DOTs in numerous states.

Poole's 1988 policy paper proposing privately financed toll lanes to relieve congestion directly inspired California's landmark private tollway law (AB 680), which authorized four pilot toll projects including the successful 91 Express Lanes in Orange County. More than 20 other states and the federal government have since enacted similar public-private partnership legislation. In 1993, Poole oversaw a study that coined the term HOT (high-occupancy toll) Lanes, a term which has become widely accepted since.

California Gov. Pete Wilson appointed Poole to the California's Commission on Transportation Investment and he also served on the Caltrans Privatization Advisory Steering Committee, where he helped oversee the implementation of AB 680.

From 2003 to 2005, he was a member of the Transportation Research Board's special committee on the long-term viability of the fuel tax for highway finance. In 2008 he served as a member of the Texas Study Committee on Private Participation in Toll Roads, appointed by Gov. Rick Perry. In 2009, he was a member of an Expert Review Panel for Washington State DOT, advising on a $1.5 billion toll mega-project. In 2010, he was a member of the transportation transition team for Florida's Governor-elect Rick Scott. He is a member of two TRB standing committees: Congestion Pricing and Managed Lanes.

Aviation

Poole is a member of the Government Accountability Office's National Aviation Studies Advisory Panel and he has testified before the House and Senate's aviation subcommittees on numerous occasions. Following the terrorist attacks of Sept. 11, 2001, Poole consulted the White House Domestic Policy Council and the leadership of the House Transportation & Infrastructure Committee.

He has also advised the Federal Aviation Administration, Office of the Secretary of Transportation, White House Office of Policy Development, National Performance Review, National Economic Council, and the National Civil Aviation Review Commission on aviation issues. Poole is a member of the Critical Infrastructure Council of the Los Angeles Economic Development Corporation and of the Air Traffic Control Association.

Poole was among the first to propose the commercialization of the U.S. air traffic control system, and his work in this field has helped shape proposals for a U.S. air traffic control corporation. A version of his corporation concept was implemented in Canada in 1996 and was more recently endorsed by several former top FAA administrators.

Poole's studies also launched a national debate on airport privatization in the United States. He advised both the FAA and local officials during the 1989-90 controversy over the proposed privatization of Albany (NY) Airport. His policy research on this issue helped inspire Congress' 1996 enactment of the Airport Privatization Pilot Program and the privatization of Indianapolis' airport management under Mayor Steve Goldsmith.

General Background

Robert Poole co-founded the Reason Foundation with Manny Klausner and Tibor Machan in 1978, and served as its president and CEO from then until the end of 2000. He was a member of the Bush-Cheney transition team in 2000. Over the years, he has advised the Reagan, George H.W. Bush, Clinton, and George W. Bush administrations on privatization and transportation policy.

Poole is credited as the first person to use the term "privatization" to refer to the contracting-out of public services and is the author of the first-ever book on privatization, Cutting Back City Hall, published by Universe Books in 1980. He is also editor of the books Instead of Regulation: Alternatives to Federal Regulatory Agencies (Lexington Books, 1981), Defending a Free Society (Lexington Books, 1984), and Unnatural Monopolies (Lexington Books, 1985). He also co-edited the book Free Minds & Free Markets: 25 Years of Reason (Pacific Research Institute, 1993).

Poole has written hundreds of articles, papers, and policy studies on privatization and transportation issues. His popular writings have appeared in national newspapers, including The New York Times, The Wall Street Journal, USA Today, Forbes, and numerous other publications. He has also been a guest on network television programs such as Good Morning America, NBC's Nightly News, ABC's World News Tonight, and the CBS Evening News. Poole writes a monthly column on transportation issues for Public Works Financing.

Poole earned his B.S. and M.S. in mechanical engineering at Massachusetts Institute of Technology (MIT) and did graduate work in operations research at New York University.