America’s transportation network is unsustainable. According to Brookings Institute, only 12.6% of jobs in major metropolitan areas are accessible within 45 minutes via transit. The time and resources that workers, particularly lower-income workers, waste on these inordinately long commutes decreases productivity and the attendant gridlock increases pollutant emission. On a national level, our aging Interstate system built with what Robert W. Poole describes as a “50-year life design” will require extensive renovation throughout the next twenty years.
In responding to these emerging challenges, federal, state and municipal governments will be hard-pressed to procure public funding for what are projected to be roughly $1 trillion in infrastructure costs for renewing the Interstate system and tens of billions of dollars to fix metropolitan transit. The gasoline taxes on which departments of transportation have traditionally relied for routine maintenance and new construction are insufficient to cover future costs for at least three reasons. First, the federal gas tax and those of most states are not indexed for annual inflation. Second, many of the tax revenues generated therein are used to subsidize non-transportation related items. Third, increasing fuel efficiency standards mandated by Corporate Average Fuel Economy (CAFE) and other regulations directly diminish per capita gasoline consumption, resulting in fewer tax revenues.
Variably-priced tolling has already proven itself capable of relieving severe congestion while simultaneously providing a sustainable, relatively self-sufficient source of funding. “Managed lanes” which charge commuters a price that varies by current traffic conditions, time of day and miles driven allocate scarce road space efficiently by allowing drivers to purchase a congestion-free trip to suit their individual preferences. In Southern California, for instance, the I-10 and I-110 high occupancy toll (HOT) lanes in Los Angeles provide 35% faster travel than did their previous high occupancy vehicle (HOV) incarnations without slowing speeds in neighboring lanes. Modes of transit such as bus rapid transit (BRT) benefit doubly: they take advantage of higher speeds and are not charged tolls. Importantly, the Orange County Transportation Authority (OCTA) and L.A. Metro have reinvested the entirety of toll revenues from these and other roads into regional highways and transit systems.
By assigning the costs of public roads to those who benefit the most from them, tolling is also fairer than gasoline taxes. An elderly woman who drives exclusively on local roads would not be forced to subsidize the transportation preferences of a suburban commuter. Additionally, tolling prices accounts for the negative externalities created by heavy vehicles, such as trucks, that are responsible for the majority of surface wearing.
In order to make the toll collection model a political reality, policy makers will have to overcome understandable but misplaced opposition from both the right and left. Many fiscal conservatives who favor decreases in government spending worry that toll revenues will simply constitute double taxation. This problem can be avoided with the policy of “value added” tolling in which concessionaires, the private corporations to whom government transportation departments lease public facilities, are authorized to collect tolls only after all major improvements for the road in question are completed and after the relevant gas tax has been phased out. A standard tolling concession – as opposed to an availability payment concession or a shadow toll concession – requires concessionaries to recoup their initial investments through toll and not tax revenue.
Similarly, left-wing critics fear that the common practice of leasing public highways to private corporations to construct and operate toll plazas threatens the public interest. However, this objection ignores the fact that standard Public Private Partnerships are governed by extensive contracts which obligate the concessionaire to ensure road safety and set caps on tolling rates. The contract governing the 2006 lease of the Indiana Toll Road, for example, required the improvement company, Cintra, and its primary lender, the Macquarie bank, to pay an initial equity payment of $3.8 billion and sign a 432-page agreement detailing even the most minute operation and maintenance responsibilities.
The highly conditional arrangement of such partnerships reflects their status as leases, not purchases. If concessionaires fail to perform on their contractual obligations, they risk financial penalties or even the termination of their lease. In any event, the facility in question remains a public asset.
Though well-intentioned, critics underestimate the severity of both roadway congestion and of the funding deficits faced by DOT’s. Introducing variable-priced and value-added tolling into our flagging transportation network is not only necessary to America’s continued prosperity, it is also a financially and politically feasible option.