I’m not a big fan of most of President Obama’s new transportation budget proposal. Much of it is not credible because it lacks a realistic funding source, especially since it calls for a nearly 40 percent increase in federal transportation spending over the next four years. But the proposal to lift the ban on using toll revenues to finance rebuilding and modernizing the Interstate highway system is an important step in the right direction. That is because:
- It would reverse recent movement away from the users-pay/users-benefit principle that is the best and fairest way to fund transportation infrastructure;
- It does not mandate that states do anything, but would simply give them a new option;
- It could and should be a step toward devolving a major portion of the highway system from federal to state control; and,
- It could open the door to increased use of long-term public-private partnerships to rebuild and modernize America’s most important transportation infrastructure.
Most Americans don’t seem to realize that highways-even the superhighways called Interstates-eventually wear out and need to be rebuilt. Most Interstates were designed for a 50-year life, if properly maintained (which not all of them have been). Over the next two decades, nearly all of them will exceed 50 years and need to be reconstructed, and quite a few corridors will also need widening.
Last year, in a major Reason Foundation study, I estimated the cost of this renewal and modernization at $1 trillion.
With the federal Highway Trust Fund on life-support, there is no funding source in sight that could remotely dedicate a trillion dollars to this 20-year project. And with fuel taxes running out of steam, we need to replace per-gallon charging with per-mile charging. The Interstate reconstruction program is an excellent place to begin this transition.
No new technology is needed. State of the art all-electronic tolling (using transponders and license-plate imaging) is widely used and accepted in the 35 states with toll roads. And a 2012 Reason study showed that the cost of collecting tolls via an all-new, all-electronic system should be as low as 5% of the revenue collected. That’s a far cry from the 20 to 30 percent needed for 20th-century, labor-intensive cash toll collection.
Critics of using tolls to finance Interstate reconstruction portray President Obama’s proposal as a new money grab that would only add to the costs faced by motorists and truckers. But that depends entirely on how the proposal is implemented. The budget proposal says the purpose of the tolling would be Interstate reconstruction. But then it adds that it could also fund transit in the same corridor, other state highways, and maybe even any highway or transit project anywhere in the state. That approach undercuts the users-pay/users-benefit principle and guarantees highway user-group opposition.
To constrain the new tolling to Interstate modernization only, a new Reason report urges five principles:
- Limit the use of toll revenues to the specific Interstate or set of Interstates within a state or metro area;
- Charge only enough to cover the cost to reconstruct, improve, and maintain those specific highways;
- Begin the tolling only after the major improvements are completed;
- Use the tolls to replace, not supplement, current fuel taxes; and,
- Provide a better level of service (smoother pavement, less congestion) than what currently prevails on the highways in question.
We call these principles Value Added Tolling. Congress could include them as conditions for giving states permission to implement tolling for Interstate reconstruction. And once a governor and state legislature begin crafting legislation to implement the program, the principles should be built into that new law, providing a second layer of legal protection for highway users.
Reason’s 2013 Interstate 2.0 study found that per-mile toll rates lower than the average now charged on most toll roads would be enough to pay for reconstruction and selective widening of the Interstates in most states. Those states could do these mega-projects without all the cost-increasing federal rules such as Buy America and Davis-Bacon that drive up construction costs. For a few states, such as Alaska and Montana, the numbers simply didn’t work out, due to a combination of low traffic and higher costs due to mountainous terrain. But there is no need to let a few exceptions prevent the rest of the states from taking the self-help route, if they choose to do so.
With Congress unlikely to provide any increase in highway funding, the least our lawmakers could do is to give states more tools for self-help. Value-added Interstate tolling is one of the most important such tools.