The Case for Toll-Financed Interstate Replacement

Policy Study

The Case for Toll-Financed Interstate Replacement

Addressing both the need to rebuild Interstates and the need to begin the transition from per-gallon fuel taxes to per-mile highway user charges.

Executive Summary

In December 2018 the Transportation Research Board’s Future Interstate Study Committee released its long-awaited report, Renewing the National Commitment to the Interstate Highway System: A Foundation for the Future. At 649 pages, including 10 appendices, it makes a powerful, evidence-based case that the Interstates are wearing out and need what amounts to replacement. Unfortunately, the report’s main recommendation—a huge increase in federal fuel taxes to support reconstructing the system using the original 90 percent federal and 10 percent state funding program—is both highly unlikely and inadvisable.

The committee’s findings are very important. First, most of the Interstate System already has, or soon will have, exceeded its original design life and will need reconstruction. A large fraction will likely require full-depth pavement replacement, from the sub-base up— and yet there are no real data available on the extent of this need, and the federal Highway Economic Requirements System includes no unit costs (per lane-mile) for this most expensive kind of reconstruction. Hence, the reconstruction cost estimates in the report may well be under-estimates.

Second, contrary to widespread assertions during the last decade that the era of traffic growth had ended, we now have renewed annual growth in vehicle-miles of travel (VMT), with truck VMT growing faster than passenger-vehicle VMT. The report uses a baseline figure of 1.5 percent for overall annual VMT growth, with lower and upper bounds of 0.75 percent and 2 percent. This growth supports the need for widening many corridors—and to minimize inconvenience to highway users if a stretch of Interstate needs widening, it’s best to do this as part of the planned reconstruction process.

Dedicated truck lanes are mentioned, but assessed only on the extent to which they might reduce congestion, when their real value will be to (1) increase trucking productivity by allowing much greater use of longer combination vehicles (LCVs) in barrier-separated lanes, and (2) reduce environmental impact by hauling more ton-miles per gallon of fuel and facilitating fuel-saving truck platooning.

While the report’s proposed $57 billion per year for 20 years is a very large number, it would not produce as much improvement as might be imagined. Despite a $44 billion backlog of Interstate bridge rehabilitation and replacement needs, the report would continue the current status quo approach of a very gradual reduction in deficient bridges. It would accept that after 20 years of major investment, Interstate miles in “poor” condition would double, from 2 percent to 4 percent. And it would accept increases over today’s massive urban Interstate traffic congestion unless annual growth in vehicle-miles of travel were to be an unrealistically low 0.75 percent. At its more-realistic rates of VMT growth, congestion would be 4 percent worse than today (at 1.5 percent annual VMT growth) or 29 percent worse than today (at 2.0 percent VMT growth) after 20 years of spending $57 billion per year.

A likely reason for the projected worsening of congestion is that the $57 billion per year does not include two major needs the report discusses: networks of express toll lanes on urban Interstates in very large metro areas and the replacement of up to 100 obsolete bottleneck interchanges in urban areas. Those improvements are already reducing congestion in the metro areas where they have been implemented, but are not included in the report’s investment proposal.

On the recommendations for how to pay for and accomplish Interstate modernization, the report is most disappointing. Its analysis includes discussion of many factors that could have led to a bold proposal, such as financing the needed replacement and modernization based on toll revenue. The report discusses the merits of tolling compared with the projected decline of fuel taxation as vehicle propulsion changes (such as increased use of electric vehicles) in the coming decades. And it also explains the wisdom of financing large- scale, long-lived capital improvements to infrastructure, which enables the benefits to be received sooner. It discusses the need to shift from per-gallon taxes to per-mile charges, but never makes the obvious point that a per-mile toll is a mileage-based user fee—and that converting the Interstates to per-mile tolling would transition over 25 percent of all U.S. VMT to per-mile charging.

To its credit, the report does recommend removing the 1956 federal ban on tolls on the Interstates (other than the few segments that were already in operation or under construction as toll roads in 1956). And it mentions the need, in coming decades, for electric vehicle charging stations “on” the Interstates, but never faces up to the federal ban on such commercial services being provided at Interstate rest areas. The only way out of that conundrum would be to persuade somebody to install EV charging facilities at their own expense and then give away the electricity. Both the tolling ban and the rest-area ban should have no part in a 21st-century Interstate System. This change would also permit next-generation “rest areas” to become full-fledged service plazas like those on existing toll roads, offering all forms of refueling, ample safe overnight parking spaces for heavy trucks, shops, and restaurants, etc.

In short, the committee’s report missed an important opportunity. Its research results could have been marshaled to support a plan to accomplish two major goals in one overall program: launching the national transition to mileage-based user fees and replacing the first-generation Interstates with a much-improved second-generation system. The key to doing both would be to use per-mile all-electronic toll revenues to underwrite revenue bonds for reconstruction and selective widening of the existing system—and its possible extension to metro areas that have developed since the 1950s but have no nearby Interstate access.

The report’s illustration of a 60 percent increase in federal gasoline and diesel taxes is misleading since it is far less than would be needed to achieve the report’s aim of investing $57 billion per year. Even a 60 percent increase is highly unlikely to gain traction in Congress. And if it did, it would be an unwise move for several reasons:

• It is not sufficient to handle the widening needed if 1.5 percent or 2 percent VMT growth materializes (which is likely if truck automation leads to essentially 24-hour long-distance trucking and a large increase in trucking’s share of goods movement).

• It does not include funding the replacement of the 100 largest interchange bottlenecks, which are largely responsible for $74 billion per year in congestion costs to trucking alone.

• It is only a temporary solution since nearly all projections show that fuel-tax receipts will soon begin a long decline over coming decades, due to ongoing changes in vehicle propulsion. Increasing fuel tax rates can only postpone this decline temporarily.

And most important of all, it is a pipedream to imagine that Congress would allocate all of any proposed near-term increase in fuel-tax revenues to Interstate reconstruction. The federal surface transportation program encompasses 108 programs, nearly all of them supported by federal highway user tax revenues. Each of those programs has a constituency, and every one of those constituents will lobby hard for any increase to be spread proportionally among all 108 programs.

This Reason Foundation study makes the case for addressing both the need to rebuild the Interstates and the need to begin the transition from per-gallon fuel taxes to per-mile highway user charges. The key insight is that an electronically-collected per-mile toll is a mileage-based user fee and one that already has wide customer acceptance. It explains why this country needs to face up to the real cost of building a better-performing Interstate System than the aging, outdated system we have now.

A number of states are already making plans to do toll-financed Interstate reconstruction and modernization. Connecticut has done three major studies and held extensive debates on whether and how to carry out such a program, probably using a provision of federal highway law that permits replacing non-tolled Interstate bridges with tolled bridges. Indiana has done two major studies, the second of which laid out a strategic plan to toll- finance the reconstruction of all its long-distance Interstates over several decades, also using the bridge provision. Virginia is debating a bill to use toll revenue to fund $2 billion worth of improvements to I-81. Wisconsin has done an initial Interstates tolling feasibility study, and legislative leaders are pushing for a follow-on study similar to Indiana’s strategic plan. In addition, both Alabama and Louisiana are considering toll-financed replacement of three aging bridges on I-10 in those states. Rhode Island is already tolling heavy trucks to help fund the replacement of 150 deficient bridges.

This Reason Foundation policy study closes with suggestions for how to make toll-financed Interstate reconstruction and modernization politically feasible and customer-friendly for both motorists and truckers. It suggests that in the 2020 surface transportation reauthorization law, Congress create a voluntary program that any state could opt into. In exchange for exempting it from the 1956 bans on tolling and commercial rest areas, the state would agree to configure the tolls as electronic per-mile charges as a first step toward replacing per-gallon taxes with per-mile charges. It would also commit to using the revenues solely for both the capital and the operating and maintenance costs of the state’s Interstate highways (no toll revenue diversion). And to ensure fairness for all users, the tolls would be charged to all vehicles, and there would be no differences in the rates charged to in-state and out-of-state vehicles. Participating states would have to enact enabling legislation agreeing to these provisions while authorizing the state DOT to develop a multi-decade plan for modernizing all its Interstates.

Full Study: The Case for Toll-Financed Interstate Replacement