Testimony before the Michigan House Ways and Means Committee on SB 517, June 24, 2020.
My name is Baruch Feigenbaum. I am the Assistant Director for Transportation Policy at Reason Foundation, a non-profit think tank with offices in Los Angeles and Washington DC. For almost four decades Reason’s transportation experts have been advising federal, state and local policymakers on market-based approaches to transportation.
I am a graduate of the Georgia Institute of Technology with degrees in Public Policy and Transportation Planning with a focus in Engineering. With Reason, I have authored studies on mobility, highway quality, highway congestion, transit options, funding alternatives and innovative financing. I have worked with the states of Georgia, Maryland, Massachusetts, North Carolina, Ohio, Pennsylvania, Texas and Virginia as well as numerous counties to implement transportation policy and funding reform. I currently serve on two National Academy of Sciences Transportation Research Board Committees, Bus Transit Systems and Intelligent Transportation Systems. Further, I am involved with the committees on Transportation Revenue and Financing, Congestion Pricing and Managed Lanes. My testimony today draws on these experiences.
Michigan’s Interstates and freeways are generally in very poor condition. The 2018 American Society of Civil Engineers report gives Michigan roads a D-. Reason’s 24th Annual Highway Report ranks Michigan 30th overall but 34th in rural Interstate pavement condition and 42nd in urban Interstate pavement condition, worse than most neighboring states. Traffic congestion is a problem in several metro areas, particularly Detroit. In addition to adding unpredictability and stress to commuters to and from work and school, congestion also harms Michigan’s economic activity and limits growth in business activity. High-quality roadways are one of the top factors businesses examine when making expansion and relocation decisions. With the delivery economy expanding by double digits each year, truck traffic is forecast to grow by more than 100% over the next 30 years. I-94 linking Detroit with Chicago and I-69, which will link Mexico and Canada within 10 years, are major freight highways. Clearly, Michigan needs to improve its Interstate and freeway network.
Today, the primary method for funding roadways is the gas tax. Understandably, raising the gas tax is unpopular. And the increase needed to fix Michigan’s highway network would be well over 20 cents. But an even bigger problem with the gas tax is that it is an increasingly unsustainable and unfair way to pay for roadways. The increase in electric vehicles, hybrids and more fuel-efficient conventional vehicles have made the gas tax increasingly complicated to administer. Many have likened the gas tax similar to a rockstar on his/her farewell tour. Similar to the rockstar, the gas tax has been an effective funding mechanism for the past 50 years, but it is on borrowed time. Over the long term, it needs to be replaced by another funding mechanism.
The best long-term replacement for the gas tax on Interstates and other major highways is tolling. When some think of tolling they imagine tollbooths requiring the exact change in quarters with a tollbooth operator who would rather be somewhere else. I label this 20th Century approach to tolling as your grandfather’s toll road. Today’s 21st-century approach to tolling is very different. Tollbooths have been replaced with electronic gantries. Quarters have been replaced with transponders such as EZ Pass that instantaneously note when a vehicle passes under a gantry. The cost of collection, as high as 25 percent of revenue in the 20th century, has decreased to less than 10 percent on tolled facilities. Most experts believe as tolling and technology improve, the overall cost will decline to less than 5 percent, roughly equivalent to the gas tax.
Tolling is popular with taxpayers as well. In several studies, when asked whether they preferred tolling or gas taxes, the public chose tolling. Why? Unlike the fuel tax which is collected from all motorists and then dispersed to all roadways in the state, with no link to which roadway a driver actually uses, tolls can be dedicated to an exact stretch of roadway. Users of a toll road have the peace of mind of knowing that the tolls they pay are being used on the roadway they use. And motorists who do not use the toll road don’t have to pay one dime for the roadway.
To protect taxpayers we recommend adding five guidelines, which we call value added tolling. These include:
- Limit the Use of Toll Revenue to the Facility
- Charge only the amount required to cover the capital and operating costs of the facility
- Begin tolling after construction or reconstruction is complete
- Use tolls to replace not supplement gas taxes
- Provide a higher level of service for tolled facilities.
As Interstate highways reach the end of their design life, several states have conducted tolling feasibility studies. In a two-part study, Indiana, Michigan’s neighbor, found tolling was feasible to rebuild its Interstates. Florida, North Carolina, Virginia, Wisconsin and Wyoming (the least populated state in the country) are all studying rebuilding Interstate highways as well.
Based on my experience, Senator Bizon’s bill, SB 517 is the best way to determine the feasibility of tolling. The two-part bill examines both whether tolling is feasible and how to implement tolling. By including both phases, Michigan will have a true picture of the feasibility of tolling and save money compared with two separate studies. The study would be conducted by an outside consulting firm and examine economic feasibility, toll rate, out-of-state use, and federal programs.
As SB 517 notes, there are several current and pending opportunities for rebuilding Interstates and freeways under federal law. Currently, the state could qualify for a slot in the Interstate Rehabilitation and Reconstruction Pilot Program. The U.S. Congress is currently working on an extension of current federal transportation policy, and the Senate’s proposed America’s Transportation Infrastructure Act of 2019 includes two new tolling programs.
Finally, if tolling is considered feasible, Michigan is encouraged to use P3s to build the tolled facilities. P3s use private capital to reduce the overall cost of the project. P3s have several advantages such as delivering needed infrastructure, raising capital, shifting risk from taxpayers to investors, providing a more businesslike approach, and enabling innovations.
Thank you for the opportunity to testify. I’m happy to answer any and all questions. Please feel free to reach out if I can provide additional information on this subject.