Prepared for the Pennsylvania State House Transportation Committee on November 9th, 2021
My name is Baruch Feigenbaum and I am the Senior Managing 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 policy issues.
During my time at Reason, I have worked with the states of Georgia, Maryland, Massachusetts, Michigan, North Carolina, Ohio, Pennsylvania, Texas, and Virginia, as well as numerous counties, to implement transportation policy and funding reforms.
According to Reason Foundation’s most recent Annual Highway Report, Pennsylvania ranks 46th in percent of structurally deficient bridges, the 5th highest in the nation. Given the large number of deficient bridges, the state needs to engage in innovative practices to improve its bridge conditions.
One innovative approach was the Rapid Bridge Replacement public-private partnership (P3) program. Over the last five years, Pennsylvania used this P3 to rebuild more than 550 bridges. After reconstruction, private operators lease the bridges for 28 years. While this program rebuilt many smaller bridges, which helped to reduce the state’s backlog of substandard bridges in need of repair, many of the Interstate bridges remain in poor physical condition.
As a result, the Pennsylvania Department of Transportation (PennDOT) is proposing a major P3 toll concession bridge initiative that rebuilds or replaces nine Interstate bridges, each of which is more than 50 years old. PennDOT’s plan has a funding and financing component. P3s are procurement methods that help deliver needed infrastructure more quickly and raise new sources of capital by shifting risk from taxpayers to investors. P3s can also enable major innovations. The private company that built the SR 91 express toll lanes introduced variable pricing that rises or falls based on congestion. new sources of capital from the private sector while shifting risk from taxpayers to investors. Develop
P3s are also more customer-oriented by adopting cost-savings practices. Transurban, which built the I-495 express toll lanes, used value engineering to reduce the project’s cost 25% compared with the original cost estimated by the Virginia Department of Transportation.
Given the dire condition of the bridges and the reality that the state’s fuel tax revenue is dedicated to other priority projects, the department is looking at toll revenue to finance the reconstruction of these nine major bridges. Without tolling, PennDOT does not have the ability to rebuild these bridges.
When some think of tolling they imagine tollbooths requiring exact change in quarters with a tollbooth operator who would rather be somewhere else. Today’s 21st-century approach to tolling is very different. Tollbooths have been replaced with electronic gantries. Quarters have been replaced with in-vehicle transponders such as E-ZPass that instantaneously note when a vehicle passes under a gantry to charge the toll. The cost of toll collection, as high as 25% of revenue in the 20th century, has decreased to less than 10% on electronically tolled facilities. Pennsylvania is currently converting the entire Turnpike System to electronic tolling. Most experts believe as tolling and technology improve, the overall cost of toll collection will decline to less than 5% of revenue, close to the gas tax’s 2% cost of collection.
Tolling is popular with taxpayers as well. In many studies, when asked whether they preferred tolling or an increase in gas taxes to fund a major project, the public chose tolling. Why? Unlike the fuel tax that is collected from all motorists and then dispersed to all
roadways in the state, tolls can be dedicated to a specific facility, such as a new bridge. Users of a toll facility know that the tolls they pay are being used on the road or bridge they use. And motorists who do not use the toll facility don’t have to pay for the roadway.
SB 382 has identified several legitimate concerns regarding PennDOT’s current bridge tolling plan. One concern is ensuring that there is no double taxation for Pennsylvania motorists. Several states already allow highway users tax refunds on toll roads for trucks. For example, truckers can use Bestpass to process highway user tax rebates when they travel on the Massachusetts Turnpike and the New York Thruway.
To protect taxpayers, we recommend adding five guidelines we call “value-added tolling” to PennDOT’s proposal:
- Limit the use of toll revenue to the newly tolled facility.
- Charge only the amount required to cover the capital and operating costs of the facility or an appropriate congestion charge that varies with the level of congestion starting at $0.
- Begin tolling only after construction or reconstruction is complete.
- Use tolls to replace, not supplement, fuel taxes.
- Provide a higher quality roadway for tolled facilities.
However, we are also concerned that SB 382 would make unnecessary changes to the Public-Private Transportation Partnership (P3) statute. The bill requires the General Assembly to approve any P3 with a user fee. We understand the importance of the General Assembly having a voice and oversight, but this requirement could micromanage the department of transportation while increasing costs and decreasing the speed of project completion.
The bill also outright voids the PennDOT Pathways Major Bridge P3 Initiative. While not every bridge may be a great fit for the program, voiding the entire nine-bridge initiative would send a signal to the transportation and finance communities that major P3s are not welcome in Pennsylvania.
Instead, we recommend the General Assembly provide guidelines and mandate that PennDOT follow the five value-added tolling protections detailed earlier in this testimony. The General Assembly can create a system to review P3 performance and outcome data, ensuring that the project meets the goals outlined by the department, including reduced traffic congestion and enhanced safety. The General Assembly should also hold PennDOT accountable for completing projects on time.