The Case for Interstate Tolls


Virginia faces a $13.6 billion price tag (net present value) to reconstruct its aging interstate highways, estimates Robert W. Pool Jr., with the Reason Foundation in a new study, “Interstate 2.0: Modernizing the Interstate Highway System via Toll Finance.” The cost nationally of reconstructing the Interstate system is estimated to cost $589 billion (in 2010 dollars).

Over and above those costs, Virginia needs another $9.6 billion to widen and make other improvements to its Interstates, according to the study, part of $394 billion nationally.

How do we pay for it all?

Current sources of revenue are inadequate to pay the massive bill, contends Poole, who advocates a user-pays system of all-electronic tolling. Tolling once was an inefficient way to collect revenue but advances in electronic and tolling and have brought down the cost from 30% of revenue in times past to less than 5%. Tolling also plays better politically; in polls, motorists also say they object less to tolling than other forms of taxation.

The [optimal] way forward would be to adopt the principles of “value-added tolling.” That means asking highway users to pay tolls only in circumstances where those paying the new tolls would personally get significant added value. That is obviously the case if the tolls finance a new bridge, new lanes or a new toll road. But it would also be the cases if a major highway or bridge has reached the end of its original design life, or is significantly undersized for the travel demand.

Unlike fuels taxes, says Poole, toll rates can be tailored to the cost of each highway. “Under a fuel tax system, operators of cars and trucks pay a single average price to use all roads, regardless of their cost. It’s as if everyone paid a standard price for a car, regardless of its cost to produce and its various features. Under such a system, nearly everybody would want a Jaguar or a Rolls Royce.”

Tolls are fairer as well, he argues.”Because the toll rates are directly related to the costs of specific highways or bridges, people pay specifically for what they use and can avoid paying for what they do not use. … Those who extensively use Interstates (such as trucking companies) would pay rates that fully cover the cost of building, operating and maintaining those specific facilities.”

Another advantage is the self-limiting nature of a toll-financed system. The federal fuel tax has morphed into a general purpose federal transportation tax. But tolls would be used used to pay off bonds, and bond buyers impose stringent conditions on the use of revenues. Money would not wind up being spent on bridges to nowhere.

Finally, Poole argues, tolls can be structured to vary with traffic demand, making it a useful congestion-management tool. (As an example, he might have cited the variable-pricing tolls on Virginia’s stretch of the Washington Capital Beltway.)

I largely agree with Poole’s analysis. The more we move to market-based pricing for transportation, the more efficiently we will utilize our transportation system. My only question is whether we really need to make all the Interstate improvements that Poole suggests are needed. Aside from the demographic and economic forces dampening driving generally, if people paid directly for their Interstate usage, they might actually use it less. Some of those improvements might prove to be unnecessary.

Update: Toll express lanes on major highways wins 60% public support versus 10% for a vehicle-miles-driven charge, according to deliberative forums conducted by the Metropolitan Washington Council of Governments transportation planning board. So reports Toll Road News(Hat tip: Larry Gross.)


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4 responses to “The Case for Interstate Tolls”

  1. The most important thing to be aware of is that right now – the Federal Transportation dollars are 1/2 general revenues instead of only gas taxes.

    The GOP wants to end the subsidies – as well as the money that goes for non-road transportation functions – like bike, transit, etc.

    The only thing the GOP seems to like is TIFIA.

    basically a loan program for infrastructure – designed to loan money for toll roads.

    Poole is correct. The BEST user fee – is the one that you and I voluntarily pay each time we make a trip.

    The gas tax is not a real user fee given the tortured and circuitous route that the gas tax takes to get converted into real infrastructure. The original premise was that your taxes would go to pay for the roads you use.

    that’s just no longer true. Your Fed gas tax may well go to pay for a bike trail in Seattle just as much as it might pay to improve some interstate in Va.

  2. reed fawell III Avatar
    reed fawell III

    Good article.

    There is world of difference between interstate tolls, and special tunnel and bridge tolls, to carry people long distances, including across big stretches of water and between and through states and going coast to coast, and those new kinds of tolls that are increasingly erected by, and going to enrich, the private moguls or quasi- private public authorities that are more and more using them like a rogue governments to manipulate and abuse local traffic.

    This abuse is typically taking place amid traffic in highly congested urban and suburban areas for the express purposes of raising the maximum amount of revenues for all sorts of private enrichment and private purposes. This includes, but is not limited to, the use of toll monies to build yet more roads with their own tolls to open up yet more and new undeveloped lands out in the hinder-lands to make landowners rich, and give industry in such places special treatment, both as to time and cost and convenience of access, all of it build on the backs of everyday citizens trying to get to work to earn a living for themselves and their families.

    These new trend and the new “quasi development and illegal taxing authorities that are rapidly rising” need to be confronted, investigated, and where its right and legal to do so, they need to be stopped. Otherwise legitimate government and people both lose control of their destiny.

  3. The interstates don’t belong to the urban areas though. They were originally designed to CONNECT urban areas to benefit the movement of people, goods and services.

    instead, they’ve been co-opted by the urban areas for local development to the detriment of the people who ARE trying to connect to other urban areas AROUND the intermediate ones.

    so now you have interstates in NoVa being used as if they were designed for NoVa – and

    and this is the important part – no more Interstate money is going to fund widenings and improvements, etc so how are you going to do it?

    and how are you going to manage urban rush hours when you are at capacity for the belts?

    tolls do two important things for urban areas – 1. they support further improvements – like braided express lanes, new overpasses, bottlenecks, ramps, etc and 2. they can help manage rush hour with dynamic tolls

    and then they do one very important thing with folks trying to get through an urban area – they give them a way to do it – for a couple of bucks.

    I’ve yet to hear alternatives from those who oppose tolls other than they think the govt is corrupt and private tolls owners – just as bad.

    1. reed fawell III Avatar
      reed fawell III

      Actually, we’ve talked at great length about alternatives. Such as building mixed use denser development in existing older urban and suburban areas that work to drive down local traffic while they also suck traffic off the Interstates and every else, all roads, within the entire region. Like, for example, the Ballston Rosslyn Corridor kills traffic everywhere in the region and across the street opposed to Tysons Corner clogs up highways, roads, and streets throughout the region, and does it with a vengeance, due to poor land uses, including the gross failure to mix its uses properly. I’ll supplement this later with this website’s articles that illustrate the point.

      In addition we need to get back to the old rubric that all roads in existing neighborhoods should be designed to handle more traffic and connect better with as many roads as possible, so that traffic is disbursed like flood waters over a broad plain rather the forced down narrow channels.

      Ironically, much of our current road planning, design, and tolling systems do the reverse. They force traffic into narrow channels as part of a management system, even now in places for the purpose up jacking up revenues using citizens trying to get to work as cash cows.

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