How Toll-Financed Interstate Reconstruction Could Address Two Major Problems

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The two largest problems facing America’s highway system are (1) the need to reconstruct and modernize the aging Interstate highway system and (2) the need to start replacing per-gallon fuel taxes with per-mile charges. In the January issue of Surface Transportation Newsletter, I suggested that the Transportation Research Board (TRB) Future Interstate Study Committee had missed an opportunity to propose addressing both problems simultaneously. That committee discussed but did not recommend long-term financing of Interstate modernization based on per-mile electronic tolling. In that article, I did not discuss how such a transition could be launched, but that is the subject of a new Reason Foundation policy study, released April 3.

“The Case for Toll-Financed Interstate Replacement” draws heavily on the case made by the TRB Committee that the Interstates need both major reconstruction and selective widening. Our new study also explains why long-term financing is wiser than pay-as-you-go funding out of annual revenues, and that depending on a huge increase in federal gasoline and diesel taxes would be unwise as well as politically unlikely. It also explains that if we expect highway users to pay (over several decades) for a trillion-dollar modernization program, they will need to get real value for the per-mile charges they will pay. And that, alas, is not what the TRB Committee report offered to motorists and truckers. Under its mid-range scenario, after 20 years of spending $57 billion per year on Interstate modernization, they project that both poor pavement and traffic congestion would worse than today.

With political control of Congress now divided, the political climate is not promising for major new infrastructure funding. And agreeing on either a serious federal effort to switch from per-gallon to per-mile highway fees or a mandated switch to tolled Interstates seems highly unlikely. Instead of proposing either, our report proposes a voluntary program to be offered to all 50 states. For any states that wanted to move to toll-financed Interstate replacement, Congress would lift the 1956 federal bans on tolling and on commercial rest areas (i.e. service plazas), but only if the state agreed to a set of provisions that would create a genuine value proposition for motorists and truckers. Here are the six conditions, and the reason for each:

Tolls must be collected electronically and charged per mile traveled. (This begins the transition from per-gallon to per-mile.)
Tolls on a segment would be instead of, not in addition to, fuel taxes—meaning fuel-tax rebates from the state would be required. (This reinforces per-mile charges as the replacement for fuel taxes.)
Toll revenues would be used only for the capital and operating costs of the state’s Interstate highways, bridges, and tunnels. (This prevents tolled corridors being used as cash cows.)
Tolls on a segment would begin only after that segment is reconstructed or replaced and opened to traffic. (This ensures that users pay only for something better than the status quo.)
Tolls must apply to all vehicles using the rebuilt Interstates. (This prevents discrimination against trucks and is fair since all users will benefit from the rebuilt Interstates.)
For a given category of vehicle, tolls must be the same for in-state and out-of-state customers. (This ensures no discrimination in interstate commerce and travel.)

As I watch the debates going on in states where Interstate tolling is being considered, I’m often dismayed by several aspects. First, there is far too much emphasis on revenue generation and far too little concern on the value for newly-tolled customers. Second, there is a focus on getting toll collection in place as soon as possible—without assurances that those who will pay the tolls can count on meaningful benefits from doing so. There is no consideration that per-mile tolls can and should be the first step in converting to mileage-based user fees—which are premised on (and promised to be) a replacement for fuel taxes, not an add-on. There is also still too much talk about charging only trucks, and there are all kinds of proposed schemes to make out-of-state Interstate users pay far more than in-state users.

Congress created the Interstates as a way to facilitate inter-state travel and commerce. If, as seems highly likely, Congress does not come up with the funding to replace the first-generation Interstates, it still has an obligation to make sure the system remains a national system that does not discriminate between in-state and out-of-state users, and that all users pay for this immense and much-needed make-over. The above conditions are an attempt to make sure that states taking advantage of this voluntary program do so in a way that both adds value for all users of the replacement corridors and preserves a seamless Interstate system that facilitates inter-state travel and commerce.

A version of this commentary first appeared in the April 3, 2019 edition of Surface Transportation Newsletter.

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