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From The Editor

Paying for Roads
by C. Kenneth Orski

Members of the House transportation committee voted unanimously to seek $48 billion for highways and transit in Fiscal Year 2004, an increase of $16 billion over Fiscal Year 2003. Their action was a first step in the congressional budget process which will ultimately guide federal funding levels for surface transportation in both the coming year and over the life of the next multi-year surface transportation authorization. Although no final decision has been made, House leaders are considering a six-year surface transportation bill costing $375 billion.

While the needs for increased funding are undeniable, the action of the transportation committee puts the congressional budget planners in a bind. The revenues paid into the Highway Trust Fund are expected to average approximately $40 billion annually over the next ten years according to the Congressional Budget Office. That would cover only about 70 percent of the proposed outlays. Growing market penetration by more fuel-efficient SUVs and hybrid vehicles could make even this estimate a generous one.

Since both the Administration and congressional leaders have ruled out raising fuel taxes, advocates of increased funding are looking for other ways to augment the Highway Trust Fund. These include shifting the 2.5 cent tax on ethanol now going into the General Fund to the Trust Fund (already included in the Administration’s budget proposal for FY 2004); drawing down a portion of the accumulated Trust Fund balance, which currently amounts to over $22 billion and is expected to grow to over $26 billion by the end of 2004; restoring the interest on the Trust Fund, indexing the gas tax to inflation and reducing fuel tax evasion. Collectively, the Congressional Research Service estimates these “revenue enhancements” could add from $3 to $5 billion per year- not an insignificant amount but not nearly enough to meet the congressional FY2004 spending target of $48 billion, not to mention the six-year $375 million reauthorization goal.

Curiously, none of the funding plans currently under discussion consider tolls as a potential source of revenue. Admittedly, charging people for using roads they think they already have paid is a losing strategy. But if motorists received something of value in return, and if the extra revenue were dedicated to expanding road capacity and relieving traffic congestion, the public might take a more benign view of tolls.

That is the underlying premise of the Reason Foundation’s study, HOT Networks: A New Plan for Congestion Relief and Better Transit, published in late February and endorsed by diverse interest groups, including AAA, Environmental Defense and the New Democrats’ Progressive Policy Institute. The study envisions creating metropolitan-wide networks of toll lanes that would serve as high speed guideways for express buses while providing a faster and more reliable travel option to individual motorists. Electronic variable tolls would maintain free-flow conditions in the priced lanes even during peak hours, something that is daily being demonstrated on California’s two High Occupancy/Toll (HOT) lane facilities. Drawing on the California experience, the study assumes that growing numbers of motorists of all income levels would be willing to pay to use the congestion-free toll lanes as travel on metropolitan highways becomes increasingly slower and more unpredictable. Using the California data, the study estimates that up to $2.9 billion could be raised annually from the tolled road networks in just eight of the most congested metropolitan areas - enough to underwrite about 70 percent of the cost of building out the premium lane networks.

Charging for access to premium lanes is an idea whose time may have come. Not only would the tolls provide badly needed revenue to supplement existing gasoline tax receipts, but toll-paying motorists and businesses for whom reaching a destination or delivering merchandise on time is of critical importance could have “travel insurance” in the form of a faster and more reliable travel. Other users would also gain because regular lanes would become less congested as some of the traffic switched to the toll lanes.

In the 2003 surface transportation reauthorization, Congress will have an opportunity to make this vision a reality. A congressionally authorized program of premium lane networks—built to benefit motorists and transit users alike—would constitute a powerful expression of the increasingly intermodal nature of our federal surface transportation program. At a time when the need for transportation capital investment greatly exceeds traditional sources of funding, premium toll lanes would give America’s metropolitan areas congestion relief and improved transit service without the need for major new tax revenues.


The writer is co-author with Robert Poole of the Reason Foundation report, HOT Networks: A New Plan for Congestion Relief and Better Transit


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