Modernization of America’s major highways and bridges is facing a serious problem. In a nutshell, highway users don’t want to pay what it costs to rebuild or replace these aging pieces of critical infrastructure. And this poses a significant threat to the ability to use long-term design-build-finance-operate-maintain (DBFOM) public-private partnerships (P3s) for these megaprojects. Two recent examples are playing out before our eyes, one in Alabama and the other in Pennsylvania, but there are many others waiting in the wings.
Several years ago the Alabama Department of Transportation (ALDOT) gave priority to a proposed plan to build a new Mobile River Bridge and Bayway to improve traffic flow in the Mobile metro area. The plan was for a DBFOM P3 project, to be financed largely by tolls. Based on the project’s estimated $2.1 billion cost, the projected one-way toll for personal vehicles was $6, but there would be frequent-user discounts and a $90 monthly pass for unlimited trips (so that 40 daily commuting trips per month would average $2.25 each).
But that plan provoked populist outcries, with all the focus on the $6 number, plus concerns about profiteering by the potential P3 developer/operator. The metropolitan planning organization (MPOs) on both sides of the river opposed the project—and ALDOT went back to the drawing boards. After proposing and rejecting a scaled-back bridge-only plan, the revived project is now going forward with the MPOs’ blessing. It includes both bridge and Bayway, now estimated at $2.7 billion, but with a one-way toll of only $2.50 for cars, a $40 unlimited monthly pass, and a frequent-user discount. The P3 procurement has been ditched, and now it’s unclear where the balance of the funding will come from.
After Pennsylvania’s $2.5 billion Major Bridge Replacement Program stalled due to a legal challenge by local governments, the legislature changed the P3 law to remove the ability to use tolls on all lanes of a highway or bridge. Only optional user fees are allowed, as on express toll lanes. PennDOT may proceed with the P3 bridge procurement—but without a funding source, it’s not clear where the needed $2.5 billion will come from.
For years, objections to tolling have held up Ohio and Kentucky going forward with replacing the obsolete Brent Spence Bridge. While tolling appears to be part of the plan for replacing the aging I-5 bridge in Portland, OR, it will likely be aimed at covering only a fraction of the estimated $5 billion cost. Fortunately, at least Louisiana seems to be bucking this anti-tolling trend, with P3 procurement under way for a toll-financed replacement of the Calcasieu Bridge on I-10 and likely as well for a new Mississippi River bridge at Baton Rouge.
Why is there so much popular opposition to tolling? Years ago highway user group argued against “erecting toll booths on existing non-tolled highways,” correctly arguing that this was simply extracting more revenue without adding any real improvements. But today, it seems to be “tolls are asking us to pay way too much.”
Perhaps the main reason for this perception is that the current 20th-century funding system disguises the real cost of building and operating major highways and bridges. First of all, per-gallon fuel taxes charge the same de-facto rate per mile driven, whether one drives on a two-lane gravel road or an eight-lane freeway. This clearly over-charges those on lower-level roads and greatly under-charges those using Interstates and freeways. Second, the federal gas tax has not been increased since 1993 and has lost at least half of its purchasing power since then. But Congress continues increasing federal highway spending via billions of dollars per year in transfers from the general fund—i.e., borrowing. So motorists and truckers have no idea what it really costs them to use the roads they drive on.
Making the problem even worse is periodic bursts of Congress playing Santa Claus, enacting stimulus or recovery bills to jump-start the economy after this or that crisis. So today, you can be sure that Alabama, Pennsylvania, and other states with major bridge replacement needs expect manna from heaven in the form of free money from Santa to rescue them from populist opposition to paying what it really costs to replace their bridges.
All of us who favor a sound, sustainable approach to highway funding (embracing the users-pay/users-benefit principle that is standard for utilities and other infrastructure), should reframe our approach to highway funding. The major background fact that makes this necessary is the coming long-term decline in gasoline and diesel tax revenue. Federal policies and auto/truck original equipment manufacturer (OEM) plans call for phasing out internal combustion engines in favor of electric propulsion. Realistic projections show that personal electric vehicles (EVs) could constitute nearly half the U.S. personal vehicle fleet by 2050, thereby greatly decreasing fuel tax revenue.
A growing number of states are carrying out pilot projects to test various ways of collection mileage-based user fees (MBUFs), also known as road user charges (RUCs). And three states (Oregon, Utah, and Virginia) have enacted voluntary programs in which owners of certain categories of personal vehicles can opt into paying per mile, getting refunds of the gas taxes they will continue to pay until all vehicles switch over.
The trucking industry is officially opposed to this transition, but trucking fleets have been participating in state MBUF pilot projects in the last few years. There is now a trucking group working with The Eastern Transportation Coalition, trying out per-mile charges for long-distance heavy trucks at the industry’s request.
State departments of transportation might be able to reduce public opposition to new tolls for major highway and bridge modernization if they reframed those user fees as the first large step toward converting their state’s highway funding from per-gallon taxes to per-mile charges. Obviously, to be credible, those paying the new per-mile charges would have to get refunds for the gas taxes they would continue to pay for all the other miles they drive, until some future date when all gas taxes are phased out and all vehicles on all roads pay by the mile.
Focusing on the need for per-mile road user charges is not a near-term solution to this problem. But state DOTs and legislative transportation committees should focus more public attention on the needed shift to paying by miles driven as they confront opposition to tolling for much needed highway and bridge modernization.
A version of this column appeared in Public Works Financing.