Solving two major highway problems the bipartisan infrastructure bill ignored

Two serious highway problems were not addressed by the Infrastructure Investment and Jobs Act (IIJA) of 2021: rebuilding America’s aging Interstate highways and jump-starting the needed shift from per-gallon fuel taxes to per-mile user charges to pay for them. These changes could be addressed via a single measure in the 2026 surface transportation reauthorization bill, which will Congress should start seriously discussing in early 2025.

In 2019, the Transportation Research Board (TRB) released a significant study, requested by Congress, on the need to rebuild most of the nation’s aging Interstate highway system. The study found that the estimated cost of rebuilding the Interstates over several decades was approximately $1 trillion. Congress has taken no steps to address this pressing need.

The TRB report mentioned toll finance as one possible way to pay for this multi-decade project. In 1998, Congress passed the Interstate System Reconstruction and Rehabilitation Pilot Program (ISRRPP). It allows three states to use toll finance to each rebuild one Interstate highway. When the North Carolina Department of Transportation (NCDOT) proposed doing this for aging I-95, those who lived near or used I-95 protested vigorously about being singled out to pay tolls, while those who used the state’s other Interstates would not be tolled. NCDOT dropped the plan, and no state has attempted to use ISRRPP since then.

While President Donald Trump often spoke of infrastructure during his first term and Trump and other Republican presidents have run up debt, it seems unlikely that the new Republican-controlled Congress and White House will be able to pass another massive bill the size of the previous bipartisan infrastructure bill, which was entirely borrowed and added to the national debt.

Instead, Congress could offer a self-help measure to states: expanding the scope of the ISRRPP to include all 50 states and all of a state’s Interstates. To be sure, not every state would rush to take advantage of the option. But over the past decade or so, eight state legislatures have funded large-scale studies of toll-financed Interstate reconstruction and modernization efforts, including—Missouri, Illinois, Indiana, and Ohio (for reconstructing I-70 across all four states with dedicated truck lanes), and individual state Interstate tolling studies in Connecticut, Indiana, Michigan, Minnesota, and Wisconsin.

So, there is evidence that some states might be first-movers if such a bill were enacted. And these projects would be great candidates for revenue-financed long-term public-private partnership (P3) projects.

The prospects for converting state highway funding from per-gallon taxes to per-mile charges have been explored via pilot projects in many states over the past decade. The major concerns of motorists, truckers, and legislators have been protecting drivers’ privacy due to fear of vehicles being “tracked” by the government, avoiding “double taxation” in which a per-mile charge is imposed in addition to the existing gas taxes paid, and a potentially unfair impact on rural road users who are assumed to end up paying more.

That last concern has been addressed by increasing evidence that most rural drivers use more fuel per month than urban road users, so charging per mile rather than via gas taxes would leave many rural drivers slightly better off.

The other concerns remain, and most recently have been joined by a new one: the cost of collecting per-mile charges compared with the cost of collecting gas taxes. Fuel is taxed at the wholesale level, and the cost of collection is generally accepted as 2% of the revenue collected.

The road user charge pilot projects typically involve fewer than a thousand motorists, so the monthly cost of equipment and staff per vehicle is huge. Proponents have argued that a statewide program would bring large economies of scale.

Earlier this year, WSP analyst Nate Bryer presented calculations aimed at making realistic unit-cost estimates. For a large state, he estimated the cost of collection would be $4.25 per month (per user) and about $9.65 per month for a smaller state. Those are staggering numbers compared to about 42 cents per month per user for the cost of collecting fuel taxes. This is a major unsolved problem.

In a forthcoming Reason Foundation policy brief, I suggest that it is very premature to convert all of a state’s roads to per-mile charging and that attempts to do so would likely fail. It would be wiser and more practical to begin converting from gas taxes to mileage fees on limited-access highways.

Today’s all-electronic tolling on such highways raises no privacy concerns for most drivers because vehicles are charged only from on-ramp to off-ramp, not their entire trip from origin to destination. Secondly, the cost of collection is in the ballpark of 5% of the revenue collected, a little more than double the 2% figure for fuel taxes. So, figure about $1 a month per motorist as the cost of collection on Interstates and freeways.

If every state decided to use per-mile tolling on its limited-access highways, about one-third of all U.S. vehicle miles of travel would be shifted from per-gallon to per-mile payment for roadway use. The expansion of ISRRPP discussed above could include the option to do this.

But there is one complication. To address the concern over “double taxation,” on each highway converted from fuel tax to per-mile charge, the state would have to refund fuel taxes incurred for the miles driven each month on each converted highway. And ideally, Congress would do the same for federal fuel taxes.

The mechanics of this are easy, using an all electronic tolling (AET) system; such refunds have been offered for many years on the Massachusetts Turnpike and New York State Thruway. A company that manages toll payments for trucking companies (Fleetworthy, formerly Bestpass) handles these refunds for subscribing companies as part of its tolling services.

The obstacle would be Congress and state departments of transportation (DOTs) not wanting to give up any of their gradually declining fuel tax revenue. But in a study published last year in TRB’s journal Transportation Research Record, I modeled a state transition along these lines and showed that over a 30-year period of individual Interstates being reconstructed and shifted to per-mile charging (with fuel tax refunds), the state’s other highways would be better off, since none of the remaining fuel tax revenue would be spent on the more-costly Interstates and would be fully available for state and local roadways.

In any case, this state-by-state conversion from gas taxes to mileage fees would likely begin slowly, with a handful of states as first-movers. Only when other state legislatures and transportation departments saw that both limited-access and non-limited-access highways would be made better off by this transition would more states opt to do likewise. During the ensuing several decades that this would take place, we can hope that better low-cost, privacy-protecting methods would be developed to convert the rest of the roadway system to per-mile charges.

A version of this column first appeared in Public Works Financing.

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Source: https://reason.org/commentary/solving-two-major-highway-problems-the-bipartisan-infrastructure-bill-ignored/