Per-Mile Tolling: Good or Bad Idea?

Sep 30, 2013

In a recent study by Robert Poole, revealing information was brought to light on the status of the United States National Highway System (NHS). Most notably of which is the lack of inflation indexing for the current pre-gallon fuel taxes. This is an issue for the interstate infrastructure due to the road surfaces reaching the effective lifetime of 50 years, thus providing a need of modernization and replacement.  Unfortunately, the national average fuel tax of forty-six cents per gallon of gasoline or fifty-two cents per gallon of diesel (Source) in conjunction with the state and federal highway trust funds is not nearly enough to adequately finance the near one trillion dollar project; aptly named "Interstate 2.0".  According to Poole "reconstruction is estimated at $589 billion, in 2010 dollars, and lane additions at $394 billion, for a total 2010 cost of $983 billion." For sufficient funding of this project, Poole has proposed a per-mile tolling system which will garner enough revenue to provide 99% of the net present value of the project's proposed cost.

Included within these costs is the estimate for executing the tolling system. One of the overt drawbacks of the current toll booth/ toll plaza system is the traffic congestion that builds up behind the checkpoint. Within the proposal for 'Interstate 2.0' adjustments to this antiquated process have been delineated. State-of-the-art All-Electronic Tolling (AET) equipment will allow fleet operators to travel throughout the United States with a single transponder linked to the fleet's account without having to reduce speed for a toll plaza.

Value-Added Tolling

Recognizing that regular interstate users would be more than perturbed at the concept of being tolled on a surface that was already paid for with fuel taxes, Poole has proposed that the practice of per-mile tolling "be implemented on the principle of 'value-added tolling." This principle means that tolling would only begin after a corridor has been brought up to 'Interstate 2.0' standards. In addition to quelling the population's nerves, this will effectively limit the risk of redundant taxation that has the possibility to occur if states are slow to remove the gas tax currently in place. However, if there is an event of double taxation, the system permits "rebates of fuel taxes generated by the miles driven on the tolled Interstates".

Advantages of Per-Mile Tolling

Since the current system of fuel taxes supports the funding of all roadways at an average rate, light passenger vehicles and long-haul tractor trailers all pay the same average price to utilize the entire nationwide transportation surface. In this outdated system of taxation, a fleet that operates primarily on inexpensive local streets pays the same fuel tax as the fleet of long-haul tractor trailers that spend a majority of its miles on multi-billion dollar bridges, interchanges and expressways. However, with the per-mile based AET proposed for Interstate 2.0, toll rates will be "tailored to the cost of each highway."

Cost dependent toll rates is just one of the advantages of per-mile tolling, in addition to this, Poole describes six other reasons for per-mile tolling creating greater benefit than per-gallon taxation:

Per-mile tolling reflects greater fairness, since those who drive mostly on Interstates will pay higher rates than those who drive mostly on local streets.

If per-mile tolling is implemented as a true user fee, it will be self-limiting, dedicated solely to the purpose for which it was implemented (and enforceable via bond covenants with those who buy toll revenue bonds).

Per-mile tolling will guarantee proper ongoing maintenance of the tolled corridors, since bond-buyers and other investors legally require this as a condition of providing the funds.

Per-mile tolling also provides a ready source of funding for future improvements to the tolled corridor.

Toll financing means needed projects, such as reconstruction and widening, can be done when they are needed, and paid for over several decades as highway users enjoy the benefits of the improved facilities.

Finally, a per-mile tolling system using AET can easily implement variable pricing on urban expressways to reduce and manage traffic congestion.

Roadblocks to Interstate 2.0

For the wheels to be set in motion on modernizing the NHS, Congress needs to provide permission due to current federal law prohibiting tolling of existing lanes on Interstate highways.  In the
current pilot program, only three states – Missouri, North Carolina, Virginia - have the opportunity to implement tolls on interstates for funding of reconstruction. Local politics for each of these states has created a stalemate in the process which is inhibiting the system from being tested. Fortunately, the Federal Surface Transportation Program is up for reauthorization in 2014 which would expand the immobile pilot program from Missouri, North Carolina and Virginia nationwide. This expansion could be the necessary catalyst for both individual states and the federal government to realize the benefits of 'value-added tolling'.

Impact for Fleet Owners

Like all political decisions, Interstate 2.0 will have a ripple effect throughout the transportation industry. Whether this will be a positive reaction from small fleets or large has yet to be evaluated. Fleetcards USA has reason to believe that fleet owners and fleet managers will look upon this favorably after open-mindedly reviewing the study. With fuel taxes being removed, the cost of fuel will be reduced while the tailoring of toll rates will create an ecosystem of fairness for fleets that travel hundreds of thousands of miles annually. Fleet Owners should approach the study with objectivity rather than stubborn bias for the long-standing system of per-gallon fuel taxes.