Recent Trends in Road Tolls

Why Doesn't Michigan Have Toll Roads?
We almost did, once. The Michigan Turnpike Authority was established in 1951 to build turnpikes between Detroit and Chicago, and Toledo and Bay City (these routes became I‑94 and I‑75).

The end of toll roads – 1956. The federal Highway Trust Fund, the 4-cent/gallon federal fuel tax, and 90 percent federal aid for the Interstate System covered most of the cost of freeway construction, and ended interest in new toll roads for 30 years.

Toll-road drawbacks. Cash tolls mean delay and increased operating cost. Cash tolls are expensive to collect, consuming 13 to 17 percent of revenues. Toll roads usually have fewer interchanges - a different design philosophy from Michigan freeways. Tolls divert traffic to parallel routes, risking neighborhood impacts. Tolls may discourage tourism and business location. Plus, people hate toll roads.

Why don’t we have tolls? Because Michigan never needed them. For many years, fuel and registration taxes were enough to take care of Michigan roads, and tolls didn’t do anything the fuel tax couldn’t. 

The Modern Toll-road Movement
There is a revival of interest in toll roads, for several reasons. Tolls can do these things that fuel and vehicle taxes can’t:

  • Raise road money without statewide tax increases.
  • Fairly apply fees to all classes of users and vehicles.
  • Direct new revenue to high-volume roads.
  • Release fuel- and registration-tax revenues for use on other roads.
  • Reduce congestion through pricing.

The following developments are making toll roads attractive:

Revenue gridlock. Congress and state legislatures are reluctant to raise road-user fees to offset increased vehicle efficiency and declining purchasing power. Transportation revenues have lagged far behind needs at the local, state, and federal levels.

Private capital. Tolls can bypass this political gridlock by attracting private investors to buy bonds or actually own the roads. Except: tolls frequently do not cover all project costs. State and local revenues or federal aid must still be expended.

Increased private involvement. Instead of just the construction phase, private firms may perform any or all of these project phases:

                        Design                                    Own

                        Finance                                  Operate

                        Build                                       Maintain

Tolls are not necessary for public/private partnerships, but they can provide revenue for repaying private financing or government infrastructure loans.

Focused funding. Tolls are typically restricted to single routes, possibly avoiding political gridlock that resists systemwide fee increases. Except: Michigan fuel and vehicle taxes are constitutionally restricted to transportation. Tolls might not be.

Improved technology. New toll roads do not use cash. Transponders and license plate readers can collect tolls by radio or video at reduced cost, without slowing traffic. 

Congestion pricing. Traffic jams can be priced out of existence. Tolls can be adjusted to ration use of toll lanes, so that express lanes are never congested. Toll express lanes can carry commuter buses at high speeds on predictable, delay-free schedules, creating “virtual exclusive bus lanes” at no additional cost.

High-Occupancy/Toll (HOT) Lanes. Tolls can admit autos to underutilized carpool lanes, where expensive capacity might otherwise be wasted. (Michigan has no carpool lanes to convert.) Tolls can admit autos to underutilized dedicated bus lanes, providing a revenue source to pay for bus rapid transit.

Changes in federal law. Federal law still prohibits conversion of Interstate and other freeways to toll roads, and generally prohibits tolls on federal-aid highways. Except for:

  • New freeways. Freeways that replace free-access roads, or new routes including Interstates, may be tolled.
  • Bridges. New and reconstructed bridges may be tolled. Toll points need not be at the bridges themselves, but can include adjacent road segments. Tolls may persist after bridge projects are completed, and be used for any transportation purpose.
  • Reconstructed roads. The Section 129 toll program allows non-Interstate roads (US- and M-routes) to be reconstructed as toll roads. Under MAP-21 of 2012, toll lanes may be added to Interstate freeways, if the number of untolled lanes is not reduced.
  • The Value Pricing Pilot Program. This allows a wide variety of toll plans so long as the price varies with congestion: HOT lanes, dynamic pricing, parking pricing, and others. None of the 15 openings are presently available for new toll projects, but they may reopen in the future.
  • Interstate System Reconstruction and Rehabilitation Pilot Program. This permits three states to reconstruct aging Interstate freeways with toll revenues. (All three openings have been awarded - to Missouri, North Carolina and Virginia - but they may be reassigned under 2015 law if no use is made of them.)

Purely state, local, or private toll projects are exempt from federal-aid restrictions.

Trends that Haven’t Happened – Yet
Interest in toll finance is growing worldwide. The following ideas are getting a lot of attention, but no serious action:

Toll conversions of existing freeways. Some states are pursuing this as a means of taxing interstate traffic for bridge or freeway reconstruction. None of the three pilot states are making use of their eligibility, but Delaware is pursuing the use of bridge tolls. 

Mileage-based user fees. User fees based on an electronic record of distance driven or routes traveled remain highly attractive to theoreticians and hardware vendors, and are under study in Oregon, Washington, California, and elsewhere. Mileage-based user fees (MBUF) has a large practical obstacle due to the cost of collection at the fuel pump or by monthly billing, and in the political setting of rates. Except: a GPS‑based system is in use in Germany and Switzerland for trucks. North America’s mileage-based truck-tax system is identical but is not automated - so far.

Cordon tolls. Some foreign cities have begun charging admission to cars as a way of managing congestion. This has been suggested for lower Manhattan, but failed to win approval in New York state.

Do people still hate toll roads?
Not necessarily. Not if the only alternative is more congestion or delay. Toll roads have won approval in several states that historically never had tolls, such as Texas, California, Minnesota, and Virginia.

 

Revised May 11, 2016, by the Intermodal Policy Division.