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Friday, July 19th, 2013

Why We Need Tolls

My latest post is online at GoLocalProv and is called “Rhode Island Needs Tolls.” While I am specifically addressing a case in Rhode Island, I explore the bigger picture and explain why across America we are likely to see expanded use of tolling – and why that’s probably the right thing. Here’s a sample:

According to Standard and Poors, the US has an accumulated infrastructure spending deficit of $2.2 trillion. Beyond the Sakonnet, an estimated 70,000 bridges need replacing nationwide. Needs range from replacing Cleveland’s decaying Innerbelt to a major transit rail investment need in New York City to upgrading America’s air traffic control systems.

Gridlock and fiscal pressures in Washington, America’s traditional infrastructure financier, compound the problem. As the Washington Post noted last year, “The bill for all that, and more, eventually will land on taxpayers’ doorsteps. But the postmark won’t read ‘Washington.’ Instead, the tax bill will come from state or local governments struggling to fill the growing void in federal funding.” Gridlock makes it difficult to get anything done at the federal level, leading to default policies like sequestration. But even if Congress did start making progress, huge fiscal imbalances (the “good news” is that our 2013 deficit will be “only” $759 billion) mean it’s unlikely the feds are going to be paying for this. That leaves states like Rhode Island on their own.
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As a rule we should be moving towards user fee systems for roadways. For too long we’ve given away roads “for free,” resulting in congestion, sprawl, environmental degradation, and yes, crumbling infrastructure. All of these come in part because we do not pay the full cost of the driving trips that we make. Pretty much anything we only indirectly pay to consume ends up over-used and under-maintained. That’s the tragedy of the commons.

17 Comments
Topics: Public Policy, Transportation
Cities: Providence

17 Responses to “Why We Need Tolls”

  1. DBR96A says:

    Time to toll I-376 and use the money to upgrade it to current Interstate standards.

  2. Richard Lewis says:

    As in so many areas of public/private policy matters, Texas is at the forefront. Major expansion and reconstruction projects for urban/sububan highways (such as the “LBJ” freeway in Dallas) are being funded privately with tolls on the expanded lanes, while existing lanes are rebuilt and remain “free”.

    Rural Interstates such as I-35 are being paralleled with new toll roads such as TX-45/80 from north of Austin to near San Antonio. (With an appeal to typical Texas bravdo, the respective speed limits are 80 and 85 MPH.)

  3. Jon Seisa says:

    I thought state motor fuel use taxes both commercial and private vehicles via annual state franchise tax reporting and also at pump point of purchase were suppose to help maintain roads, highways, interstate expressways and bridges? Perhaps the deteriorating economy has generated a shortfall in revenue precipitating less vehicles on the roads due to lack of disposable income causing an inability for motorists to buy expensive fuel and this has impact state revenue normally earmarked for bridges and other highway maintenance.

  4. Joe Beckmann says:

    We don’t need tolls, but we do need infrastructure. Much of the infrastructure need reflects how long it’s been since Eisenhower built the interstates, using the Army Corps of Engineers. We’re now using Halliburton and Parsons-Brinkerhoff, whose construction quadrupled the cost of the Massachusetts Big Dig and who were Romney’s favorite contractors (and Cheney’s former employer). Their fees are multiples of other contractors, usually used in places like Oregon or Washington State. And, for that matter, as both Roosevelt and Eisenhower discovered, infrastructure investment is real investment, not just moneyspending. The Return on that Investment is improved value to everything that gets better access – as has been true since the first railroads and subways.

  5. @Joe Beckmann: So what about any of this leads you to believe we don’t need tolls? This is an honest answer because the value of infrastructure is poorly captured in the current model, which leads to overbuilding and underfunding. Tolls tell you the exact value of a highway project to the end user and the market as a whole. Honestly, a lot of infrastructure could improve if it was funded on a “as needed” basis through at least some form of market signal. I would like to hear your counter argument to this.

  6. John Morris says:

    The idea that all infrastructure adds economic value is absurd. Like any other investment, it all depends on what you build relative to what you spend and what other uses that money might have been used for.

    Tolling is a step towards connecting demand with supply. However, under the current system there is still no certainty the money will be spent to maintain that asset.

  7. Joe Beckmann says:

    On the simplest level, real estate values skyrocket when transit changes – New York quadrupled in 10 years, as has parts of Boston. That improves the tax base considerably, and, were there, for one example, a “real estate transfer tax” – or a sales tax on real estate, that, in effect charges newcomers for the benefits of that infrastructure – you’d need neither tolls nor any other means. That value also lasts decades, and, were it managed and maintained (which very, very few municipalities or states actually do!), it would return multiples of its investment, including interest costs. Now, of course, if you build apartments for politicians instead of roads, transit or cable systems, then, of course, it won’t return very much economic value to the general population. But THAT IS OBVIOUS. What’s really surprising is that your view of capital investment is that it must return quick cash value like tolls rather than longer term asset value like transit.

    Incidentally, that was also the premise of the E-Rate – to build internet infrastructure that would make regions with cheap and efficient electronic communication pay off more to more users, and thereby attract more of those high end users. The Obama administration is pushing this, but – with know-nothings like most of these respondents – will surely have a hard time. And, finally, such infrastructure works best if it remains PUBLIC (the way Eisenhower did it!). When the public invests in infrastructure for private gain, that’s when tolls are due, but, even then, they should come from the private firms themselves either in taxes or fees.

  8. John Morris says:

    Funny you say that since the New York transit system you speak of was mostly built and more importantly planned by private firms.

    The New York system added that kind of value because zoning during that period allowed developers to take maximum advantage of the improvements-something that can’t happen now in most cities today.

    How about just changing the zoning, parking minimums and other regulations that keep us from the transit we already have?

    Giving a few small examples of successful investments (most made many years ago) and then leaping to imply all add value is deceptive and idiotic.

  9. John Morris says:

    Pittsburgh recently spent around 600 million on a transit extension to The North Shore, which logically should have added billions in potential real estate value. But since the city had previously built two huge sports stadiums it serves a largely dead area of parking lots and garages.

    Transit agencies across the country still force a park & ride model on communities, which destroys most local value near stations. Why should they care about the real estate value?

    Please give us some numbers showing the great returns on Eisenhower’s great road investments, which were partly sold as evacuation routes. How did that work with Katrina? In fact the loss of rail transportation in most cities has made them roach motels with no reasonable way to escape when disaster threatens.

  10. Joe Beckmann says:

    In the first place, subways were how cities adapted the greed of the rural rails to the spoils of political machines: New York subways went to farmland in upper Manhattan, which, by coincidence, was by then largely owned by Tammany Hall. This was an era between 1898 (when Greater New York was founded) and 1904 (when the IRT & BMT opened). A key destination, for one example, was Columbia University whose President (himself a former “reform” mayor) chose to move from what’s now Rockefeller Center to the Upper West Side.

    Subways were also created largely from trolley line networks – many (outside of New York) still use trolleys (in San Francisco and Boston, with which I’m most familiar), although they’re now air conditioned, etc. In other words, they were used to DEVELOP cities rather than respond to and work with highways, since, at least until the 1920’s, it was most unclear that cars would overwhelm trains. Remember, their primary competition was horsedrawn, and that, frankly, stunk.

    The reason real estate loses value with stations now is that those stations are planned to capture real estate that cars already destroyed (cars, trucks, and ships). There were no parking lots in New York in 1903.

    That means that mass transit investment is most profitable (to both public and private sectors) when it INCREASES the density, rather than reduces auto traffic. Suburbs are already choking on their autos (and emissions), so, until they generate enough density to merit mass transit, they might as well evaporate.

    What that means is that urban value is now – always was, and will be even more in the future – measured by density, as a positive, lower cost value than green space. Density saves energy – elevators carry more passengers than most highways. And energy will only get more expensive and disruptive.

    And be careful about measuring new mass transit, since it’s cost factors are often vastly inflated by layers of contracted services. The task of transit is to move people, and the impact of that mobility makes the money. Firms like Halliburton and Parsons are less interested in cost-benefit than they are in benefiting themselves. That’s the way it was for Tammany, but Tammany also had – ultimately – a public accountability that Cheney would never recognize.

    Incidentally, the value that Eisenhower’s expressways added was largely to those same suburbs and to US auto makers. Once that industry was really internationalized (eg., Toyota and BMW), that value tended to diffuse.

  11. John Morris says:

    Nothing in this history lesson undercuts my basic points. Transit investments created value back then in a a way current building, parking and zoning restrictions would not allow today in most cities.

    Acting like we could get that kind of return today without changing those rules is deceptive or ignorant.

    One also can’t say add up the value expressways added to suburbs without subtracting that value from cities themselves- or accounting for the actual long term maintenance costs.

    At best, in most cases, highways transferred value.

    The idea that we can get a high return on transit while keeping its main competitor, “free” shows equal ignorance.

  12. Joe Beckmann says:

    Listen, I live in Somerville, Massachusetts, the target of a $1.3 billion subway extension, and my house is now five times the value it was when I bought it 15 years ago. It’s not because it’s nicer. It’s because of subways. And those aren’t new or obscure “rules,” they are the observed fact of living near a subway that’s been talked about for forty years and is gradually becoming visible.

    Incidentally, an even higher R.O.I. should be available through high speed internet cable. And leaving that to a private contractor will only suck up the public benefit.

  13. John Morris says:

    I guess that Somerville has zoning laws and development patterns that allow that value to develop. That’s most often not the case.

    We already have lots of underdeveloped areas with good or great transit connections around. Look at Chicago, Newark, Yonkers, Bridgeport etc.

    Acting like this is some kind done deal type thing is not being honest about the real problems.

    Your internet cable idea points out the problem. Is everyone on a mountain in Colorado entitled to a high speed internet cable too?

  14. John Morris says:

    The real issue that Aaron doesn’t point out is that in many or most cases, tolling could never recover the cost of construction or repair.

    The bridge mentioned seems to connect Providence & Newport and probably only gets substantial traffic in the summer. Exposed to salt air, humidity, cold winters & nor’easter’s it’s gotta be a repair nightmare.

    Quite likely, no private entity would want to buy it and it shouldn’t have been built.

    Already toll revenue on many turnpikes has taken a huge hit.

    I understand that this problem cuts too close to the bone to be widely discussed.

  15. John Morris says:

    Turns out that’s not exactly what the bridge connects. Anyway, it doesn’t link to very large communities and the cost vs. benefit is pretty low given the extreme weather it has to stand up to.

    At what point does one say stop? What ever happened to the nice rural place or seasonal location that stayed rural? What productive investments will this money come from?

  16. Nathanael says:

    I think I agree with everyone.

    Rural places need a chance to be rural. Now, the value of paved roads in rural areas, and the value of railway stations in rural areas, is that people from rural areas need to get the farm produce to urban areas! Farm areas need transportation, but the needs are quite different from the needs in urban areas.

    Urban areas need a chance to be urban.

    Suburban areas… are OK, but we could use less of them, and more rural and urban areas.

    Transp

  17. John Morris says:

    This area is not a farming district. My guess is tourism, summer homes and fishing are the primary industries.

    East coast barrier islands were often occupied by seasonal bungalows. You went on a ferry, to a simple shack and enjoyed the isolation and beauty of nature.(This isn’t exactly a barrier island) Now people demand all the amenities of a city- on someone else’s dime.

    Bottom line is that tolls are very unlikely to cover the real costs here. a huge percent of our current infrastructure is malinvestment and would never be paid for by actual users.

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