Interstate tolls could generate billions for Indiana

Register now

DALLAS -- Adding tolls to Indiana’s interstates could generate between $39 billion and $53 billion for Indiana highway construction and maintenance and fill a gap created by declining revenue from fuel taxes, according to the Indiana Department of Transportation.

That's the recommendation of a feasibility study released by the Indiana Department of Transportation.

Omaha, Nebraska-based architectural, engineering, and consulting firm HDR Inc. prepared the study for INDOT. It was released last week.

It comes as the state posted a request for proposals from firms interested in developing a strategic plan toward developing and implementing tolling on interstate highways. A vendor will be selected in January and the plan would be due December 2018.

The study also addresses the state’s ability to enter into public private partnerships for toll road projects.

Indiana used P3 financing to privatize its existing Indiana Toll Road in 2006. It also used a P3 for the Ohio River Bridges project.

That P3 was partly financed with private activity bonds, a funding arrangement that would be barred under tax reform legislation moving forward in the U.S. House of Representatives.

INDOT and the Indiana Finance Authority declined to comment on what impact the developing federal legislation would have on the state's study of developing and implementing tolling on Indiana highways.

Federal law currently prohibits states from simply adding tolls to existing, unimproved Interstate highways, though the study contemplates the available pilot programs and circumstances where it would be allowed.

The study on tolling is part of the infrastructure bill passed by the Indiana General Assembly and signed into law by Gov. Eric Holcomb earlier this year.

The bill requires INDOT to prepare a strategic plan for tolling implementation and deliver a plan by Dec. 1, 2018. To meet that deadline, INDOT initiated the RFP process last week with the intent to select a contractor in early 2018.

“The RFP process allows development of the strategic plan to move forward with enough time to meet the December 2018 deadline,” said Scott Manning, strategic communications director for INDOT. “No decisions have been made on tolling at this point however. HEA1002 does not give a deadline for deciding whether to implement additional toll routes.”

The infrastructure legislation raises $1.2 billion annually through a 10 cent-per-gallon increase on gasoline, additional special fees and surcharges, and shifts 4.5 cents of the existing state sales tax on gas from the Indiana General Fund to the State Highway Fund.

The bill also called for the toll study.

Toll funding could replace the decline expected in fuel tax revenues. Fuel tax revenue has become less stable over time as vehicle fuel efficiency improved, according to the INDOT study. “This will have a negative impact on road funding,” INDOT wrote.

"The issue is that in 2021 the revenue from sales from gasoline and diesel sales falls off like a rock and it keeps falling into the 2030s," said state Rep. Ed Soliday, R-Valparaiso. ''When you look at what are our alternatives to fill that gap and you sure don't want to use the general fund because you're taking money out of education so user-pay is where we're at, and there's only so many tools available."

An Interstate tolling program would enable Indiana to focus on the portion of the highway system that is the most heavily traveled and the most expensive to maintain. INDOT was initially seeking a firm to study tolling on five corridors: I-94 from Illinois to Michigan; I-65 from I-90 south to I-465 and then south from I-465 to the Ohio River; and I-70 from the Illinois state line to I-465, then from I-465 to the Ohio state line. It is also considering tolling in Indianapolis.

However Holcomb said in a statement issued after the INDOT RFP was posted that the I-465 corridor in Indianapolis and other similar loop interstates will not be a part of any strategic plans on tolling. Manning confirmed that I-465 was removed from last week’s feasibility study at the request of the governor. “That route will not be included in future analysis,” Manning said.

INDOT’s feasibility study says the state stands to raise billions by tying transportation funding to the amount of travel on Indiana highways. That would help Indiana prepare for the expected decrease in fuel consumption. “An Interstate tolling program would enable Indiana to focus on the portion of the highway system that is the most heavily travelled and the most expensive to maintain,” INDOT stated.

The study shows there is an 85% chance that revenues would exceed $39 billion from 2021 to 2050. There's a 50 percent chance a toll system would exceed $53 billion.

The analysis assumes electronic toll collection so vehicles do not have to stop or slow down to pay tolls. It also assumes that the bulk of vehicles will have a toll transponder tied to an electronic account. Drivers without a transponder would pay an additional $2 surcharge to cover the cost of toll collection via mail.

Tolling scenarios vary and have the highest toll at 6 cents per mile along I-64 to 4 cents a mile for the other routes. On an average, the study assumes that passenger vehicles would pay 4 cents a mile; light/medium trucks, 6 cents a mile; and heavy trucks, 19 cents a mile.

The tolling study also looks at whether drivers will divert from an interstate to avoid paying tolls. It finds that I-64 could lose 22% of its vehicles due to tolling with a loss of 14% along I-74, 11 % along I-70, 10% along I-69 and I-65 and 9% along I-94.

One state lawmaker is concerned that the diversion could cause safety issues for drivers. Senator Mike Bohacek, R-Michiana Shores said that tolling I-94 would divert more traffic on to U.S. Highway 12 and U.S. 20, and potentially increase the number of accidents.

"It's an area that we know has been a real problem and continues to be a problem and we need to make sure we keep our citizens safe, and quite frankly as I look at I-94 and I look at that corridor, that's not a corridor that needs significant infrastructure improvement,” said Bohacek.

Bohacek wants I-94 to also be excluded from tolling. “As far as the I-94 corridor to me for tolling is a non-starter, and I will do everything that I can to stop that,” he said.

The feasibility study of the six interstates has been given to Holcomb for review. Manning said that the road funding bill does not give a deadline for when to implement the additional toll routes but Holcomb has previously emphasized that tolling wouldn't start for six, seven or eight years.

For reprint and licensing requests for this article, click here.
Toll revenue bonds Private activity bonds Infrastructure Government finance Budgets Indiana Finance Authority Indiana