Tolls on interstate highways could provide the revenue needed in Trump's proposal to attract private investment in transportation infrastructure.

​DALLAS – Tolls on interstate highways are the only way to provide the revenue stream needed to attract the level of private investment in transportation projects envisioned in President-elect Donald Trump's 10-year, $1 trillion infrastructure proposal, according to industry experts.

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The infrastructure plan released by the Trump campaign just before the election is based on $138 billion of federal tax credits authorized by Congress that would give investors an incentive to pump an unprecedented amount of private financing into public infrastructure.

But public-private partnerships need a revenue stream to provide an acceptable rate of return to the private partners, leaving many road and bridge projects reliant totally upon public funding. 

"Totally removing the existing restrictions that stop states from tolling existing interstate highway capacity would unleash P3s in this country," said Bob Poole, director of transportation policy at the libertarian-leaning Reason Foundation.

"Congress likes the idea of more funding for infrastructure but they want to get it out of a magic pile of money from somewhere," he said. "Tolling the interstate would provide $1 trillion of new federal infrastructure funding without raising the gasoline tax. There's a lot of potential if Congress can be persuaded."

Tolling of existing interstate capacity has been prohibited since the highway program began in the mid-1950s.

The five-year Fixing America's Surface Transportation Act that became law in late 2015 retained the Interstate System Reconstruction and Rehabilitation Pilot Program (ISRRPP). The program authorized by a 1998 funding bill allows three states – Virginia, North Carolina, and Missouri – to toll interstate lanes with approval from the Transportation Department. None of the three have yet taken advantage of the program.

The FAST Act extended the ISRRPP for another three years. It gave the three states a year to advance their plans before their slots could be offered to other states.

Tolls on current interstate highway lane capacity could allow the federal gasoline tax of 18.4 cents per gallon and the diesel tax of 24.4 cents per gallon to be lowered, Poole said.

"The federal gasoline tax could be reduced and the revenues dedicated to the upkeep of the interstate highway, which is the way it was intended back when President Eisenhower's plan was adopted in the 1950s," he said. "You could put in a modest toll and lower the gasoline tax in return. That would make interstate tolls a true user fee."

A per-mile toll of 3.5 cents per mile and 14 cents per mile for trucks would be sufficient for 30 states, with a higher toll needed in 15 others.

Rural States
Mostly rural states probably could not support tolls and would require some other form of federal assistance, Poole said.

Grass-roots citizens groups would join with industry groups such as the Alliance for Toll-Free Interstates to oppose tolling of the current free interstate system, said Terri Hall, founder and director of the Texans for Toll-free Highways political action committee.

"Working people cannot afford to pay exorbitant tolls of up to $20 each way going to and from work," she said. "That's like taking a pay cut of $3,000 a year. Only a few people can afford that and still survive."

The push for P3s is a slap in the face of Trump supporters like her, Hall said.

"We are very disappointed in Mr. Trump's plan. It came out very late in the campaign, after a lot of people had already early voted," she said. "It's really a mystery to us and a big betrayal of the working class voters who supported him. There's going to be a huge backlash if Congress goes along with this."

Voters see tolls as just another tax, Hall said.

"I can assure you [Trump] is going to get a lot of pushback from taxpayers who are tired of these crony-capitalism deals that guarantee huge profits to contractors and investors," she said.

Interstate tolling will be vigorously opposed by trucking interests, said Chris Spear president of American Trucking Associations.

"Tolling the interstates is a total non-starter," he said. "It is toxic and we will fight it, tooth and nail."

Raising fuel taxes and indexing them to inflation is the best way to fund transportation, Spear said.

"Tolling is the worst type of approach," he said. "The rural states would be hurt the worst because they don't have the population or the traffic needed to make interstate tolling work.

Infrastructure is an encompassing economic issue that should unite the variety of transportation sectors, Spear said.

"We will work with the new administration and do what we can to get an infrastructure bill passed but we can't come in like a wrecking ball," he said. "We have to get all modes of transportation together—airports, ports, and rail – and get people with different agendas to come together."

P3 Outlook
The outlook for P3s is promising in 2017 thanks to the Trump proposal, according to Pat Jones, chief executive officer of the International Bridge, Tunnel and Turnpike Association.

"An improving economy is putting more cars and trucks on the road, and the unsuitability of the gas tax for funding transportation is making toll roads more attractive," he said. "State transportation officials are looking more and more at tolls to make up the difference in what they get from the gasoline tax and the funding needed for highways."

Giving states the option to toll their interstates could provide the private equity needed for Trump's large infrastructure program, Jones said.

"Lifting the ban on interstate tolls would be absolutely huge," he said. "It would not require a single dime of federal funding to boost infrastructure funding by billions of dollars every year.

"The question on interstate tolling is 'Is it politically palatable,' and right now it probably isn't and that's a big challenge," Jones added.  "But in the future, as technology makes toll collections easier and the gasoline tax revenue declines, that reluctance will go away," he said.

Congress could take action next year to encourage P3s but overcoming the need for revenue is a difficult task, said Marcia Hale, executive director of Building America's Future, an infrastructure advocacy group.

"Tax credits would be good, a revival of Build America Bonds – which were a form of tax credits—would be good, but P3s are not going to solve the infrastructure funding problem," she said.

"There are not enough projects with a revenue stream to expect them to be a big part in resolving the infrastructure situation," Hale said. "There are 70,000 bridges in this country that need repairs and upgrades, but only 1,000 to 2,000 of them could be tolled. That leaves a lot of infrastructure that states and local governments will have to fund out of their resources."

Federal regulations allow states to toll new express lanes on existing interstates if they reduce congestion while retaining all the current free lanes, but those opportunities are few, said Ananth Prasad, director of the transportation practice at infrastructure firm HNTB.

"Populous states like Texas, Virginia, and Georgia are either tolling new express lanes on interstates right now or building them. Illinois and other states are looking at it," he said. "But there are a limited number of roads out there with the traffic that you need for successful express toll lanes."

Rural states that are already struggling with financing transportation projects and they don't have the congested roads needed to justify tolled express lanes, Prasad said.

"Congress should allow states to toll the all the existing interstates," he said. "Don't require them to do it, but give them the authority to toll the existing interstates. "It would be difficult for the U.S. P3 industry to support the $100 billion per year of infrastructure financing proposed in the Trump plan, said Dr. Jonathon Gifford director of the Center for Transportation Public-Private Partnership Policy at George Mason University.

"That's especially true in the earlier years because there are not a lot of viable projects just sitting around, shovel-ready and waiting to get started," he said. "We learned that from the federal stimulus program in 2009."

Financing transportation infrastructure with user fees is a fine theory but tolling must be done carefully to avoid a perception of double taxation, Gifford said.

"If the Congress and President-elect Trump want to enable and incentivize more use of P3s, they could look at ways to remove existing regulatory and procedural barriers to project delivery," he said. "There will always be the need for the muni credit market. It's a large, liquid market that plays well in the project funding mix."

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