Without tax increases to finance transportation infrastructure, tolling on large portions of the nation’s interstate highway system will be inevitable, Citi managing director Ronald Marino said on Friday.
“Unless the government goes back to broad-based taxes, the inevitability of having to use tolls to a greater degree or other types of user fees is within our near future,” Marino said on a panel at a Municipal Analysts Group of New York luncheon in Manhattan.
“We cannot sustain the [operations and maintenance], never mind the significant upgrades that a 40-year-old or 50-year-old interstate system requires if D.C. isn’t going to increase broad-based taxes for the federal highway system.”
The nation’s infrastructure system is in a revenue crisis, he said. Federal gas taxes that fund highway and bridge infrastructure have not increased since 1994 when they were set at 18.4 cents a gallon. The recession has brought construction costs down somewhat, but revenue has not increased.
“We’re still talking about a 60% inflation since 1994 without a concomitant increases in revenue sources,” Marino said.
New tolling will create “unbelievable political antagonism” because lawmakers don’t want to toll “free” assets, he said. An example of tolling that might be more palatable to voters is the proposal in Pennsylvania to toll Interstate 80, he said. The proposed system would create tolling barriers that would permit some drivers traveling short distances to continue to use the highway for free while drivers traveling longer distances would have to pay.
Public-private partnerships wherein an asset such as a road is leased to a private company in return for a large up-front payment is not a panacea, panelists said.
“The economic climate is going to spur people to look into it more and more but there’s definitely been a change in the way in which these things can be financed — the Macquarie [Capital] model no longer works,” said panelist Doreen Frasca, president of Frasca & Associates LLC. “You really have to look at the quality of the asset and its ability to generate the types of money that in return for the up-front capital that’s going to be required.”
Frasca is under consideration to serve on New York’s State Asset Maximization Board that, once created, will look at P3 projects for the state.
Marino said the financing of the 99-year lease of the Chicago Skyway to Macquarie-Cintra used 40-year derivative contracts.
“I don’t think there’s anyone taking that kind of bet today, that kind of investment today, for 40 years,” he said.