Highway Finance: States' Expanding Use of Tolling Illustrates Diverse Challenges and Strategies
Published: 2006-06-28T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Congestion is increasing rapidly across the nation and freight traffic is expected to almost double in 20 years. In many places, decision makers cannot simply build their way out of congestion, and traditional revenue sources may not be sustainable. As the baby boom generation retires and the costs of federal entitlement programs rise, sustained, large-scale increases in federal highway grants seem unlikely. To provide the robust growth that many transportation advocates believe is required to meet the nation's mobility needs, state and local decision makers in virtually all states are seeking alternative funding approaches. Tolling (charging a fee for the use of a highway facility) provides a set of approaches that are increasingly receiving closer attention and consideration. This report examines tolling from a number of perspectives, namely: (1) the promise of tolling to enhance mobility and finance highway transportation, (2) the extent to which tolling is being used and the reasons states are using or not using this approach, (3) the challenges states face in implementing tolling, and (4) strategies that can be used to help states address tolling challenges. GAO is not making any recommendations. GAO provided a draft of this report to U.S. Department of Transportation (DOT) officials for comment. DOT officials generally agreed with the information provided.
section_title: What GAO Found
paragraphs: Tolling has promise as an approach to enhance mobility and finance transportation. Tolling can potentially enhance mobility by reducing congestion and the demand for roads when tolls vary according to congestion to maintain a predetermined level of service. Such tolls can create incentives for drivers to avoid driving alone in congested conditions when making driving decisions. In response, drivers may choose to share rides, use public transportation, travel at less congested times, or travel on less congested routes, if available. Tolling also has the potential to provide new revenues, promote more effective investment strategies, and better target spending for new and expanded capacity. Tolling can also potentially leverage existing revenue sources by increasing private-sector participation and investment. Over half of the states in the nation have or are planning toll roads to respond to what officials describe as shortfalls in transportation funding, to finance new highway capacity, and to manage road congestion. While the number of states that are tolling or plan to toll has grown since the completion of the Interstate Highway System, and many states currently have major new capacity projects under way, many states report no current plans to introduce tolling because the need for new capacity does not exist, the approach would not generate sufficient revenues, or they have made other choices. According to state transportation officials who were interviewed as part of GAO's nationwide review, substantive challenges exist to implementing tolling. For example, securing public and political support can prove difficult when the public and political leaders argue that tolling is a form of double taxation, is unreasonable because tolls do not usually cover the full costs of projects, and is unfair to certain groups. Other challenges include obtaining sufficient statutory authority to toll, adequately addressing the traffic diversion that might result when motorists seek to avoid toll facilities, and coordinating with other states or jurisdictions on tolling projects. GAO's review of how states implement tolling suggests three strategies that can help facilitate tolling. First, some states have developed policies and laws that facilitate tolling. For example, Texas enacted legislation that enables transportation officials to expand tolling in the state and leverage tax dollars by allowing state highway funds to be combined with other funds. Second, states that have successfully advanced tolling projects have provided strong leadership to advocate and build support for specific projects. In Minnesota, a task force was convened to explore tolling and ultimately supported and recommended a tolling project. Finally, tolling approaches that provided tangible benefits appear to be more likely to be accepted than projects that offer no new tangible benefits or choice to users. For example, in California, toll prices on the Interstate 15 toll facility are set to keep traffic flowing freely in the toll lanes.

section_title: Letter
paragraphs: The nation’s highways are critical to providing for and enhancing  mobility—the free flow of passengers and goods—and to sustaining  America’s economic growth. Mobility gives people access to goods,  services, recreation, and jobs; gives businesses access to materials,  markets, and people; and promotes the movement of personnel and  materiel to meet national defense needs. During the twentieth century,  motor fuel taxes were the mainstay of highway financing, and during the  latter part of that century the construction of the 47,000 mile Interstate  Highway System dominated the agendas and activities of state and federal  highway decision makers. In the twenty-first century, state and local  transportation officials are on the front lines of transportation decision  making and face a new and daunting set of challenges. Congestion is  increasing rapidly across the nation, particularly in urban areas, and freight  traffic is expected to almost double in 20 years. In many places, decision  makers cannot simply build their way out of congestion, and traditional  revenue sources may not be sustainable. As the baby boom generation  retires and the costs of federal entitlement programs rise, sustained, large- scale increases in federal highway grants seem unlikely. To provide the  robust growth that many transportation advocates believe is required to  meet the nation’s mobility needs, state and local decision makers in  virtually all states are seeking alternative funding approaches. Tolling (i.e.,  charging a fee for the use of a highway) provides a set of approaches that  are increasingly receiving closer attention and consideration.
As requested, this report provides information on states’ experiences with  tolling and provides some insights on issues that state transportation  officials have encountered when considering or implementing a tolling  approach. Specifically, this report examines (1) the promise of tolling to  enhance mobility and finance highway transportation, (2) the extent to  which tolling is being used in the United States and the reasons states are  using or not using this approach, (3) the challenges states face in  implementing tolling, and (4) strategies that can be used to help states  address the challenges to tolling.
To fulfill our objectives, we reviewed and analyzed research reports and  analytical studies; interviewed a wide range of stakeholders, including state  and local transportation officials, project sponsors, and private-sector  representatives; conducted a nationwide survey of state departments of  transportation; and conducted semistructured interviews with state  department of transportation officials. We also performed a correlation  analysis to identify the extent to which state financial and demographic  characteristics are associated with states’ use of tolling. In addition, we  interviewed transportation stakeholders in six states that were either  planning toll projects or constructing toll projects. In addition to our survey  and semistructured interviews, states planning toll roads were identified  through an analysis of states’ participation in Federal Highway  Administration (FHWA) tolling programs, including the Interstate System  Reconstruction and Rehabilitation Pilot Program and the Value Pricing  Pilot, and states constructing toll roads were identified through an analysis  of relevant reports and studies. During our review, we determined that a  number of states with toll bridges or tunnels do not have or are not  considering the tolling of roads. We, therefore, decided to exclude toll  bridges and tunnels from our definition of states tolling or planning to toll  to more accurately report on the challenges to tolling. Although we discuss  the federal role with regard to states’ experience with tolling, we did not  assess the effectiveness of federal toll programs or the potential effects of  federal grant programs on states’ experience with the approach. (See app. I  for our objectives, scope, and methodology.) We performed our work from  June 2005 through June 2006 in accordance with generally accepted  government auditing standards.
subsections: section_title: Background
paragraphs: The responsibility for building and maintaining highways in the United  States rests with state departments of transportation in each of the 50  states, the District of Columbia, and Puerto Rico. In addition, local  governments finance road construction through sources such as property  and sales taxes. In 2004, state governments took in about $104 billion from  various sources to finance their highway capital and maintenance  programs—44 percent of these revenues came from state fuel taxes and  other state user fees, and 28 percent came from federal grants. Sources of  state highway revenues in 2004 are shown in figure 1.
Other (locl contribution, ond proceed,  nd micellneous)
FHWA administers federal grant funds through the federal-aid highway  program and distributes highway funds to the states through annual  apportionments established by statutory formulas. Once FHWA apportions  these funds, they are available to be obligated for the construction,  reconstruction, and improvement of highways and bridges on eligible  federal-aid highway routes and for other purposes authorized in law. Within  these parameters, responsibility for planning and selecting projects  generally rests with state departments of transportation (DOT) and with  metropolitan planning organizations, and these states and planning  organizations have considerable discretion in selecting specific highway  projects that will receive federal funds. For example, section 145 of title 23  of the United States Code describes the federal-aid highway program as a  federally assisted state program and provides that the federal authorization  of funds, as well as the availability of federal funds for expenditure, shall  not infringe on the states' sovereign right to determine the projects to be  federally financed.
About 5 percent of the highway revenues to the states in 2004 came from  tolls. In 2005, the United States had about 5,000 miles of toll facilities in  operation or under construction, including about 2,800 miles, or 6 percent,  of the Interstate Highway System, according to FHWA. Tolling of roads  began in the late 1700s. From 1792 through 1845, an estimated 1,562  privately owned turnpike companies managed and charged tolls on about  15,000 miles of turnpikes throughout the country. Between 1916 and 1921,  the number of automobiles in the United States almost tripled, from 3.5  million to 9 million, and as automobile use increased, pressure grew for  more government involvement in financing the construction and  maintenance of public roads. In 1919, Oregon became the first state to  impose a motor fuel tax to finance roadway construction. In 1916, the  Federal Aid Road Act provided states with federal funds to finance up to 50  percent of the cost of roads and bridges constructed to provide mail  service. This act and its successor, the 1922 Federal Highway Act,  prohibited tolling on roads financed with federal funds.
In the 1930s and 1940s, President Roosevelt led the thinking for developing  a series of interconnected systems of toll roads that crossed the United  States, which was the beginning of the idea of an interstate highway  system. Then, between 1940 and 1952, 5 states opened such highways, which they financed through tolls. The first of these highways, the  Pennsylvania Turnpike, was completed in 1940. During this time, about 30  states considered building toll roads, given the success of Pennsylvania. In  1943, Congress passed an amendment to the Federal Highway Act,  directing the Commissioner of Public Roads to conduct a survey for an  express highway system and report the results to the President and  Congress. However, there was no determination as to how such a system  would be funded. President Eisenhower supported a toll system financed  with bonds to be paid back with toll revenues until the bonds were paid off,  at which time the tolls would be removed. A committee appointed by  President Eisenhower also recommended a highway program financed  with bonds, but proposed that federal fuel tax revenues, instead of tolls, be  used to pay back the bonds. Ultimately, the Federal-Aid Highway Act of  1956 authorized the creation of a Highway Trust Fund to collect federal fuel  tax revenues and finance the construction of the Interstate Highway  System on a pay-as-you-go basis. The act prohibited tolling on interstate  highways and all federally assisted highways; as a consequence, states built  few new toll roads while the Interstate Highway System was under  construction. However, many of the toll roads built before 1956 were  eventually incorporated into the Interstate Highway System, and tolling on  these roads was allowed to continue. Tolling was also allowed, on a case- by-case basis under very specific conditions and with a limited federal  funding share, for interstate bridges and tunnels.
During the 1990s, as interstate construction wound down, states again  began considering and implementing tolling. At the same time, some of the  federal restrictions on the use of federal funds for tolling began to ease.  The Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA)  liberalized some of the long-standing federal restrictions on tolling by  permitting tolling for the construction, reconstruction, or rehabilitation of  federally assisted non-Interstate roadways and by raising the federal share  on interstate bridges and tunnels to equal the share provided for other  federal-aid highway projects. The 1998 Transportation Equity Act for the  21st Century (TEA-21) established a new pilot program to allow the  conversion of a free interstate highway, bridge, or tunnel to a toll facility if  needed reconstruction or rehabilitation was possible only with the collection of tolls. The Safe, Accountable, Flexible, Efficient  Transportation Equity Act: A Legacy for Users (SAFETEA-LU), enacted in  2005, continued all of the previously established toll programs and added  new programs. The federal tolling-related programs that have been  authorized in surface transportation legislation are shown in table 1.
SAFETEA-LU also created a National Surface Transportation  Infrastructure Financing Commission to consider revenue sources  available to all levels of government, particularly Highway Trust Fund  revenues, and to consider new approaches to generating revenues for  financing highways. The commission’s objective is to develop a report  recommending policies to achieve revenues for the Highway Trust Fund  that will meet future needs. The commission is required to produce a final  report within 2 years of its first meeting.
In addition to SAFETEA-LU’s new tolling provisions and enhancements to  existing programs, FHWA offers an innovative credit assistance program,  which can be used to develop toll roads, and an experimental program,  which can be used to test innovative toll road development procedures.  The Transportation Infrastructure Finance and Innovation Act of 1998  (TIFIA) permits FHWA to offer three kinds of credit assistance for  nationally or regionally significant surface transportation projects: direct  loans, loan guarantees, and lines of credit. Because TIFIA provides credit  assistance rather than grants, states are likely to use it for infrastructure  projects that can generate their own revenues through user charges, such  as tolls or other dedicated funding sources. TIFIA credit assistance is  aimed at advancing the completion of large, capital intensive projects— such as toll roads—that otherwise might be delayed or not built at all  because of their size and complexity and the financial market’s uncertainty  over the timing of revenues from a project. The main goal of TIFIA is to  leverage federal funds by attracting substantial private and other  nonfederal investment in projects. FHWA has also encouraged  experimental projects through the Special Experimental Projects 15 (SEP- 15) program, which is intended to encourage the formation of public-  private partnerships for projects by providing additional flexibility for  states interested in experimenting with innovative ways to develop  projects, according to FHWA officials. SEP-15 allows innovation and  flexibility in contracting, compliance with environmental requirements,  right-of-way acquisition, and project finance.
In addition, the Department of Transportation’s Office of Transportation  Policy is proposing a pilot program—the Open Roads Pilot Program—to  explore alternatives to the motor fuel tax. Under this pilot, the Office of  Transportation Policy is proposing to make funds available to up to five  states to demonstrate on a large scale the viability and effectiveness of  financing alternatives to the motor fuel tax. Goals of the program would be  to: (1) demonstrate whether or not there are viable alternatives to the  motor fuel tax that will provide necessary investment resources while  simultaneously improving system performance and reducing congestion,  (2) identify successful motor fuel tax substitutes that have widespread  applicability to other states, and (3) provide a possible framework for  future federal reauthorization proposals.
section_title: Tolling Has Promise as an Approach for Enhancing Mobility and for Financing Transportation
paragraphs: As congestion increases and concerns about the sustainability of  traditional roadway financing sources grow, tolling has promise as an  approach to enhance mobility and to finance transportation. Tolls that are  set to vary with the level of congestion can potentially lead to a reduction in  congestion and demand for roads. Such tolls can create additional  incentives for drivers to avoid driving alone in congested conditions when  making their driving decisions. In response, drivers may choose to share  rides, use public transportation, travel at less congested (generally off- peak) times, or travel on less congested routes, if available, to reduce their  toll payments. Tolling is also consistent with the important user pays  principle, can potentially better target spending for new and expanded  capacity, and can potentially enhance private-sector participation and  investment in major highway projects. Tolling’s promise is particularly  important in light of long-term fiscal challenges and pressures on the  federal budget.
subsections: section_title: In the Face of Increasing Congestion, Tolling Holds Promise as an Approach to Enhance Mobility
paragraphs: Tolling can be used to potentially enhance mobility by managing  congestion, which is already substantial in many urban areas. Congestion  impedes both passenger and freight mobility and ultimately, the nation’s  economic vitality, which depends in large part on an efficient  transportation system. Highway congestion for passenger and commercial  vehicles traveling during peak driving periods doubled from 1982 through  2000. According to the Texas Transportation Institute, drivers in 85 urban  areas experienced 3.7 billion hours of delay and wasted 2.3 billion gallons  of fuel in 2003 because of traffic congestion. The Texas Transportation  Institute estimated that the cost of congestion was $63.1 billion (in 2003  dollars), a fivefold increase over two decades after adjusting for inflation.  On average, drivers in urban areas lost 47 hours on the road in 2003, nearly  triple the delay travelers experienced on average in 1982. During this same  period, congestion grew in urban areas of every size; however, very large  metropolitan areas with populations of more than 3 million were most  affected. (See fig. 2 for examples of congestion growth in selected urban  areas.) Freight traffic—which has doubled since 1980 and in some  locations constitutes 30 percent of interstate system traffic—added to this  congestion at a faster rate than passenger traffic, and FHWA projects  continued growth, estimating that the volume of freight traffic on U.S.  roads will increase 70 percent by 2020.
A number of factors, as follows, are converging to further exacerbate  highway congestion:  Most population growth in the nation occurs in already congested  metropolitan areas. In 2000, the U.S. Census Bureau reported that 79  percent of 281 million U.S. residents lived in metropolitan areas.  Nationwide, the population is expected to increase by 54 million by  2020, and most of that growth is expected in metropolitan areas.
Vehicle registrations are steadily increasing. In 2003, vehicle  registrations nationwide stood at 230 million, a 17 percent increase in  just 10 years.
Road usage, as measured by vehicle miles traveled (VMT), grew at a  steady annual rate of 2.8 percent from 1980 through 2003. For the 10- year period between 1994 and 2003, the total increase in VMT was 22  percent.
Road construction has increased at a slower pace than population  growth, vehicle registrations, and road usage. For example, from 1980 to  2000, VMT increased by 80 percent while urban lane miles increased 37  percent.
In light of this increasing congestion, a tolling structure that includes  congestion pricing can potentially reduce congestion and the demand for  roads during peak hours. Through congestion pricing, tolls can be set to  vary during congested periods to maintain a predetermined level of service.  One potential effect of this pricing structure is that the price that a driver  pays for such a trip, including the toll, may be equal to or close to the total  cost of that trip, including the external costs that drivers impose on others,  such as increased travel time, pollution, and noise. Such tolls create  financial incentives for drivers to consider these costs when making their  driving decisions. In response, drivers may choose to share rides, use  transit, travel at less congested (generally off-peak) times, or travel on less  congested routes to reduce their toll payments. Such choices can  potentially reduce congestion and the demand for road space at peak  periods, thus potentially allowing the capacity of existing roadways to  accommodate demand with fewer delays.
Actual experience with congestion pricing is still fairly limited in the United  States, with only five states operating such facilities and six states planning facilities. Some results show that where variable tolls are implemented,  changes in toll prices affect demand and, therefore, levels of congestion.  For example, on State Route 91 in California, the willingness of people to  use the Express Lanes has been shown to be directly related to the price of  tolls. A study by Cal Poly State University for the California DOT estimated  that a 10 percent increase in tolls would reduce traffic by 7 percent to 7.5  percent, while a 100 percent increase in tolls would reduce traffic by about  55 percent. By adjusting the price of tolls, the flow of traffic can be  maintained in the toll lanes so that congestion remains at manageable  levels. In the Minneapolis-St. Paul area, a Minnesota DOT study of a  proposed system of variable priced HOT lanes called MnPASS estimated  that, over time, average speeds and vehicle mileage would increase, while  vehicle hours traveled would decrease. By 2010, with tolled express lanes  and free HOV lanes, the daily vehicle mileage on the entire system is  projected to be 3.6 million compared with 3.2 million if the highways are  not tolled. Average overall speed on the system is expected to be 47 mph  compared with 42.8 mph if the system is not implemented. Finally,  congestion pricing has been in use internationally as well.  Canada, Great  Britain, Norway, Singapore, and South Korea all have roadways that are  tolled to manage demand and reduce congestion. For example, in 1996,  South Korea implemented congestion tolls on two main tunnels. Traffic  volume decreased by 20 percent in the first 2 years of operation, and  average traffic speed increased by 10 kilometers per hour.
Although congestion pricing was dismissed by some decision makers in the  past partly because motorists queuing at toll booths to pay tolls created  congestion and delays, advances in automated toll collection have greatly  reduced the cost and inconvenience of toll collection. Today, nearly every  major toll facility provides for electronic toll collection, greatly reducing  the cost and inconvenience of toll collection. With electronic toll  collection, toll fee collection for using a facility can be done at near  highway cruising speed because cars do not have to stop at toll plazas.  However, as we reported, there are no widely accepted standards for  electronic toll systems, which could become a barrier to promoting the  needed interoperability between toll systems.
section_title: Tolling Holds Promise as an Approach to Finance Transportation Projects
paragraphs: Tolling holds promise to improve investment decisions and raise revenues  in the face of growing concerns about the sustainability of traditional  financing sources for surface transportation. For many years, federal and  state motor fuel taxes have been the mainstay of state highway revenue. In  the last few years, however, federal and motor fuel tax rates have not kept  up with inflation. Between 1995 and 2004, total highway revenues for states  grew an average of 3.6 percent per year, with average annual increases of  4.9 percent for federal grants and 3 percent for revenues from state  sources, according to FHWA data. However, these increases were smaller  than increases in the cost of materials and labor for road construction and  are not sufficient to keep pace with the robust levels of growth in highway  spending many transportation advocates believe is needed. The federal  motor fuel tax rate of 18.4 cents per gallon has not been increased since  1993, and thus the purchasing power of fuel tax revenues has been steadily  eroded by inflation. Although the Highway Trust Fund was reauthorized  in 1998 and 2005, no serious consideration was given to raising fuel tax  rates. Most states faced a similar degradation of the value of their state  motor fuel tax revenues—although 28 states raised their motor fuel tax  rates between 1993 and 2003, only three states raised their rates enough to  keep pace with inflation. State gasoline tax rates range from 7.5 cents per  gallon in Georgia to 28.5 cents in Wisconsin. Seven states have motor fuel  tax rates that vary with the price of fuel or the inflation rate—including one  state that repealed the linkage of its fuel tax rate to the inflation rate  effective in 2007. Figure 3 shows the decline in the purchasing power in  real terms of revenues generated by federal and state motor fuel tax rates  since 1990.
Even if federal and state motor fuel tax rates were to keep pace with  inflation, the growing use of fuel-efficient vehicles and alternative-fueled  vehicles would, in the longer term, further diminish fuel tax revenues.  Although all highway motorists pay fuel taxes, those who drive hybrid- powered or other alternative-fueled vehicles consume less fuel per mile  than those who drive gas-only vehicles. As a result, these motorists pay less  fuel tax per mile traveled. According to the U.S. Energy Information  Agency, hybrid vehicle sales grew twentyfold between 2000 and 2005 and  will grow to 1.5 million vehicles annually by 2025. In the past five years,  hybrid vehicle sales grew in the United States twentyfold, from 9,400 in  2000 to over 200,000 in 2005. Moreover, the U.S. Energy Information  Agency projects that hybrid vehicle sales will grow to 1.5 million annually  by 2025. Sales of alternative-fueled vehicles, such as alcohol-flexible-fueled  vehicles, are projected to increase to 1.3 million in 2030, with electric and  fuel cell technologies projected to increase by 2030 as well.
As concerns about the sustainability of traditional roadway financing  sources grow, tolling can potentially target investment decisions by  adhering to the user pays-principle. National roadway policy has long  incorporated the user pays concept, under which the costs of building and  maintaining roadways are paid by roadway users, generally in the form of  excise taxes on motor fuels and other taxes on inputs into driving, such as  taxes on tires or fees for registering vehicles or obtaining operator licenses.  This method of financing is consistent with one measure of equity that  economists use in assessing the financing of public goods and services, the  benefit principle, which measures equity according to the degree that  readily identifiable beneficiaries bear the cost. As a result, the user pays  concept is widely recognized as a critical anchor for transportation policy.
Increasingly, however, decision makers have looked to other revenue  sources—such as income, property, and sales tax revenues—to finance  roads. Using these taxes results in some sacrifice of the benefit principle  because there is a much weaker link to the benefits of roadway  expenditures for those taxes than there is for fuel taxes. Tolling, however,  is more consistent with user pay principles because tolling a particular  road and using the toll revenues collected to build and maintain that road  more closely link the costs with the distribution of the benefits that users  derive from it. Motor vehicle fuel taxes can provide a rough link between  costs and benefits but do not take into account the wide variation in costs  required to provide different types of facilities (i.e., roads, bridges, tunnels,  interchanges) some of which can be very costly.
Tolling can also potentially lead to more targeted, rational, and efficient  investment by state and local governments. Roadway investment can be  more efficient when it is financed by tolls because the users who benefit  will likely support additional investment to build new capacity or enhance  existing capacity only when they believe the benefits exceed the costs.  When costs are borne by nonusers, the beneficiaries may demand that  resources be invested beyond the economically justifiable level. Tolling can  also provide the potential for more rational investment because, in contrast  to most grant-financed projects, toll project construction is typically  financed by bonds sold and backed by future toll revenues, and projects  must pass the test of market viability and meet goals demanded by  investors. However, even with this test there is no guarantee that projects  will always be viable.
A tolling structure that includes congestion pricing can also help guide  capital investment decisions for new facilities. As congestion increases,  tolls also increase and such increases (sometimes referred to as  “congestion surcharges”) signal increased demand for physical capacity,  indicating where capital investments to increase capacity would be most  valuable. At the same time, congestion surcharges would provide a ready  source of revenue for local, state, and federal governments, as well as for  transportation facility operators in order to help fund these investments in  new capacity that, in turn, can reduce delays. Over time, this form of  pricing can potentially influence land-use plans and the prevalence of  telecommuting and flexible workplaces, particularly in heavily congested  corridors where external costs are substantial and congestion surcharges  would be relatively high.
Tolling can also be used as a tool for leveraging increased private-sector  participation and investment. In March 2004, we reported that three  states—California, Virginia, and South Carolina—had pursued private- sector investment and participation in major highway projects. Since that  time, Virginia has pursued additional projects, and Texas has contracted  with a private entity to participate and invest in a major highway project.  Tolling can be used to enhance private participation because it provides a  mechanism for the private sector to earn the return on investment it  requires to participate. Involving the private sector allows state and local  governments to build projects sooner, conserve public funding from  highway capital improvement programs for other projects, and limit their  exposure to the risks associated with acquiring debt.
section_title: In the Long Term, Tolling Holds Promise for Addressing the Transportation Challenges Ahead
paragraphs: Federal and state policymakers have begun looking toward future options  for long-term highway financing. For example, SAFETEA-LU established  the National Surface Transportation Infrastructure Financing Commission  to study prospective Highway Trust Fund revenues and assess alternative  approaches to generating revenues for the Fund. SAFETEA-LU also  authorized a study, to be performed by the Public Policy Center of the  University of Iowa, to test an approach to assessing highway use fees based  on actual mileage driven. This approach would use an onboard computer to  measure the miles driven by a specific vehicle on specific types of  highways. A few states have also begun looking toward the long-term  financing options. Oregon, the first state to enact a motor fuel tax, is  sponsoring a study on the technical feasibility of replacing the gas tax with  a per-mile fee. During 2006, volunteers will have onboard mileage-counting  equipment added to their vehicles and will, for one year, pay a road user fee  equal to 1.2 cents a mile instead of paying the state’s motor fuel tax.
But beyond the questions of financing and financing sources, broader  issues and challenges exist. As the baby boom generation ages, mandatory  federal commitments to health and retirement programs will consume an  ever-increasing share of the nation’s gross domestic product (GDP) and  federal budgetary resources, placing severe pressures on all discretionary  programs, including those that fund defense, education, and transportation.  Our simulations show that by 2040, revenues to the federal government  might barely cover interest on the debt—leaving no money for either  mandatory or discretionary programs—and that balancing the budget  could require cutting federal spending by as much as 60 percent, raising  taxes by up to 2 ½ times their current level, or some combination of the  two. As we have reported, this pending fiscal crisis requires a fundamental  reexamination of all federal programs, including those for highways. This  reexamination should raise questions such as whether a federal role is still  needed, whether program funding can be better linked to performance, and  whether program constructs are ultimately sustainable. It is in this context  that tolling has promise for addressing the challenges ahead. In particular,  we have suggested that a reexamination of the federal role in highways  should include asking whether the federal government should even  continue to provide financing through grants or whether, instead, it should  develop and expand alternative mechanisms that would better promote  efficient investments in, and use of, infrastructure and better capture  revenue from users.
section_title: States’ Use of Tolling to Address Funding Shortfalls, Finance New Capacity, and Manage Congestion Is Expanding; but for Some States, Tolling Is Not Viewed as Feasible
paragraphs: According to our survey of state transportation officials, there are toll road  facilities in 24 states and plans to build toll road facilities in 7 other states.  Tolling grew in the 1940s and 1950s, but after a period of slower growth,  states’ tolling began to expand again in the 1990s. The 5 states that began  tolling after 1990 are currently planning additional toll roads. Officials in  states that have toll roads or are planning toll roads indicated that their  primary reasons for using or considering the use of a tolling approach were  to address transportation shortfalls, finance new capacity, and manage  congestion. Transportation officials in some states, however, told us that  tolling is not now seen as feasible because there is little need for new tolled  capacity, tolling revenues would be insufficient, and they would face public  and political opposition to tolling.
subsections: section_title: Nearly Half of the States Have Operating Toll Roads, and More States Are Planning Toll Roads
paragraphs: Currently, there are toll road facilities in 24 states throughout the United  States, and there are plans to build toll road facilities in 7 additional states.  Figure 4 shows the states that have at least one existing toll road, according  to our survey of transportation officials from all 50 states and the District of  Columbia and our review of FHWA toll-related programs. (See app. III for  the survey questions.)
Tolling grew in the 1950s, slowed for several decades, and again began to  expand rapidly in the 1990s. Five states—California, Colorado, Minnesota,  South Carolina, and Utah—opened their first toll roads from 1990 to 2006  and, according to our survey of state transportation officials, all five are  currently planning, or in some stage of building, at least one new toll road.  Large states that have recently built toll roads, such as California, Florida,  and Texas, are also moving ahead with plans to build and expand systems  of tolls. In Texas, for example, the DOT’s Turnpike Authority Division is  developing a proposed multiuse, statewide network of transportation  routes that will incorporate existing and new highways called the TTC,  while three other regional toll authorities in Austin, Dallas, and Houston  are also planning toll roads. In California, a state legislative initiative in  1989 led to the development of toll roads in Orange County, including the  State Route 91 Express Lanes and State Route 125 in San Diego. And in  Florida, the DOT-run Florida Turnpike Enterprise operates nine tolled  facilities that include almost 500 miles of toll roads and is studying the  feasibility of implementing tolling to manage congestion on other facilities,  including Interstate 95 in Miami-Dade County.
According to our survey of state transportation officials and our review of  state applications to FHWA tolling pilot programs, a total of 23 states have  plans to build toll road facilities. (Fig. 5 summarizes the status of states’  plans for highway tolling.) Eleven of these states have received the  required environmental clearances and have projects that are under design  or in construction. The remaining 12 states do not have projects that have  proceeded this far, but do have plans to build toll road facilities, according  to their respective state transportation officials. Of these 23 states,   16 have existing toll roads and are planning additional toll roads, and   7 are planning their first toll roads.
section_title: Some States Use Tolling to Address Funding Shortfalls, Finance New Capacity, and Manage Congestion; Other States Find Tolling Not Feasible or Have Made Other Choices
paragraphs: Officials in most states planning toll roads indicated that the primary  reasons for considering a tolling approach were to address what state  officials characterized as transportation funding shortfalls, to finance and  build new capacity, and to manage congestion. States that are not planning  to build toll roads have found that tolling is not feasible or have made other  choices.
subsections: section_title: States Use Tolling to Address Transportation Funding Shortfalls
paragraphs: Transportation officials indicated that one of the primary reasons for using  or considering a tolling approach was to respond to what the officials  described as shortfalls in transportation funding. In Georgia, for example,  an official told us that tolling has become a strategy because there is a  significant gap in transportation funding, and the motor fuel tax rate is the  lowest in the country, 7.5 cents per gallon. In North Carolina, where the  North Carolina Turnpike Authority was established in 2002, an official told  us that traditional funding is not adequate to address transportation needs.  North Carolina has estimated that, over the next 25 years, it will need $85  billion in new transportation projects to accommodate the state’s growth.  With a projected shortfall of $30 billion and what the official described as a  lack of political will to increase motor fuel tax rates, the state has adopted  tolling as one strategy to address transportation needs. In Utah, state  transportation officials have estimated a $16.5 billion shortfall through  2030 in funding for highway projects and are considering tolling, along with  other funding alternatives. Finally, an official told us that, in spite of a  motor fuel tax rate increase in 2003 and a $200 million bonding program,  Indiana has a 10-year, $2.8 billion shortfall in highway funding and is  viewing tolling as one financing tool to close the gap. The Indiana DOT has  operated the Interstate 80/Interstate 90 Indiana Toll Road for 50 years and  would like to apply that experience in operating toll roads to new roads.
In other states, transportation officials conducted financial assessments on  specific highway projects and determined that, to complete the projects,  tolling would be required as a source of revenue. For example, in Missouri,  a funding analysis performed by the Missouri DOT found that the estimated  construction costs for the Interstate 70 reconstruction exceed the available  federal, state, and local funding sources, and the project cannot be  advanced without tolling or other revenue increases. Missouri DOT  estimates that the Interstate 70 reconstruction project will cost between  $2.7 and $3.2 billion and that, with a current funding shortfall of $1 billion to $2 billion annually, tolling is being actively considered to close that gap.  Likewise, studies by the Texas DOT determined that tolling would be  required on particular highway projects. For example, reconstructing a   23-mile portion of Interstate 10 near Houston was estimated to cost $1.99  billion. Available federal, state, and local funds amounted to $1.75 billion, a  shortfall of $305.2 million. The Harris County Toll Road Authority invested  $238 million for the right to operate tolled lanes within the facility. In  addition, the Texas Transportation Commission, which oversees the state  DOT, ordered that all new controlled-access highways should be  considered as potential toll projects that will undergo toll feasibility  studies. The commission views tolling as a tool that can help stretch limited  state highway dollars further so that transportation needs can be met.  Moreover, states are looking for whatever financial relief tolling can  provide. In some states, tolling is being considered, even though toll  revenues are expected to only partially cover the costs of particular  projects. In Mississippi, for example, the state DOT indicated that tolling  may be advanced if toll revenues cover 25 percent to 50 percent of a  facility’s cost. In Arkansas, tolling is being considered if toll revenues fund  as little as 20 percent of the initial construction costs, provided tolls pay for  operations and maintenance.
To identify state characteristics that are linked with state decisions to toll,  we performed a correlation analysis to examine the relationship between  those decisions and various state demographic and financial  characteristics. Although certain characteristics in a state’s finances and  tax policies might be related to financial need, our correlation analysis  found only limited relationships between various state financial and  demographic measures and states’ decisions to toll or not to toll. For  example, although we found a slight inverse relationship between a state’s  decision to toll and the level of its motor fuel taxes, this relationship is not  strong enough to conclude that states planning toll roads are more likely to  be the ones with lower motor fuel tax rates than other states. However, we  found that both the size of the state, whether measured by population or by  VMT, and whether it is growing rapidly, again measured by population or  VMT growth, are directly related to states’ decisions to toll. (For more  information on the results of our correlation analysis, see app. II.)
section_title: States Use Tolling to Finance New Capacity
paragraphs: According to transportation officials, states are using or considering a  tolling approach to finance new capacity that cannot otherwise be funded  under current and projected transportation funding scenarios. Such new  capacity may be in the form of new highways or new lanes on existing  highways. For example, in Colorado, the state DOT is studying the  investment of $3 billion in increased highway capacity, with 10 percent, or  $300 million of the investment, coming from federal, state, and local  governments and the remainder coming from tolls. With a $48 billion  shortfall projected through 2030 and the percentage of congested lane- miles projected to increase by 161 percent, tolling is being considered.  Projections by the state DOT in Colorado suggest that revenues are  sufficient to allow for only spot improvements on a few transportation  corridors over the next 25 years and, without tolling, none can undergo a  major upgrade, and new capacity cannot be added.
Some states are using tolling to supplement their traditional motor fuel tax  transportation funding through private-sector involvement and investment.  Tolling is being used as a means to gain access to private equity and to shift  the investment risk, in part, to the private sector. Currently, 18 states have  some form of public-private partnership (PPP) legislation, allowing for  innovative contracting with the private sector. Many of the 18 states have  PPP programs that were established to allow for toll concession  agreements to finance highway projects. For example, Oregon and Texas  are specifically looking to attract private investment as a new source of  financing. The TTC, as shown in figure 6, is being financed, in part,  through a series of PPPs. The Texas DOT has contracted with Cintra- Zachry to develop a long-term development plan for the corridor, which  includes the potential to construct and operate the first 316-mile portion of  TTC 35, from Dallas to San Antonio. Cintra-Zachry has pledged an  investment of $6 billion and a payment of $1.2 billion for the right to build,  operate, and collect tolls for up to 50 years on the initial segment of TTC 35.  In Oregon, the Office of Innovative Partnerships and Alternative Funding— an Oregon DOT office empowered to pursue alternative funding, including  private investment through tolling—has received proposals from the  Oregon Transportation Improvement Group, a consortium led by the  Macquarie Infrastructure Group, to complete two tolled facilities in the  Portland area. In both Texas and Oregon, the projects were approved under  SEP-15, which enabled the two states to waive certain federal requirements  and to negotiate with the project developers before awarding contracts.  Acceptance of the projects under SEP-15 does not commit federal-aid  funding for the projects, and FHWA retains the right to declare the project  ineligible for federal-aid funds at any time during the SEP-15 process until  there is formal FHWA project approval.
Growing freight traffic is also prompting some states to consider using tolls  to pay for capacity enhancement. Examples include Interstate 81 in Virginia  and Interstate 70 in Missouri. According to the original design of Interstate  81, built beginning in 1957, truck traffic would account for 15 percent of  traffic on the highway; truck traffic now accounts for up to 35 percent, and traffic levels are expected to double by 2035. Interstate 70,  originally designed to carry up to 14,000 vehicles per day in rural areas,  now carries up to 58,000 per day, and truck traffic, which was intended to  be 10 percent of total traffic, is now 25 percent. Both interstates are major  freight routes where truck traffic is expected to continue to increase. In  2003, the Virginia DOT received FHWA conditional provisional approval  under the Interstate System Reconstruction and Rehabilitation Pilot  Program to toll vehicles other than cars and pickup trucks (freight trucks  and buses) on Interstate 81. Likewise, for Interstate 70, the Missouri DOT  received conditional provisional approval in July 2005 to participate in the  same pilot program. In certain cases, proposals for truck-only toll (TOT)  lanes seek to manage congestion while increasing capacity by diverting  trucks from passenger routes to dedicated lanes. TOT lanes are being  considered on heavy freight routes, including Interstate 81 in Virginia, TTC  in Texas (see fig. 7), and routes throughout the Atlanta Metropolitan Region  in Georgia.
section_title: States Use Tolling to Manage Congestion
paragraphs: While growing congestion and traffic volumes have increased the demand  for additional highway capacity, transportation officials told us that tolling  is being considered as a tool to manage congestion. Applying tolls that vary  with the level of congestion—congestion pricing—can reduce congestion  and the demand for roads because tolls that vary according to the level of  congestion can be used to maintain a predetermined level of service. Such  tolls create additional incentives for drivers to avoid driving alone in  congested conditions when making driving decisions. In response, drivers  may choose to share rides, use public transportation, travel at less  congested (generally off-peak) times, or travel on less congested routes, if  available, to reduce their toll payments.
Tolling for congestion management can take the form of HOT lanes, which  are adjacent to nontolled lanes. HOT lanes are used to manage congestion  by creating a tolling structure that varies toll prices according to the level  of congestion. Such a tolling structure can reflect the external costs that  users of the facility impose on others. In some cases, HOV lanes that had  been underused have been converted to HOT lanes, allowing HOVs to  continue to use the lane as an HOV lane but allowing single-occupancy  vehicles to use the lane provided they are willing to pay a toll. In 5 of the 23  states planning toll roads, efforts to manage congestion on existing  capacity is prompting tolling. California, Colorado, Texas, Virginia, and  Washington all have HOT lane projects planned that will use variably priced  tolls to alleviate congestion by managing the level of traffic. All of these  states have received grants under FHWA’s Value Pricing Pilot to either  develop or implement the projects. In California, the State Route 91  Express Lanes, as shown in figure 7, opened in 1995, and the Interstate 15  Express Lanes, opened in 1998, have dedicated, tolled lanes where the flow  of traffic is managed through toll prices that vary daily and hourly. Tolls on  State Route 91 range from as little as $1.10 to as much as $8.50. During  periods of heavier demand and congestion, toll prices are higher so that  fewer people will use the lanes, and a consistent flow of traffic can be  maintained. In Texas, the Katy Freeway in Houston was originally designed  to carry 80,000 vehicles per day. With traffic now exceeding 200,000  vehicles per day, the Texas DOT, in cooperation with FHWA, opened HOV-3  lanes (lanes that could only be used by carpools of 3 or more passengers)  to vehicles with two passengers who pay a toll as express toll lanes in 1998.  Texas DOT is also building managed lanes, scheduled to open in 2009, that  will have peak toll pricing between 6:00 a.m. and 11:00 a.m. and between  2:00 p.m. and 8:00 p.m. The result, in both cases, is a system in which  commuters pay a toll for access to less congested lanes. More recently, in  Minnesota, where Minneapolis and St. Paul have been experiencing rapid  growth in congestion and, according to the Minnesota DOT, HOV lanes  were underused, the state legislature authorized the conversion of the  Interstate 394 HOV lanes to HOT lanes. The Interstate 394 MnPASS optional  toll lanes project opened in May 2005 with “dynamic pricing” to adjust tolls  from anywhere from 25 cents to $8.00, according to traffic levels.
In some states, tolling or variable pricing—in which toll rates differ  depending on conditions such as the time of day or location—is used  specifically to manage freight congestion. In October 2005, for example, the  Delaware DOT launched an initiative designed to address problems with  freight congestion on the Delaware Turnpike (Interstate 95) by encouraging  trucks to travel at night. Tolls on trucks between 10:00 p.m. and 6:00 a.m.  are 75 percent less than tolls during more congested daytime hours.  Another effort that incorporates variable pricing, but is not a traditional  form of facility-based tolling, is a road user fee system that is being  developed with an FHWA Value Pricing Pilot grant by the Oregon Office of  Innovative Partnerships and Alternative Funding in cooperation with  Oregon State University. The system assesses mileage-based fees in place  of motor fuels taxes, and the fees vary for miles traveled during rush hour  and within cordoned downtown areas.
section_title: Many States Find That Tolling Is Not Feasible or Have Made Other Choices
paragraphs: The reason most frequently cited by state transportation officials for not  tolling is that tolling is not feasible. More specifically, there is little need for  new tolled capacity, tolling revenues would be insufficient, or there is  public and political opposition to tolling as follows:  Little need for new tolled capacity. Transportation officials in many  states indicated that low traffic volumes, a lack of congestion, and low  demands for additional capacity make tolling impractical. In states such  as Montana, North Dakota, South Dakota, and Wyoming, the population  density and percentages of urban vehicle miles traveled are too low to  support tolling.
Insufficient revenues. In some states, tolling is not considered  because toll revenues would not cover the costs of projects. In some  cases, the issue involves traffic volumes that are so low that a tolling  approach would be impractical. In those states, transportation officials  explained that even if a tolling approach were to be considered, tolls  would have to be prohibitively high to fund capacity enhancements and  would likely result in traffic diversion to nontolled, alternative routes.  For example, a transportation official in Kansas told us that there are  few routes in Kansas that have a high enough level of traffic to make  them viable for tolling. Therefore, opportunities for tolling are limited  under the classic definition of feasibility, for which toll revenue must be  adequate to fund construction, maintenance, and operations of a facility.  Under this definition, most roads would not generate sufficient revenues  from tolls to fund new highway capacity. In other cases, where traffic  volumes are higher, transportation officials told us that a tolling  approach is not even considered unless it can be demonstrated that the  project will be self-sustaining. In Massachusetts, for example, an  evaluation of HOT lanes determined that the toll rates people would be  willing to pay would not raise enough revenue to fund the capital  expenses to construct the facility.
Public and political opposition. Officials from many states that are  not pursuing tolling mentioned some form of public or political  opposition to toll roads that has dissuaded transportation professionals  from pursuing tolling. The public or political opposition is so strong,  according to officials in some states, that tolling is studied only with  great caution and sensitivity, if at all. While some states mentioned the  lack of a tolling culture as a reason for not tolling, other states that have  tolled roads for years cited the long-standing presence of toll roads as a  reason for not planning to expand tolling. In New Jersey, New  Hampshire, and Ohio—states with long-established toll roads—state  officials said the presence of tolls has instilled public opposition to  them. For example, New Jersey officials told us that opposition to new  toll roads is strong because many state border crossings and major  highways are already tolled. In other cases, DOTs face political  opposition to tolling. In Mississippi, where other toll projects are still  being considered, the state DOT withdrew its application to toll  Interstate 10 under the Interstate System Reconstruction and  Rehabilitation Pilot Program in response to political opposition.
States that do not toll and are not planning to construct toll roads have also  chosen options other than tolling to finance highway construction and  maintenance. For example, 13 states that are not planning toll roads have  used “GARVEE bonds” as grant anticipation financing to borrow funds and  pledge future federal-aid highway revenues for repayment. South Carolina  used state infrastructure bank loans and federal credit assistance, along  with state and local funds, for its “27 in 7 Accelerated Program” through  which it is completing $5 billion worth of highway infrastructure capacity  and improvements in 7 years, compared with the 27 years it estimated  would be needed under conventional financing means. A smaller number of  states, such as Iowa and Tennessee, have remained committed to a  primarily pay-as-you-go approach, building new capacity only when money  becomes available through motor fuel tax revenues or other state revenues.
section_title: States That Are Considering and Implementing a Tolling Approach Face Two Broad Types of Challenges
paragraphs: Drawing on our analyses of states’ experience with tolling and on a review  of selected published research on tolling, we have identified two broad  types of challenges that transportation officials have encountered when  attempting to implement tolling: (1) the difficulty of obtaining political and  public support in the face of opposition from the public and political  leaders and (2) the difficulty of implementing tolling given a lack of, or  overly restrictive, enabling toll legislation; concerns about potential traffic  diversion resulting from toll projects; and a need to coordinate with other  states and regions when toll projects cross jurisdictional boundaries. (See  fig. 8.) While these two broad types of challenges may make a tolling  approach difficult to adopt or implement, states have nevertheless  identified specific ways to resolve or mitigate the challenges. We discuss  the strategies that states have used to address tolling challenges in the  following section of this report.
subsections: section_title: Garnering Political and Public Support Is the Most Often Cited Challenge to Tolling
paragraphs: State transportation officials who are implementing or are considering  implementing tolling say that garnering political and public support is  perhaps the greatest challenge to tolling. Some studies have also reported  this challenge. For example, in a recently issued report, the Transportation  Research Board cited studies that identified the unpopularity of toll roads  and public skepticism as fundamental obstacles to employing a tolling  approach. The report identified the inconvenience of paying tolls, being  forced to pay twice, and inequities that a tolling approach would produce  as the most commonly expressed objections. The Congressional Budget  Office noted in its report that opponents of toll roads often charge that  such roads are unfair to motorists with low incomes who may not be able  to afford them. This concern is intensified if it involves trips to work and  the motorist has few alternatives. In a policy brief issued by the Brookings  Institution, the author notes that a drawback of tolls is that people think  these tolls would be just another tax, forcing them to pay for something they have already paid for through gasoline taxes. We have also noted in  prior work that political opposition to tolling has been substantial because  of concerns about equity and fairness. According to our analysis, a  number of factors influence public and political perceptions about tolling.  (See fig. 9.)
Double taxation arguments. The most frequent objection to tolls is the  argument that motorists traveling on toll roads are being asked to pay  twice; that is, a new roadway toll is being levied in addition to existing  taxes. States have a number of dedicated sources of revenues that are used  to finance highway capital programs. According to transportation experts,  the public generally believes that transportation costs are already being  paid for through motor fuel, property, and sales taxes, as well as license  and registration fees, and in the case of trucks, special tire taxes and  weight-distance fees. Therefore, new road user fees, such as tolls, are often  viewed as new taxes.
Transportation officials in a number of states reported that concerns about  double taxation limited their consideration of a tolling approach to varying  degrees. In Wisconsin, where tolling is not being implemented, a  transportation official told us that the public understands that the fuel  excise tax and other user fees are used to fund highway construction.  Therefore, the public would view tolling as another tax being imposed on  them. This type of concern can be compounded when tolls are being  proposed for an existing facility. For example, in Missouri, consideration of  tolling to pay for Interstate 70’s reconstruction faced opposition, in part,  because the public believes that the interstate highway has already been  paid for, according to state DOT officials. Missouri citizens generally regard  tolls as government’s way of making users pay again, according to state  transportation officials. This view is supported by Missouri’s history of  commitment to free roads. Citizens in Texas have voiced similar arguments  against tolls. In Houston, for example, plans to convert State Highway 249  to a tolled road have met with some resistance on the grounds of double  taxation. At the public hearing organized to hear views on the conversion,  officials estimated that an overwhelming majority of those in attendance  were against the conversion because they felt that the road had already  been paid for. Strong opposition can arise even before a roadway has been  completed. A proposal to toll a nearly completed portion of U.S. Route 183  north of Austin was retracted after citizens expressed strong opposition.  Transportation officials told us that these citizens believed that since the  road was nearly complete, introducing tolls would amount to double  taxation.
Projects are not self-sustaining. Transportation officials told us that  they often find it difficult to demonstrate that tolling is reasonable and  necessary because revenues collected from toll projects usually do not  fully cover project costs. In Oregon, for example, a financial analysis of toll  proposals indicated that the proposals under consideration would not be  economically feasible through the collection of tolls alone, according to  transportation officials. A private consortium was selected to negotiate  with the state DOT for the purpose of advancing the projects. However, in  the view of this consortium, the new toll road can be financially viable only  if existing parallel roads are tolled. In some states, transportation officials  stated toll projects are not even considered unless it can be demonstrated  that the project will be self-sustaining. In Kentucky, for example, a  transportation official told us that traffic volumes alone can rarely  financially sustain rural roads through tolling and emphasized that it would  be difficult to garner public support for a toll project that required partial  subsidization. A transportation official in Arkansas told us that while  tolling is considered if revenues fund at least 20 percent of initial  construction costs, a toll project would only be considered if it can be  shown that toll revenues would cover all operations and maintenance  costs. In Florida, toll proposals must pass a financial feasibility test and  prove that the proposed projects will be self-sustaining before the projects  are further considered for advancement. According to Florida Turnpike  Enterprise officials, the standard for feasibility is that by the twelfth year of  operation, projected revenues must cover at least 50 percent of operating  costs and debt service and by the twenty-second year of operation,  projected revenues must cover all costs and debt service.
Concerns about inequities. Another objection to the use of tolling  involves concerns about the inequities that the approach would produce.  According to our review, groups that could be adversely affected by tolling  often object, as follows, on the basis of geographic inequity, income  inequity, and user inequity:   Geographic inequity. Concerns about geographic inequity reflect  the belief that certain regions will benefit disproportionately from a  tolling approach while other regions will be unfairly disadvantaged.  Using a tolling approach to address a transportation need in one part  of a state might free up federal and state funding that might have  otherwise been used to address that need. This available federal and  state funding could then be used to support roads in another part of  the state, creating an unfair burden on those motorists that are being  tolled. In Florida, for example, there have been concerns about the  distribution and use of funds collected for projects in one region  (southern Florida) being distributed to and used for projects in  another region of the state (northern Florida). In the 1990s, three  southern counties—Palm Beach, Broward, and Dade—secured  legislation that would require the Florida Turnpike Enterprise to  calculate the dollar amount collected in those counties and  determine how much of that amount was returned to the counties to  be used on their facilities. As a result, the Florida Turnpike  Enterprise created a formula to implement that law, reflecting the  need to balance collections in those counties with what is being  spent on facilities in those counties.
Income inequity. Concerns about the unequal ability of lower- income and higher-income groups to pay tolls are often cited by  transportation experts as an important political barrier to the acceptance of a tolling approach. Those opposing tolls on the basis  of income inequity argue that since tolls would represent a higher  portion of the earnings of lower-income households using the tolled  road, tolling imposes a greater financial burden on them and,  therefore, is unfair. In Maryland, this concern resulted in removing  HOT lanes from consideration in state transportation plans,  according to FHWA. In June 2001, the governor decided to remove  HOT lanes from the state transportation plan because of the  perceived inequity of linking an easier commute with a person’s  ability to pay. However, in the following year, the governor’s office  initiated a revised feasibility study of value pricing that included  investigating and addressing the equity issues that were raised  earlier, while encouraging the air quality and congestion relief  benefits of HOV lanes.
User inequity. User inequity involves the belief that some classes of  system users are being unfairly disadvantaged. The trucking industry,  freight industry, and businesses may view tolling in this light. For  example, a transportation official in Virginia told us that a proposal  to toll only trucks on Interstate 81 is generally viewed by truckers as  an unfair burden being imposed on them. This transportation official  also noted that if the proposal is implemented, truckers will seek  alternative routes to avoid the tolls. In Missouri, officials  representing fuel marketers, fuel retailers, gas stations, and  convenience stores told us that they consider a tolling proposal  unfair. According to the industry officials, these businesses have  spent millions of dollars on their exit locations along the interstate  and believe they have paid their fair share of taxes. Consideration of  a tolling approach to enhance mobility on the interstate could  potentially have an adverse impact on these businesses because  some customers may choose alternative routes.
General views on government. According to transportation officials  with whom we spoke, public opposition to tolling can be exacerbated by a  mistrust of government generally. They said that when government  proposes tolls as a way to finance transportation, the public generally  considers the tolls as a new tax.
This mistrust can also be directed specifically at state transportation  departments. For example, in 1992, the Missouri DOT proposed a 15-year  plan that included a number of promised projects that would be  undertaken with an increase in the state’s gas tax. However, according to  state transportation officials, after gaining support for the increase, the  state DOT did not deliver the promised projects as scheduled. These  officials said this failure to deliver contributed to the public’s mistrust of  the DOT and its resistance to attempts by the DOT to secure toll authority  over the years. In some states, concerns about the cost and management of  major highway and bridge programs have reflected dissatisfaction with the  performance of state transportation departments. For instance, as we  reported in 2002, a legislative commission in Virginia reported on cost  overruns and schedule delays in the state’s highway program in 2000 and  found that cost estimates prepared for projects were substantially below  the final costs. This commission identified a potential funding gap of  around $3.5 billion in the state’s $9 billion, 6-year transportation plan. Such  concerns about past performance can present challenges for transportation  officials who are attempting to advance a tolling approach.
Mistrust can also extend to private entities involved in toll road  development. As we reported in 2004, states engaging private-sector  sponsorship and investment can relinquish political control over their  ability to set toll rates and to carry out infrastructure improvements on  competing publicly owned roadways. For example, California could not  make any improvements along State Route 91—a project privately financed  with a combination of equity, bank, and institutional debt—until the year  2030 because a noncompete clause created a 1.5 mile protection zone along  each side of the corridor. According to officials from the Orange County  Transportation Authority, public pressure on the state DOT to improve the  nontolled portion of the road motivated the county to purchase the road  back from the private consortium.
section_title: State and Local Transportation Officials Face Formidable Challenges in Implementing Tolling Approaches
paragraphs: In some states, transportation officials told us that they face challenges in  implementing toll projects. (See fig. 10.) We identified the following three  implementation-related challenges:  Secure legislative authority to toll.
Address the impact of traffic diversion caused by tolling.
Coordinate with other states or regions.
Secure the authority to toll. Not having, or having restrictions built into,  enabling toll legislation poses a challenge for some transportation officials  as they develop tolling options. They told us that limited legislative  authority for tolling hampered their ability to consider a full range of  options to address the transportation needs in their states. Ultimately,  these transportation officials sought methods other than tolling to address  transportation needs or delayed the development of an identified toll  project as they pursued tolling legislation.
Missouri’s experience illustrates the challenges transportation officials face  when the state DOT does not have the statutory authority to use a tolling  approach to advance a project. State transportation officials are  considering turning Interstate 70 into a toll road to finance capacity  improvements. However, voters would first have to approve an amendment  to the state constitution to put toll roads under the state DOT’s  jurisdiction—a measure that voters rejected in 1970 and 1992. To avoid  another rejection, state DOT officials are exploring alternative financing  methods under existing authority, including the use of a nonprofit  corporation to build, operate, and maintain the toll project. Transportation  officials emphasize, however, that under this option, the entity would not  be able to spend state highway revenues for the project—the same  restriction that would prevent the state DOT from advancing a toll  project—because state funds can be used only for the purposes  enumerated in the state constitution, and toll roads were not one of those  purposes.
Restrictions in enabling legislation can also hamper attempts to implement  toll projects. For example, in the mid-1990s, the Minnesota legislature  authorized a study of public-private partnerships and tolling as one  approach to address congestion and leverage state transportation  investments. In conjunction with that study, the state DOT requested  public-private partnership tolling proposals and received five proposals in  response from private firms. Ultimately, the state DOT recommended a  proposal to build Trunk Highway 212 as a toll facility and proceeded to  complete a development agreement with a private partner. However, the  proposal was vetoed under the provision of the enabling legislation that  gives veto authority to local units of government affected by a project. As a  result, the Trunk Highway 212 project is now being completed under  traditional methods and, according to transportation officials, is taking  longer to complete due to funding limitations. New legislation, passed in  2003, eliminated the local veto authority for converting HOV lanes to HOT  lanes on existing facilities, giving transportation officials more flexibility to  implement a tolling approach. This legislation, which followed a DOT study  of HOV lane usage on Interstate 394, authorizes the conversion of the HOV  lanes on Interstate 394 to HOT lanes to improve their efficiency.  Subsequently, through a design-build-operate agreement, a private partner  was secured to bring resources to the table and run the operation.
Address concerns about traffic diversion. Traffic diversion resulting  from tolling may adversely affect people, municipalities, and businesses.  Concerns about such diversion have surfaced in comments by  municipalities, businesses, and the trucking industry on a proposal to toll  trucks on Interstate 81 in Virginia, according to state transportation  officials. Affected Virginia municipalities have suggested, for example, that  trucks will leave the interstate to avoid tolls and wind up on local roads.  Such diversion has the potential to create congestion, increase accident  and fatality rates, and increase the municipalities’ costs of maintaining  these roads. The affected municipalities have also expressed concerns  about the potential negative effects on economic development that may  result from the loss of business along toll routes. According to a recently  completed study that considered a number of different proposals, traffic  diversion is likely to occur if Interstate 81 is tolled. The study estimated  that up to one in four trucks would divert to nearby parallel routes if a high  toll rate was applied to commercial vehicles.
Concerns about traffic diversion are not limited to new toll roads. The Ohio  Turnpike opened in the 1950s and, in the 1990s, traffic studies revealed that  commercial vehicles were increasingly diverting onto parallel untolled  roads, creating safety and other concerns. In response, the governor  released the Northern Ohio Freight Strategy in October 2004, which  included a policy to reduce tolls on commercial vehicles in order to  redirect traffic back to the Ohio Turnpike. Subsequent traffic studies  revealed this strategy was mostly successful.
Coordinate on projects that involve multiple states or jurisdictions.  Coordination among states and regional jurisdictions is likely to become a  growing issue because increasing traffic congestion in metropolitan areas  is likely to require regional solutions. Without good coordination with  neighboring jurisdictions, individual jurisdictions may find it difficult to  solve traffic congestion. Even if one jurisdiction manages to reduce  congestion within its system, it may simply shift that congestion to an  adjacent jurisdiction. Yet numerous factors could make coordination  difficult. For example, the need for coordination is especially critical if  states adopt separate tolling legislation with varying, perhaps incompatible,  provisions and begin tolling. Other potential challenges include ensuring  the interoperability of toll collection facilities when toll proposals involve  more than one state, addressing differences in state toll legislation, and  mitigating geographic inequities by fairly apportioning the anticipated  benefits and disadvantages of toll projects among all stakeholders.
Oregon’s experience illustrates how some of these issues might present  challenges for transportation officials who are attempting to advance  interstate toll projects. Oregon officials cited differing statutory authorities  between Oregon and neighboring Washington as a potential coordination  issue. In Oregon, transportation officials have the authority to enter into  PPPs when advancing a tolling approach, while their counterparts in  Washington do not yet have the authority to do so if proposals for  partnerships are unsolicited. As a result, stakeholders involved with the  Columbia River Crossing Project on Interstate 5, which Oregon officials are  attempting to pursue as a toll project with a private partner, are seeking to  promote legislation in both states that will provide explicit authorization to  advance the project. The Oregon officials also noted that coordination  would be necessary to address geographic inequities that might arise from  the project, explaining that more of the toll revenues could come from  Washington, since motorists there commute into Portland. Transportation  officials in both states will need to take this into account as they work  towards an equitable apportioning of the project’s costs and benefits.
section_title: Three Broad Strategies Can Help State Transportation Officials Address Challenges to Tolling
paragraphs: As shown in figure 11, our review of state practices in implementing tolling  suggests three broad strategies that can help transportation officials  address challenges to its adoption and implementation. These strategies  have both short-term and long-term relevance for states as they consider  new transportation finance options to supplement traditional approaches.  Transportation officials in states that are currently implementing or  considering tolling as a means to raise revenue or mitigate congestion can  consider these strategies in the short term to build support and smooth  implementation of the tolling approaches under consideration. In the  longer term, transportation officials in states that are not currently tolling,  but choose to begin to do so, can consider these strategies to build support  for tolling.
subsections: section_title: Develop an Institutional Framework That Supports Tolling
paragraphs: The first strategy that transportation officials can consider involves  developing an institutional framework that facilitates tolling. In developing  such a framework, transportation officials can consider building support  for a tolling approach with the public and decision makers in the state and  securing enabling tolling legislation. (See fig. 12.) Developing such a  framework through these two means involves identifying and articulating  the goals to be achieved by the tolling approach in the context of larger  state policy goals.
Building support. Building support for a tolling approach includes two  interim steps—establishing a rationale for tolling and defining the  underlying motivations for its use. Together, these steps provide a basis for  gaining political and public support before seeking and securing adequate  tolling legislation.
Establishing a solid rationale for tolling involves linking the specific  reasons, or goals, for tolling with state policy goals for transportation. For  example, linking a tolling goal, such as managing congestion, to a broader  state goal, such as using existing infrastructure more efficiently, can  provide a basis for its use. Similarly, a tolling goal of supplementing  transportation funding with new revenues could contribute to a broad state  policy goal of funding investment in transportation systems with revenues  generated directly from users.
Articulating the underlying motivations for using a tolling approach can  also help transportation officials build support for and accomplish broader  transportation goals and tailor tolling goals to accomplish those ends. For  example, consideration of a tolling approach might be motivated by a  desire to accomplish other goals, such as finding a replacement for the gas  tax or attracting private investment for transportation. Irrespective of the  motivations that guide the development of the goals, advocates of tolling  have to make a compelling case for its use to build public acceptance for it  and make it politically viable. Goal setting can help transportation officials  articulate the motivations for using the approach, identify the goals to be  achieved by its use, and demonstrate how the tolling goals will tie into  broader state goals. Such a process can help decision makers formulate a  transparent and comprehensive rationale for the use of tolling and gain  public and political support for it.
Secure legislative authority. Securing tolling legislation is the next step  in developing an institutional framework for tolling. Although there are  common reasons for tolling, the form legislation takes in each state often  depends on the motivations for using the approach and ultimately the goals  to be achieved through it. Our review of legislative efforts in Texas,  Virginia, Oregon, and Florida illustrates how legislation evolved in  response to different motivations and tolling goals. Following are some of  these legislative efforts:  Leveraging transportation dollars. Texas enacted legislation that  provided for a broader application of tolling than currently existed  and established a funding mechanism that supported a broader use of  tolls in the state’s transportation system. This legislation facilitates  tolling by realizing two goals—to expand the use of tolling and to  leverage tax dollars by allowing state highway funds to be combined  with other funds to build toll roads. This combination of funds makes  toll roads more feasible, since the entire cost of the project does not  have to be repaid with tolls. Virginia’s Public-Private Transportation  Act of 1995 (PPTA) allows qualifying local governments and certain  other political entities to enter into agreements authorizing private  entities to acquire, construct, improve, maintain, and operate  qualifying transportation facilities. The public entities may either  solicit or accept unsolicited proposals from private sources. Private- sector sponsorship and investment in transportation projects could  help states realize both an established tolling goal to accelerate  project delivery and a goal to leverage tax dollars by securing private  investment in transportation projects.
Operating like a business. In some cases, there is a motivation to  “reinvent government” by operating in a more businesslike manner.  Public agencies of all types have pursued innovation and best  practices found in the private sector to improve the cost- effectiveness and timeliness of product delivery. A goal that  embodies these motivations can take many forms in legislation. In  Florida, for example, legislation was passed in 2002 that turned the  Florida Turnpike, operated by the Florida DOT, into a business  organization as a way to preserve, improve, and expand the turnpike  system. State decision makers were interested in operating the  turnpike as a business for the state and employing private-sector  methods in the areas of management, finance, organization, and  operation. The goals for the enterprise are to increase revenues,  expand capital program capabilities, and improve customer service.
Transitioning to a new system of transportation finance. The  sustainability of the current financing system has been called into  question, and as we have reported, a fundamental reexamination of  the present system will be necessary to increase the cost- effectiveness of spending and to mitigate congestion. Some  transportation experts believe that shifting to a fee structure that  more directly charges vehicle operators for their actual use of roads  would improve the operation of the road system and better target  investment. For example, Oregon’s efforts to explore mileage charges  provide some insights into how legislation can be developed to carry  out such an ambitious goal. A road user fee proposal, passed by the  state legislature in 2001, created a user fee task force to design a  method of charging drivers for their use of the state’s roads as an  alternative to the current system of gas taxes. The task force  proposed the eventual imposition of a mileage fee in place of existing  gas taxes and pilot testing for the mileage fee as the first step toward  implementation. An institutional framework, such as the framework  under development in Oregon, can help states that are seeking to test  or implement new methods of highway financing to realize such  goals.
section_title: Provide Leadership to Build Support for Individual Projects and Address Tolling Challenges in Project Design
paragraphs: The second strategy that can facilitate the use of tolling involves  implementing two interrelated and critical components: (1) providing  leadership to build support for and advance individual projects and (2)  addressing challenges to tolling in project design. (See fig. 13.) We have  found that having a strong advocate or advocates—committed both to  building support for projects and to ensuring that the projects move  forward—is crucial to the success of a project. A corollary to providing  committed leadership is ensuring that leaders endorse those projects that  most effectively address challenges to tolling in project design.
Providing leadership. Although leadership can take different forms, our  review revealed that a strong advocate can help build support for a toll  project. Transportation agency representatives or political leaders are  likely candidates to move a project to public acceptance. For example, in  Texas, the Governor and key legislators took the lead in developing and  supporting initiatives that would facilitate the use of tolling to finance  highway construction. Their efforts led to the enactment of legislation that  enabled the state DOT to invest in toll projects. In Indiana, the Governor  and the DOT Commissioner have supported tolling as an approach to  finance transportation projects by promoting it in the media and in the  legislature. However, in some instances, public distrust of political and  governmental agencies may require a leader to emerge from another arena.  For example, in Minnesota, a task force of state and local officials, citizens,  and business leaders was convened in 2001 to explore a range of road  pricing options, including the conversion of HOV lanes to HOT lanes, and  make recommendations to elected officials. Since tolling had been fairly  controversial in the past, decision makers believed that a task force would  provide a more credible and independent voice to the general public.  Ultimately, the task force supported HOV to HOT conversions, and with the  Governor’s support and the passage of legislation authorizing the  conversion, the Interstate 394 HOT lanes project was implemented.
As a spokesperson for a project, a leader can explain to the public how  tolling will address a state’s particular transportation situation. Through  the communication of essential ideas and values that a toll proposal  encompasses, support for the project can be solidified. Communicating the  benefits that tolling can provide for motorists, such as increased efficiency,  travel time savings, and choices about when and where to drive, could  increase the likelihood of buy-in from the public and political leaders. For  example, after examining congestion pricing options in Minnesota, a task  force of state legislators, mayors, as well as business, environmental, and  transportation leaders recommended that the state should proceed with a  demonstration project. This led to the passage of legislation in 2003  supporting the conversion of HOV lanes on Interstate 394 into optional toll  lanes, which would allow solo drivers to access the HOV lanes for a fee.  With the help of a communications consultant, a project team led by the  University of Minnesota’s Hubert H. Humphrey Institute worked to address  the concerns of the public and communicate the benefits of the project to  the general public. The primary benefits of the project that were conveyed  included free access and priority for carpools and bus users, premium  speeds in express lanes that are maintained by tolls that vary with demand,  and access to the express lanes to single-occupancy vehicles willing to pay  a toll. Surveys conducted prior to project implementation revealed that 69  percent of those surveyed were aware of and understood the purpose of  the project, and 64 percent believed that allowing single-occupancy  vehicles to use the carpool lanes by paying a toll was a good idea. A leader  can also stress that tolls can help make up for shortfalls in public funds,  allowing needed highway improvements to be completed sooner.  According to some transportation officials, this point is particularly  relevant when the public does not share a state transportation leader’s view  of the state’s needs, or of the challenges associated with addressing those  needs within the current fiscal environment, or both.
One effective way to communicate the benefits of tolling is through  organized public education, outreach, and marketing efforts. Through such  efforts, the public can be informed about the transportation situation in the  state and the various options that are available to address transportation  needs. For example, in California, strong political figures, as well as state  and local officials, acted as champions for individual toll projects. Seeking  to maximize the efficiency of the transportation system through congestion  pricing, these leaders and officials promoted two congestion pricing  projects—the Interstate 15 project and the State Route 91 project—using  public education and outreach to inform the public about the objectives of  the projects and to demonstrate how the objectives would be achieved.
Addressing challenges. In identifying toll projects to promote,  responsible leaders will likely be interested in projects that mitigate the  challenges to tolling. Therefore, addressing concerns about double  taxation, inequity, diversion, and coordination in project design can help  transportation officials build support for toll projects and secure  committed advocates for the projects.
When considering a tolling approach, transportation officials can identify  ways to effectively address identified challenges and gain a better  understanding of the potential impact of the approach through data  collection and analysis. Understanding the potential effects of a toll project  on traffic flows, specific groups, business activity, and commercial  transportation can be particularly useful to transportation officials as they  build measures into the project’s design to address identified challenges.  Table 2 includes examples of questions and data needs that transportation  officials might consider as part of their data collection and analysis.
To address general objections to tolling, transportation officials can also  consider potential arguments that might be raised on the grounds of double  taxation and inequity and think about ways to address these arguments.  Addressing these types of concerns is complex because the fairness of  shifting to tolling depends on the fairness of the existing system of finance  and on how it would be changed by a shift. It can be argued, particularly in  states where sales and property taxes are important sources of financing  for the transportation system, that the existing system is not very equitable.  In contrast, a tolling approach raises revenues directly from those users  willing to pay for the service. Furthermore, the economics literature  suggests that concerns about inequity can be mitigated to some degree if  revenues are distributed in a way that addresses those concerns.
Transportation officials can address concerns about double taxation and  inequity during project design as a way to counter potential opposition on  these grounds. Setting goals for a project that reflect its intended purpose  and addressing any key challenge that could affect the achievement of the  goals can help transportation officials directly respond to the concerns. For  example, if the project goal is to use a tolling approach to relieve  congestion, transportation officials could set the toll to reflect the external  costs associated with peak period use of the road, and the toll revenues  could be dedicated to maintaining, operating, and adding capacity to the  facility. This approach might convince users that the toll is not just another  tax that would be used for other purposes. In contrast, if the project goal is  to address inequities, revenues could be distributed quite differently.  Revenues could be distributed to disadvantaged groups in the form of tax  rebates or improvements in roads and transit in certain areas. If businesses  in specific areas are adversely affected by a project, toll revenues might be  used to improve transportation services in those regions. For the Interstate  394 HOT lanes project, state decision makers established the project goals  of improving efficiency and maintaining free-flow speeds for transit and  carpools using the converted HOV lanes. These goals led to decisions on  how the toll revenues would be distributed. The law requires that half of  the excess revenues generated from HOT lane facilities be used to improve  and maintain transit service.
Addressing the coordination issues involved in designing regional and  multistate projects is perhaps more daunting. No ideal institutional  mechanism appears to be available for managing a regional program;  nevertheless, some states have created new institutions to address  interstate coordination issues. For example, Oregon and Washington  formed a bistate task force to coordinate planning for improvements that  cross state borders. The task force includes officials from both state  governments, representatives from the affected metropolitan planning  organizations (MPO), members of the business community, and residents  of each state. The task force is charged with considering all modes of  transportation that could potentially ease congestion and improve capacity  on Columbia River crossings. The two states are jointly conducting  environmental impact studies on highway expansion and transit  improvements. The Oregon and Washington DOTs, the Portland and  Vancouver MPOs, and the transit authorities from both states are jointly  leading this study on the impact of capacity enhancement. Involving  officials from both states in evaluating the project can help ensure that  projects are equitable and effective in addressing the needs of both states.
section_title: Select a Tolling Approach That Provides Tangible Benefits to Users
paragraphs: When proposing a tolling approach, transportation officials should  consider promoting one that will produce tangible benefits to users while  justifying both the costs of the project and the fees that users will be  required to pay for the service. (See fig. 14.) The prospect of such benefits  increases the likelihood of the project’s acceptance and can help allay  general objections to tolling.
Although tolling can take different forms and decisions about its use are  state specific, transportation experts have noted that projects that use  congestion pricing offer predictability and choice to the user and may be  less likely to arouse fierce opposition than projects that offer no new  benefits or choice. For example, HOT lane projects, which include both  priced and free lanes, offer the benefit of faster trip times for a price in  HOT lanes and the choice of a “free,” but probably slower, trip in general  purpose lanes. Pricing the entire facility might result in more efficient  rationing of limited space on congested roads, but congestion tolls on  entire facilities or networks tend to meet with resistance despite their  economic efficiency. HOT lanes, on the other hand, may be less likely to  encounter resistance because they offer premium service for those willing  to pay the fee. While actual experience with road pricing in the United  States is still fairly limited, proponents of HOT lanes cite several benefits as  follows:   First, according to reports and studies issued by FHWA, the  Transportation Research Board, the Reason Foundation, and the  Brookings Institution, they provide a premium service for a fee to those  travelers who have a special need and are willing to pay the fee.  Through variable pricing, traffic flows freely even during the height of  rush hours. The use of price and occupancy restrictions to manage the  number of vehicles traveling on them enables HOT lanes to maintain  volumes consistent with uncongested levels of service.
Second, studies and reports issued by FHWA and the Reason  Foundation note that HOT lanes reduce traffic congestion in the  general-purpose lanes by diverting some solo drivers to the HOT lanes,  thereby benefiting those drivers who use conventional lanes.
Third, according to FHWA and others, HOT lanes can make better use of  underutilized carpool (HOV) lanes, thereby alleviating political pressure  to decommission them. HOT lanes may provide an opportunity to  improve the efficiency of existing or newly built HOV lanes by filling  excess capacity that would not otherwise be used. At the same time,  HOT lanes continue to serve as HOV lanes for carpools and buses.
Finally, reports and studies issued by FHWA and the Reason Foundation  note that HOT lanes generate revenue for transportation improvements.  Tolls can generate revenue for highway and transit improvements, such  as Bus Rapid Transit.
HOT lanes have been implemented on Interstate 15 in San Diego, State  Route 91 in Southern California, the Katy Freeway and U.S. Route 290 in  Houston, and Interstate 394 in Minneapolis. These cases illustrate how  transportation officials have advanced projects seeking to achieve the  potential benefits that may result from the approach. For example, to  guarantee free-flowing traffic, toll prices on the Interstate 15 HOT lanes  project are set dynamically, changing every 6 minutes to keep traffic  flowing freely in the HOT lanes. In providing motorists with choice and  providing premium services, the State Route 91 Express Lanes provide a  level of emergency and safety surveillance that, according to surveys  conducted by the private firm operating the toll facility, some drivers  choose to pay to use the toll lanes even when there is no congestion on the  adjacent free lanes. To optimize the use of existing infrastructure, more  productivity was sought on the Katy Freeway. HOVs are defined as cars  with three or more people during certain peak hours. The Katy Freeway  QuickRide program allows cars with two persons to use the HOV lanes if  they pay a toll. Daily use by paying users has been between 150 and 200  vehicles for peak periods, and peak hour travelers using the facility save an  average of 18 minutes compared with travelers on the nonpriced lanes.  Finally, linking the conversion of the HOV lanes to transit to increase  mobility and equity was taken into account on the Interstate 394 and  Interstate 15 projects. Toll revenues generated on the Interstate 394 HOT  lanes are designated for facility and transit improvement and a large  portion of surplus revenues on Interstate 15 are used for new bus service.
section_title: Concluding Observations
paragraphs: As congestion threatens the nation’s mobility at a time when motor fuel  taxes—the principal source of funding for highway improvements—have  not kept up with rising costs, federal and state policy has generally been  not to increase motor fuel taxes, and state and local decision makers are  increasingly looking to a range of alternative mechanisms, including tolling,  to advance their surface transportation programs. Over half the states have  either adopted tolling or are seriously considering tolling—and this number  may increase. A tolling approach can, under the right circumstances, be an  attractive choice to state or local governments because of the range of  potential benefits—generating new revenues, managing congestion,  financing new capacity—that it may provide. But these potential benefits  come only by honestly and forthrightly addressing the challenges that a  tolling approach presents. State and local governments may be able to  address these challenges by pursuing strategies that focus on developing an  institutional framework that facilitates tolling, by demonstrating  leadership, and by pursuing toll projects that provide tangible benefits to  users. While perhaps not applicable to every state to the same degree or in  the same way, these strategies form a basis for overcoming potential  impediments to tolling and developing a meaningful and effective tolling  approach that best suits the environment in each state.
In the twenty-first century, demographic trends will drive mandatory  federal spending commitments and potentially overwhelm the ability of the  federal government to deliver and grow its discretionary programs. This  looming crisis requires a fundamental reexamination of existing  government programs and commitments, and state and local governments  will be challenged to consider new ways of delivering their programs.  Regardless of the demand for highway improvements, sustained, long-term,  large-scale increases in federal highway grants and state and local spending  seem unlikely. In this context, a tolling approach is more than just finding  new sources of money. Should states choose to undertake it, a tolling  approach has the potential to promote efficiency in the use of  infrastructure, allocate costs to users and capture revenue from  beneficiaries, stimulate private financing and investment, and provide cost- effective solutions to mobility challenges if viewed as fair and equitable by  the public.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided a draft of this report to the Department of Transportation for  review and comment. Officials from the Department indicated that they  generally agreed with the report and provided technical clarifications,  which we incorporated as appropriate.
As agreed with your office, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies of this report to congressional  committees with responsibilities for transportation issues; the Secretary of  Transportation; and the Administrator, Federal Highway Administration.  We will also make copies available to others upon request. In addition, this  report will be available at no charge on the GAO Web site at  http://www.gao.gov.
If you or your staff have any questions about this report, please contact me  at heckerj@gao.gov or (202)512-2834. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this report. GAO staff who made key contributions to this report are  listed in appendix IV.
section_title: Objectives, Scope, and Methodology
paragraphs: The objectives of this report were to examine (1) the promise of tolling to  enhance mobility and finance highway transportation, (2) the extent to  which tolling is being used in the United States and the reasons states are  using or not using this approach, (3) the challenges states face in  implementing tolling, and (4) strategies that can be used to help states  address the challenges to tolling. We noted where federal programs have  played a role in state tolling decisions and projects, but we did not evaluate  the effectiveness of those programs.
To examine the promise of tolling to enhance mobility and finance highway  transportation, we reviewed reports and studies issued by federal agencies  and academia, as well as articles from relevant trade journals; relied on  perspectives gained from our past work on transportation finance; and  analyzed relevant studies and reports issued by transportation experts. To  identify the issues related to the transportation system in terms of funding  and mobility, we analyzed data on population patterns and growth from  U.S. Census reports and vehicle miles traveled and motor fuel tax trends  from the Federal Highway Administration’s (FHWA) Highway Statistics  reports for 1982 to 2004. We also analyzed data from the 2005 Urban  Mobility Report to determine congestion levels and congestion costs for  selected cities in the United States. To supplement the information  obtained through our literature review, we interviewed officials of the  American Automobile Association; International Bridge, Tunnel and  Turnpike Association; the American Association of State Highway and  Transportation Officials; and the Environmental Defense Fund.
To determine the extent to which tolling is being used in the United States,  we designed and administered an Internet survey of state department of  transportation (DOT) officials and performed a correlation analysis to  examine the extent to which state financial and demographic  characteristics are associated with their status on using tolling. (For more  information about the correlation analysis, refer to app. II.) Our review  focused on toll roads and therefore, did not include toll bridges and  tunnels.
Survey. The questionnaire asked about each state’s current and planned  toll road facilities. We sent the questionnaire to the directors of state DOTs  in 49 states and Washington, D.C. We did not send a questionnaire to the  Louisiana DOT because we administered our survey only a few weeks after  Hurricane Katrina struck New Orleans and the Gulf Coast.
To minimize nonsampling error, such as measurement errors that can be  introduced when respondents do not understand questions or when they  do not have information to answer a particular question, we undertook  several quality assurance steps. Our social science survey specialists  designed draft questionnaires and conducted pretests with state DOT  officials in four states. During these pretests, we assessed the extent to  which respondents interpreted questions and response categories  consistently, the time respondents needed to complete the survey, and the  extent to which respondents had the information needed to answer the  survey questions. Using the results of these pretests, we revised the  questionnaire.
We administered the survey to the directors of state DOTs via the Internet  during September and October 2005, e-mailing the directors a Web link to  our questionnaire and requesting that they or their designees complete it.  We received responses from 49 states and Washington, D.C.—a 100 percent  response rate. We analyzed the data using statistical software.
We compared the responses to key survey questions with information  obtained from our interviews with state DOT officials and from state  applications to the FHWA’s tolling pilot program. In four instances, data  from these sources were inconsistent. We contacted DOT officials in these  states to resolve these inconsistencies and adjusted the survey results  accordingly.
Semistructured interviews. To determine the reasons states use or do  not use tolling, the challenges to tolling, and the strategies that have been  used to address the challenges, we conducted semistructured interviews  with state transportation officials from all states except Louisiana, and  interviewed stakeholders in six states that we visited to determine the  reasons states use or do not use the approach, the challenges to using the  approach, and the strategies that have been used to address the challenges.  We did not gather information directly from the public.
We developed a set of questions to ask in semistructured interviews of state  transportation officials to gain more detailed information on states’ reasons  for tolling or not tolling and the challenges states face in tolling. Having  visited 6 states and interviewing transportation officials there, and  excluding Louisiana, we conducted semistructured interviews from the  remaining states. We did not interview transportation officials in Louisiana  because our semistructured interviews were conducted shortly after  Hurricane Katrina struck New Orleans and the Gulf Coast. To determine  the appropriate state official to interview in each state, we relied on  information from FHWA Division Administrators for the respective states.  After gathering the information from FHWA, we contacted and interviewed  the state officials and conducted our interviews. We analyzed the data from  the semistructured to identify major themes.
Site visits. To supplement information from our survey and  semistructured interviews, we visited six states that were in various stages  of planning or constructing diverse types of toll projects. We selected the  states for their diversity in terms of geography, transportation needs, and  tolling plans. The states were Minnesota, Mississippi, Missouri, Oregon,  Texas, and Virginia. We visited those six states to obtain more detailed  information on the challenges states are encountering and the strategies  states employ or are considering employing to toll. We judgmentally  selected four states where tolling was either planned or under way and two  states where tolling had been proposed and rejected by a vote of either the  citizens or the legislature. During our site visits, we interviewed state, local,  and FHWA officials.
To identify strategies that can be used to address the challenges to tolling,  we analyzed the results of our review on tolling efforts and built on the  perspectives gained from our past work on federal investment strategies.  We also analyzed reports and studies issued by transportation experts and  academia on finance reform to identify broad strategies that can be used to  help transportation officials adopt and implement a tolling approach.
We performed our work from June 2005 through June 2006 in accordance  with generally accepted government auditing standards.
section_title: Correlation Analysis
paragraphs: To identify state characteristics that are linked with states’ decisions to toll  roads, we performed a correlation analysis that examined the relationship  between those decisions and various state demographic and financial  characteristics. These characteristics included, but were not limited to,  population; per-capita income; gross state product; vehicle miles traveled;  capital expenditures on highways; and local, state, and federal highway  trust fund appropriations. To perform this analysis, we updated the data  that we had collected from the Federal Highway Administration (FHWA)  and Bureau of Economic Analysis (BEA) for our previous reports, and  converted them to inflation-adjusted 2004 dollars using BEA’s chain-type  price index for gross domestic product (GDP), as well as its state highway  and streets chain-type price index. For those characteristics that  represented measures of change, we used the changes in these factors from  1990 to 2000 to be consistent with the years when the U.S. Census of  Population and Housing was conducted and, for those characteristics that  represented measures of levels, we used data from 2002. We chose 2002  because data for some characteristics were not available for more recent  years. We divided states into two groups, tolling and nontolling, based on  information gathered from our state survey and FHWA documentation. We  considered the associations between tolling and nontolling with each  demographic or financial characteristic singly and did not control for the  effects of other characteristics on these tolling decisions (as we would do  in a multivariate analysis). For this reason, the results of our correlation  analysis indicate a simple statistical relationship between tolling status and  a study characteristic and do not imply causality. Interactions may be more  complex when multiple characteristics are simultaneously associated with  tolling status. In addition, our results may be sensitive to how we defined  tolling status.
Although certain characteristics in a state’s finances and tax policies might  be related to financial need, our correlation analysis found only limited  relationships between various state demographic and financial measures  and whether states are and are not planning toll roads. (See table 3.) For  example, we found the following:  There is wide variation in state motor fuel tax rates among the states,  ranging, as discussed earlier, from 7.5 cents to 28.1 cents per gallon in  2002, and we investigated whether state motor fuel tax rates are  correlated with decisions to toll. While a slight inverse relationship  exists between a state’s decision to toll and the level of its motor fuel  taxes, the slightness of this relationship suggests that states planning  toll roads are not much more likely to be the ones with lower motor fuel  tax rates than other states.
While state incomes vary greatly, a state with higher motor fuel tax rates  is also more likely to have higher fuel tax revenues as a percentage of its  gross state product than states with lower motor fuel tax rates. As with  fuel tax rates, a slight inverse relationship exists between a state’s  decision to toll and the level of its fuel tax revenues as a percentage of  its gross state product. However, the slightness of this relationship  suggests that states planning toll roads are not much more likely to be  the ones with lower fuel tax revenues as a percentage of their gross  state product than other states.
The extent to which motor fuel taxes are disbursed to nontransportation  uses could contribute to what state officials characterized as general  shortfalls in highway funding. The relationship between states planning  toll roads and the use of motor-fuel tax revenue is only slight, suggesting  that states planning toll roads are not much more likely to have more of  their fuel tax revenues used for nontransportation programs than other  states.
Although there appears to be little relationship between state finance and  tax policy characteristics and tolling, our analysis indicates that there are  some other factors that are related to states' decisions on tolling. For  example, both the size of the state, whether measured by population or by  vehicle miles traveled (VMT), and whether it is growing rapidly, again  measured by population or VMT growth, are directly related to states’  decisions to toll. These relationships are consistent with statements made  by state transportation officials on the use of tolling to fund highways due  to increasing demand for highway travel. In addition, our analysis revealed  a relationship between federal funding and a state’s decision to toll. Each  state collects federal motor fuel taxes that are deposited into the Highway  Trust Fund and receives grants through the federal-aid highway program  according to formulas specified in law. The states that are planning toll  roads are moderately associated with the federal-aid “donor states”—those  states that contribute more to the Highway Trust Fund than they receive in  federal highway grants. Thus, donor states are statistically more likely to be  planning toll roads than donee states—those states that receive more in  grants than they collect.
section_title: Survey Questions
subsections: section_title: Current Toll Road Facilities
paragraphs: Question 1:  Are there any toll road facilities in your state? Please do not count any  tolled bridges or tunnels as toll roads.  1. Yes  2. No (Skip to question 10.)
Question 2:  Are any of these facilities new roads that were built on new alignments?  1. Yes  2. No Question 3:  Were any of these facilities previously untolled?  1. Yes  2. No Question 4:  Are any of these facilities new lanes added to roadways that were  previously untolled?  1. Yes  2. No Question 5:  Are any of these facilities HOT lanes (in which single occupancy vehicles  can gain access to HOV lanes by paying a toll)?  1. Yes  2. No Question 6:  Do any of these facilities charge tolls that vary by time of day?  1. Yes  2. No Question 7:  In what year did the first toll road facility in your state open to traffic?  (Please do not consider facilities that opened before 1938.)
Question 8:  In what year did the most recent toll road facility in your state open to  traffic? (Please do not consider facilities that opened before 1938.)
Question 9:  Which of the following agencies participate in managing the toll  road facilities in your state?  1. State Department of Transportation  2. Public toll authority  3. Other state agency  4. Local or regional government agency  5. Private entity Question 10:  Are there plans in your state to build any toll road facilities for which an  Environmental Review and a Record of Decision have been completed?  1. Yes  2. No (Skip to question 19.)
section_title: Final Questions
section_title: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the individual named above, Steve Cohen, Assistant Director;  Mark Braza; Jay Cherlow; Bess Eisenstadt; Simon Galed; Moses Garcia;  Bert Japikse; Terence Lam; Liz McNally; and Don Watson made key  contributions to this report.