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Prospectus Blog Tolling, Finance Innovation Vital For Infrastructure Growth

Implemented regionally, tolling and congestion pricing will be the key that unlocks the door to more efficient use of major highways in Puget Sound. Incentives for more telecommuting, carpooling, vanpooling and off-peak travel will grow substantially, as tolls and especially time-variable congestion pricing are instituted over the next few years. Tolling coupled with investment by public employee and labor union pension funds will also help close funding gaps on major road, bridge and transit projects needed to accomodate economic growth and environmental protection. Despite some political resistance, this paradigm will transform transportation infrastructure development across North America in coming years and decades.
Let’s once again take a partial and recent survey of the landscape, starting with Puget Sound.
Just last week, the Washington State Transportation Commission set a range of tolling charges for solo drivers to use the new HOT (High Occupancy and Toll) lanes on SR 167 in south King County. Depending on traffic volume and congestion in the lanes at the time of use, the charge for solo drivers will be from 50 cents to nine dollars. KOMO-TV reports here. The commission’s announcement notes this is a four-year pilot project, expected to launch this April and that transit buses, vanpools, two passenger-plus vehicles and motorcycles will be exempt from the SR 167 HOT lane tolls.
Allocating Peak-Hour Road Capacity To Handle Growth
The SR 167 HOT lanes – one in each direction, for now – are a good start. Roads and transit in central Puget Sound need repair, expansion, rational management and unified, accountable regional governance. Taking measures to allocate finite peak-hour road capacity is a baseline action for future problem-solving. The region will eventually need two HOT Lanes in each direction on all our interstate and major state highways including SR 167, I-405, I-5, SR 99, SR 520 (pictured, left, in all its rush-hour glory) and I-90.
Taking The Long View
Hover at 20,000 feet for a moment, looking down at central Puget Sound. The Puget Sound Regional Council in their draft “Vision 2040” report, projects that between 2000 and 2040, the four-county metro Seattle region is expected to see a 52 percent population jump. We’re a land of opportunity. Plus kayaks, book lust, artisinal bread, and a relatively moderate climate. Really. People just can’t seem to stop wanting to live and work here.
But the accreting hordes will greatly tax our infrastructure, one way or another. Already, multi-billion dollar, safety-driven construction projects such as replacement of the decrepit Alaskan Way Viaduct on SR 99 and the disaster-prone SR 520 floating bridge beg the question of supplemental funding.
That’s because funds secured to date will fall well short of final costs – which keep growing due to project launch delays and tightening global competition among customers for transportation construction labor and materials. One example is a planned car rental center at SeaTac Airport, for which, the Seattle Times reports, costs have risen almost 30 percent in the last year. In the article, a Port of Seattle Commissioner attributes that to rising prices for steel and concrete.
Additional funding for major road, bridge and transit construction projects would be delivered via tolling strategies including variable-rate congestion pricing; and quite possibly via investment from trade union and public employee pension funds such as that of CalPers – which has started its own infrastructure investment account. On a project basis, these investments could be supplemented by private transportation infrastructure funds such as those managed by Goldman Sachs and Macqaurie. To facilitate political cooperation, it’s best if the public sector retains ownership of the assets, even if it leases them out over the long-term as part of a maintenance and operations agreement. The public sector should also have final say on setting and raising toll rates. There are other issues, such as whether new arterials or highways parallel to a tolled facility can be permitted and whether they should then also be tolled (probably, yes); and how all that affects revenue streams. No one is saying that any of this stuff is a snap. But we’ll be seeing more of it.
In each project where tolling and/or innovative finance strategies are employed to fund construction, the aim should be to ensure timely completion of the right design alternatives. These are the ones with the best life-cycle cost-benefit ratio in terms of congestion reduction, increased transit use and greenhouse gas controls, and surface environmental and economic benefits.
This is especially the case in Puget Sound – on the replacement for the Viaduct on SR 99, going to and through downtown; and across Lake Washington on a rebuilt SR 520 bridge.
WA State Legislature To Set Stage For More Tolling
Establishing a policy framework for coming decisions on tolling, the Washington State House last week passed Engrossed Second Substitute House Bill 1773, now before the state Senate Transportion Committee. The bill anticipates action to set specific tolls on the SR 520 bridge, which has to be replaced before a storm or earthquake causes it to collapse, and for which a $138 million federal DOT Urban Partnerships grant has been made, contingent on legislative approval by September 30, 2009 of a tolling plan for the facility. The bill gives tolling authority to the state for all state roads and bridges, but allows local tolling, with state approval if there’s judged to be a significant impact possible on the use of a state road or bridge.
Smartly, the bill allows the potential use of tolls on a facility for transit – but only on the very same facility, and only if so directed by the legislature. For hard-core policy wonks, the relevant language is that such revenues can be employed to “improve, preserve, manage or operate” the facility; and that they can be used to “provide for the operations of conveyances of people or goods.” Key Olympia sources confirm the transit-friendly meaning of these terms.
Down the road, the trick will be dividing up toll monies between corridor reconstruction and maintenance on the one hand, versus transit on the other.
The ESSHB 1773 vehicle must be approved by the Senate Transportation Committee by Monday March 3; approved by the full Senate by March 7; and then any Senate changes to the current House bill approved by the House before the legislative session ends on March 13.
The looming legislation, though just a first step toward broader regional tolling here, comes as the stars are beginning to align. Friday’s Seattle Times reiterates that Governor Chris Gregoire is warming up to tolling SR 520 to help pay for its replacement, and the parallel I-90, to prevent traffic diversion from toll-avoiding SR 520 commuters. In addition, a transportation budget bill passed by the House last week makes an important passing reference to “pre-construction tolling” on SR 520 – pocket-protector pals, please see page 49, line 4.
Public support is solidifying for tolls in Puget Sound, as well. The Seattle Post-Intelligencer editorial board reports a King County poll finds four out of five respondents prefer tolling SR 520 over increases in the license tab fees, or the gas or sales tax, to help pay for its replacement. And as we noted recently, the governor is also broadly hinting at the need for tolling to pay for a $4 billion-plus rebuild (including beefed-up corridor transit) of the badly-congested Interstate Bridge, connecting Oregon and Washington across the Columbia River on I-5. You know……..the Corridor From Hell? Remember encounters with it on those trips from Pugetopolis to the mid or southern Oregon Coast – and how you then took the slow, scenic route along the coast on the way back, just to avoid it?
In any case, Washington state isn’t travelling by itself on the road to regional tolling, and the coming collaboration with Oregon on I-5 is hardly the only indicator. In recent days and weeks interest in new tolling projects has continued to grow across North America – driven by gaps in road expansion or maintenance funding, and worsening peak-hour traffic congestion.
Toronto Regional Tolling Proposal Sparks Debate
The Globe and Mail reports that a blue-ribbon panel comprised of business, labor and academic leaders has issued a report on how the financially-troubled city of Toronto can get its house in order, and a tolling proposal is one major recommendation. The report recommends the city add tolls to the Don Valley Parkway and the Gardiner Expressway. Eye Weekly reports the 401 and 427 expressways ringing the city could also be included in the regional tolling plan, as well.
The panel recommends that oversight of newly-tolled facilities be transferred from the city to either the province or Metrolinx, formerly the Greater Toronto Transportation Authority. Proponents say the move would save the city $20 million per year in maintenance costs, boost transit use and raise millions for new subways and light rail lines.
Page 17 of the full report includes the tolling recommendations, which can hardly be considered the work of conservative business ideologues, given that they’re followed by a call for a non-surface parking tax coupled with increased bike routes and car-free zones.
Another recommendation – on page 22 – is for the city to look to partner with the private sector and the Canadian Pension Funds on major transportation infrastructure projects. Whaddaya know?
The Toronto regional tolling recommendations are already sparking dialog.
Last week, the reaction from Toronto Mayor David Miller (pictured above, right) was guarded; he said tolling must be applied regionally, if at all.
But over the weekend, the Toronto Star reported he seems to be warming to the idea, and is now stressing the link between new tolling and generating more transit funding.

“If you want to build in transit, which we’ll have to if Toronto is going to succeed, you have to consider the way to finance it,” he said. “I think it (road tolls) needs some serious consideration, very serious.”

The “Double-Taxation” Red Herring
As this Toronto Star article notes, push-back can be expected on the proposed tolls from motorists invoking the hoary notion of “double taxation.” That fails to recognize the unavoidable long-term decline in fuel tax revenues due to better mileage, and the political difficulties of raising a fuel tax, even as the cost of road maintenance ticks upward with each vehicle mile travelled. Fading gas tax revenues increasingly pose this very same challenge to U.S. states, as McClatchy Newspapers Washington, D.C. correspondent Les Blumenthal reported yesterday on the front page of the Sunday Tacoma News Tribune. Likewise for Canadian provinces with major metro regions and heavily used roads. Writing in the Financial Post Policy Analyst Benjamin Dachis of the C.D. Howe Institute likes the Toronto regional tolling idea:

One of the panel’s wisest proposals is to suggest that Toronto cede control of the Gardiner Expressway and Don Valley Parkways to the province and have tolls placed on all GTA freeways. Toll revenues from these two freeways alone could amount to $7-billion over their useful lifetimes. Toronto’s freeways, particularly the 401, offer a unique opportunity for a hybrid system of express toll lanes in the current middle lanes while maintaining free lanes in the right-hand collectors. Only those willing to pay for congestion-free travel will pay the toll. Buses could be given free access to these toll lanes to improve commuter bus service to surrounding communities when they would otherwise be stuck in traffic.

More support for the tolling recommendations comes from the editorial board of the Toronto Star.
Tolling Front And Center In Virginia Beach, San Francisco, Louisville
Elsewhere, the Virginia Beach City Council will be getting a report examining whether to re-impose tolls on I-264. The tolls would cut congestion and help fund the concurrent $1.6 billion reconfiguration of problem interchanges on the highway, at a peak-hour cost of up to $2.85 on a key stretch.
In the Bay Area, the Golden Gate Bridge, Highway and Transportation District is considering a $1 hike in tolls on its namesake, landmark bridge due to growing maintenance costs for that span and the bus and passenger-only ferry fleets it runs.
Faced with dwindling prospects for full federal and state gas tax funding, Kentucky state legislative leaders of both parties and the governor agree that tolls will have to be a key ingredient in the state’s $2.9 billion share of the $4.1 billion Ohio River Bridges Project connecting Louisville to Indiana. It would add two new bridges to those currently spannng the river (pictured above, left) to ease congestion. The project would also include re-engineering the city’s “Spaghetti Junction” highway interchange.
Oh, Edinburgh!
Of course some locales, afflicted by perverse populism or voodoo economics, go further than merely declining to toll when feasible. They actually rescind existing tolls on busy roadways. Surprise! The rush hour lengthens considerably, as Edinburgh motorists travelling the Forth Road Bridge corridor are discovering. And those tolls, as it happens, paid for the bridge’s maintenance.
RELATED:
Transportation Action Plan For Puget Sound,” Cascadia Center.
Tolling, HOT Lanes Spread In U.S.; Creep Foward In Puget Sound,” Cascadia Prospectus. (Incl. metro D.C., L.A., Orange County, Salt Lake City, PA, & the “Lexus Lanes” canard.)
Congestion Pricing, Tolls Loom For Puget Sound,” Cascadia Prospectus. (Incl. San Diego, NYC/NJ).
Tolling Goes Mainstream,” Cascadia Prospectus. (Incl. GA, VA, AL, ME, NC, FL).
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