A new study says tolls and gas taxes are possible funding solutions to pay for much-needed repairs to this critical piece of transportation infrastructure.
The U.S. Interstate Highway System has transformed American society, allowing travelers to go coast to coast without stopping at a traffic light and facilitating the long-distance movement of goods.
The Interstate Highway System represents only 1% of U.S. public road miles but carries 25% of all vehicle miles traveled, and 50% of the miles traveled by trucks. Americans have become so dependent on interstates that it’s easy to forget they are a relatively recent phenomenon, first developed in the 1950s. However, most of the system has reached the end of its design life and requires extensive reconstruction. Beyond that, the physical location of some highways is out of date, as regions of the country that have grown in recent decades aren’t served by these vital roadways.
A Deteriorating Asset
A recent congressionally mandated study from the National Academy of Sciences’ Transportation Research Board, “Renewing the National Commitment to the Interstate Highway System,” identifies several of the biggest challenges facing the system and suggests financing options. The study found that deterioration of interstate pavement now requires much more than enhanced maintenance — in many areas, it needs reconstruction down to the foundation.
The committee, a 13-member group with representatives from academia, industry, transportation agencies and non-profits, promotes a new plan to renew the interstate highway system over and above ongoing maintenance and repair. The 649-page report calls for a “rightsizing program” to expand the system to include newly emerging regions of the country. Other challenges identified include improving safety as traffic volumes increase and adapting to changing vehicle technologies.
The report notes that current state and federal spending on interstates has been about $25 billion annually. To renew interstates over the next 20 years will require $45 billion to $70 billion annually, although this does not include funding to update the interstate’s 15,000 interchanges or designs to protect against damage caused by severe weather.
User-Based Funding Mechanisms
The big question is how to pay for such an enormous investment.
The study recommends a substantial increase in the federal fuel tax. Calculations suggest a 60% increase in gas and diesel fuel taxes, which would allow a 90% federal/state match for the proposed new program.
However, there might not be much political appetite for higher gas taxes. For example, according to an October 2018 report from NPR, the last increase in the federal gas tax was in 1993, to 18.4 cents per gallon for unleaded and 23.4 cents for diesel, and it was not indexed for inflation. The combined impact of rising construction costs and improved fuel efficiency has resulted in a two-thirds decline in the purchasing power of the gas tax since that time. Most states have raised their own gas taxes in the past five years, in some cases substantially, but federal action might be essential to pay for maintenance to the highway system.
Are Toll Roads the Way to Go?
To assist states in raising their match, the study recommends that Congress lift the ban on tolls for interstate highways (a ban that actually applies to all roads built with federal aid, and dates back to 1916). Tolls can be a revenue source as well as a potential powerful pricing tool to help reduce traffic in peak hours. The study suggests it could make sense to consider a lower matching ratio for adding capacity to existing facilities and building new connections to regions that were not included in the original interstate system.
Capacity needed for increased congestion signals a market for tolled facilities, and pricing could reduce traffic. Similarly, connections to emerging regions could have good potential for tolls, especially to accelerate construction. A higher matching share for reconstruction and remediation could incentivize maintenance over new construction.
Areas where demand supports tolls could have a lower match ratio for federal funds, possibly 50/50, giving the states more skin in the game, encouraging more effective routes and reducing federal expenses. Tolling would also allow more thoughtful consideration of potential new development in a corridor, rather than allowing traffic from unexpected growth to swamp highway additions.
The adoption of fully automated self-driving vehicles offers an additional opportunity for financing on a per-mile basis rather than per gallon. Pay as you go has wide acceptance among consumers for ride-hailing services such as Uber and Lyft (including peak hour surcharges), unified transit passes serving different operators and a variety of on-street parking apps.
However, that might not be the case in the public sector — note the recent French “yellow vest” protests over increased truck fuel taxes and the Oregon Senate’s Republican-led walkout over a carbon tax.
Either approach, an inflation-adjusted increase in the federal gas tax or dynamic pricing, would meet the goal of creating a reliable funding source. Considering the long record of failures in gas tax increases, it may be time for a different approach to preserve the benefits of the nation’s interstate highways.
Reliable funding is essential to ensure convenience and efficiency for future travelers, the broader economy and the commercial real estate industry, for whom preserving access is part of the value of existing and future developments.