SOME FINANCIAL, ECONOMIC, AND SOCIAL POLICY ISSUES ASSOCIATED WITH TOLL FINANCE

Abstract

Financial pressures are forcing state departments of transportation to consider alternative funding strategies, including an expanded role for toll financing as a supplemental source of revenue to complement current user charges. It is timely and appropriate, therefore, to examine some important financial, economic, and social policy issues associated with tolls. The discussion is primarily directed toward the use of tolls for major reconstruction on federal-aid highways. Among the findings are that, despite the relative inefficiency of toll finance as a highway revenue mechanism, there are circumstances in which tolls may be economically justified. One example is when there are insufficient revenues from traditional highway user imposts and toll financing is used to make needed highway improvements many years in advance of when they otherwise could be made. However, federal policy, which mandates full repayment of all prior federal aid used on a potential toll facility, severely limits the usefulness of the toll mechanism for purposes of resurfacing, restoring, rehabilitating, and reconstructing highways. This policy has no economic justification. From a social equity perspective, toll financing has a potential advantage over current user taxes and fees because of the ability to more closely align the user charge with the benefit received or with the direct use made of the highway facility. The choices made about toll collection system design have significant implications for the capital and operating costs of toll collection. However, toll collection design decisions cannot rest on cost criteria alone, for the design will have implications for user access, traffic route choice, toll revenue, safety, and highway financing equity that also must be recognized.

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