Electronic Tolls Can Finance Our Future Infrastructure Needs

All across the world, policymakers are looking for new solutions to meet the ever-growing public demand for mobility. People want roads that are safe, well maintained, and free of congestion.


New technologies like self-driving cars and big data are part of the answer. Modern road infrastructure, however, is expensive to build and maintain, and the future of road transportation will depend as much on new models of funding as on new models of vehicles.


An approach that is gaining momentum while simultaneously accepted by the driving public is the presence of electronically collected tolls.


For policymakers, electronic tolling safeguards revenues for road widening, reconstruction, repairs and bridge replacement.


For drivers, convenience is paramount. With electronic tolls, drivers can seamlessly pass through tolls without experiencing delays or idling in traffic waiting to pay tollbooth operators in cash. This results in environmental benefits too with reduced emissions and improved traffic flow.


For the government and investor-owned companies, toll financing allows ringfenced revenue flows to finance long-term, critical infrastructure projects. They also ensure the ongoing maintenance, finance costs, and investor returns are covered.


Fundamentally, this model shifts the paradigm of thinking on infrastructure financing to meet 21st-century realities.


The transportation dilemma in the US is outlined in a December 2018 report issued by the Transportation Research Board’s Future Interstate Study Committee. It cites that between 1980 and 2015, vehicle-miles of travel on motorways around major cities increased by 230%, yet lane-miles increased by 115%. The result? Traffic bottlenecking and congestion on highly traveled roadways.


New approaches to address these challenges are required.


The case for electronic toll financed infrastructure replacement and modernization is the subject of a new study authored by Robert W. Poole, Jr. at the U.S.-based Reason Foundation.


The study finds that tolling enables long-term financing, so projects are built sooner and benefit from existing mechanisms for ongoing improvements. The tolling model is also a better fit for structuring investor-financed Public-Private Partnerships. It states that tolling is inherently fairer to highway users, both from the perspective of attributing a fair price for the nature of the road and enabling variable pricing based on peak times and express lanes.


The study does raise legitimate concerns about the tolling model. Namely, that tolling infrastructure increases a highway’s construction cost and is more expensive to collect than gas taxes. It also points out that until the perfect model is achieved, road users are likely to pay gas taxes as well as toll fees. The report, however, addresses and resolves these arguments.


Despite the evidence, funding of road infrastructure upgrades and development is a debate that continues to challenge policymakers, politicians, and the private sector.


All parties agree that action is necessary, yet road infrastructure is ailing and not keeping pace with the demands placed on it by socioeconomic progress.


The American Society of Civil Engineers issued a poor rating for US infrastructure in 2019. To achieve a good rating by 2025, these experts estimate that $4.6 trillion of funds will need to be dedicated to improvements.


Drivers are feeling underserved by their governments. Investors often hold back because the policy and procurement frameworks are not in place to allow the pools of worldwide capital to flow into infrastructure investment in a way that meets investment criteria.


For too long, the reflexive answer to this challenge is for gas taxes to fund infrastructure maintenance. This argument is prevalent and gaining traction, especially in the United States where gas taxes have not increased in 25 years. The logic here is relatively straightforward; the more one drives on roadways, the more one should pay.


However, this approach is facing ever-growing problems. In a constrained public funding environment, monies raised through gas taxes and intended for repairing infrastructure oftentimes is diverted by policymakers to other government programs, not public roadways investment. This means drivers do not see the direct benefits from their gas taxes. This concern was raised in 2006 by the US by the Transportation Research Board, a program unit of the National Academies of Sciences, Engineering, and Medicine.


Furthermore, not all cars are equal – some are larger, and others are heavier. Gas mileage and efficiency standards vary from car to car.


The rise of electric vehicles and ride sharing will further diminish this approach over time as they become more common on roadways.


Fundamentally, the evolution of the motor vehicle is undermining the gas tax. Innovative and new approaches are thus required.


While every country, state, or city will have their preferred approach to structuring infrastructure investments, the uniting challenge is a viable revenue model. Here, there is a very compelling case for electronic tolling as the paradigm shift to meet 21st-century realities.


For governments grappling with transportation challenges, electronic tolling on motorways and congestion pricing in urban hubs has gained traction as a traffic panacea.


Congestion pricing initiatives using electronic toll collection technology in London, Stockholm, Singapore, and Milan have proven their value on congestion and revenue protection. Traffic flows are less choked and dynamic toll rates vary based upon the time of day and varying degree of city congestion. Pollution and smog reduction is a net benefit as well.


This transportation reality could soon hit New York City by 2021 following a decision by state lawmakers to adopt congestion pricing policies, though the issue remains contentious.


Los Angeles is now exploring this issue as local officials are considering innovative methods to fund significant transportation projects ahead of the 2028 Olympics.


This convergence of interests and benefits for all parties on highways and motorways are especially evident in Chile and Brazil where free-flowing tolling systems have proven remarkably successful for drivers, coinciding with a surge in infrastructure upgrade and repair projects, all while proving profitable for operators.


All actors, from drivers to policymakers, investors to operators, rideshare users to public transportation consumers agree that the status quo cannot endure for our roadways and transportation modes.


Overdue highway reconstruction and modernization is necessary and electronic toll financing is a viable and impactful approach deserving of careful consideration as we upgrade our 20th-century infrastructure for the 21st century.