News
The road less traveled
Toll revenue falls short

By Dave Tanner
staff writer

 

Peter Berkhout never thought much about toll roads until high fuel prices forced him to.

The owner-operator who grew up in Hoboken, NJ, but who now lives in Milford, PA, says toll roads have always served a purpose in the Northeast. But as the nationwide average price for diesel shot up to nearly $5 per gallon this summer, Berkhout and other truckers like him have had to adapt or face the consequences.

 “Just to get in and out of New Jersey and into Long Island, it’s costing me $94,” Berkhout told Land Line in late August while making a dedicated run. “This is probably going to be a $140 toll day for me.”

Berkhout is one of a growing number of truckers and other highway users adapting to high fuel prices by cutting costs, including the use of toll roads, whenever possible. For example, Berkhout said he recently traveled 35 miles out of his way on Interstate 80 to avoid an $80 toll on the Pennsylvania Turnpike.

Taking a toll

Truckers and other highway users leaving the toll roads is having an effect on the tolling authorities.

In Texas, where tolling has emerged as a way to pay for new lane and highway capacity, toll operators – including the North Texas Tollway Authority – saw red during months they had projected traffic increases.

 “Historically, we have seen slight decreases in traffic when fuel prices spike, and that traffic adjusts as prices decline,” NTTA spokeswoman Sherita Coffelt told Land Line in August.

In Florida, the Orlando-Orange County Expressway Authority reported a toll revenue decrease of 5.37 percent for the month of June 2008 compared to June 2007. The total collected was 8.49 percent below projections made a year earlier.

 “When people’s wallets are stretched thin, it’s even more likely that they’ll try to avoid a toll road and find a way around it, such as an inadequate side road,” said Greg Cohen, CEO of the American Highway Users Alliance.

Maine Turnpike Authority Spokesman Bruce Pelletier said commercial traffic is a good barometer for how the economy is doing.

 “Commercial vehicle traffic is down also, and that’s an indication that the economy is weakening or slower as well,” he said, adding that overall traffic decreased 5.7 percent on the turnpike in June 2008 compared to June 2007.

Fitch Ratings, a firm specializing in financial reports and economic outlooks, downgraded its rating of toll roads as an investment from stable in March to negative in August. Fitch Analyst Michael McDermott said the firm monitors a number of toll roads to assess risk for investors.

 “A sector outlook does not mean every bond is negative; rather, it means the environment faced by toll roads is more pressured,” McDermott told Land Line.

The Fitch report cited a “continued economic weakness, coupled with an approximately 33 percent increase in gasoline prices” to explain why U.S. toll roads had experienced a traffic decline of 16 percent in recent months.

OOIDA officials said the Fitch report was not surprising, given that truckers who pay for their own tolls will use a toll road only if it clearly benefits their operations. Association officials are opposed to toll roads when surrounding free routes are inadequate or off-limits for trucks.

 “This report certainly shows that toll roads are not a good value for the American highway user,” said OOIDA’s Director of Legislative Affairs Mike Joyce.

‘Freeways’ aren’t free

The decline in traffic is affecting more than just toll roads.

After 28 straight years of traffic growth on highways built with federal and state fuel taxes, the U.S. Department of Transportation reported that Americans drove 53 billion fewer miles from November 2007 through July 2008 than they did during the same time the previous year.

Mileage declines have happened only twice in the history of modern roads – once during the oil embargo in 1973-74 and again during the economic recession of 1979-80.

U.S. Transportation Secretary Mary Peters said fewer miles traveled leads to less funding for roads and bridges that rely on fuel taxes.

 “We can’t afford to continue pinning our transportation network’s future to the gas tax,” Peters said.

The Bush administration continues to use traffic statistics and a shrinking Highway Trust Fund to promote its agenda.

 “The transportation secretary is telling only half of the story because her preferred mechanism for paying for roads is through tolling and privatization. In fact, those mechanisms are hurt even more by the decline in vehicle miles traveled than the gas tax,” Cohen said.

The next highway funding reauthorization legislation is due in 2009, and Peters has made it clear that tolling, congestion pricing and public-private partnerships should be on the table.

The current highway reauthorization bill, known as SAFETEA-LU or the Safe, Accountable, Fair and Efficient Transportation Equity Act – A Legacy for Users, paved the way in 2005 for the administration strategy. Included in SAFETEA-LU were pilot programs for tolling interstates; priorities for other tolling initiatives; and the groundwork for high-occupancy toll lanes and congestion pricing.

With the presidential election set to occur before the 2009 reauthorization, many highway users and stakeholders believe that tolling and privatization should be scaled back.

The majority of a federally appointed commission studying future revenue streams took a stance against tolling, saying in January that the administration’s philosophy was not a panacea.

Commissioners acknowledge that the fuel tax is a ripe candidate for being phased out over time in favor of a tax on vehicle miles traveled, but the money has to come from somewhere, especially in the short term.

Some members of the commission contend that fuel taxes should increase by 25-40 cents per gallon to fund transportation leading up to the phaseout, but the last increase in the federal fuel tax occurred in 1993.

Peters, who was appointed by the president to chair the commission, broke away from the majority and wrote her own congressional report to say that tolling, congestion pricing and public-private partnerships will solve transportation and congestion problems.

She continues to move forward, having signed off on congestion-pricing grants to several major cities and continuing to review candidates for interstate tolling programs.

Transportation officials in Pennsylvania emerged in the fall of 2007 with an application to toll 311 miles of Interstate 80 in the state. Gov. Ed Rendell wrote a letter in July urging Peters to expedite federal approval of the application. Federal authority had not been granted as of press time.

The Americans for a Strong National Highway Network, of which OOIDA is a founding member, sent a letter of its own to Peters in August, urging her to reject the Pennsylvania application.

Interstates ‘belong to the people’

Truckers like Berkhout in the Northeast and OOIDA Life Member Fred Lapp of Sarasota, FL, dread the day that a toll-free interstate such as I-80 would ever become a toll road.

 “It’s just not a good situation,” Lapp said. “There’s not going to be a gain in any of that.”

Berkhout contends he and others have already paid for those roads.

 “I look upon the interstate system as part of the commons of my country, things I have supported in 31 years as a truck driver,” Berkhout adds. “They don’t belong to the state; they belong to the people.”

Whether it’s tolling I-80 or leasing an existing piece of infrastructure such as the Pennsylvania Turnpike to private investors, future projections and profits for tolling authorities are based on traffic growth and not traffic decline.

 “There’s just concern all around because you’re counting on volume of traffic and certain toll rates,” said Joyce, adding that declines in traffic volume may cause tolling authorities to raise rates just to maintain the status quo.

Toll increases could, in turn, lead to more traffic diversion, according to researchers Michael Belzer and Peter Swan in a study prepared in January for the Transportation Research Board in Washington, DC.

Belzer and Swan showed that traffic on the Ohio Turnpike decreased when authorities implemented a toll increase and that the traffic came back when officials scaled back on tolls.

Critics of excessive tolling call it “bad policy” that the administration continues to promote tolling as a solution to transportation problems, especially when truckers and other highway users have economic incentives to stay away.

Declines worry private investors

Declines in traffic and toll revenue also put private infrastructure investors on the losing end in 2008.

Just two years into a 75-year lease of the Indiana Toll Road and three years into a 99-year lease of the Chicago Skyway, operator ITR Concession Co., a Spanish-Australian consortium consisting of Cintra and Macquarie, reported that traffic has declined on both roadways.

Company spokesman Matt Pierce said that fuel prices and other economic factors have played a role, but that the company and its shareholders continue to remain optimistic about the future.

“We understand that these are long-term leases and throughout the life of the project there will be peaks and valleys. We are just in one of those valleys,” Pierce told Land Line.

Joyce said the valleys, as discussed in the Fitch Rating report, show that toll roads – including privately operated ones – are not the be-all and end-all solution to transportation funding woes.

 “This report goes to show that having toll roads run by private companies could certainly be a dangerous precedent to set for our nation’s economy,” he said. LL

david_tanner@landlinemag.com

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