No. 94 The Illinois Tollway: An Opportunity for Reform
- Policy Study (pdf)
The Illinois tollway system--one of the largest in the nation--is under the most serious political attack of its 41-year history.
Illinois Governor George Ryan told journalists on September 8 that he regarded tolls as a "nuisance" and wanted to greatly reduce, if not eliminate, the toll system in Illinois.
On October 5, saying he expects them to "pursue the direction I've set for them," Ryan nominated three new members to the Illinois State Toll Highway Authority (ISTHA) and appointed a personal aide, Thomas Cuculich, 39, as its new executive director.
In his announcement the Governor said that motorists who depend on the tollway system daily to move around the Chicago area "have grown increasingly frustrated" with it. "It is time for changes and those changes begin today," said Ryan in an October 5 news release.
The Governor's news release goes on to say: "Gov. Ryan's vision for the tollway system is to make it more efficient for motorists, with the long-term goal of reducing or phasing out tolls charged to motorists. He has directed state transportation officials to develop options for changes in the system." [emphasis added]
Announcing the new appointments, the Governor was quoted as saying, "I will expect Tom [Cuculich, the new CEO] and the Toll Authority board to pursue the direction I've set for them, and I'll be looking for them to give me their recommendations in 60 days."
The statement notes that the present executive director, Ralph C. Wehner, announced his retirement for the end of this year. Cuculich has already taken over though Wehner is remaining at the Toll Authority until the end of the year. The new board appointees are Norman Gold, 69, an accountant and attorney; Carl Kramp, 65; and former Kane County co-treasurer Gordon Volkman, 68, a banker. The Governor announced the reappointment of Paula Fasseas, 44, a banker. None of these people has expressed any concern about the Governor's apparent complete takeover of the Toll Authority or the fact that the board now seems superfluous.
In an interview with the Chicago Tribune (October 14), Cuculich said: "My mission is to make the tollway system as convenient as possible for our customers, the motorists, and to look at the elimination of tolls." He said privatization of the tollway would be among the options he would present to the Governor. He said he will be focusing on ways to improve travel times on the tollways. He is not sure if this means fewer toll plazas, as suggested by the Governor: "Whether it can be done or not remains to be seen."
Cuculich made it clear he's working only for the Governor, saying: "I'm not here to make a career out of this. I am here to carry out the Governor's mission, which is to find a way to reduce the authority, and to get it out of motorists' lives."
The study is organized as follows:
A Profile of the Illinois Tollway
In Northern Illinois, the tollways represent about one-third of the motorway/expressway standard lane-mileage. The Toll Authority operates four major toll roads totaling over 2,000 lane-km with a centerline of 437 km (273 miles), two-thirds of which was built in 27 months of construction between 1956 and 1958.
The tollways provide major north-south movement around Cook County, the inner part of the greater Chicago metropolis--America's third-largest in population (roughly 9 million). The tollways are also main routes west (through Aurora) and northwest (to Rockford). They are the principal distributors for the large commercial area around O'Hare International Airport and the Schaumburg retail center.
The Illinois State Toll Highway Authority (ISTHA) is America's largest toll authority in the number of daily tolls taken--some 2 million. The Garden State Parkway in New Jersey is the next largest by number of tolls, with just over 1.5 million/day.
In revenues collected, ISTHA ranks tied for third. The New York area bridge and tunnel toll authorities (Triborough and Port Authority New York and New Jersey) collect more revenue than any other tollway system in the country. The Illinois Toll Authority then joins the New York State Thruway and the Pennsylvania and New Jersey Turnpikes in a cluster of toll agencies that collect between $300 million and $400 million/year.
ISTHA is expected to collect $370 million in tolls this year, equivalent to one-third of the amount raised by Illinois state gasoline and diesel taxes ($1,100 million). The 19 cents/gallon gas tax would have to be increased by 6.4 cents if tolls were to be abolished and no other changes were made. But the Governor says he doesn't want to raise gas taxes.
"It's a nuisance to go through tollbooths and I agree with the public [complaints]. Drastic changes are needed," the Governor told the press. "It is on my scope and on my radar. If there's some way to handle the transfer [of the toll roads to the state] and pay off the bonds and work it fiscally and financially, I'm going to do that. But not with a gas tax increase."
The state toll authority has about $890 million of bonds outstanding, almost half of them 1992 bonds due in 2017. But that debt pales into insignificance beside the bonds that the Toll Authority has been planning to issue over the next ten years: $8 billion worth, split about equally between reconstruction and new roads.
Engineering consultants have concluded it would be most economical to completely rebuild the two-thirds of the Illinois tollway system constructed in 1956-58. This is proposed to be "from the dirt up" because it is no longer cost-effective to continue overlays and sealing of 40-year-old pavement. Many bridges, too, need major work, and with this level of reconstruction it is normal to bring interchanges up to modern standards, and sometimes to add travel lanes.
The new roads have all been approved by the Illinois legislature and include extensions of several of the existing toll roads, especially the north-south I-355 and construction of a new north-south link west of O'Hare airport.
The Case for Higher Tolls
The Toll Authority's natural response to the need for more revenue is to call for higher tolls. Governor Ryan appointed the current chairman of the Authority, Arthur Philip, to that position on July 23 knowing that Philip had been outspoken about the need for toll increases during a previous term as a member of the board.
As chairman, Philip did call for higher tolls. Indeed, on the very day of his appointment, he told reporters, "Tolls have to be raised to maintain, to modernize, and to expand the toll roads. Let's bite the bullet. It costs more money the longer you wait."
The last systemwide toll increases on Illinois tollways were in September 1983, when tolls at the mainline plazas went from the 1958 rate of 30 cents to 40 cents. Most tolls average about 2 cents/km (3.5 cents/mile); they probably need to be raised to about 3 cents/km (5 cents/mile) to fully recover current operating and maintenance costs. To support a fully modernized system, something like $1.00 is probably needed in place of the present 40-cent toll, so the average 20 km (13-mile) trip would cost 5 cents/km (7.5 cents/mile).
Philip may have thought, What better time politically to increase tolls than after the election? But his political patron, Governor Ryan, had apparently used the same logic to propose major tax and fee increases of his own, making Philip's announcement politically embarrassing to the Governor, setting the stage for the current push for fundamental reform.
Philip's announcement came amid debate over the Governor's controversial proposal to raise $573 million/year extra with a 62 percent hike in vehicle registration fees, a five-fold increase in title transfer fees, and higher alcohol taxes. This was to fund Illinois FIRST, a $12 billion five-year public works program covering transit, state and local roads, schools, and local public buildings. Those increases have since been approved by the state legislature. Complicating the situation is the fact that Arthur Philip is the brother of James "Pate" Philip, president of the Illinois Senate and an outspoken public critic of tax and fee increases.
Governor Ryan told reporters immediately after Philip's comments were made public that "I am not for higher tolls" and said he would let Philip "know how I feel." But he then said ISTHA was "pretty much an autonomous board." He went on: "I want to make sure that ISTHA keeps the toll roads running and operating efficiently. Part of the reason that you appoint boards is that you let them kind of do their own thing. You don't dictate to them what they should and shouldn't do."
Nevertheless, two months later the Governor seemed to be dictating policy: "I am absolutely against any increase in tolls and my goal is to reduce the toll authority as much as I can and eliminate some of the tolls and get the [toll] price down and [eventually] do away with it completely. We are talking about 275 miles of roads that the [state Department of Transportation] could take over and operate." (Chicago Tribune, September 9)
A few days later at a League of Women Voters meeting he was on the subject again: "If we can eliminate (the tolls), I'd like to do it, if we can figure out a way to do that. But I'm practical enough to know that maybe the finances won't allow us to do that, at least now. It might take some time to get it done. Any way we can get rid of it would be OK with me. But certainly, I think it needs to be made more efficient. There should be fewer tolls that people have to go through. . . . I don't think most people mind the 30 or 40 cents they have to throw in the basket. . . . I think it's that they have to stop every five minutes to throw it in. And we should be able to eliminate some of those tolls and make it more efficient." (Chicago Tribune, September 15)
Electronic Toll Collection
Important to the debate over whether to raise or abolish tolls is the ongoing transition to collecting tolls by using electronic toll (ET) collecting systems.
ISTHA executive director Tom Cuculich has said that a very difficult question is the future of I-PASS, the ET system currently being implemented by the Toll Authority. The Authority has all its lanes wired, and a long-term plan is in place for phasing in highway-speed open-road ET (i.e., drivers would not have to stop or even slow down to have their toll accounts automatically debited). Presently, less than one-quarter of Illinois toll transactions are electronic.
"If we are looking at, in the long term, eliminating the tollway system, how do we balance that with continuing to invest in I-PASS?" Cuculich asked in the Tribune interview. "It's something of a Catch-22, because I-PASS at some point does ease congestion." Reaching a decision on any further expansion of and spending on I-PASS will come in the next few months, Cuculich said, adding that the Governor had not told him to freeze spending on anything so far.
The Toll Authority has spent some $50 million on ET conversion. It has completed ET retrofitting on all 525 toll lanes in its 20 mainline plazas and 46 ramp plazas. At all its mainline plazas, the Authority has dedicated ET lanes operating at 1,800 vehicles per hour, with a posted speed of 30 mph. Two plazas are operating with full highway-speed ET, and another three are under construction.
Following Houston's lead, the Toll Authority has begun to demolish conventional toll lanes to build full highway-speed toll lanes at plazas it is rebuilding. These require a major capital outlay--usually eight-figures/plaza--for overhead bridges or underpavement tunnels for staff if manual and coin collection is to be continued on either side.
Some 240,000 ET tags are in use in Illinois with an average 800 added each day, so 300,000 seem likely to be in use by year's end. All this is happening without an active campaign to market toll tags, nor are tag users given a break in the toll rate they pay.
At close to 2 million transactions/day, the Illinois tollway system is by far the busiest in the U.S., though in revenue terms it ranks number three or four. Its large number of low tolls (mostly 40 cents) and heavy usage of low-cost automatic coin machines (which take 80 percent of tolls) make the financial case for ET conversion less compelling than it was in, say, New York, where tolls are high, coins are rarely used, and the system before conversion depended heavily on toll collectors.
ET users enjoy big time savings, but the improvements have not noticeably reduced delays for cash payers. Moreover, in some places improved toll plaza throughput has been offset by downstream delays unrelated to the tolls. At times whole stretches of tollway are simply overloaded.
The Toll Authority is six months into a $30 million contract with TransCore to upgrade lane controllers, signals, and manual toll collector registers at all 53 toll plazas. That work may have to be put on hold, given the Governor's desire for radical changes to the system.
Scandal, Waste, and Patronage
The first head of ISTHA, Austin Wyman, is frequently quoted as having said in a speech back in 1956 when work was starting on the original 299 km (182 miles) of the system that the roads would be made "free" when the bonds were paid off in 1984. Ever since, the Toll Authority has been criticized by some elected officials and taxpayer spokespersons for being a wasteful and self-perpetuating bureaucracy.
The charge is not entirely without foundation, though the reality is that a road cannot be built, paid for, and enjoyed cost-free for ever after.
A road is never fully paid for: It continues to cost money to be maintained and its entire physical structure of bridges and pavement needs to be completely rebuilt every few decades. Roads start to wear out from the moment they open, due to traffic and weather. This is especially true in areas, such as the Midwest, that use salt on winter roads. The real debate, then, is over how best to pay for the inevitable maintenance: through tolls, gasoline taxes, or other revenue sources.
Since 1956, successive governors and legislatures in Illinois have voted to continue tolls to pay for operations and maintenance and to underwrite expansion of the tollway system. In the 1970s it was the east-west extensions, in the 1980s the north-south, and in the 1990s more north-south extensions. The Toll Authority was given its instructions by successive legislatures. But often that did not help the Authority's image as a self-serving, self-perpetuating clique. Skeptics saw the legislature as manipulated by the Toll Authority, or viewed it all as part of a corrupt power structure.
The current chairman, Arthur Philip, recently acknowledged to the Chicago Tribune that not many years ago jobs at the Toll Authority, including most toll collector jobs, were awarded on the basis of political patronage. He says most of that ended with legal changes. "You can't do that kind of stuff anymore. Everything is so far above board now, it's really straight, and you don't have to worry about (political) fiefdoms anymore." Critics point out, though, that toll collector jobs are small potatoes compared to the lucrative contracts awarded to engineering firms, road builders, and increasingly, bond houses, where "pinstripe patronage" (i.e., steering contracts to political allies) still seems to be the order of the day.
Under the previous executive director, Ralph Wehner, the Toll Authority seems to have been scandal-free, but as recently as April 1997 his predecessor, Robert Hickman, was convicted of a $240,000 fraud in a sale of tollway land. Hickman had been a campaign fundraiser for then-Governor Jim Edgar. In June 1994 the state Auditor General attacked a confidential pension scheme for top Toll Authority employees, including Hickman, as improper. The ISTHA board did not defend the scheme and discontinued it after the auditor's criticism, apparently conceding that it had been an indefensible "perk."
Some critics see padding in the Authority's costs and in its accounts. ISTHA depreciates its roadways and bridges like a business does, assuming a life of 20 to 40 years. Its depreciation charges are thus high. Its accounts show provision of $126 million for depreciation and amortization. Critics point out that other toll authorities, like the New Jersey Turnpike, do cash accounting without any depreciation.
But to ignore depreciation of capital overstates net revenues and leads to practices that allow assets to run down. Financial analysts at bond rating agencies have leveled scathing criticism at New Jersey's financial policies and accounting practices. The state will pay a higher interest rate to sell bonds than will ISTHA or other authorities with a sound treatment of depreciation.
Accepted business standards of accounting are also under fire from those who want to use "innovative financing" to build more debt on a smaller revenue stream, often with a state infrastructure "bank" at the bottom of the creditor heap carrying risk that investors won't touch. This is, simply, bad policy.
The Toll Authority is accused of having high costs of operations, but this charge, too, is difficult to confirm. Toll collection costs are over $50 million, or 13 percent of revenue. With the electronic toll (ET) collection and higher tolls already being planned or proposed, that proportion should come down substantially. The alternative to tolls, tax collection, costs money too. A recent study showed, for example, that sales tax collection typically costs 7 percent of revenue. Estimates of the cost of income tax collections run higher, though those costs are largely borne by taxpayers rather than collectors, and therefore go unreported. (1)
Institutional reputations once badly damaged are difficult to repair. Fair or not, there are influential people around Chicago who say that the present Toll Authority is not really reformed, just better at concealing its inefficiencies and self-indulgences than its predecessor. All this weakens the position of the Toll Authority in defending itself against a governor on a populist campaign against it.
The irritation of waiting in lines at a plaza to pay gives tolling a very negative connotation and tends to create an emotional prejudice against tolls. Yet like all prices, tolls also have positive characteristics which thoughtful people will recognize.
Tolls provide a revenue stream to pay for the roads--to operate and maintain them, and also to rebuild and expand them if needed to accommodate motorists' needs. Properly set, tolls place the financial burden most fairly on those who use the roads, and they charge according to use. They are inherently fairer than taxes to pay for roads, since taxes are levied regardless of the use of a particular road and bear little relationship to the value motorists gain from the road, or the costs motorists impose on others by using a road.
Tolls can also help determine how much extra road is justified. Just as a commons is over-grazed, so an unpriced road will tend to attract traffic beyond that which would pay the costs of the facility.
"When scarce and valued goods, like highway capacity, are given away, queues of people who want them will form. The nation has invested billions of dollars in the existing highway and transit system, often justified on the basis of reducing congestion. Yet there is little evidence that urban traffic congestion has been eased," wrote a Transportation Research Board panel in a seminal report, Curbing Gridlock. (2)
Large parts of the Illinois tollway are already used to capacity, so the abolition of tolls would worsen congestion for all by increasing traffic. A more constructive course would be to recognize that increased capacity on the tollway system is probably needed, and to see how tolls can be used to fund and guide that process.
Local urban planning consultant John L. Gann says that the most important contribution tolls can make will be to allow highway improvements to be made without an increased tax burden. He contends that "If tolls are seen as the mechanism that makes it possible for Illinois to increase roadway capacity, the public will support them." Gann echoes the view of others that the toll plazas are not the only capacity constraint on the tollway system; the travel lanes and interchanges themselves will need enhancement, independent of the toll plazas.
Brett Baden of Chicago's RCF Economic & Financial Consulting also endorses the idea that setting proper toll rates will help make the best use of resources and produce better social outcomes. He argues that financing roads entirely out of taxes or license fees is extremely poor pricing, commenting: "The fee you paid in July is unlikely to affect your driving behavior in December." Similarly, he points out that gasoline taxes paid bear little relationship to costs imposed via axle weight damage to pavement or to the space the vehicle takes up in a crowded roadway. By contrast, tolls can be tailored to more nearly reflect these factors.
Baden emphasizes the value of exploring new ways of setting tolls in the future. He argues that rigid fixed tolls are not optimal because the costs of extra motorists driving a road are greater in congested conditions than when traffic is freely flowing. Moreover, the value a motorist gets traveling on a properly managed toll road in peak conditions on the whole roadway network is greater than off-peak.
This is the argument for moving toward toll rates that vary by time of day or level of congestion. Toll rates should be lower off-peak, but higher during peak periods. The benefit to the motorist will be that a few fellow motorists who value their trip less than the higher toll will decide (1) to move their trip to a time when the road is less crowded, or (2) to use transit, or (3) to rearrange their affairs so they don't need to make the trip. Where variable toll rates are used, overloading of the road can be avoided and annoying stop-and-go driving averted.
So long as tolls are paid predominantly in cash, via coin machines or collectors at the toll booth, then toll rates must be kept constant to avoid more confusion at the plazas. But once tolling is accomplished mainly by electronic transponder and monthly utility-type billing, and the toll plazas are downsized or abolished, such flexible toll rates will become technically quite feasible.
Reforming Illinois' Tollway System
Wilbur Smith & Associates Recommendations
The Illinois State Toll Highway Authority has nearly completed a "Long Range Toll Collection Alternatives Study." Commissioned from Wilbur Smith & Associates (WSA) in early 1998, well before the Governor's election and his anti-toll views were expressed, the study is extremely relevant to executive director Tom Cuculich's assignment from the Governor.
Preliminary results of the study were presented recently by the Toll Authority's chief planner, Lidia Pilecky, and the WSA study's lead analyst, Paul Marcella. (3)
Pilecky said that electronic tolling (ET) is the "key to the survival" of the system since it would be unthinkable to physically enlarge the system's toll plazas to cope with extra traffic. "We have to live within our existing toll plazas, and the only way to get traffic through better is electronic tolling," said Pilecky.
The questions to be answered by the WSA study were: how fast should the Toll Authority try to increase ET usage; what measures would achieve different levels of ET usage; and how much would each of those measures cost.
WSA's study developed projections of ET usage under a base scenario for which it was assumed that no steps would be taken to deliberately speed ET penetration into the driving population. In this base scenario, electronic tolling is expected to represent about 40 percent of all tollway trips--and 45 percent of trips taken during weekday peak periods--by 2015. In essence, the base scenario projects approximately a 1 percentage pont increase annually in the ET share.
The WSA analysts also considered a variety of strategies to speed ET's penetration into the Chicago-area driving population: toll discounts of 20, 33, and 45 percent for ET users, and universal free distribution of e-tags.
Toll discounting. WSA's findings very clearly support a strategy of high ET discounts. Given the projected growth of traffic on the tollways, congestion at toll plazas will grow if there is no deliberate effort to move motorists to ET. The cost of expanding conventional toll collection by enlarging toll plazas would be greater than the revenue losses caused by discounting tolls in order to move drivers to ET. The Toll Authority's capital and operating costs both would be reduced by ET discounts. WSA finds that high discounts work better than low discounts, producing a $280 million net savings as compared to the base scenario.
Highway-speed tolling. An active program of building highway-speed or express toll lanes (XTLs) does not make sense financially, according to the WSA study, because of very high capital costs and small savings. The WSA analysts conclude that highway-speed tolling should be installed only when a toll plaza needs to be rebuilt anyway, rather than for its own sake.
Free distribution of e-tags. The WSA report also finds against having all vehicles in the Chicago area use e-tags. While the tags make sense for regular users, the upfront cost of the tags and the ongoing cost of administering accounts make it uneconomical for near-universal use by occasional tollway users. WSA explains that even if every motorist in the Chicago tollway area were given a free e-tag, some won't install them, and therefore won't use them. Moreover, WSA finds, through-traffic by residents of Wisconsin, Indiana, and other nearby states (who wouldn't be given the free tags) means some kind of non-ET collection would still be required.
The Toll Authority and WSA apparently did not consider the costs and benefits of three other alternatives:
- A special low-cost/low-user e-tag program in which a basic read-only e-tag is supplied, instead of the bells-and-whistles version that the Toll Authority normally supplies. The basic tag might cost only $15 per unit, vs. the $35 cost of the current tag. Operating costs for basic tag users, who would receive no monthly account statement, would also be lower.
- A requirement that all drivers wishing to use the tollways have e-tags. On-road toll collection could be abolished and the whole system converted to open-road tolling.
- A program of imaging license plates and mail-billing drivers without e-tags, also allowing the abolition of on-road tolling.
Additional Reform Proposals
The reforms recommended below fall into four categories: electronic toll collection, time-of-day tolling, rebating gasoline taxes, and privatization. These suggestions, described only in the briefest of terms here, are based on a growing body of data from real-world applications of new technologies and new ownership arrangements. The bibliography at the end of this paper cites some of this research. None of these ideas is "just a theory" or untried. Most are being acted on by some of the largest municipal governments in the world.
The reader will note that this study does not recommend abolishing tolls, since that would move the state away from the direction innovative states and nations are heading. There are plenty of options for improving the state's current toll system that will meet the Governor's objectives while improving the efficiency and long-term financial footing of the tollways.
Electronic Toll Collection. E-tolling can reduce the Toll Authority's capital costs, by avoiding the need to add lanes at toll booths, and also reduce the operating costs of toll collection.
The Toll Authority should put forward a detailed program for accelerating installation of highway-speed electronic tolling throughout the tollway system so it becomes available for all trips within, say, four years. Following the advice contained in the upcoming WSA report, the Authority should offer a significant toll discount, say 45 percent, for those who lease e-tags. The Authority should also increase the marketing effort behind I-PASS.
A more sweeping option would be a commitment to end all cash toll collection by a date certain and rely entirely on electronic toll collection. This scenario would prove cost-effective if inexpensive, lower-tech transponders were distributed for free, and if a system were implemented to photograph license plates and bill by mail those without e-tags. This would allow the complete abolition of on-road tolling, with major capital and operational cost savings and dramatically reduced congestion.
Time-of-Day Tolling. Electronic tolling makes possible the variable-rate pricing discussed in Part 2 above. Toll rates can be made to vary by time of day, thereby encouraging people to use the roadways during periods of relatively low use, and to find alternative routes or reschedule trips during periods of high use. Nationwide, 60 percent or more of people using highways during rush hours are running errands, visiting friends, or making other trips for purposes other than commuting to work. They could choose to make these trips at times of day when their presence on the road would not add to congestion, but currently they have little incentive to do so.
Electronic highway signs and radio stations devoted to traffic conditions can tell drivers the current fare and explain their options. Such a system would guarantee free-flowing traffic (except in cases of a major accident) in return for tolls that reflect the true cost of a driver's choice to use a highway at a particular time of day.
To understand the power that time-of-day tolling has to reduce congestion, as well as construction and maintenance costs, consider a simple scheme in which tolls on most tollways near downtown Chicago are reduced to zero between the hours of 8:00 p.m. and 6:00 a.m., but are raised to $1.00 between the hours of 6:00 a.m. and 8:00 p.m. Enough people would probably change their travel plans to significantly relieve congestion during the busiest times of day. Most people would pay roughly the same in tolls as they do today, but time wasted while trapped in traffic jams would be greatly reduced.
End Double-Taxation for Highway Users. A legitimate criticism of tolls is that they constitute a form of "double taxation" on tollway users. Chicago-area highway users pay among the nation's highest gasoline taxes due to the accumulation of federal, state, county, local, and special taxing district taxes, plus Illinois' unusual practice of collecting general sales taxes on gasoline purchases, plus other taxes levied on motor fuel. On top of all this comes the dramatic increase in vehicle registration fees approved by the legislature in order to pay for the Governor's Illinois FIRST projects.
Illinois' state gasoline tax is 19 cents/gallon. The average private automobile gets about 19 miles per gallon. So the effective state gas tax on vehicles traveling the tollways is roughly 1 cent/mile. "Double-taxation" could be ended by rebating against monthly tollway bills an amount equivalent to that tax, with correspondingly larger rebates for classes of vehicles that consume more fuel and thus are higher-taxed. An application for the rebate could easily be incorporated into the state's income tax forms. Only people with e-tags could apply for the rebates, creating another incentive for people to shift to electronic tolling.
Illinois should take the lead by rebating its own gasoline tax, and it should urge the federal government to do the same with its 18.3 cents/gallon tax, which could provide a similar 1 cent/mile rebate against tolls. The approximately 2 cents/mile that motorists pay in federal and state fuel taxes compares with 3 cents/mile for the average 13-mile trip on the Illinois tollway system with present tolls.
Privatize the Tollways. The reforms mentioned so far assume that ownership and management of the tollways remains in the hands of a government agency. But there is little reason to believe this is necessary, and growing empirical evidence suggests that moving to private management and/or ownership is a superior arrangement.
Such a transition, called privatization, can tap the expertise and other resources of private firms while at the same time avoiding the bureaucracy and perverse incentive structures that characterize the government sector.
In Virginia, the Dulles Greenway is a totally investor-built and -operated toll road. So are the 91-Express Lanes in the Los Angeles area. Smaller investor-built toll facilities have been built in Alabama and are under construction in Utah, Florida, and Texas, and others are being designed in Florida and California.
Tollways in Orlando, southern California, and Colorado are still formally state or local government entities, but the overwhelming bulk of their operations is contracted out, so only a small number are on government payroll. Few people probably know it, but the Detroit-Windsor tunnel is privately owned, as is the Ambassador bridge between Michigan and Canada.
A similar trend toward privatization is taking place internationally. Toronto's 407-ETR, the world's most advanced automated toll road, is fully privatized, as is the world's second automated highway, Melbourne CityLink in Australia. The formerly government-owned Autostrade SPA, which operates most of Italy's motorways, is in the process of privatization. France's Cofiroute SA, which generates more revenue than any U.S. toll agency, is investor-owned.
The Illinois State Toll Highway Authority could be given the job of overseeing the privatization process. Many of its present staff would be recruited by competitive toll operating companies. Indeed, the Toll Authority's staff might decide to become one of the groups to bid on a management or management/ownership contract, in which case the Department of Transportation should oversee the bidding process.
The Governor's call for fundamentally rethinking the Illinois tollway system creates an opportunity to put forward reforms that will place Illinois at the forefront, nationally and internationally, of tollway management. This is an opportunity that business leaders, elected officials, taxpayers, commuters, and nearly everyone who lives in Illinois should not allow to pass without their input and active participation.
Governor Ryan's statements about wanting a better deal for Illinois motorists from the tollways are most understandable and laudable. Conditions on the tollways today involve too much congestion--partly at the toll plazas, but also because of interchange problems and insufficient roadway capacity along some stretches. The Toll Authority has been slower than some other toll agencies (though faster than others) to implement new technologies for faster, more efficient, and more convenient electronic toll collection.
Getting rid of tolls, by itself, would make conditions for motorists worse, not better. Motorists would further overload the tollways during rush hours while depriving the roads of a revenue stream needed for their upkeep and improvement. Those motorists understand that this is a big and important roadway system, and expensive too. No one else in some other part of the state or the country is going to foot the bill for the serious reconstruction that is needed or for ongoing costs. There will never be free roads; there is no such thing as a free lunch.
But Governor Ryan is right to say motorists are fed up with queuing to throw coins. That is no way to run a tollway in an electronic age. The Governor deserves support for shaking things up by expressing the frustration that hundreds of thousands of tollway customers feel each day.
There is everything to gain and little to lose by calling for competitive proposals from investors and from the existing Toll Authority staff on how they would operate and improve these facilities for the public, and on what terms. With a set of real proposals on the table, open to full public scrutiny, there will be a chance for a more businesslike tollway system to evolve, to the benefit of everyone who uses (or relies on others who use) the region's highways.
Peter Samuel is editor and publisher of Toll Roads Newsletter, a monthly newsletter on toll roads and road price issues. For subscription information, call 301/631-1148 or send e-mail to email@example.com. Samuel is a North American correspondent for London's World Highways and Intelligent Transportation Systems International magazines. He has an honors degree in economics from the University of Melbourne, Australia.
(Entries with authors' names underlined are available through PolicyBot on The Heartland Institute's Web site at www.heartland.org.)
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Poole, Robert and Kenneth Orski, "HOT Lanes," Policy Study #257 (Los Angeles, CA: Reason Public Policy Institute, 1999).
Roth, Gabriel, Roads in a Market Economy (Brookfield, VT: Ashage, 1998).
Roth, Gabriel, "How to Solve Our Highway Problems," Consumers' Research, June 1997.
Rufolo, Anthony M. and John A. Charles, "Low-Cost Solutions to Portland's Traffic Problems: Congestion Pricing and Free-Market Transit," Policy Summary (Portland, OR: Cascade Policy Institute, March 1998).
Samuel, Peter, "Building Our Way Out of Congestion," Policy Study #250 (Los Angeles, CA: Reason Public Policy Institute, 1999).
Samuel, Peter, "Roads Without the State," The Freeman (Foundation for Economic Education), January 1998.
Semmens, John, "Congestion Pricing: Traffic and the Market," The Pragmatist, June 1997.
Semmens, John, "Twelve Ways to Keep the Valley Moving Without Expanding Public Transit," Arizona Issue Analysis (Phoenix, AZ: Goldwater Institute, 1997).
Small, Kenneth et al., Road Work (Washington, DC: Brookings Institution, 1989).
Transportation Research Board, Curbing Gridlock (Washington, DC: National Academy Press, 1994).
Winston, Clifford and Chad Shirley, Alternative Route (Washington, DC: Brookings Institution, 1998).
1. James Payne, Costly Returns: The Burdens of the U.S. Tax System (San Francisco, CA: Institute for Contemporary Studies, 1993).
2. Curbing Gridlock: Peak-Period Fees to Relieve Traffic Congestion, Transportation Research Board Special Report 242, two volumes (Washington, DC: National Academy Press, 1994), page 19.
3. Contact Lidia Pilecky, ISTHA, 630/241-6100.
The Value of Tolls