Tolls and Private Capital May Drive New Investment

Published June 1, 2008

Could highways become more like freight railroads? Could future highway infrastructure be financed with user fees and private capital, just like rail infrastructure? Or is the notion that highways are a public good to be supported primarily by taxpayers too deeply ingrained to allow for such a radical change in approach?

The debate on this score has just begun, and its eventual outcome is uncertain. Ultimately, the answer may hinge less on how Congress decides to fund the federal contribution to the surface transportation program than on how governors, state legislatures, and local governments across the nation decide to approach the long-term challenge of financing new road infrastructure.

Highway Toll Options

The signals from many state capitals suggest user fees in the form of tolls are increasingly being considered as the principal means of financing future highways and bridges. Governors and legislative committees in as many as 14 states are contemplating adding tolls to their arsenal of revenue measures.

This does not mean the need for fuel taxes will disappear. The gas tax will continue to be needed to fund the ever-growing requirements to preserve and modernize the nation’s aging road facilities. However, finding the resources to pay for new capacity will require a more entrepreneurial approach, with the freight railroads serving as a possible financing model.

User fees in the form of tolls may turn out to be the most sensible way to ensure the long-term integrity of the highway system without imposing an unacceptable tax burden on the American people.

C. Kenneth Orski