Paying for Transportation: Let's Not Be Fuelish

My father taught me that “there’s no such thing as a free lunch”. I’m trying to teach my daughter that there’s no such thing as a free ride.

With a newly minted driver’s license, she’s found new freedom behind the wheel… until I ask her to fill the gas tank. Now, as we drive past local gas stations, she’s taken new interest in comparison pricing.

A large part of the cost of gas is taxes that subsidize our transportation system. That’s why gas is so much cheaper in New Jersey (no taxes)… but also why they have expensive tolls on their highways. Remember… “no free ride”.

But as I have written about for five years now, gasoline prices in this country are still too low because they don’t ask us to pay for the true costs associated with driving.

How much would gasoline cost if the pump price included the billions we spend each day fighting to keep access to Middle East oil? Or, what if drivers were asked to repay the 40% of all police costs associated with patrolling the roads? Or how about asking motorists to pay at the pump for the land lost to taxation by turning it into highways?

But it gets worse.

In Connecticut we are facing a major funding crisis in transportation because of our over-reliance on the gas tax.

Not even the relatively expensive fares on Metro-North reflect the true cost of running that service, hence the operating subsidy by the state from the Special Transportation Fund (STF). Created in 1984, the STF was to be a “lock box” of money to invest in our state’s transportation infrastructure and help cover the cost of transit operations.

But 40% of the STF comes from gasoline taxes. So in 1997 when Governor John Rowland got the legislature to cut the gas tax from 39 cents to 25 cents a gallon, he doomed the fare-paying bus and rail passengers in our state.

Every penny of gas tax raises $15 million in annual revenue. So Rowland’s tax-cutting stunt cost the STF $210 million a year, or almost $3 billion to date. That’s money that wasn’t available to be used to repair our roads, buy new rail cars or buses or keep fares affordable.

And going forward, with automobiles becoming more fuel efficient (i.e. using less gas) and eventually becoming all-electric (using no gas), the STF will have even less funding to maintain the highways and keep mass transit affordable.

And that’s not even considering the legislature’s recent diversion of $10 million from the STF into the general fund to balance the budget. So much for “lock boxes.”

What’s the alternative?

Well, tolls would be a good start. But the state’s Transportation Strategy Board spent a million dollars to study tolling, only to reject eleven options cited by the consultants. And there are precious few lawmakers in Hartford or Washington willing to suggest tolling our “free-ways”, especially in an election year.

Or how about using a VMT (Vehicle Miles Traveled) tax? Motorists would pay for the number of miles they drive: a highway use fee. Of course, the use of GPS to track their travel patterns and charge by time-of-day and congestion probably leaves the libertarians shaking… as if Big Brother doesn’t know your every move already by tracking your cell phone.

Or how about what they’ve done in Portland Oregon, a payroll tax of .07% with proceeds going directly to the transit system, by-passing sticky-fingered legislators.

Someone, somehow is going to pay for our roads and rails. If not in a gas tax, then in some other revenue raising-mechanism. Because, as we must all understand, there is no free ride.

"Value Pricing Our Highways"

Tired of sitting in bumper-to-bumper rush hour traffic on I-95 and the Merritt? Well, esteemed economist Milton Friedman has the answer.

Almost a decade ago, Freidman wrote that traffic congestion was just a matter of supply and demand: too much demand and not enough supply. Some have suggested expanding the supply of roadways by double-decking I-95 or widening the Merritt Parkway. But can you imagine the billions of dollars in cost and years of disruption? And how would the “upper deck” look soaring 90 feet in the air to cross existing bridges? A simpler (and less costly) solution to gridlock seems to be in managing the demand using “value pricing”.

Today, when we drive our highways at rush hour it costs us no more than if we drive off-peak. That is wrong. The value derived from being able to cruise (or crawl) on I-95 in morning rush hour is much higher than at midnight, and should be priced accordingly.

Consider the other services we consume that offer off-peak pricing. Go to a movie on a Saturday night and you’ll pay more than on a weekday afternoon. Take a flight on a busy holiday weekend, when everyone else wants to fly, and you’ll pay more. Even Metro-North offers peak and off-peak (reduced) fares. So too should our highways.

Using electronic tolls (think E-ZPass), motorists who want or must drive at rush hour would pay a small price for the privilege. Those who don’t need to be on the roads at the busiest hours would wait, and pay less (or maybe nothing). That would mean fewer cars at rush hour and less congestion. Those paying the tolls at rush hour would get faster trip times… real value for the price. And the money raised could pay for long overdue highway improvements or, better yet, subsidies for mass transit to keep fares low and attract even more cars off the highways.

Is it worth, say, $4 to drive eleven miles at rush hour? You bet, if it means you pick up your kid at daycare on time and avoid their $1 per minute penalty for late pick-up… or if you can actually make that important 8:30 am meeting that wins you an important piece of business. Time is money.

Value pricing is already underway on the George Washington Bridge. In rush hour, big-rigs pay $40 to cross. But off-peak with E-ZPass it’s only $35 and overnight the toll drops to $27.50. Since its introduction, value pricing has evened out the bridge’s traffic load, saving everybody time and money.

Why haven’t we put such technology to use in Connecticut? Three reasons: 1) people think tolls actually slow down traffic, 2) there are fears of another fiery truck crash into a toll booth and 3) there is a myth that if we reinstate tolls on our highways we’ll have to repay the Federal government billions of dollars. All are false.

Drive the Garden State or Jersey Turnpike using EZPass and you can sail thru the barrier at top speed. Trucks don’t collide into toll booths (and if you’re really worried about trucker safety, let’s open the Greenwich inspection station 24 x 7). And even the Federal DOT acknowledges that it will approve highway tolls used as a traffic mitigation tool.

While other states rapidly embrace “congestion pricing”, Connecticut’s still trying to get together a study of the concept. Seven years after it was formed, you can expect the state-wide Transportation Strategy Board to finally discuss such a plan next month.

Studies, debates, delays. Is this why we’re called “The Land of Steady Habits”?