Indiana is truly at a crossroads and could become one of the few states with the right tools in the toolbox to tackle long-term sustainable transportation funding for our roads and bridges. The current pending legislation can elevate Indiana to the forefront of long-range funding options by embracing tolling as a long-term funding tool for our interstate system.
Indiana’s current transportation revenue revolves around gas and diesel fuel taxes collected at the fuel pump. From 1963 to 2002, the fuel tax on gasoline has gone from 3 to 18 cents per gallon. Unfortunately, even with the increased fuel tax, fuel efficiency of vehicles has increased more than 66 percent and construction costs for highways has gone up more than 300 percent since the 1980s.
Indiana currently generates over $830 million a year in fuel taxes that along with registration fees and other miscellaneous fees make up the state allocated transportation revenue of $1.4 billion. The state revenue is distributed to both the Indiana Department of Transportation (INDOT) as well as local governments and metropolitan planning organizations (MPO) with a roughly 58 percent/42 percent allocation.
Unfortunately, the needs for the entire transportation network far outweigh the available funding resources. INDOT alone needs more than $1.2 to $1.4 billion a year in additional revenue to continue to maintain the transportation network that’s the backbone of our economic growth. Even with a potential fuel tax increase, the revenue generated by fuel tax will continue to decline due to increase of electric and higher fuel economy vehicles.
How can tolling help fund Indiana’s needs?
Tolling of the Indiana interstate system would bring needed revenue into the transportation network and provide long-term sustainable funding. With practical, realistic toll rates in place, likely $0.05/mile for passenger vehicles, and $0.15/mile for trucks that are comparable to toll rates in states like Illinois, Georgia, and Florida, the net impact to users will not be dramatic. Indiana could see potential toll revenues of over $1 billion a year, a large portion of which would be paid by out-of-state drivers. This is a conservative estimate of potential revenue that could be collected on the interstate system within Indiana. The revenue estimates could also be adjusted upward due to congestion pricing in dense urban areas. Dynamic pricing could also be utilized to help reduce congestion on the interstate system by increasing toll rates during peak travel times in areas with sustained congestion issues. The toll revenue could be expected to pay for all reconstruction, added capacity, new interstate routes, and all ongoing maintenance and operations of the interstate routes. The tolling implementation plan would be phased in and tolling would only start once the road and bridges were reconstructed and available for the traveling public.
Tolling the Indiana interstate system brings the following benefits:
A user-based fee system that requires the user of the facility to pay for the convenience of high-speed connectivity.
The opportunity for revenue to be collected from all users including traditional users, hybrid vehicles, and electric vehicles.
The opportunity for revenue to be collected from out-of-state users in accordance with their use of the facilities. Currently, it is estimated that over 25 percent of the traffic on Indiana roads are in from out of state, and those people don’t necessarily purchase fuel here to fund Indiana roads.
Additionally, in dense urban areas, it can provide opportunity for congestion pricing, where it’s not possible to build needed capacity.
Under the tolling scenario discussed herein, it is assumed the state and federal gas taxes would remain in place. The revenue generated by current state and federal gas taxes would be used to upgrade and maintain all the state and US routes. The continued collection of existing gas taxes would allow for a larger percentage of the state and federal gas taxes to be given to local governments for upgrading and maintaining their transportation networks. One of the usual complaints about tolling is that drivers will divert from toll routes and use the local system, placing more traffic on, and ultimately damaging, the local system. Generally, traffic diversion amounts to less than 10 percent of the system traffic. Moreover, under this scenario, the local system will also see upgrades with additional revenue available to combat any diversion issues. For example, most interstates have a parallel US route; I-70 has US 40. Under this scenario, US 40 would see upgrades because there would be an expected increase in traffic and there would be funding in place to handle those upgrades. Tolling the interstate system could also free up the funds for local municipalities to use some of their transportation revenue for mass transit projects.
Indiana’s infrastructure will continue to degrade and impact our competitiveness economically if we don’t act quickly to fund adequate transportation improvements. Tolling of our interstate system is the most sensible, fair, and equitable solution for all users and for the entire transportation network that drives Indiana’s economy. It is a pretty simple concept to pay for the resources you use. Everyone pays their utility bills for water and electric services. Transportation resources should be no different for a safe, reliable, well-maintained system that provides the foundation for strong economic development and job creation. It is the responsibility of industry leaders from both public and private entities to take up the charge and help educate the public on the necessity to increase transportation funding to support long-term economic growth.
Steve is a vice president in the Transportation Group and a partner at American Structurepoint. He is experienced in all facets of civil engineering and has practiced across the country.