Is Missouri Ready For Tolls?

This Missouri News Horizon story has some updated information on the Missouri Department of Transportation’s (MoDOT) proposal to institute tolling on I-70. The story has some good information about the plan; a plan that I enthusiastically support. I think this is an excellent plan from MoDOT.

MoDOT officials state that in order to pay to rebuild I-70 using gas taxes (and I have nothing against gas taxes; I just prefer tolls where feasible), they would have to impose a 15-cent per gallon state gas tax hike. I am going to do a follow-up post next week on costs after I have time to work through the numbers, but for now, realize that everyone in Missouri would pay that same extra 15 cents, including people who rarely use highways, particularly I-70. People in Kennett would pay the same as people in Kingdom City. People who drive primarily on local roads (paid for with local property and sales taxes as well as gas taxes) would pay the same as people who drive predominantly on highways (which gas taxes pay for almost entirely).

The Show-Me Institute released a terrific study on private financing of highways back in November 2008. The study was done by “distinguished urban economist” (Freakonomics’ words, not mine) Kenneth Small. It may be my favorite paper that we have released, and it has something important to say about this exchange in the hearing with MoDOT yesterday:

Committee chair, Sen. Bill Stouffer, R-Napton, said he was concerned that motorists may try to avoid I-70 if it became a toll road, pushing traffic onto smaller roads, such as Highway 36 and Highway 50.

Keith said the concern was valid, but it would be up to the toll road operator to make sure tolls aren’t excessive.

The concern about traffic being pushed onto other roads because of high tolls is legitimate. Prof. Small states on page 23 of the study:

The best results occur when the objective for awarding the franchise takes into account a combination of all three forms of payment by users and taxpayers: their own costs of congestion, toll payments, and the subsidy required. This is a highly stylized model not suited for designing a franchise for a specific road, but it does highlight the importance of considering not only toll payments and subsidies but also congestion costs incurred by users of both roads.

In the simplest terms, the eventual toll rate need not be 100 percent of cost or 0 percent of cost. It may be desirable to continue some subsidy of I-70 through gas taxes to keep the toll rate low enough to maximize use of I-70 and limit spillover traffic. The fact that I-70 is a major, heavily-traveled road means that such a subsidy would likely be small, and it is entirely possible that a toll rate can be set that covers all costs and return on investment and requires no subsidy. That is my hope, but if a small subsidy going forward means that the new I-70 would reach its uncongested capacity (the toll should be set high enough to discourage congestion), and thereby limit the unnecessary usage of alternate roads and the costs that could be incurred in that situation, then I do not see anything wrong with a limited subsidy of a toll road.

I have one minor critisicm of the proposal. I do not think this should be required:

After the project is complete, the contractors would operate the toll plazas for a period of years until the contractor’s investment has been repaid.

I say just toll it now and forever. After the investment is repaid, there will still be maintenance costs. It may be reasonable to require that the toll be lowered at that point in time (when the debt is gone and MoDOT faces just upkeep), but doing away with toll at that point is not necessary, in my opinion. However, that point is minor, and I think MoDOT deserves great credit for this proposal.

David Stokes