Sunday, December 25, 2011

Texas Toll Roads: The Flawed Benefits and Costs

by Alexander Simmons

As Texas is faced with a burgeoning population and further economic development, its poor transportation infrastructure becomes a greater issue. In the past decade, the state has chosen to address this problem through toll roads financed by public-private partnerships. Currently, Texas lawmakers are debating building new toll roads or converting already existing highways into tolls. In theory, tolls help improve the mobility of the local population, prevent congestion, ameliorate road quality, decrease the amount of time needed to construct roads, increase development, boost productivity from time saved, and avoid tax increases. Many of these benefits are indeed factual and have little tradeoff; however, others are flawed. Moreover, there are costs associated with toll ways that policymakers seem unaware of. With its already widespread usage and possible expansion, it is important that policymakers consider the tradeoffs associated with toll roads.

Flawed Benefits
Theory states that new toll roads decrease congestion by providing new road alternatives. However, toll roads often only solve congestion problems for a small portion of the population. Residents within a mile from the toll road usually get the highest amount of usage, while those further away are relegated to other more congested routes. Additionally, many citizens cannot financially afford to drive tolls regularly. Thus, there ends up being a lopsided share of traffic between the two road networks and lifestyle inequality. The toll ways are usually uncongested and sometimes receive sparse usage, while the free roads face heavy traffic that result in travel times that are twice that of the tolls.

Theory urges that toll ways improve consumer access to local business and thus, further economic development along the road. However, there is little evidence to support this in the short run. According to Sukumar Kalmanje’s research, Texas toll ways attract additional trips to local business by a negligent 1% and thus, have almost no effect on short-term development. Although, in the long run, it is likely that economic development will follow the route of the toll way and lead to agglomeration. Unfortunately, there is not enough evidence from Texas toll ways to support this argument.

Tax Increases
Due to Texas’s balance budget requirement, road funding cannot be done without either cutting another government program or increasing taxes. In theory, toll ways opt as a method of building roads without increasing taxes. Yet, tolls are essentially a consumption tax on driving. Instead of paying a road tax in a lump sum, residents contribute on a daily basis.

Toll Price Increases
Currently, all toll contracts in Texas grant private contractors the right to raise toll prices on an annual basis. These increases are often tied to an inflation based index or revenue maximization formula. Proponents insist that road prices should increase proportionally with the prices of other goods. However, this argument ignores importance of roads. Consumers have the option to remove other goods from their consumption basket, but cannot do the same with driving. Additionally, price increases are allowed during recessions or oil shocks and successfully worsen downturns.

Politically Unpopular
There is widespread distain for tolls in Texas. Despite their many benefits, Texans view them as a form of double taxation and resent the constant increase in prices. At some point, the general consensus of the population must be considered by representatives.

Unwanted Foreign Influence
Since most toll roads in the United States have been built by public agencies, there is virtually no private sector toll industry. Therefore, large toll contracts are frequently given to foreign companies. In the midst of an economic downturn and growing concerns of globalization, many critics cite this as a poor economic practice and claim it exposes the United States to security risks. In reality, the foreign firms originate from strong ally countries and employ almost entirely Americans on the projects. Thus, the foreign influence has no measurable negative effect. However, while this argument is not realistic, policymakers still must consider the general perception of the public.

Opportunity Costs
As with any government sponsored project, there are opportunity costs policymakers should consider. In this case, it its best to look at the opportunity costs within transportation infrastructure improvement. For instance, funding could be directed to public transportation options, which are severely lacking in Texas. If the general stigma attached to public transportation in Texas could be overcome, the economic gains and those that benefit could be much greater than in any road project. However, large scale public transportation projects require a substantial investment and at this point, there is little political support for such spending.

As policymakers debate about how to solve Texas’ infrastructure issues, it is important that they properly measure the often cited benefits of toll ways with the costs mentioned above. If purely publicly funded roads without tolls are no longer an option due to budget constraints and public transportation projects are off the table, toll roads built via public-private partnerships may indeed be the best option for Texans. However, this does not mean that policymakers can accept toll projects naively and ignore taxpayers’ opinions. 


maybe you should consider investing a bit in public transport, you gasoline addicts :D

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