When toll revenue comes up short
The Statesman reports that central Texas toll revenue might not meet projections due to the economic downturn:
The combination of sky-high gas prices this summer and then a plunging economy this fall has caused toll road use in Central Texas to stagnate, tollway officials say, and many tollways across the country have seen falling traffic. The sluggish traffic raises questions about whether some roads will be able to pay the decades of debt remaining without tapping tax money.
In the Austin area, although traffic on all four tollways (three run by the state, one by a local authority) is at or above levels of a year ago, two of the toll roads are bringing in less revenue than was projected when money was borrowed to build them. Revenue on Loop 1 for September through November was about 2 percent less than for the same period of 2007.
The overall performance of the three Texas Department of Transportation tollways traffic has been essentially flat since May and the lagging development picture in Central Texas suggest that the system of roads could struggle to meet projections of revenue increasing more than 60 percent over the next two years.
I’m sure some this news will elicit some schadenfreude from toll opponents. Expect to see this shortfall treated as a mark against tolls — something along the lines of, “Tolls are a failure as a funding mechanism so we may as well use tax revenue.”
But the shortfall is not evidence of anything other than that roads are less valuable during economic downturns (fewer people working and shopping) and periods of high gas prices. All roads are less valuable. The drop in the value of free roads is masked by the fact that they are free. Yes, they might be a little less congested, but otherwise there is no way to tell how much demand has dropped because they are unpriced. With toll roads, the drop in demand has no place to hide.
And we shouldn’t want demand to be a mystery. Whether a price is charged or not, there is a finite amount drivers are willing to pay for a road. When the cost of construction exceeds this “shadow price,” building the road makes no economic sense — it means economic waste. That waste, of course, is passed along to everyone who pays the taxes to fund the road. We can make a mistake in choosing to build a particular toll road, but we’ll have a better idea of the value of that road if we charge a toll than if we do not.
I do believe that our toll system can be improved. We currently use flat tolls rather than variable congestion pricing; variable congestion pricing is much more efficient. And we can save ourselves some grief by tolling the right roads. It makes no sense (economic sense, anyway) to toll a new, lightly-traveled road while leaving the old, congested road untolled. Let me re-quote Brendan O’Flaherty:
There’s no good reason to have a toll on an empty stretch of new road that hasn’t been paid off; there’s plenty of reason to have one on a congested road that has been paid off. Since roads are generally uncongested right after they’re built and become more congested as they become older . . . , the idea that tolls should be used to pay off a road’s costruction cost leads to the worst possible allocation of resources: high tolls at first that discourage trips that should be made, and no or low tolls later that encourage waiting that should not be done. It’s like taking a vile-tasting medicine when you’re young and healthy, and stopping it when you get sick and it could help you.
A corollary is that tolling old, congested roads with proven demand provides a reliable stream of income for funding new roads. Which means fewer stories about revenue shortfalls.
