Highway Finance: States' Expanding Use of Tolling Illustrates	 
Diverse Challenges and Strategies (28-JUN-06, GAO-06-554).	 
                                                                 
Congestion is increasing rapidly across the nation and freight	 
traffic is expected to almost double in 20 years. In many places,
decision makers cannot simply build their way out of congestion, 
and traditional revenue sources may not be sustainable. As the	 
baby boom generation retires and the costs of federal entitlement
programs rise, sustained, large-scale increases in federal	 
highway grants seem unlikely. To provide the robust growth that  
many transportation advocates believe is required to meet the	 
nation's mobility needs, state and local decision makers in	 
virtually all states are seeking alternative funding approaches. 
Tolling (charging a fee for the use of a highway facility)	 
provides a set of approaches that are increasingly receiving	 
closer attention and consideration. This report examines tolling 
from a number of perspectives, namely: (1) the promise of tolling
to enhance mobility and finance highway transportation, (2) the  
extent to which tolling is being used and the reasons states are 
using or not using this approach, (3) the challenges states face 
in implementing tolling, and (4) strategies that can be used to  
help states address tolling challenges. GAO is not making any	 
recommendations. GAO provided a draft of this report to U.S.	 
Department of Transportation (DOT) officials for comment. DOT	 
officials generally agreed with the information provided.	 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-06-554 					        
    ACCNO:   A56040						        
  TITLE:     Highway Finance: States' Expanding Use of Tolling	      
Illustrates Diverse Challenges and Strategies			 
     DATE:   06/28/2006 
  SUBJECT:   Federal aid for highways				 
	     Financial analysis 				 
	     Public roads or highways				 
	     State-administered programs			 
	     Transportation					 
	     Transportation costs				 
	     User fees						 
	     Tolling						 
	     Highway Trust Fund 				 
	     Interstate Highway System				 

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GAO-06-554

     

     * Report to Congressional Requesters
          * June 2006
     * HIGHWAY FINANCE
          * States' Expanding Use of Tolling Illustrates Diverse Challenges
            and Strategies
     * Contents
          * Results in Brief
          * Background
          * Tolling Has Promise as an Approach for Enhancing Mobility and for
            Financing Transportation
               * In the Face of Increasing Congestion, Tolling Holds Promise
                 as an Approach to Enhance Mobility
               * Tolling Holds Promise as an Approach to Finance
                 Transportation Projects
               * In the Long Term, Tolling Holds Promise for Addressing the
                 Transportation Challenges Ahead
          * States' Use of Tolling to Address Funding Shortfalls, Finance New
            Capacity, and Manage Congestion Is Expanding; but for Some
            States, Tolling Is Not Viewed as Feasible
               * Nearly Half of the States Have Operating Toll Roads, and
                 More States Are Planning Toll Roads
               * Some States Use Tolling to Address Funding Shortfalls,
                 Finance New Capacity, and Manage Congestion; Other States
                 Find Tolling Not Feasible or Have Made Other Choices
                    * States Use Tolling to Address Transportation Funding
                      Shortfalls
                    * States Use Tolling to Finance New Capacity
                    * States Use Tolling to Manage Congestion
               * Many States Find That Tolling Is Not Feasible or Have Made
                 Other Choices
          * States That Are Considering and Implementing a Tolling Approach
            Face Two Broad Types of Challenges
               * Garnering Political and Public Support Is the Most Often
                 Cited Challenge to Tolling
               * State and Local Transportation Officials Face Formidable
                 Challenges in Implementing Tolling Approaches
          * Three Broad Strategies Can Help State Transportation Officials
            Address Challenges to Tolling
               * Develop an Institutional Framework That Supports Tolling
               * Provide Leadership to Build Support for Individual Projects
                 and Address Tolling Challenges in Project Design
               * Select a Tolling Approach That Provides Tangible Benefits to
                 Users
          * Concluding Observations
          * Agency Comments and Our Evaluation
     * Objectives, Scope, and Methodology
     * Correlation Analysis
     * Survey Questions
          * Current Toll Road Facilities
          * Final Questions
     * GAO Contact and Staff Acknowledgments

Report to Congressional Requesters

June 2006

HIGHWAY FINANCE

States' Expanding Use of Tolling Illustrates Diverse Challenges and
Strategies

Contents

Tables

Figures

Abbreviations

June 28, 2006Letter

The Honorable James M. Inhofe Chairman Committee on Environment and Public
Works United States Senate

The Honorable Christopher S. "Kit" Bond Chairman Subcommittee on
Transportation and Infrastructure Committee on Environment and Public
Works United States Senate

The nation's highways are critical to providing for and enhancing
mobility-the free flow of passengers and goods-and to sustaining America's
economic growth. Mobility gives people access to goods, services,
recreation, and jobs; gives businesses access to materials, markets, and
people; and promotes the movement of personnel and materiel to meet
national defense needs. During the twentieth century, motor fuel taxes
were the mainstay of highway financing, and during the latter part of that
century the construction of the 47,000 mile Interstate Highway System
dominated the agendas and activities of state and federal highway decision
makers. In the twenty-first century, state and local transportation
officials are on the front lines of transportation decision making and
face a new and daunting set of challenges. Congestion is increasing
rapidly across the nation, particularly in urban areas, and freight
traffic is expected to almost double in 20 years. In many places, decision
makers cannot simply build their way out of congestion, and traditional
revenue sources may not be sustainable. As the baby boom generation
retires and the costs of federal entitlement programs rise, sustained,
large-scale increases in federal highway grants seem unlikely. To provide
the robust growth that many transportation advocates believe is required
to meet the nation's mobility needs, state and local decision makers in
virtually all states are seeking alternative funding approaches. Tolling
(i.e., charging a fee for the use of a highway) provides a set of
approaches that are increasingly receiving closer attention and
consideration.

As requested, this report provides information on states' experiences with
tolling and provides some insights on issues that state transportation
officials have encountered when considering or implementing a tolling
approach. Specifically, this report examines (1) the promise of tolling to
enhance mobility and finance highway transportation, (2) the extent to
which tolling is being used in the United States and the reasons states
are using or not using this approach, (3) the challenges states face in
implementing tolling, and (4) strategies that can be used to help states
address the challenges to tolling.

To fulfill our objectives, we reviewed and analyzed research reports and
analytical studies; interviewed a wide range of stakeholders, including
state and local transportation officials, project sponsors, and
private-sector representatives; conducted a nationwide survey of state
departments of transportation; and conducted semistructured interviews
with state department of transportation officials. We also performed a
correlation analysis to identify the extent to which state financial and
demographic characteristics are associated with states' use of tolling. In
addition, we interviewed transportation stakeholders in six states that
were either planning toll projects or constructing toll projects. In
addition to our survey and semistructured interviews, states planning toll
roads were identified through an analysis of states' participation in
Federal Highway Administration (FHWA) tolling programs, including the
Interstate System Reconstruction and Rehabilitation Pilot Program and the
Value Pricing Pilot, and states constructing toll roads were identified
through an analysis of relevant reports and studies. During our review, we
determined that a number of states with toll bridges or tunnels do not
have or are not considering the tolling of roads. We, therefore, decided
to exclude toll bridges and tunnels from our definition of states tolling
or planning to toll to more accurately report on the challenges to
tolling. Although we discuss the federal role with regard to states'
experience with tolling, we did not assess the effectiveness of federal
toll programs or the potential effects of federal grant programs on
states' experience with the approach. (See app. I for our objectives,
scope, and methodology.) We performed our work from June 2005 through June
2006 in accordance with generally accepted government auditing standards.

Results in Brief

Tolling has promise as an approach to enhance mobility and finance
transportation. A tolling approach can potentially help enhance mobility
by managing congestion. Congestion impedes both passenger and freight
mobility and is increasing as a result of rapid population growth and more
vehicles traveling farther on our roads. Applying tolls that vary with the
level of congestion-congestion pricing-can potentially reduce congestion
and the demand for roads because tolls that vary according to the level of
congestion can be used to maintain a predetermined level of service. Such
tolls create additional incentives for drivers to avoid driving alone in
congested conditions when making driving decisions. In response, drivers
may choose to share rides, use public transportation, travel at less
congested (generally off-peak) times, or travel on less congested routes,
if available, to reduce their toll payments. For example, a study of the
State Route 91 Express Lanes in California found that when tolls increased
50 percent during peak hours, traffic during those hours dropped by about
one-third. As concerns about the sustainability of traditional financing
sources continue to grow, tolling also has promise to improve investments
and raise revenue. The per-gallon fuel tax, the mainstay of transportation
finance for 80 years, is declining in purchasing power because fuel tax
rates are not increasing, and more fuel-efficient vehicles and
alternative-fueled vehicles undermine the long-term viability of fuel
taxes as the basis for financing transportation. In this environment,
tolling potentially has promise to promote more effective infrastructure
investment strategies by better targeting spending for new and expanded
capacity. For example, among other factors, toll project construction is
typically financed by bonds, and projects must pass the test of market
viability and meet goals demanded by investors, although even with this
test, there is no guarantee that projects will always be viable. Tolling
can also potentially enhance private-sector participation and investment
in major highway projects. Tolling's promise is particularly important in
light of long-term pressures on the federal budget.

According to our survey of state transportation officials, 31 of the 50
states and the District of Columbia have or are planning toll roads,
including 24 states that are operating toll roads and 7 states that are
planning to toll. Tolling grew in the 1940s and 1950s and, after a period
of slower growth, states' tolling again began to expand in the 1990s. In
total, 23 states are in some phase of planning new toll roads. Officials
in the 31 states that have toll roads or are planning toll roads indicated
that their primary reasons for using or considering the use of a tolling
approach was to address transportation funding shortfalls, finance new
capacity, and manage congestion. For example, in Texas, tolling is being
used to finance major new capacity projects, such as the Trans Texas
Corridor (TTC)-a proposed multiuse, statewide network of transportation
routes that will incorporate existing and new highways-and to manage
congestion in Houston and other metropolitan areas. Transportation
officials in some states, however, have told us that tolling is not
feasible because of limited need for new capacity, insufficient tolling
revenues, and public and political opposition to tolling. For example,
officials from nearly every state that is not pursuing tolling mentioned
some form of public or political opposition to toll roads. In New Jersey,
officials told us that opposition to new toll roads is strong because many
state border crossings and major highways are already tolled.

State transportation officials face two types of challenges that are
broadly related to securing support for and implementing a tolling
approach to finance transportation. The first type of challenge, according
to transportation officials, is the difficulty of obtaining public and
political support in the face of opposition from the public and political
leaders in states where tolling is being considered and applied. According
to transportation officials with whom we spoke, opposition is largely
based on arguments that (1) fuel taxes and other dedicated funding sources
are used to pay for roads and tolling is, therefore, a form of double
taxation; (2) a tolling approach is unreasonable because tolls often do
not cover the costs of a project; and (3) applying tolls can produce
regional, income, and other inequities. For example, a Wisconsin
transportation official told us that Wisconsin is not implementing a
tolling approach because the public generally believes that fuel taxes
already pay for roads and tolls would adversely affect the state's tourist
economy, while Kentucky and Arkansas officials said that it would be
difficult to undertake tolling unless toll roads could be largely
financially self-sufficient. In Florida, concerns about regional inequity
led local governments to pass a law that led to the state's taking action
to ensure that spending on facilities in three counties was commensurate
with toll collections in those three counties.  The second type of
challenge is the practical difficulty of implementing tolling, including
obtaining the statutory authority to toll, addressing the traffic
diversion that might result when motorists seek to avoid toll facilities,
and coordinating with other states or jurisdictions. For example,
Minnesota had legislation authorizing tolling, but conditions built into
the legislation, most importantly, local government veto authority that
could be exercised without recourse, prevented transportation officials
from implementing a specific project. As a result, when state decision
makers identified a toll project that would convert underused high
occupancy vehicle (HOV) lanes to high occupancy toll (HOT) lanes that
would allow non-HOV's to use the lanes for a fee-the Interstate 394
optional toll lane project-state decision makers pursued specific
legislation that exempted HOV to HOT lane conversions from local veto,
thus providing an opportunity to advance the Interstate 394 optional toll
lane project several years later.

Through our review of the ways states use tolling, we have identified
three broad strategies that have both short-term and long-term relevance
for state transportation officials who are considering tolling. The first
strategy that transportation officials can consider involves developing
policies and laws that facilitate the use of tolling to finance
transportation. In developing such a framework, transportation officials
can, first, build support for the approach by establishing a rationale for
its use and then secure the legislative authority to use the approach. For
example, to expand the use of tolling and to leverage tax dollars by
allowing state highway funds to be combined with other funds, Texas
enacted legislation that enabled transportation officials to realize these
goals. The second strategy that transportation officials can consider
involves providing leadership to build support for individual projects and
addressing the challenges to tolling in project design. For example, in
Minnesota, a task force of state and local officials, citizens, and
business leaders was convened in 2001 to explore a range of road pricing
options, including the conversion of HOV lanes to HOT lanes, and make
recommendations to elected officials. Since tolling had been fairly
controversial in the past, decision makers believed that a task force
would provide a more credible and independent voice to the general public.
Ultimately, the task force supported the HOV to HOT conversions and, with
the governor's support and the passage of legislation authorizing the
conversion, the project was implemented. The last strategy that
transportation officials can consider involves selecting a tolling
approach and a project that provides tangible benefits. Promoting a
project that provides tangible benefits can potentially help
transportation officials justify both the costs of the project and the
fees that users will be required to pay for the service. Although tolling
can take different forms and decisions about its use are state specific,
in concept, a tolling structure that varies with the level of
congestion-congestion pricing-offers increased predictability and, as a
result, provides tangible benefits to users. While actual experience with
congestion pricing is still fairly limited in the United States, projects
in operation illustrate how transportation officials have advanced
projects seeking to achieve the potential benefits that may result from
congestion pricing. For example, toll prices on Interstate 15 in San Diego
are set dynamically, changing every 6 minutes, which has succeeded in
keeping traffic flowing freely.

The U.S. Department of Transportation reviewed a draft of this report.
Officials from the Department indicated that they generally agreed with
the information provided and provided technical clarifications, which we
incorporated as appropriate.

Background

The responsibility for building and maintaining highways in the United
States rests with state departments of transportation in each of the 50
states, the District of Columbia, and Puerto Rico. In addition, local
governments finance road construction through sources such as property and
sales taxes. In 2004, state governments took in about $104 billion from
various sources to finance their highway capital and maintenance
programs-44 percent of these revenues came from state fuel taxes and other
state user fees, and 28 percent came from federal grants. Sources of state
highway revenues in 2004 are shown in figure 1.

Figure 1: State Highway Revenue Sources, Fiscal Year 2004

FHWA administers federal grant funds through the federal-aid highway
program and distributes highway funds to the states through annual
apportionments established by statutory formulas. Once FHWA apportions
these funds, they are available to be obligated for the construction,
reconstruction, and improvement of highways and bridges on eligible
federal-aid highway routes and for other purposes authorized in law.
Within these parameters, responsibility for  planning and selecting
projects generally rests with state departments of transportation (DOT)
and with metropolitan planning organizations, and these states and
planning organizations have considerable discretion in selecting specific
highway projects that will receive federal funds.  For example, section
145 of title 23 of the United States Code describes the federal-aid
highway program as a federally assisted state program and provides that
the federal authorization of funds, as well as the availability of federal
funds for expenditure, shall not infringe on the states' sovereign right
to determine the projects to be federally financed.

About 5 percent of the highway revenues to the states in 2004 came from
tolls. In 2005, the United States had about 5,000 miles of toll facilities
in operation or under construction, including about 2,800 miles, or 6
percent, of the Interstate Highway System, according to FHWA.1 Tolling of
roads began in the late 1700s. From 1792 through 1845, an estimated 1,562
privately owned turnpike companies managed and charged tolls on about
15,000 miles of turnpikes throughout the country.2 Between 1916 and 1921,
the number of automobiles in the United States almost tripled, from 3.5
million to 9 million, and as automobile use increased, pressure grew for
more government involvement in financing the construction and maintenance
of public roads.3 In 1919, Oregon became the first state to impose a motor
fuel tax to finance roadway construction.4 In 1916, the Federal Aid Road
Act provided states with federal funds to finance up to 50 percent of the
cost of roads and bridges constructed to provide mail service. This act
and its successor, the 1922 Federal Highway Act, prohibited tolling on
roads financed with federal funds.

In the 1930s and 1940s, President Roosevelt led the thinking for
developing a series of interconnected systems of toll roads that crossed
the United States, which was the beginning of the idea of an interstate
highway system. Then, between 1940 and 1952, 5 states opened such
highways,

which they financed through tolls.5 The first of these highways, the
Pennsylvania Turnpike, was completed in 1940. During this time, about 30
states considered building toll roads, given the success of Pennsylvania.
In 1943, Congress passed an amendment to the Federal Highway Act,
directing the Commissioner of Public Roads to conduct a survey for an
express highway system and report the results to the President and
Congress. However, there was no determination as to how such a system
would be funded.  President Eisenhower supported a toll system financed
with bonds to be paid back with toll revenues until the bonds were paid
off, at which time the tolls would be removed. A committee appointed by
President Eisenhower also recommended a highway program financed with
bonds, but proposed that federal fuel tax revenues, instead of tolls, be
used to pay back the bonds. Ultimately, the Federal-Aid Highway Act of
1956 authorized the creation of a Highway Trust Fund to collect federal
fuel tax revenues and finance the construction of the Interstate Highway
System on a pay-as-you-go basis. The act prohibited tolling on interstate
highways and all federally assisted highways; as a consequence, states
built few new toll roads while the Interstate Highway System was under
construction. However, many of the toll roads built before 1956 were
eventually incorporated into the Interstate Highway System, and tolling on
these roads was allowed to continue. Tolling was also allowed, on a
case-by-case basis under very specific conditions and with a limited
federal funding share, for interstate bridges and tunnels.

During the 1990s, as interstate construction wound down, states again
began considering and implementing tolling. At the same time, some of the
federal restrictions on the use of federal funds for tolling began to
ease. The Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA)
liberalized some of the long-standing federal restrictions on tolling by
permitting tolling for the construction, reconstruction, or rehabilitation
of federally assisted non-Interstate roadways and by raising the federal
share on interstate bridges and tunnels to equal the share provided for
other federal-aid highway projects. The 1998 Transportation Equity Act for
the 21st Century (TEA-21) established a new pilot program to allow the
conversion of a free interstate highway, bridge, or tunnel to a toll
facility if needed reconstruction or rehabilitation was possible only with
the

collection of tolls.6 The Safe, Accountable, Flexible, Efficient
Transportation Equity Act: A Legacy for Users (SAFETEA-LU), enacted in
2005, continued all of the previously established toll programs and added
new programs. The federal tolling-related programs that have been
authorized in surface transportation legislation are shown in table 1.

Table 1: Tolling-Related Programs Authorized in Surface Transportation
Legislation

                                        

             Program                               Purpose                    
Value Pricing Pilot Program  Authorized in ISTEA in 1991, this program is  
                                a pilot program for local transportation      
                                programs to determine the potential of        
                                different value pricing approaches to manage  
                                congestion, including projects that would use 
                                tolls on highway facilities.                  
Interstate System            Authorized in TEA-21 in 1998, this program    
Reconstruction and           allows tolls on three pilot projects in       
Rehabilitation Toll Pilot    different states to reconstruct an existing   
Program                      interstate facility.                          
Express Lanes Demonstration  Authorized in SAFETEA-LU in 2005, this        
Program                      program allows 15 demonstration projects to   
                                use tolling on interstate highways to manage  
                                high congestion levels, reduce emissions to   
                                meet specific Clean Air Act requirements, or  
                                finance additional Interstate lanes to reduce 
                                congestion.                                   
High Occupancy Vehicle (HOV) Authorized in SAFETEA-LU in 2005, this        
Facilities                   program permits states to charge tolls to     
                                vehicles that do not meet occupancy           
                                requirements to use an HOV lane even if the   
                                lane is on an interstate facility.            
Interstate System            Authorized in SAFETEA-LU in 2005, this        
Construction Toll Pilot      program permits tolls on three pilot projects 
Program                      by a state or compact of states to construct  
                                new interstate system highways.               
Section 129 of title 23,     Section 129 authorizes federal participation  
United States Code           in specific toll activities that are          
                                otherwise generally prohibited under Section  
                                301, also from title 23.                      

Source: FHWA.

SAFETEA-LU also created a National Surface Transportation Infrastructure
Financing Commission  to consider revenue sources available to all levels
of government, particularly Highway Trust Fund revenues, and to consider
new approaches to generating revenues for financing highways. The
commission's objective is to develop a report recommending policies to
achieve revenues for the Highway Trust Fund that will meet future needs.
The commission is required to produce a final report within 2 years of its
first meeting.

In addition to SAFETEA-LU's new tolling provisions and enhancements to
existing programs, FHWA offers an innovative credit assistance program,
which can be used to develop toll roads, and an experimental program,
which can be used to test innovative toll road development procedures. The
Transportation Infrastructure Finance and Innovation Act of 1998 (TIFIA)
permits FHWA to offer three kinds of credit assistance for nationally or
regionally significant surface transportation projects: direct loans, loan
guarantees, and lines of credit. Because TIFIA provides credit assistance
rather than grants, states are likely to use it for infrastructure
projects that can generate their own revenues through user charges, such
as tolls or other dedicated funding sources. TIFIA credit assistance is
aimed at advancing the completion of large, capital intensive
projects-such as toll roads-that otherwise might be delayed or not built
at all because of their size and complexity and the financial market's
uncertainty over the timing of revenues from a project. The main goal of
TIFIA is to leverage federal funds by attracting substantial private and
other nonfederal investment in projects. FHWA has also encouraged
experimental projects through the Special Experimental Projects 15
(SEP-15) program, which is intended to encourage the formation of public-
private partnerships for projects by providing additional flexibility for
states interested in experimenting with innovative ways to develop
projects, according to FHWA officials. SEP-15 allows innovation and
flexibility in contracting, compliance with environmental requirements,
right-of-way acquisition, and project finance.

In addition, the Department of Transportation's Office of Transportation
Policy is proposing a pilot program-the Open Roads Pilot Program-to
explore alternatives to the motor fuel tax. Under this pilot, the Office
of Transportation Policy is proposing to make funds available to up to
five states to demonstrate on a large scale the viability and
effectiveness of financing alternatives to the motor fuel tax. Goals of
the program would be to: (1) demonstrate whether or not there are viable
alternatives to the motor fuel tax that will provide necessary investment
resources while simultaneously improving system performance and reducing
congestion, (2) identify successful motor fuel tax substitutes that have
widespread applicability to other states, and (3) provide a possible
framework for future federal reauthorization proposals.

Tolling Has Promise as an Approach for Enhancing Mobility and for
Financing Transportation

As congestion increases and concerns about the sustainability of
traditional roadway financing sources grow, tolling has promise as an
approach to enhance mobility and to finance transportation. Tolls that are
set to vary with the level of congestion can potentially lead to a
reduction in congestion and demand for roads. Such tolls can create
additional incentives for drivers to avoid driving alone in congested
conditions when making their driving decisions. In response, drivers may
choose to share rides, use public transportation, travel at less congested
(generally off-peak) times, or travel on less congested routes, if
available, to reduce their toll payments. Tolling is also consistent with
the important user pays principle, can potentially better target spending
for new and expanded capacity, and can potentially enhance private-sector
participation and investment in major highway projects. Tolling's promise
is particularly important in light of long-term fiscal challenges and
pressures on the federal budget.

In the Face of Increasing Congestion, Tolling Holds Promise as an Approach
to Enhance Mobility

Tolling can be used to potentially enhance mobility by managing
congestion, which is already substantial in many urban areas. Congestion
impedes both passenger and freight mobility and ultimately, the nation's
economic vitality, which depends in large part on an efficient
transportation system. Highway congestion for passenger and commercial
vehicles traveling during peak driving periods doubled from 1982 through
2000. According to the Texas Transportation Institute, drivers in 85 urban
areas experienced 3.7 billion hours of delay and wasted 2.3 billion
gallons of fuel in 2003 because of traffic congestion.7 The Texas
Transportation Institute estimated that the cost of congestion was $63.1
billion (in 2003 dollars), a fivefold increase over two decades after
adjusting for inflation. On average, drivers in urban areas lost 47 hours
on the road in 2003, nearly triple the delay travelers experienced on
average in 1982. During this same period, congestion grew in urban areas
of every size; however, very large metropolitan areas with populations of
more than 3 million were most affected. (See fig. 2 for examples of
congestion growth in selected urban areas.) Freight traffic-which has
doubled since 1980 and in some locations constitutes 30 percent of
interstate system traffic-added to this congestion at a faster rate than
passenger traffic, and FHWA projects continued growth, estimating that the
volume of freight traffic on U.S. roads will increase 70 percent by 2020.

Figure 2: Annual Delay per Traveler in Selected Urban Areas, 1982, 1993,
and 2003

A number of factors, as follows, are converging to further exacerbate
highway congestion:

o Most population growth in the nation occurs in already congested
metropolitan areas. In 2000, the U.S. Census Bureau reported that 79
percent of 281 million U.S. residents lived in metropolitan areas.
Nationwide, the population is expected to increase by 54 million by 2020,
and most of that growth is expected in metropolitan areas.

o Vehicle registrations are steadily increasing. In 2003, vehicle
registrations nationwide stood at 230 million, a 17 percent increase in
just 10 years.

o Road usage, as measured by vehicle miles traveled (VMT), grew at a
steady annual rate of 2.8 percent from 1980 through 2003. For the 10-year
period between 1994 and 2003, the total increase in VMT was 22 percent.

o Road construction has increased at a slower pace than population growth,
vehicle registrations, and road usage. For example, from 1980 to 2000, VMT
increased by 80 percent while urban lane miles increased 37 percent.

In light of this increasing congestion, a tolling structure that includes
congestion pricing can potentially reduce congestion and the demand for
roads during peak hours. Through congestion  pricing, tolls can be set to
vary during congested periods to maintain a predetermined level of
service. One potential effect of this pricing structure is that the price
that a driver pays for such a trip, including the toll, may be equal to or
close to the total cost of that trip, including the external costs that
drivers impose on others, such as increased travel time, pollution, and
noise.8 Such tolls create financial incentives for drivers to consider
these costs when making their driving decisions. In response, drivers may
choose to share rides, use transit, travel at less congested (generally
off-peak) times, or travel on less congested routes to reduce their toll
payments.9 Such choices can potentially reduce congestion and the demand
for road space at peak periods, thus potentially allowing the capacity of
existing roadways to accommodate demand with fewer delays.

Actual experience with congestion pricing is still fairly limited in the
United States, with only five states operating such facilities and six
states planning

facilities.10 Some results show that where variable tolls are implemented,
changes in toll prices affect demand and, therefore, levels of congestion.
For example, on State Route 91 in California, the willingness of people to
use the Express Lanes has been shown to be directly related to the price
of tolls. A study by Cal Poly State University for the California DOT
estimated that a 10 percent increase in tolls would reduce traffic by 7
percent to 7.5 percent, while a 100 percent increase in tolls would reduce
traffic by about 55 percent.11 By adjusting the price of tolls, the flow
of traffic can be maintained in the toll lanes so that congestion remains
at manageable levels. In the Minneapolis-St. Paul area, a Minnesota DOT
study of a proposed system of variable priced HOT lanes called MnPASS
estimated that, over time, average speeds and vehicle mileage would
increase, while vehicle hours traveled would decrease.12 By 2010, with
tolled express lanes and free HOV lanes, the daily vehicle mileage on the
entire system is projected to be 3.6 million compared with 3.2 million if
the highways are not tolled. Average overall speed on the system is
expected to be 47 mph compared with 42.8 mph if the system is not
implemented. Finally, congestion pricing has been in use internationally
as well.  Canada, Great Britain, Norway, Singapore, and South Korea all
have roadways that are tolled to manage demand and reduce congestion. For
example, in 1996, South Korea implemented congestion tolls on two main
tunnels. Traffic volume decreased by 20 percent in the first 2 years of
operation, and average traffic speed increased by 10 kilometers per hour.

Although congestion pricing was dismissed by some decision makers in the
past partly because motorists queuing at toll booths to pay tolls created
congestion and delays, advances in automated toll collection have greatly
reduced the cost and inconvenience of toll collection. Today, nearly every
major toll facility provides for electronic toll collection, greatly
reducing the cost and inconvenience of toll collection.  With electronic
toll collection, toll fee collection for using a facility can be done at
near highway cruising speed because cars do not have to stop at toll
plazas. However, as we reported, there are no widely accepted standards
for electronic toll systems, which could become a barrier to promoting the
needed interoperability between toll systems.13

Tolling Holds Promise as an Approach to Finance Transportation Projects

Tolling holds promise to improve investment decisions and raise revenues
in the face of growing concerns about the sustainability of traditional
financing sources for surface transportation. For many years, federal and
state motor fuel taxes have been the mainstay of state highway revenue. In
the last few years, however, federal and motor fuel tax rates have not
kept up with inflation. Between 1995 and 2004, total highway revenues for
states grew an average of 3.6 percent per year, with average annual
increases of 4.9 percent for federal grants and 3 percent for revenues
from state sources, according to FHWA data. However, these increases were
smaller than increases in the cost of materials and labor for road
construction and are not sufficient to keep pace with the robust levels of
growth in highway spending many transportation advocates believe is
needed.14 The federal motor fuel tax rate of 18.4 cents per gallon has not
been increased since 1993, and thus the purchasing power of fuel tax
revenues has been steadily eroded by inflation. Although the Highway Trust
Fund15 was reauthorized in 1998 and 2005, no serious consideration was
given to raising fuel tax rates. Most states faced a similar degradation
of the value of their state motor fuel tax revenues-although 28 states
raised their motor fuel tax rates between 1993 and 2003, only three states
raised their rates enough to keep pace with inflation. State gasoline tax
rates range from 7.5 cents per gallon in Georgia to 28.5 cents in
Wisconsin. Seven states have motor fuel tax rates that vary with the price
of fuel or the inflation rate-including one state that repealed the
linkage of its fuel tax rate to the inflation rate effective in 2007.
Figure 3 shows the decline in the purchasing power in real terms of
revenues generated by federal and state motor fuel tax rates since 1990.

Figure 3: Combined Federal and Average State Motor Fuel Tax Rates

Note: Tax rates are in 2004 inflation-adjusted dollars. Totals for 1992,
1995, 1996, 2000, and 2003 are rounded. State average gas tax rate is a
"weighted average."

Even if federal and state motor fuel tax rates were to keep pace with
inflation, the growing use of fuel-efficient vehicles and
alternative-fueled vehicles would, in the longer term, further diminish
fuel tax revenues. Although all highway motorists pay fuel taxes, those
who drive hybrid-powered or other alternative-fueled vehicles consume less
fuel per mile than those who drive gas-only vehicles. As a result, these
motorists pay less fuel tax per mile traveled. According to the U.S.
Energy Information Agency, hybrid vehicle sales grew twentyfold between
2000 and 2005 and will grow to 1.5 million vehicles annually by 2025. In
the past five years, hybrid vehicle sales grew in the United States
twentyfold, from 9,400 in 2000 to over 200,000 in 2005. Moreover, the U.S.
Energy Information Agency projects that hybrid vehicle sales will grow to
1.5 million annually by 2025. Sales of alternative-fueled vehicles, such
as alcohol-flexible-fueled vehicles, are projected to increase to 1.3
million in 2030, with electric and fuel cell technologies projected to
increase by 2030 as well.

As concerns about the sustainability of traditional roadway financing
sources grow, tolling can potentially target investment decisions by
adhering to the user pays-principle. National roadway policy has long
incorporated the user pays concept, under which the costs of building and
maintaining roadways are paid by roadway users, generally in the form of
excise taxes on motor fuels and other taxes on inputs into driving, such
as taxes on tires or fees for registering vehicles or obtaining operator
licenses. This method of financing is consistent with one measure of
equity that economists use in assessing the financing of public goods and
services, the benefit principle, which measures equity according to the
degree that readily identifiable beneficiaries bear the cost. As a result,
the user pays concept is widely recognized as a critical anchor for
transportation policy.16

Increasingly, however, decision makers have looked to other revenue
sources-such as income, property, and sales tax revenues-to finance roads.
Using these taxes results in some sacrifice of the benefit principle
because there is a much weaker link to the benefits of roadway
expenditures for those taxes than there is for fuel taxes.17 Tolling,
however, is more consistent with user pay principles because tolling a
particular road and using the toll revenues collected to build and
maintain that road more closely link the costs with the distribution of
the benefits that users derive from it. Motor vehicle fuel taxes can
provide a rough link between costs and benefits but do not take into
account the wide variation in costs required to provide different types of
facilities (i.e., roads, bridges, tunnels, interchanges) some of which can
be very costly.

Tolling can also potentially lead to more targeted, rational, and
efficient investment by state and local governments. Roadway investment
can be more efficient when it is financed by tolls because the users who
benefit will likely support additional investment to build new capacity or
enhance existing capacity only when they believe the benefits exceed the
costs. When costs are borne by nonusers, the beneficiaries may demand that
resources be invested beyond the economically justifiable level. Tolling
can also provide the potential for more rational investment because, in
contrast to most grant-financed projects, toll project construction is
typically financed by bonds sold and backed by future toll revenues, and
projects must pass the test of market viability and meet goals demanded by
investors. However, even with this test there is no guarantee that
projects will always be viable.18

A tolling structure that includes congestion pricing can also help guide
capital investment decisions for new facilities. As congestion increases,
tolls also increase and such increases (sometimes referred to as
"congestion surcharges") signal increased demand for physical capacity,
indicating where capital investments to increase capacity would be most
valuable. At the same time, congestion surcharges would provide a ready
source of revenue for local, state, and federal governments, as well as
for transportation facility operators in order to help fund these
investments in new capacity that, in turn, can reduce delays. Over time,
this form of pricing can potentially influence land-use plans and the
prevalence of telecommuting and flexible workplaces, particularly in
heavily congested corridors where external costs are substantial and
congestion surcharges would be relatively high.

Tolling can also be used as a tool for leveraging increased private-sector
participation and investment. In March 2004, we reported that three
states-California, Virginia, and South Carolina-had pursued private-sector
investment and participation in major highway projects. Since that time,
Virginia has pursued additional projects, and Texas has contracted with a
private entity to participate and invest in a major highway project.19
Tolling can be used to enhance private participation because it provides a
mechanism for the private sector to earn the return on investment it
requires to participate. Involving the private sector allows state and
local governments to build projects sooner, conserve public funding from
highway capital improvement programs for other projects, and limit their
exposure to the risks associated with acquiring debt.20

In the Long Term, Tolling Holds Promise for Addressing the Transportation
Challenges Ahead

Federal and state policymakers have begun looking toward future options
for long-term highway financing. For example, SAFETEA-LU established the
National Surface Transportation Infrastructure Financing Commission to
study prospective Highway Trust Fund revenues and assess alternative
approaches to generating revenues for the Fund. SAFETEA-LU also authorized
a study, to be performed by the Public Policy Center of the University of
Iowa, to test an approach to assessing highway use fees based on actual
mileage driven. This approach would use an onboard computer to measure the
miles driven by a specific vehicle on specific types of highways. A few
states have also begun looking toward the long-term financing options.
Oregon, the first state to enact a motor fuel tax, is sponsoring a study
on the technical feasibility of replacing the gas tax with a per-mile fee.
During 2006, volunteers will have onboard mileage-counting equipment added
to their vehicles and will, for one year, pay a road user fee equal to 1.2
cents a mile instead of paying the state's motor fuel tax.

But beyond the questions of financing and financing sources, broader
issues and challenges exist. As the baby boom generation ages, mandatory
federal commitments to health and retirement programs will consume an
ever-increasing share of the nation's gross domestic product (GDP) and
federal budgetary resources, placing severe pressures on all discretionary
programs, including those that fund defense, education, and
transportation. Our simulations show that by 2040, revenues to the federal
government might barely cover interest on the debt-leaving no money for
either mandatory or discretionary programs-and that balancing the budget
could require cutting federal spending by as much as 60 percent, raising
taxes by up to 2  1/2 times their current level, or some combination of
the two. As we have reported, this pending fiscal crisis requires a
fundamental reexamination of all federal programs, including those for
highways. This reexamination should raise questions such as whether a
federal role is still needed, whether program funding can be better linked
to performance, and whether program constructs are ultimately sustainable.
It is in this context that tolling has promise for addressing the
challenges ahead. In particular, we have suggested that a reexamination of
the federal role in highways should include asking whether the federal
government should even continue to provide financing through grants or
whether, instead, it should develop and expand alternative mechanisms that
would better promote efficient investments in, and use of, infrastructure
and better capture revenue from users.

States' Use of Tolling to Address Funding Shortfalls, Finance New
Capacity, and Manage Congestion Is Expanding; but for Some States, Tolling
Is Not Viewed as Feasible

According to our survey of state transportation officials, there are toll
road facilities in 24 states and plans to build toll road facilities in 7
other states. Tolling grew in the 1940s and 1950s, but after a period of
slower growth, states' tolling began to expand again in the 1990s. The 5
states that began tolling after 1990 are currently planning additional
toll roads. Officials in states that have toll roads or are planning toll
roads indicated that their primary reasons for using or considering the
use of a tolling approach were to address transportation shortfalls,
finance new capacity, and manage congestion. Transportation officials in
some states, however, told us that tolling is not now seen as feasible
because there is little need for new tolled capacity, tolling revenues
would be insufficient, and they would face public and political opposition
to tolling.

Nearly Half of the States Have Operating Toll Roads, and More States Are
Planning Toll Roads

Currently, there are toll road facilities in 24 states throughout the
United States, and there are plans to build toll road facilities in 7
additional states. Figure 4 shows the states that have at least one
existing toll road, according to our survey of transportation officials
from all 50 states and the District of Columbia and our review of FHWA
toll-related programs. (See app. III for the survey questions.)

Figure 4: Existing Toll Road Facilities

Tolling grew in the 1950s, slowed for several decades, and again began to
expand rapidly in the 1990s. Five states-California, Colorado, Minnesota,
South Carolina, and Utah-opened their first toll roads from 1990 to 2006
and, according to our survey of state transportation officials, all five
are currently planning, or in some stage of building, at least one new
toll road. Large states that have recently built toll roads, such as
California, Florida, and Texas, are also moving ahead with plans to build
and expand systems of tolls. In Texas, for example, the DOT's Turnpike
Authority Division is developing a proposed multiuse, statewide network of
transportation routes that will incorporate existing and new highways
called the TTC,21 while three other regional toll authorities22 in Austin,
Dallas, and Houston are also planning toll roads. In California, a state
legislative initiative in 1989 led to the development of toll roads in
Orange County, including the State Route 91 Express Lanes and State Route
125 in San Diego. And in Florida, the DOT-run Florida Turnpike Enterprise
operates nine tolled facilities that include almost 500 miles of toll
roads and is studying the feasibility of implementing tolling to manage
congestion on other facilities, including Interstate 95 in Miami-Dade
County.

According to our survey of state transportation officials and our review
of state applications to FHWA tolling pilot programs, a total of 23 states
have plans to build toll road facilities.23 (Fig. 5 summarizes the status
of states' plans for highway tolling.) Eleven of these states have
received the required environmental clearances and have projects that are
under design or in construction. The remaining 12 states do not have
projects that have proceeded this far, but do have plans to build toll
road facilities, according to their respective state transportation
officials. Of these 23 states,

o 16 have existing toll roads and are planning additional toll roads,24
and

o 7 are planning their first toll roads.25

Figure 5: Planned Toll Road Facilities

Some States Use Tolling to Address Funding Shortfalls, Finance New
Capacity, and Manage Congestion; Other States Find Tolling Not Feasible or
Have Made Other Choices

Officials in most states planning toll roads indicated that the primary
reasons for considering a tolling approach were to address what state
officials characterized as transportation funding shortfalls, to finance
and build new capacity, and to manage congestion. States that are not
planning to build toll roads have found that tolling is not feasible or
have made other choices.

States Use Tolling to Address Transportation Funding Shortfalls

Transportation officials indicated that one of the primary reasons for
using or considering a tolling approach was to respond to what the
officials described as shortfalls in transportation funding. In Georgia,
for example, an official told us that tolling has become a strategy
because there is a significant gap in transportation funding, and the
motor fuel tax rate is the lowest in the country, 7.5 cents per gallon. In
North Carolina, where the North Carolina Turnpike Authority was
established in 2002, an official told us that traditional funding is not
adequate to address transportation needs. North Carolina has estimated
that, over the next 25 years, it will need $85 billion in new
transportation projects to accommodate the state's growth. With a
projected shortfall of $30 billion and what the official described as a
lack of political will to increase motor fuel tax rates, the state has
adopted tolling as one strategy to address transportation needs. In Utah,
state transportation officials have estimated a $16.5 billion shortfall
through 2030 in funding for highway projects and are considering tolling,
along with other funding alternatives. Finally, an official told us that,
in spite of a motor fuel tax rate increase in 2003 and a $200 million
bonding program, Indiana has a 10-year, $2.8 billion shortfall in highway
funding and is viewing tolling as one financing tool to close the gap. The
Indiana DOT has operated the Interstate 80/Interstate 90 Indiana Toll Road
for 50 years and would like to apply that experience in operating toll
roads to new roads.

In other states, transportation officials conducted financial assessments
on specific highway projects and determined that, to complete the
projects, tolling would be required as a source of revenue. For example,
in Missouri, a funding analysis performed by the Missouri DOT found that
the estimated construction costs for the Interstate 70 reconstruction
exceed the available federal, state, and local funding sources, and the
project cannot be advanced without tolling or other revenue increases.
Missouri DOT estimates that the Interstate 70 reconstruction project will
cost between $2.7 and $3.2 billion and that, with a current funding
shortfall of $1 billion

to $2 billion annually, tolling is being actively considered to close that
gap.26 Likewise, studies by the Texas DOT determined that tolling would be
required on particular highway projects. For example, reconstructing a
23-mile portion of Interstate 10 near Houston was estimated to cost $1.99
billion. Available federal, state, and local funds amounted to $1.75
billion, a shortfall of $305.2 million. The Harris County Toll Road
Authority invested $238 million for the right to operate tolled lanes
within the facility. In addition, the Texas Transportation Commission,
which oversees the state DOT, ordered that all new controlled-access
highways should be considered as potential toll projects that will undergo
toll feasibility studies. The commission views tolling as a tool that can
help stretch limited state highway dollars further so that transportation
needs can be met. Moreover, states are looking for whatever financial
relief tolling can provide. In some states, tolling is being considered,
even though toll revenues are expected to only partially cover the costs
of particular projects. In Mississippi, for example, the state DOT
indicated that tolling may be advanced if toll revenues cover 25 percent
to 50 percent of a facility's cost. In Arkansas, tolling is being
considered if toll revenues fund as little as 20 percent of the initial
construction costs, provided tolls pay for operations and maintenance.

To identify state characteristics that are linked with state decisions to
toll, we performed a correlation analysis to examine the relationship
between those decisions and various state demographic and financial
characteristics.  Although certain characteristics in a state's finances
and tax policies might be related to financial need, our correlation
analysis found only limited relationships between various state financial
and demographic measures and states' decisions to toll or not to toll. For
example, although we found a slight inverse relationship between a state's
decision to toll and the level of its motor fuel taxes, this relationship
is not strong enough to conclude that states planning toll roads are more
likely to be the ones with lower motor fuel tax rates than other states.
However, we found that both the size of the state, whether measured by
population or by VMT, and whether it is growing rapidly, again measured by
population or VMT growth, are directly related to states' decisions to
toll. (For more information on the results of our correlation analysis,
see app. II.)

States Use Tolling to Finance New Capacity

According to transportation officials, states are using or considering a
tolling approach to finance new capacity that cannot otherwise be funded
under current and projected transportation funding scenarios. Such new
capacity may be in the form of new highways or new lanes on existing
highways. For example, in Colorado, the state DOT is studying the
investment of $3 billion in increased highway capacity, with 10 percent,
or $300 million of the investment, coming from federal, state, and local
governments and the remainder coming from tolls. With a $48 billion
shortfall projected through 2030 and the percentage of congested
lane-miles projected to increase by 161 percent, tolling is being
considered. Projections by the state DOT in Colorado suggest that revenues
are sufficient to allow for only spot improvements on a few transportation
corridors over the next 25 years and, without tolling, none can undergo a
major upgrade, and new capacity cannot be added.

Some states are using tolling to supplement their traditional motor fuel
tax transportation funding through private-sector involvement and
investment. Tolling is being used as a means to gain access to private
equity and to shift the investment risk, in part, to the private sector.
Currently, 18 states have some form of public-private partnership (PPP)
legislation, allowing for innovative contracting with the private sector.
Many of the 18 states have PPP programs that were established to allow for
toll concession agreements to finance highway projects. For example,
Oregon and Texas are specifically looking to attract private investment as
a new source of financing. The TTC, as shown in figure 6,27 is being
financed, in part, through a series of PPPs. The Texas DOT has contracted
with Cintra-Zachry to develop a long-term development plan for the
corridor, which includes the potential to construct and operate the first
316-mile portion of TTC 35, from Dallas to San Antonio. Cintra-Zachry has
pledged an investment of $6 billion and a payment of $1.2 billion for the
right to build, operate, and collect tolls for up to 50 years on the
initial segment of TTC 35. In Oregon, the Office of Innovative
Partnerships and Alternative Funding-an Oregon DOT office empowered to
pursue alternative funding, including private investment through
tolling-has received proposals from the Oregon Transportation Improvement
Group, a consortium led by the Macquarie Infrastructure Group, to complete
two tolled facilities in the Portland area. In both Texas and Oregon, the
projects were approved under SEP-15, which enabled the two states to waive
certain federal requirements and to negotiate with the project developers
before awarding contracts. Acceptance of the projects under SEP-15 does
not commit federal-aid funding for the projects, and FHWA retains the
right to declare the project ineligible for federal-aid funds at any time
during the SEP-15 process until there is formal FHWA project approval.

Figure 6: Conceptual Drawing of the Trans Texas Corridor

Growing freight traffic is also prompting some states to consider using
tolls to pay for capacity enhancement. Examples include Interstate 81 in
Virginia and Interstate 70 in Missouri. According to the original design
of Interstate 81, built beginning in 1957, truck traffic would account for
15 percent of traffic on the highway; truck traffic now accounts for up to
35

percent, and traffic levels are expected to double by 2035. Interstate 70,
originally designed to carry up to 14,000 vehicles per day in rural areas,
now carries up to 58,000 per day, and truck traffic, which was intended to
be 10 percent of total traffic, is now 25 percent. Both interstates are
major freight routes where truck traffic is expected to continue to
increase. In 2003, the Virginia DOT received FHWA conditional provisional
approval under the Interstate System Reconstruction and Rehabilitation
Pilot Program to toll vehicles other than cars and pickup trucks (freight
trucks and buses) on Interstate 81. Likewise, for Interstate 70, the
Missouri DOT received conditional provisional approval in July 2005 to
participate in the same pilot program. In certain cases, proposals for
truck-only toll (TOT) lanes seek to manage congestion while increasing
capacity by diverting trucks from passenger routes to dedicated lanes. TOT
lanes are being considered on heavy freight routes, including Interstate
81 in Virginia, TTC in Texas (see fig. 7), and routes throughout the
Atlanta Metropolitan Region in Georgia.

States Use Tolling to Manage Congestion

While growing congestion and traffic volumes have increased the demand for
additional highway capacity, transportation officials told us that tolling
is being considered as a tool to manage congestion. Applying tolls that
vary with the level of congestion-congestion pricing-can reduce congestion
and the demand for roads because tolls that vary according to the level of
congestion can be used to maintain a predetermined level of service. Such
tolls create additional incentives for drivers to avoid driving alone in
congested conditions when making driving decisions. In response, drivers
may choose to share rides, use public transportation, travel at less
congested (generally off-peak) times, or travel on less congested routes,
if available, to reduce their toll payments.

Tolling for congestion management can take the form of HOT lanes, which
are adjacent to nontolled lanes. HOT lanes are used to manage congestion
by creating a tolling structure that varies toll prices according to the
level of congestion. Such a tolling structure can reflect the external
costs that users of the facility impose on others. In some cases, HOV
lanes that had been underused have been converted to HOT lanes, allowing
HOVs to continue to use the lane as an HOV lane but allowing
single-occupancy vehicles to use the lane provided they are willing to pay
a toll. In 5 of the 23 states planning toll roads, efforts to manage
congestion on existing capacity is prompting tolling. California,
Colorado, Texas, Virginia, and Washington all have HOT lane projects
planned that will use variably priced tolls to alleviate congestion by
managing the level of traffic. All of these states have received grants
under FHWA's Value Pricing Pilot to either develop or implement the
projects. In California, the State Route 91 Express Lanes, as shown in
figure 7, opened in 1995, and the Interstate 15 Express Lanes, opened in
1998, have dedicated, tolled lanes where the flow of traffic is managed
through toll prices that vary daily and hourly. Tolls on State Route 91
range from as little as $1.10 to as much as $8.50. During periods of
heavier demand and congestion, toll prices are higher so that fewer people
will use the lanes, and a consistent flow of traffic can be maintained. In
Texas, the Katy Freeway in Houston was originally designed to carry 80,000
vehicles per day. With traffic now exceeding 200,000 vehicles per day, the
Texas DOT, in cooperation with FHWA, opened HOV-3 lanes (lanes that could
only be used by carpools of 3 or more passengers) to vehicles with two
passengers who pay a toll as express toll lanes in 1998. Texas DOT is also
building managed lanes, scheduled to open in 2009, that will have peak
toll pricing between 6:00 a.m. and 11:00 a.m. and between 2:00 p.m. and
8:00 p.m. The result, in both cases, is a system in which commuters pay a
toll for access to less congested lanes. More recently, in Minnesota,
where Minneapolis and St. Paul have been experiencing rapid growth in
congestion and, according to the Minnesota DOT, HOV lanes were underused,
the state legislature authorized the conversion of the Interstate 394 HOV
lanes to HOT lanes. The Interstate 394 MnPASS optional toll lanes project
opened in May 2005 with "dynamic pricing" to adjust tolls from anywhere
from 25 cents to $8.00, according to traffic levels.

Figure 7: California State Route 91 Express Lanes and Toll Rates

Note: Shading represents varying toll prices.

In some states, tolling or variable pricing-in which toll rates differ
depending on conditions such as the time of day or location-is used
specifically to manage freight congestion. In October 2005, for example,
the Delaware DOT launched an initiative designed to address problems with
freight congestion on the Delaware Turnpike (Interstate 95) by encouraging
trucks to travel at night. Tolls on trucks between 10:00 p.m. and 6:00
a.m. are 75 percent less than tolls during more congested daytime hours.
Another effort that incorporates variable pricing, but is not a
traditional form of facility-based tolling, is a road user fee system that
is being developed with an FHWA Value Pricing Pilot grant by the Oregon
Office of Innovative Partnerships and Alternative Funding in cooperation
with Oregon State University. The system assesses mileage-based fees in
place of motor fuels taxes, and the fees vary for miles traveled during
rush hour and within cordoned downtown areas.

Many States Find That Tolling Is Not Feasible or Have Made Other Choices

The reason most frequently cited by state transportation officials for not
tolling is that tolling is not feasible. More specifically, there is
little need for new tolled capacity, tolling revenues would be
insufficient, or there is public and political opposition to tolling as
follows:

o Little need for new tolled capacity.  Transportation officials in many
states indicated that low traffic volumes, a lack of congestion, and low
demands for additional capacity make tolling impractical. In states such
as Montana, North Dakota, South Dakota, and Wyoming, the population
density and percentages of urban vehicle miles traveled are too low to
support tolling.

o Insufficient revenues. In some states, tolling is not considered because
toll revenues would not cover the costs of projects. In some cases, the
issue involves traffic volumes that are so low that a tolling approach
would be impractical. In those states, transportation officials explained
that even if a tolling approach were to be considered, tolls would have to
be prohibitively high to fund capacity enhancements and would likely
result in traffic diversion to nontolled, alternative routes. For example,
a transportation official in Kansas told us that there are few routes in
Kansas that have a high enough level of traffic to make them viable for
tolling. Therefore, opportunities for tolling are limited under the
classic definition of feasibility, for which toll revenue must be adequate
to fund construction, maintenance, and operations of a facility. Under
this definition, most roads would not generate sufficient revenues from
tolls to fund new highway capacity. In other cases, where traffic volumes
are higher, transportation officials told us that a tolling approach is
not even considered unless it can be demonstrated that the project will be
self-sustaining. In Massachusetts, for example, an evaluation of HOT lanes
determined that the toll rates people would be willing to pay would not
raise enough revenue to fund the capital expenses to construct the
facility.

o Public and political opposition.  Officials from many states that are
not pursuing tolling mentioned some form of public or political opposition
to toll roads that has dissuaded transportation professionals from
pursuing tolling. The public or political opposition is so strong,
according to officials in some states, that tolling is studied only with
great caution and sensitivity, if at all. While some states mentioned the
lack of a tolling culture as a reason for not tolling, other states that
have tolled roads for years cited the long-standing presence of toll roads
as a reason for not planning to expand tolling. In New Jersey, New
Hampshire, and Ohio-states with long-established toll roads-state
officials said the presence of tolls has instilled public opposition to
them. For example, New Jersey officials told us that opposition to new
toll roads is strong because many state border crossings and major
highways are already tolled. In other cases, DOTs face political
opposition to tolling. In Mississippi, where other toll projects are still
being considered, the state DOT withdrew its application to toll
Interstate 10 under the Interstate System Reconstruction and
Rehabilitation Pilot Program in response to political opposition.

States that do not toll and are not planning to construct toll roads have
also chosen options other than tolling to finance highway construction and
maintenance. For example, 13 states that are not planning toll roads have
used "GARVEE bonds" as grant anticipation financing to borrow funds and
pledge future federal-aid highway revenues for repayment. South Carolina
used state infrastructure bank loans and federal credit assistance, along
with state and local funds, for its "27 in 7 Accelerated Program" through
which it is completing $5 billion worth of highway infrastructure capacity
and improvements in 7 years, compared with the 27 years it estimated would
be needed under conventional financing means. A smaller number of states,
such as Iowa and Tennessee, have remained committed to a primarily
pay-as-you-go approach, building new capacity only when money becomes
available through motor fuel tax revenues or other state revenues.

States That Are Considering and Implementing a Tolling Approach Face Two
Broad Types of Challenges

Drawing on our analyses of states' experience with tolling and on a review
of selected published research on tolling, we have identified two broad
types of challenges that transportation officials have encountered when
attempting to implement tolling: (1) the difficulty of obtaining political
and public support in the face of opposition from the public and political
leaders and (2) the difficulty of implementing tolling given a lack of, or
overly restrictive, enabling toll legislation; concerns about potential
traffic diversion resulting from toll projects; and a need to coordinate
with other states and regions when toll projects cross jurisdictional
boundaries. (See fig. 8.) While these two broad types of challenges may
make a tolling approach difficult to adopt or implement, states have
nevertheless identified specific ways to resolve or mitigate the
challenges. We discuss the strategies that states have used to address
tolling challenges in the following section of this report.

Figure 8: Challenges to Tolling

Garnering Political and Public Support Is the Most Often Cited Challenge
to Tolling

State transportation officials who are implementing or are considering
implementing tolling say that garnering political and public support is
perhaps the greatest challenge to tolling. Some studies have also reported
this challenge. For example, in a recently issued report, the
Transportation Research Board cited studies that identified the
unpopularity of toll roads and public skepticism as fundamental obstacles
to employing a tolling approach.28 The report identified the inconvenience
of paying tolls, being forced to pay twice, and inequities that a tolling
approach would produce as the most commonly expressed objections.29 The
Congressional Budget Office noted in its report that opponents of toll
roads often charge that such roads are unfair to motorists with low
incomes who may not be able to afford them. This concern is intensified if
it involves trips to work and the motorist has few alternatives.30 In a
policy brief issued by the Brookings Institution, the author notes that a
drawback of tolls is that people think these tolls would be just another
tax, forcing them to pay for something

they have already paid for through gasoline taxes.31 We have also noted in
prior work that political opposition to tolling has been substantial
because of concerns about equity and fairness.32 According to our
analysis, a number of factors influence public and political perceptions
about tolling. (See fig. 9.)

Figure 9: Challenges to Tolling

Double taxation arguments. The most frequent objection to tolls is the
argument that motorists traveling on toll roads are being asked to pay
twice; that is, a new roadway toll is being levied in addition to existing
taxes. States have a number of dedicated sources of revenues that are used
to finance highway capital programs. According to transportation experts,
the public generally believes that transportation costs are already being
paid for through motor fuel, property, and sales taxes, as well as license
and registration fees, and in the case of trucks, special tire taxes and
weight-distance fees. Therefore, new road user fees, such as tolls, are
often viewed as new taxes.

Transportation officials in a number of states reported that concerns
about double taxation limited their consideration of a tolling approach to
varying degrees. In Wisconsin, where tolling is not being implemented, a
transportation official told us that the public understands that the fuel
excise tax and other user fees are used to fund highway construction.
Therefore, the public would view tolling as another tax being imposed on
them. This type of concern can be compounded when tolls are being proposed
for an existing facility. For example, in Missouri, consideration of
tolling to pay for Interstate 70's reconstruction faced opposition, in
part, because the public believes that the interstate highway has already
been paid for, according to state DOT officials. Missouri citizens
generally regard tolls as government's way of making users pay again,
according to state transportation officials. This view is supported by
Missouri's history of commitment to free roads. Citizens in Texas have
voiced similar arguments against tolls. In Houston, for example, plans to
convert State Highway 249 to a tolled road have met with some resistance
on the grounds of double taxation. At the public hearing organized to hear
views on the conversion, officials estimated that an overwhelming majority
of those in attendance were against the conversion because they felt that
the road had already been paid for. Strong opposition can arise even
before a roadway has been completed.  A proposal to toll a nearly
completed portion of U.S. Route 183 north of Austin was retracted after
citizens expressed strong opposition. Transportation officials told us
that these citizens believed that since the road was nearly complete,
introducing tolls would amount to double taxation.

Projects are not self-sustaining. Transportation officials told us that
they often find it difficult to demonstrate that tolling is reasonable and
necessary because revenues collected from toll projects usually do not
fully cover project costs. In Oregon, for example, a financial analysis of
toll proposals indicated that the proposals under consideration would not
be economically feasible through the collection of tolls alone, according
to transportation officials. A private consortium was selected to
negotiate with the state DOT for the purpose of advancing the projects.
However, in the view of this consortium, the new toll road can be
financially viable only if existing parallel roads are tolled. In some
states, transportation officials stated toll projects are not even
considered unless it can be demonstrated that the project will be
self-sustaining. In Kentucky, for example, a transportation official told
us that traffic volumes alone can rarely financially sustain rural roads
through tolling and emphasized that it would be difficult to garner public
support for a toll project that required partial subsidization. A
transportation official in Arkansas told us that while tolling is
considered if revenues fund at least 20 percent of initial construction
costs, a toll project would only be considered if it can be shown that
toll revenues would cover all operations and maintenance costs. In
Florida, toll proposals must pass a financial feasibility test  and prove
that the proposed projects will be self-sustaining before the projects are
further considered for advancement. According to Florida Turnpike
Enterprise officials, the standard for feasibility is that by the twelfth
year of operation, projected revenues must cover at least 50 percent of
operating costs and debt service and by the twenty-second year of
operation, projected revenues must cover all costs and debt service.

Concerns about inequities.  Another objection to the use of tolling
involves concerns about the inequities that the approach would produce.
According to our review, groups that could be adversely affected by
tolling often object, as follows, on the basis of geographic inequity,
income inequity, and user inequity:

o Geographic inequity.  Concerns about geographic inequity reflect the
belief that certain regions will benefit disproportionately from a tolling
approach while other regions will be unfairly disadvantaged. Using a
tolling approach to address a transportation need in one part of a state
might free up federal and state funding that might have otherwise been
used to address that need. This available federal and state funding could
then be used to support roads in another part of the state, creating an
unfair burden on those motorists that are being tolled. In Florida, for
example, there have been concerns about the distribution and use of funds
collected for projects in one region (southern Florida) being distributed
to and used for projects in another region of the state (northern
Florida). In the 1990s, three southern counties-Palm Beach, Broward, and
Dade-secured legislation that would require the Florida Turnpike
Enterprise to calculate the dollar amount collected in those counties and
determine how much of that amount was returned to the counties to be used
on their facilities. As a result, the Florida Turnpike Enterprise created
a formula to implement that law, reflecting the need to balance
collections in those counties with what is being spent on facilities in
those counties.

o Income inequity.  Concerns about the unequal ability of lower-income and
higher-income groups to pay tolls are often cited by transportation
experts as an important political barrier to the

acceptance of a tolling approach.33 Those opposing tolls on the basis of
income inequity argue that since tolls would represent a higher portion of
the earnings of lower-income households using the tolled road, tolling
imposes a greater financial burden on them and, therefore, is unfair. In
Maryland, this concern resulted in removing HOT lanes from consideration
in state transportation plans, according to FHWA. In June 2001, the
governor decided to remove HOT lanes from the state transportation plan
because of the perceived inequity of linking an easier commute with a
person's ability to pay. However, in the following year, the governor's
office initiated a revised feasibility study of value pricing that
included investigating and addressing the equity issues that were raised
earlier, while encouraging the air quality and congestion relief benefits
of HOV lanes.

o User inequity. User inequity involves the belief that some classes of
system users are being unfairly disadvantaged. The trucking industry,
freight industry, and businesses may view tolling in this light. For
example, a transportation official in Virginia told us that a proposal to
toll only trucks on Interstate 81 is generally viewed by truckers as an
unfair burden being imposed on them. This transportation official also
noted that if the proposal is implemented, truckers will seek alternative
routes to avoid the tolls. In Missouri, officials representing fuel
marketers, fuel retailers, gas stations, and convenience stores told us
that they consider a tolling proposal unfair. According to the industry
officials, these businesses have spent millions of dollars on their exit
locations along the interstate and believe they have paid their fair share
of taxes. Consideration of a tolling approach to enhance mobility on the
interstate could potentially have an adverse impact on these businesses
because some customers may choose alternative routes.

General views on government.  According to transportation officials with
whom we spoke, public opposition to tolling can be exacerbated by a
mistrust of government generally. They said that when government proposes
tolls as a way to finance transportation, the public generally considers
the tolls as a new tax.

This mistrust can also be directed specifically at state transportation
departments. For example, in 1992, the Missouri DOT proposed a 15-year
plan that included a number of promised projects that would be undertaken
with an increase in the state's gas tax. However, according to state
transportation officials, after gaining support for the increase, the
state DOT did not deliver the promised projects as scheduled. These
officials said this failure to deliver contributed to the public's
mistrust of the DOT and its resistance to attempts by the DOT to secure
toll authority over the years. In some states, concerns about the cost and
management of major highway and bridge programs have reflected
dissatisfaction with the performance of state transportation departments.
For instance, as we reported in 2002, a legislative commission in Virginia
reported on cost overruns and schedule delays in the state's highway
program in 2000 and found that cost estimates prepared for projects were
substantially below the final costs. This commission identified a
potential funding gap of around $3.5 billion in the state's $9 billion,
6-year transportation plan. Such concerns about past performance can
present challenges for transportation officials who are attempting to
advance a tolling approach.

Mistrust can also extend to private entities involved in toll road
development. As we reported in 2004, states engaging private-sector
sponsorship and investment can relinquish political control over their
ability to set toll rates and to carry out infrastructure improvements on
competing publicly owned roadways. For example, California could not make
any improvements along State Route 91-a project privately financed with a
combination of equity, bank, and institutional debt-until the year 2030
because a noncompete clause created a 1.5 mile protection zone along each
side of the corridor. According to officials from the Orange County
Transportation Authority, public pressure on the state DOT to improve the
nontolled portion of the road motivated the county to purchase the road
back from the private consortium.

State and Local Transportation Officials Face Formidable Challenges in
Implementing Tolling Approaches

In some states, transportation officials told us that they face challenges
in implementing toll projects. (See fig. 10.) We identified the following
three implementation-related challenges:

o Secure legislative authority to toll.

o Address the impact of traffic diversion caused by tolling.

o Coordinate with other states or regions.

Figure 10: Challenges to Tolling

Secure the authority to toll.  Not having, or having restrictions built
into, enabling toll legislation poses a challenge for some transportation
officials as they develop tolling options. They told us that limited
legislative authority for tolling hampered their ability to consider a
full range of options to address the transportation needs in their states.
Ultimately, these transportation officials sought methods other than
tolling to address transportation needs or delayed the development of an
identified toll project as they pursued tolling legislation.

Missouri's experience illustrates the challenges transportation officials
face when the state DOT does not have the statutory authority to use a
tolling approach to advance a project. State transportation officials are
considering turning Interstate 70 into a toll road to finance capacity
improvements. However, voters would first have to approve an amendment to
the state constitution to put toll roads under the state DOT's
jurisdiction-a measure that voters rejected in 1970 and 1992. To avoid
another rejection, state DOT officials are exploring alternative financing
methods under existing authority, including the use of a nonprofit
corporation to build, operate, and maintain the toll project.
Transportation officials emphasize, however, that under this option, the
entity would not be able to spend state highway revenues for the
project-the same restriction that would prevent the state DOT from
advancing a toll project-because state funds can be used only for the
purposes enumerated in the state constitution, and toll roads were not one
of those purposes.

Restrictions in enabling legislation can also hamper attempts to implement
toll projects. For example, in the mid-1990s, the Minnesota legislature
authorized a study of public-private partnerships and tolling as one
approach to address congestion and leverage state transportation
investments. In conjunction with that study, the state DOT requested
public-private partnership tolling proposals and received five proposals
in response from private firms. Ultimately, the state DOT recommended a
proposal to build Trunk Highway 212 as a toll facility and proceeded to
complete a development agreement with a private partner. However, the
proposal was vetoed under the provision of the enabling legislation that
gives veto authority to local units of government affected by a project.
As a result, the Trunk Highway 212 project is now being completed under
traditional methods and, according to transportation officials, is taking
longer to complete due to funding limitations. New legislation, passed in
2003, eliminated the local veto authority for converting HOV lanes to HOT
lanes on existing facilities, giving transportation officials more
flexibility to implement a tolling approach. This legislation, which
followed a DOT study of HOV lane usage on Interstate 394, authorizes the
conversion of the HOV lanes on Interstate 394 to HOT lanes to improve
their efficiency. Subsequently, through a design-build-operate agreement,
a private partner was secured to bring resources to the table and run the
operation.

Address concerns about traffic diversion. Traffic diversion resulting from
tolling may adversely affect people, municipalities, and businesses.
Concerns about such diversion have surfaced in comments by municipalities,
businesses, and the trucking industry on a proposal to toll trucks on
Interstate 81 in Virginia, according to state transportation officials.
Affected Virginia municipalities have suggested, for example, that trucks
will leave the interstate to avoid tolls and wind up on local roads. Such
diversion has the potential to create congestion, increase accident and
fatality rates, and increase the municipalities' costs of maintaining
these roads. The affected municipalities have also expressed concerns
about the potential negative effects on economic development that may
result from the loss of business along toll routes. According to a
recently completed study that considered a number of different proposals,
traffic diversion is likely to occur if Interstate 81 is tolled.34 The
study estimated that up to one in four trucks would divert to nearby
parallel routes if a high toll rate35 was applied to commercial vehicles.

Concerns about traffic diversion are not limited to new toll roads. The
Ohio Turnpike opened in the 1950s and, in the 1990s, traffic studies
revealed that commercial vehicles were increasingly diverting onto
parallel untolled roads, creating safety and other concerns. In response,
the governor released the Northern Ohio Freight Strategy in October 2004,
which included a policy to reduce tolls on commercial vehicles in order to
redirect traffic back to the Ohio Turnpike. Subsequent traffic studies
revealed this strategy was mostly successful.

Coordinate on projects that involve multiple states or jurisdictions. 
Coordination among states and regional jurisdictions is likely to become a
growing issue because increasing traffic congestion in metropolitan areas
is likely to require regional solutions. Without good coordination with
neighboring jurisdictions, individual jurisdictions may find it difficult
to solve traffic congestion. Even if one jurisdiction manages to reduce
congestion within its system, it may simply shift that congestion to an
adjacent jurisdiction. Yet numerous factors could make coordination
difficult. For example, the need for coordination is especially critical
if states adopt separate tolling legislation with varying, perhaps
incompatible, provisions and begin tolling. Other potential challenges
include ensuring the interoperability of toll collection facilities when
toll proposals involve more than one state, addressing differences in
state toll legislation, and mitigating geographic inequities by fairly
apportioning the anticipated benefits and disadvantages of toll projects
among all stakeholders.

Oregon's experience illustrates how some of these issues might present
challenges for transportation officials who are attempting to advance
interstate toll projects. Oregon officials cited differing statutory
authorities between Oregon and neighboring Washington as a potential
coordination issue. In Oregon, transportation officials have the authority
to enter into PPPs when advancing a tolling approach, while their
counterparts in Washington do not yet have the authority to do so if
proposals for partnerships are unsolicited. As a result, stakeholders
involved with the Columbia River Crossing Project on Interstate 5, which
Oregon officials are attempting to pursue as a toll project with a private
partner, are seeking to promote legislation in both states that will
provide explicit authorization to advance the project. The Oregon
officials also noted that coordination would be necessary to address
geographic inequities that might arise from the project, explaining that
more of the toll revenues could come from Washington, since motorists
there commute into Portland. Transportation officials in both states will
need to take this into account as they work towards an equitable
apportioning of the project's costs and benefits.

Three Broad Strategies Can Help State Transportation Officials Address
Challenges to Tolling

As shown in figure 11, our review of state practices in implementing
tolling suggests three broad strategies that can help transportation
officials address challenges to its adoption and implementation. These
strategies have both short-term and long-term relevance for states as they
consider new transportation finance options to supplement traditional
approaches. Transportation officials in states that are currently
implementing or considering tolling as a means to raise revenue or
mitigate congestion can consider these strategies in the short term to
build support and smooth implementation of the tolling approaches under
consideration. In the longer term, transportation officials in states that
are not currently tolling, but choose to begin to do so, can consider
these strategies to build support for tolling.

Figure 11: Strategies to Address Challenges to Tolling

Develop an Institutional Framework That Supports Tolling

The first strategy that transportation officials can consider involves
developing an institutional framework that facilitates tolling. In
developing such a framework, transportation officials can consider
building support for a tolling approach with the public and decision
makers in the state and securing enabling tolling legislation. (See fig.
12.) Developing such a framework through these two means involves
identifying and articulating the goals to be achieved by the tolling
approach in the context of larger state policy goals.

Figure 12: Strategies to Address Challenges to Tolling

Building support. Building support for a tolling approach includes two
interim steps-establishing a rationale for tolling and defining the
underlying motivations for its use. Together, these steps provide a basis
for gaining political and public support before seeking and securing
adequate tolling legislation.

Establishing a solid rationale for tolling involves linking the specific
reasons, or goals, for tolling with state policy goals for
transportation.36 For example, linking a tolling goal, such as managing
congestion, to a broader state goal, such as using existing infrastructure
more efficiently, can provide a basis for its use. Similarly, a tolling
goal of supplementing transportation funding with new revenues could
contribute to a broad state policy goal of funding investment in
transportation systems with revenues generated directly from users.

Articulating the underlying motivations for using a tolling approach can
also help transportation officials build support for and accomplish
broader transportation goals and tailor tolling goals to accomplish those
ends. For example, consideration of a tolling approach might be motivated
by a desire to accomplish other goals, such as finding a replacement for
the gas tax or attracting private investment for transportation.
Irrespective of the motivations that guide the development of the goals,
advocates of tolling have to make a compelling case for its use to build
public acceptance for it and make it politically viable. Goal setting can
help transportation officials articulate the motivations for using the
approach, identify the goals to be achieved by its use, and demonstrate
how the tolling goals will tie into broader state goals. Such a process
can help decision makers formulate a transparent and comprehensive
rationale for the use of tolling and gain public and political support for
it.

Secure legislative authority.  Securing tolling legislation is the next
step in developing an institutional framework for tolling. Although there
are common reasons for tolling, the form legislation takes in each state
often depends on the motivations for using the approach and ultimately the
goals to be achieved through it. Our review of legislative efforts in
Texas, Virginia, Oregon, and Florida illustrates how legislation evolved
in response to different motivations and tolling goals. Following are some
of these legislative efforts:

o Leveraging transportation dollars.  Texas enacted legislation that
provided for a broader application of tolling than currently existed and
established a funding mechanism that supported a broader use of tolls in
the state's transportation system.37 This legislation facilitates tolling
by realizing two goals-to expand the use of tolling and to leverage tax
dollars by allowing state highway funds to be combined with other funds to
build toll roads. This combination of funds makes toll roads more
feasible, since the entire cost of the project does not have to be repaid
with tolls. Virginia's Public-Private Transportation Act of 1995 (PPTA)
allows qualifying local governments and certain other political entities
to enter into agreements authorizing private entities to acquire,
construct, improve, maintain, and operate qualifying transportation
facilities. The public entities may either solicit or accept unsolicited
proposals from private sources.  Private-sector sponsorship and investment
in transportation projects could help states realize both an established
tolling goal to accelerate project delivery and a goal to leverage tax
dollars by securing private investment in transportation projects.

o Operating like a business. In some cases, there is a motivation to
"reinvent government" by operating in a more businesslike manner. Public
agencies of all types have pursued innovation and best practices found in
the private sector to improve the cost-effectiveness and timeliness of
product delivery. A goal that embodies these motivations can take many
forms in legislation. In Florida, for example, legislation was passed in
2002 that turned the Florida Turnpike, operated by the Florida DOT, into a
business organization as a way to preserve, improve, and expand the
turnpike system. State decision makers were interested in operating the
turnpike as a business for the state and employing private-sector methods
in the areas of management, finance, organization, and operation. The
goals for the enterprise are to increase revenues, expand capital program
capabilities, and improve customer service.

o Transitioning to a new system of transportation finance.  The
sustainability of the current financing system has been called into
question, and as we have reported, a fundamental reexamination of the
present system will be necessary to increase the cost-effectiveness of
spending and to mitigate congestion.38 Some transportation experts believe
that shifting to a fee structure that more directly charges vehicle
operators for their actual use of roads would improve the operation of the
road system and better target investment. For example, Oregon's efforts to
explore mileage charges provide some insights into how legislation can be
developed to carry out such an ambitious goal. A road user fee proposal,
passed by the state legislature in 2001, created a user fee task force to
design a method of charging drivers for their use of the state's roads as
an alternative to the current system of gas taxes. The task force proposed
the eventual imposition of a mileage fee in place of existing gas taxes
and pilot testing for the mileage fee as the first step toward
implementation. An institutional framework, such as the framework under
development in Oregon, can help states that are seeking to test or
implement new methods of highway financing to realize such goals.

Provide Leadership to Build Support for Individual Projects and Address
Tolling Challenges in Project Design

The second strategy that can facilitate the use of tolling involves
implementing two interrelated and critical components: (1) providing
leadership to build support for and advance individual projects and (2)
addressing challenges to tolling in project design. (See fig. 13.) We have
found that having a strong advocate or advocates-committed both to
building support for projects and to ensuring that the projects move
forward-is crucial to the success of a project. A corollary to providing
committed leadership is ensuring that leaders endorse those projects that
most effectively address challenges to tolling in project design.

Figure 13: Strategies to Address Challenges to Tolling

Providing leadership. Although leadership can take different forms, our
review revealed that a strong advocate can help build support for a toll
project. Transportation agency representatives or political leaders are
likely candidates to move a project to public acceptance. For example, in
Texas, the Governor and key legislators took the lead in developing and
supporting initiatives that would facilitate the use of tolling to finance
highway construction. Their efforts led to the enactment of legislation
that enabled the state DOT to invest in toll projects. In Indiana, the
Governor and the DOT Commissioner have supported tolling as an approach to
finance transportation projects by promoting it in the media and in the
legislature.  However, in some instances, public distrust of political and
governmental agencies may require a leader to emerge from another arena.
For example, in Minnesota, a task force of state and local officials,
citizens, and business leaders was convened in 2001 to explore a range of
road pricing options, including the conversion of HOV lanes to HOT lanes,
and make recommendations to elected officials. Since tolling had been
fairly controversial in the past, decision makers believed that a task
force would provide a more credible and independent voice to the general
public. Ultimately, the task force supported HOV to HOT conversions, and
with the Governor's support and the passage of legislation authorizing the
conversion, the Interstate 394 HOT lanes project was implemented.

As a spokesperson for a project, a leader can explain to the public how
tolling will address a state's particular transportation situation.
Through the communication of essential ideas and values that a toll
proposal encompasses, support for the project can be solidified.
Communicating the benefits that tolling can provide for motorists, such as
increased efficiency, travel time savings, and choices about when and
where to drive, could increase the likelihood of buy-in from the public
and political leaders. For example, after examining congestion pricing
options in Minnesota, a task force of state legislators, mayors, as well
as business, environmental, and transportation leaders recommended that
the state should proceed with a demonstration project. This led to the
passage of legislation in 2003 supporting the conversion of HOV lanes on
Interstate 394 into optional toll lanes, which would allow solo drivers to
access the HOV lanes for a fee. With the help of a communications
consultant, a project team led by the University of Minnesota's Hubert H.
Humphrey Institute worked to address the concerns of the public and
communicate the benefits of the project to the general public. The primary
benefits of the project that were conveyed included free access and
priority for carpools and bus users, premium speeds in express lanes that
are maintained by tolls that vary with demand, and access to the express
lanes to single-occupancy vehicles willing to pay a toll. Surveys
conducted prior to project implementation revealed that 69 percent of
those surveyed were aware of and understood the purpose of the project,
and 64 percent believed that allowing single-occupancy vehicles to use the
carpool lanes by paying a toll was a good idea. A leader can also stress
that tolls can help make up for shortfalls in public funds, allowing
needed highway improvements to be completed sooner. According to some
transportation officials, this point is particularly relevant when the
public does not share a state transportation leader's view of the state's
needs, or of the challenges associated with addressing those needs within
the current fiscal environment, or both.

One effective way to communicate the benefits of tolling is through
organized public education, outreach, and marketing efforts. Through such
efforts, the public can be informed about the transportation situation in
the state and the various options that are available to address
transportation needs. For example, in California, strong political
figures, as well as state and local officials, acted as champions for
individual toll projects. Seeking to maximize the efficiency of the
transportation system through congestion pricing, these leaders and
officials promoted two congestion pricing projects-the Interstate 15
project and the State Route 91 project-using public education and outreach
to inform the public about the objectives of the projects and to
demonstrate how the objectives would be achieved.

Addressing challenges. In identifying toll projects to promote,
responsible leaders will likely be interested in projects that mitigate
the challenges to tolling. Therefore, addressing concerns about double
taxation, inequity, diversion, and coordination in project design can help
transportation officials build support for toll projects and secure
committed advocates for the projects.

When considering a tolling approach, transportation officials can identify
ways to effectively address identified challenges and gain a better
understanding of the potential impact of the approach through data
collection and analysis. Understanding the potential effects of a toll
project on traffic flows, specific groups, business activity, and
commercial transportation can be particularly useful to transportation
officials as they build measures into the project's design to address
identified challenges. Table 2 includes examples of questions and data
needs that transportation officials might consider as part of their data
collection and analysis.

Table 2: Questions That Can Be Considered When Planning and Designing Toll
Projects

                                        

           Question                              Purpose                      
How will traffic be       Analyzing how tolls would affect personal,       
diverted and who will     business, and commuting trips could help         
suffer?                   decision makers estimate the extent to which     
                             traffic would be diverted. From these estimates, 
                             transportation officials can develop strategies  
                             to address the impact of this diversion on       
                             affected groups.                                 
To what extent will tolls Determining the extent to which tolls will meet  
meet the project's goals? the project's financial and other goals could    
                             help project sponsors make decisions about       
                             setting the proper toll. If tolls are too low,   
                             they will not generate enough revenue to pay for 
                             the project or, in the case of congestion        
                             pricing, they will not divert sufficient traffic 
                             to relieve congestion.                           
Who loses and how do we   Analyzing the effects that a toll project might  
compensate them?          have on specific groups enables transportation   
                             officials to address many questions about the    
                             equity consequences of the project. The data     
                             that could be collected include important        
                             household and lifestyle characteristics,         
                             including (but not limited to) income,           
                             residential location, commuting patterns, number 
                             of vehicles, number of workers, family size,     
                             annual travel, and employment type and location. 
                             Without these data, it would be difficult to     
                             estimate the consequences for the groups that    
                             could be most affected. Analysis would provide   
                             better estimates of the extent to which a        
                             tolling approach would shift drivers to carpools 
                             and transit and would provide more insight into  
                             how transit operators might be able to expand    
                             service and how transit service might benefit    
                             lower-income users.                              
How will the project      Given the importance of transportation to the    
affect business activity  economy of metropolitan areas and the widespread 
and commercial            perception that congestion increases business    
transportation?           costs, transportation officials could consider   
                             examining the impact of tolling on business      
                             activity and commercial transportation when      
                             considering the use of a tolling approach.       
                             However, this can be difficult for               
                             transportation officials because little is known 
                             about the magnitude of congestion costs.a        
                             Factors affecting this include the logistics     
                             patterns of firms; the frequency, origin, and    
                             destination of trips; and the ability of firms   
                             to adapt to congestion without affecting costs.  
                             Research on how a tolling approach would affect  
                             commercial carriers operating on those           
                             facilities could also provide some insights.     

Source: GAO analysis of relevant literature.

aTransportation Research Board, Curbing Gridlock: Peak-Period Fees to
Relieve Traffic Congestion (Washington, D.C.: January 1994).

To address general objections to tolling, transportation officials can
also consider potential arguments that might be raised on the grounds of
double taxation and inequity and think about ways to address these
arguments. Addressing these types of concerns is complex because the
fairness of shifting to tolling depends on the fairness of the existing
system of finance and on how it would be changed by a shift. It can be
argued, particularly in states where sales and property taxes are
important sources of financing for the transportation system, that the
existing system is not very equitable. In contrast, a tolling approach
raises revenues directly from those users willing to pay for the service.
Furthermore, the economics literature suggests that concerns about
inequity can be mitigated to some degree if revenues are distributed in a
way that addresses those concerns.

Transportation officials can address concerns about double taxation and
inequity during project design as a way to counter potential opposition on
these grounds. Setting goals for a project that reflect its intended
purpose and addressing any key challenge that could affect the achievement
of the goals can help transportation officials directly respond to the
concerns. For example, if the project goal is to use a tolling approach to
relieve congestion, transportation officials could set the toll to reflect
the external costs associated with peak period use of the road, and the
toll revenues could be dedicated to maintaining, operating, and adding
capacity to the facility. This approach might convince users that the toll
is not just another tax that would be used for other purposes. In
contrast, if the project goal is to address inequities, revenues could be
distributed quite differently. Revenues could be distributed to
disadvantaged groups in the form of tax rebates or improvements in roads
and transit in certain areas. If businesses in specific areas are
adversely affected by a project, toll revenues might be used to improve
transportation services in those regions. For the Interstate 394 HOT lanes
project, state decision makers established the project goals of improving
efficiency and maintaining free-flow speeds for transit and carpools using
the converted HOV lanes. These goals led to decisions on how the toll
revenues would be distributed. The law requires that half of the excess
revenues generated from HOT lane facilities be used to improve and
maintain transit service.

Addressing the coordination issues involved in designing regional and
multistate projects is perhaps more daunting. No ideal institutional
mechanism appears to be available for managing a regional program;
nevertheless, some states have created new institutions to address
interstate coordination issues. For example, Oregon and Washington formed
a bistate task force to coordinate planning for improvements that cross
state borders. The task force includes officials from both state
governments, representatives from the affected metropolitan planning
organizations (MPO), members of the business community, and residents of
each state. The task force is charged with considering all modes of
transportation that could potentially ease congestion and improve capacity
on Columbia River crossings. The two states are jointly conducting
environmental impact studies on highway expansion and transit
improvements. The Oregon and Washington DOTs, the Portland and Vancouver
MPOs, and the transit authorities from both states are jointly leading
this study on the impact of capacity enhancement. Involving officials from
both states in evaluating the project can help ensure that projects are
equitable and effective in addressing the needs of both states.

Select a Tolling Approach That Provides Tangible Benefits to Users

When proposing a tolling approach, transportation officials should
consider promoting one that will produce tangible benefits to users while
justifying both the costs of the project and the fees that users will be
required to pay for the service. (See fig. 14.) The prospect of such
benefits increases the likelihood of the project's acceptance and can help
allay general objections to tolling.

Figure 14: Strategies to Address Challenges to Tolling

Although tolling can take different forms and decisions about its use are
state specific, transportation experts have noted that projects that use
congestion pricing offer predictability and choice to the user and may be
less likely to arouse fierce opposition than projects that offer no new
benefits or choice.39 For example, HOT lane projects, which include both
priced and free lanes, offer the benefit of faster trip times for a price
in HOT lanes and the choice of a "free," but probably slower, trip in
general purpose lanes. Pricing the entire facility might result in more
efficient rationing of limited space on congested roads,40 but congestion
tolls on entire facilities or networks tend to meet with resistance
despite their economic efficiency. HOT lanes, on the other hand, may be
less likely to encounter resistance because they offer premium service for
those willing to pay the fee. While actual experience with road pricing in
the United States is still fairly limited, proponents of HOT lanes cite
several benefits as follows:41

o First, according to reports and studies issued by FHWA, the
Transportation Research Board, the Reason Foundation, and the Brookings
Institution, they provide a premium service for a fee to those travelers
who have a special need and are willing to pay the fee. Through variable
pricing, traffic flows freely even during the height of rush hours. The
use of price and occupancy restrictions to manage the number of vehicles
traveling on them enables HOT lanes to maintain volumes consistent with
uncongested levels of service.

o Second, studies and reports issued by FHWA and the Reason Foundation
note that HOT lanes reduce traffic congestion in the general-purpose lanes
by diverting some solo drivers to the HOT lanes, thereby benefiting those
drivers who use conventional lanes.42

o Third, according to FHWA and others, HOT lanes can make better use of
underutilized carpool (HOV) lanes, thereby alleviating political pressure
to decommission them. HOT lanes may provide an opportunity to improve the
efficiency of existing or newly built HOV lanes by filling excess capacity
that would not otherwise be used. At the same time, HOT lanes continue to
serve as HOV lanes for carpools and buses.

o Finally, reports and studies issued by FHWA and the Reason Foundation
note that HOT lanes generate revenue for transportation improvements.
Tolls can generate revenue for highway and transit improvements, such as
Bus Rapid Transit.43

HOT lanes have been implemented on Interstate 15 in San Diego, State Route
91 in Southern California, the Katy Freeway and U.S. Route 290 in Houston,
and Interstate 394 in Minneapolis. These cases illustrate how
transportation officials have advanced projects seeking to achieve the
potential benefits that may result from the approach. For example, to
guarantee free-flowing traffic, toll prices on the Interstate 15 HOT lanes
project are set dynamically, changing every 6 minutes to keep traffic
flowing freely in the HOT lanes. In providing motorists with choice and
providing premium services, the State Route 91 Express Lanes provide a
level of emergency and safety surveillance that, according to surveys
conducted by the private firm operating the toll facility, some drivers
choose to pay to use the toll lanes even when there is no congestion on
the adjacent free lanes. To optimize the use of existing infrastructure,
more productivity was sought on the Katy Freeway. HOVs are defined as cars
with three or more people during certain peak hours. The Katy Freeway
QuickRide program allows cars with two persons to use the HOV lanes if
they pay a toll. Daily use by paying users has been between 150 and 200
vehicles for peak periods, and peak hour travelers using the facility save
an average of 18 minutes compared with travelers on the nonpriced lanes.44
Finally, linking the conversion of the HOV lanes to transit to increase
mobility and equity was taken into account on the Interstate 394 and
Interstate 15 projects. Toll revenues generated on the Interstate 394 HOT
lanes are designated for facility and transit improvement and a large
portion of surplus revenues on Interstate 15 are used for new bus service.

Concluding Observations

As congestion threatens the nation's mobility at a time when motor fuel
taxes-the principal source of funding for highway improvements-have not
kept up with rising costs, federal and state policy has generally been not
to increase motor fuel taxes, and state and local decision makers are
increasingly looking to a range of alternative mechanisms, including
tolling, to advance their surface transportation programs. Over half the
states have either adopted tolling or are seriously considering
tolling-and this number may increase. A tolling approach can, under the
right circumstances, be an attractive choice to state or local governments
because of the range of potential benefits-generating new revenues,
managing congestion, financing new capacity-that it may provide. But these
potential benefits come only by honestly and forthrightly addressing the
challenges that a tolling approach presents. State and local governments
may be able to address these challenges by pursuing strategies that focus
on developing an institutional framework that facilitates tolling, by
demonstrating leadership, and by pursuing toll projects that provide
tangible benefits to users. While perhaps not applicable to every state to
the same degree or in the same way, these strategies form a basis for
overcoming potential impediments to tolling and developing a meaningful
and effective tolling approach that best suits the environment in each
state.

In the twenty-first century, demographic trends will drive mandatory
federal spending commitments and potentially overwhelm the ability of the
federal government to deliver and grow its discretionary programs. This
looming crisis requires a fundamental reexamination of existing government
programs and commitments, and state and local governments will be
challenged to consider new ways of delivering their programs. Regardless
of the demand for highway improvements, sustained, long-term, large-scale
increases in federal highway grants and state and local spending seem
unlikely. In this context, a tolling approach is more than just finding
new sources of money. Should states choose to undertake it, a tolling
approach has the potential to promote efficiency in the use of
infrastructure, allocate costs to users and capture revenue from
beneficiaries, stimulate private financing and investment, and provide
cost-effective solutions to mobility challenges if viewed as fair and
equitable by the public.

Agency Comments and Our Evaluation

We provided a draft of this report to the Department of Transportation for
review and comment. Officials from the Department indicated that they
generally agreed with the report and provided technical clarifications,
which we incorporated as appropriate.

As agreed with your office, unless you publicly announce the contents of
this report earlier, we plan no further distribution until 30 days from
the report date. At that time, we will send copies of this report to
congressional committees with responsibilities for transportation issues;
the Secretary of Transportation; and the Administrator, Federal Highway
Administration. We will also make copies available to others upon request.
In addition, this report will be available at no charge on the GAO Web
site at h  ttp://www.gao.gov.

If you or your staff have any questions about this report, please contact
me at h  [email protected] or (202)512-2834. Contact points for our Offices
of Congressional Relations and Public Affairs may be found on the last
page of this report. GAO staff who made key contributions to this report
are listed in appendix IV.

JayEtta Z. Hecker Director, Physical Infrastructure Issues

Appendix I

Objectives, Scope, and Methodology

The objectives of this report were to examine (1) the promise of tolling
to enhance mobility and finance highway transportation, (2) the extent to
which tolling is being used in the United States and the reasons states
are using or not using this approach, (3) the challenges states face in
implementing tolling, and (4) strategies that can be used to help states
address the challenges to tolling. We noted where federal programs have
played a role in state tolling decisions and projects, but we did not
evaluate the effectiveness of those programs.

To examine the promise of tolling to enhance mobility and finance highway
transportation, we reviewed reports and studies issued by federal agencies
and academia, as well as articles from relevant trade journals; relied on
perspectives gained from our past work on transportation finance; and
analyzed relevant studies and reports issued by transportation experts. To
identify the issues related to the transportation system in terms of
funding and mobility, we analyzed data on population patterns and growth
from U.S. Census reports and vehicle miles traveled and motor fuel tax
trends from the Federal Highway Administration's (FHWA) Highway Statistics
reports  for 1982 to 2004. We also analyzed data from the 2005 Urban
Mobility Report1 to determine congestion levels and congestion costs for
selected cities in the United States. To supplement the information
obtained through our literature review, we interviewed officials of the
American Automobile Association; International Bridge, Tunnel and Turnpike
Association; the American Association of State Highway and Transportation
Officials; and the Environmental Defense Fund.

To determine the extent to which tolling is being used in the United
States, we designed and administered an Internet survey of state
department of transportation (DOT) officials and performed a correlation
analysis to examine the extent to which state financial and demographic
characteristics are associated with their status on using tolling. (For
more information about the correlation analysis, refer to app. II.) Our
review focused on toll roads and therefore, did not include toll bridges
and tunnels.

Survey. The questionnaire asked about each state's current and planned
toll road facilities. We sent the questionnaire to the directors of state
DOTs in 49 states and Washington, D.C. We did not send a questionnaire to
the Louisiana DOT because we administered our survey only a few weeks
after Hurricane Katrina struck New Orleans and the Gulf Coast.

To minimize nonsampling error, such as measurement errors that can be
introduced when respondents do not understand questions or when they do
not have information to answer a particular question, we undertook several
quality assurance steps. Our social science survey specialists designed
draft questionnaires and conducted pretests with state DOT officials in
four states. During these pretests, we assessed the extent to which
respondents interpreted questions and response categories consistently,
the time respondents needed to complete the survey, and the extent to
which respondents had the information needed to answer the survey
questions. Using the results of these pretests, we revised the
questionnaire.

We administered the survey to the directors of state DOTs via the Internet
during September and October 2005, e-mailing the directors a Web link to
our questionnaire and requesting that they or their designees complete it.
We received responses from 49 states and Washington, D.C.-a 100 percent
response rate. We analyzed the data using statistical software.

We compared the responses to key survey questions with information
obtained from our interviews with state DOT officials and from state
applications to the FHWA's tolling pilot program. In four instances, data
from these sources were inconsistent. We contacted DOT officials in these
states to resolve these inconsistencies and adjusted the survey results
accordingly.

Semistructured interviews.  To determine the reasons states use or do not
use tolling, the challenges to tolling, and the strategies that have been
used to address the challenges, we conducted semistructured interviews
with state transportation officials from all states except Louisiana, and
interviewed stakeholders in six states that we visited to determine the
reasons states use or do not use the approach, the challenges to using the
approach, and the strategies that have been used to address the
challenges. We did not gather information directly from the public.

We developed a set of questions to ask in semistructured interviews of
state transportation officials to gain more detailed information on
states' reasons for tolling or not tolling and the challenges states face
in tolling. Having visited 6 states and interviewing transportation
officials there, and excluding Louisiana, we conducted semistructured
interviews from the remaining states. We did not interview transportation
officials in Louisiana because our semistructured interviews were
conducted shortly after Hurricane Katrina struck New Orleans and the Gulf
Coast. To determine the appropriate state official to interview in each
state, we relied on information from FHWA Division Administrators for the
respective states. After gathering the information from FHWA, we contacted
and interviewed the state officials and conducted our interviews. We
analyzed the data from the semistructured to identify major themes.

Site visits. To supplement information from our survey and semistructured
interviews, we visited six states that were in various stages of planning
or constructing diverse types of toll projects. We selected the states for
their diversity in terms of geography, transportation needs, and tolling
plans. The states were Minnesota, Mississippi, Missouri, Oregon, Texas,
and Virginia. We visited those six states to obtain more detailed
information on the challenges states are encountering and the strategies
states employ or are considering employing to toll. We judgmentally
selected four states where tolling was either planned or under way and two
states where tolling had been proposed and rejected by a vote of either
the citizens or the legislature. During our site visits, we interviewed
state, local, and FHWA officials.

To identify strategies that can be used to address the challenges to
tolling, we analyzed the results of our review on tolling efforts and
built on the perspectives gained from our past work on federal investment
strategies. We also analyzed reports and studies issued by transportation
experts and academia on finance reform to identify broad strategies that
can be used to help transportation officials adopt and implement a tolling
approach.

We performed our work from June 2005 through June 2006 in accordance with
generally accepted government auditing standards.

Appendix II

Correlation Analysis

To identify state characteristics that are linked with states' decisions
to toll roads, we performed a correlation analysis that examined the
relationship between those decisions and various state demographic and
financial characteristics. These characteristics included, but were not
limited to, population; per-capita income; gross state product; vehicle
miles traveled; capital expenditures on highways; and local, state, and
federal highway trust fund appropriations. To perform this analysis, we
updated the data that we had collected from the Federal Highway
Administration (FHWA) and Bureau of Economic Analysis (BEA) for our
previous reports,1 and converted them to inflation-adjusted 2004 dollars
using BEA's chain-type price index for gross domestic product (GDP), as
well as its state highway and streets chain-type price index. For those
characteristics that represented measures of change, we used the changes
in these factors from 1990 to 2000 to be consistent with the years when
the U.S. Census of Population and Housing was conducted and, for those
characteristics that represented measures of levels, we used data from
2002. We chose 2002 because data for some characteristics were not
available for more recent years. We divided states into two groups,
tolling and nontolling, based on information gathered from our state
survey and FHWA documentation. We considered the associations between
tolling and nontolling with each demographic or financial characteristic
singly and did not control for the effects of other characteristics on
these tolling decisions (as we would do in a multivariate analysis). For
this reason, the results of our correlation analysis indicate a simple
statistical relationship between tolling status and a study characteristic
and do not imply causality. Interactions may be more complex when multiple
characteristics are simultaneously associated with tolling status. In
addition, our results may be sensitive to how we defined tolling status.

Although certain characteristics in a state's finances and tax policies
might be related to financial need, our correlation analysis found only
limited relationships between various state demographic and financial
measures and whether states are and are not planning toll roads. (See
table 3.) For example, we found the following:

o There is wide variation in state motor fuel tax rates among the states,
ranging, as discussed earlier, from 7.5 cents to 28.1 cents per gallon in
2002, and we investigated whether state motor fuel tax rates are
correlated with decisions to toll. While a slight inverse relationship
exists between a state's decision to toll and the level of its motor fuel
taxes, the slightness of this relationship suggests that states planning
toll roads are not much more likely to be the ones with lower motor fuel
tax rates than other states.

o While state incomes vary greatly, a state with higher motor fuel tax
rates is also more likely to have higher fuel tax revenues as a percentage
of its gross state product than states with lower motor fuel tax rates. As
with fuel tax rates, a slight inverse relationship exists between a
state's decision to toll and the level of its fuel tax revenues as a
percentage of its gross state product. However, the slightness of this
relationship suggests that states planning toll roads are not much more
likely to be the ones with lower fuel tax revenues as a percentage of
their gross state product than other states.

o The extent to which motor fuel taxes are disbursed to nontransportation
uses could contribute to what state officials characterized as general
shortfalls in highway funding. The relationship between states planning
toll roads and the use of motor-fuel tax revenue is only slight,
suggesting that states planning toll roads are not much more likely to
have more of their fuel tax revenues used for nontransportation programs
than other states.

Although there appears to be little relationship between state finance and
tax policy characteristics and tolling, our analysis indicates that there
are some other factors that are related to states' decisions on tolling.
For example, both the size of the state, whether measured by population or
by vehicle miles traveled (VMT), and whether it is growing rapidly, again
measured by population or VMT growth, are directly related to states'
decisions to toll. These relationships are consistent with statements made
by state transportation officials on the use of tolling to fund highways
due to increasing demand for highway travel. In addition, our analysis
revealed a relationship between federal funding and a state's decision to
toll. Each state collects federal motor fuel taxes that are deposited into
the Highway Trust Fund and receives grants through the federal-aid highway
program according to formulas specified in law. The states that are
planning toll roads are moderately associated with the federal-aid "donor
states"-those states that contribute more to the Highway Trust Fund than
they receive in federal highway grants. Thus, donor states are
statistically more likely to be planning toll roads than donee
states-those states that receive more in grants than they collect.

Table 3: Results of Correlation Analysis

                                        

                        Factors                             Decision to tolla 
                                                                              
                                                      correlation coefficient 
                                                                              
                                                     (number of observations) 
Motor fuel tax rate (in cents per gallon)                      -0.052 (51) 
Fuel tax revenue as percent of gross state                     -0.005 (51) 
product                                           
Percent of fuel tax revenues used for nonhighway              -0.095 (50)b 
purposes                                          
Population                                                      0.309 (51) 
Percentage change in population                                 0.140 (51) 
Vehicle miles traveled (in millions)                            0.368 (51) 
Percentage change in vehicle miles traveled                     0.295 (51) 
Highway Trust Fund apportionment/payment ratio                 -0.319 (51) 

Source: GAO.

Note: Data from 2002 were used in the correlation analysis, except for the
percentage change in population and the percentage change in vehicle miles
traveled, both of which measure values in 2000 against values in 1990.
Motor fuel tax rates were expressed in 2004 dollars. It is worth noting
that the correlation coefficient indicates a statistical association
between the study variable and tolling/nontolling status of a state
without controlling for the effects of other characteristics on these
tolling decisions as in a multivariate analysis.

a1=yes, 0=no.

bWe did not include data for the District of Columbia.

Appendix III

Survey Questions

Current Toll Road Facilities

Question 1: Are there any toll road facilities in your state? Please do
not count any tolled bridges or tunnels as toll roads. 1. Yes 2. No (Skip
to question 10.)

Question 2: Are any of these facilities new roads that were built on new
alignments? 1. Yes 2. No

Question 3: Were any of these facilities previously untolled? 1. Yes 2. No

Question 4: Are any of these facilities new lanes added to roadways that
were previously untolled? 1. Yes 2. No

Question 5: Are any of these facilities HOT lanes (in which single
occupancy vehicles can gain access to HOV lanes by paying a toll)? 1. Yes
2. No

Question 6: Do any of these facilities charge tolls that vary by time of
day? 1. Yes 2. No

Question 7: In what year did the first toll road facility in your state
open to traffic? (Please do not consider facilities that opened before
1938.)

Question 8: In what year did the most recent toll road facility in your
state open to traffic? (Please do not consider facilities that opened
before 1938.)

Question 9: Which of the following agencies participate in managing the
toll road facilities in your state? 1. State Department of Transportation
2. Public toll authority 3. Other state agency 4. Local or regional
government agency 5. Private entity

Planned Toll Road Facilities

Question 10: Are there plans in your state to build any toll road
facilities for which an Environmental Review and a Record of Decision have
been completed? 1. Yes 2. No (Skip to question 19.)

Question 11: Are any of these facilities in the design or right-of-way
stage? 1. Yes 2. No

Question 12: Are any of these facilities in the construction phase? 1. Yes
2. No

Question 13: Are there plans for any of these facilities to be new roads
built on new alignments? 1. Yes 2. No

Question 14: Are there plans to toll a roadway that is currently untolled?
1. Yes 2. No

Question 15: Are there plans for any of these facilities to be new lanes
added to roadways that are currently untolled? 1. Yes 2. No

Question 16: Are there plans for any of these facilities to be HOT lanes
(in which single occupancy vehicles can gain access to HOV lanes by paying
a toll)? 1. Yes 2. No

Question 17: Are there plans for any of these facilities to charge tolls
that vary by time of day? 1. Yes 2. No

Question 18: Which of the following agencies would participate in managing
these planned toll road facilities? 1. State Department of Transportation
2. Public toll authority 3. Other state agency 4. Local or regional
government agency 5. Private entity

Final Questions

Question 19: Are there plans in your state to build any toll road
facilities for which an Environmental Review or a Record of Decision have
NOT been completed? 1. Yes 2. No

Appendix IV

GAO Contact and Staff Acknowledgments

GAO Contact

JayEtta Z. Hecker (202)512-2834

Staff
Acknowledgments

In addition to the individual named above, Steve Cohen, Assistant
Director; Mark Braza; Jay Cherlow; Bess Eisenstadt; Simon Galed; Moses
Garcia; Bert Japikse; Terence Lam; Liz McNally; and Don Watson made key
contributions to this report.

(544101)

www.gao.gov/cgi-bin/getrpt? GAO-06-554 .

To view the full product, including the scope

and methodology, click on the link above.

For more information, contact JayEtta Z. Hecker at (202)512-2834 or
[email protected].

Highlights of GAO-06-554 , a report to congressional requesters

June 2006

HIGHWAY FINANCE

States' Expanding Use of Tolling Illustrates Diverse Challenges and
Strategies

Congestion is increasing rapidly across the nation and freight traffic is
expected to almost double in 20 years. In many places, decision makers
cannot simply build their way out of congestion, and traditional revenue
sources may not be sustainable. As the baby boom generation retires and
the costs of federal entitlement programs rise, sustained, large-scale
increases in federal highway grants seem unlikely. To provide the robust
growth that many transportation advocates believe is required to meet the
nation's mobility needs, state and local decision makers in virtually all
states are seeking alternative funding approaches. Tolling (charging a fee
for the use of a highway facility) provides a set of approaches that are
increasingly receiving closer attention and consideration. This report
examines tolling from a number of perspectives, namely: (1) the promise of
tolling to enhance mobility and finance highway transportation, (2) the
extent to which tolling is being used and the reasons states are using or
not using this approach, (3) the challenges states face in implementing
tolling, and (4) strategies that can be used to help states address
tolling challenges.

GAO is not making any recommendations. GAO provided a draft of this report
to U.S. Department of Transportation (DOT) officials for comment. DOT
officials generally agreed with the information provided.

Tolling has promise as an approach to enhance mobility and finance
transportation. Tolling can potentially enhance mobility by reducing
congestion and the demand for roads when tolls vary according to
congestion to maintain a predetermined level of service. Such tolls can
create incentives for drivers to avoid driving alone in congested
conditions when making driving decisions. In response, drivers may choose
to share rides, use public transportation, travel at less congested times,
or travel on less congested routes, if available. Tolling also has the
potential to provide new revenues, promote more effective investment
strategies, and better target spending for new and expanded capacity.
Tolling can also potentially leverage existing revenue sources by
increasing private-sector participation and investment.

Over half of the states in the nation have or are planning toll roads to
respond to what officials describe as shortfalls in transportation
funding, to finance new highway capacity, and to manage road congestion.
While the number of states that are tolling or plan to toll has grown
since the completion of the Interstate Highway System, and many states
currently have major new capacity projects under way, many states report
no current plans to introduce tolling because the need for new capacity
does not exist, the approach would not generate sufficient revenues, or
they have made other choices.

According to state transportation officials who were interviewed as part
of GAO's nationwide review, substantive challenges exist to implementing
tolling. For example, securing public and political support can prove
difficult when the public and political leaders argue that tolling is a
form of double taxation, is unreasonable because tolls do not usually
cover the full costs of projects, and is unfair to certain groups. Other
challenges include obtaining sufficient statutory authority to toll,
adequately addressing the traffic diversion that might result when
motorists seek to avoid toll facilities, and coordinating with other
states or jurisdictions on tolling projects.

GAO's review of how states implement tolling suggests three strategies
that can help facilitate tolling. First, some states have developed
policies and laws that facilitate tolling. For example, Texas enacted
legislation that enables transportation officials to expand tolling in the
state and leverage tax dollars by allowing state highway funds to be
combined with other funds. Second, states that have successfully advanced
tolling projects have provided strong leadership to advocate and build
support for specific projects. In Minnesota, a task force was convened to
explore tolling and ultimately supported and recommended a tolling
project. Finally, tolling approaches that provided tangible benefits
appear to be more likely to be accepted than projects that offer no new
tangible benefits or choice to users. For example, in California, toll
prices on the Interstate 15 toll facility are set to keep traffic flowing
freely in the toll lanes.
*** End of document. ***