Tolls aren’t Green

04 Feb Tolls aren’t Green

posted Feb 4, 2013 from Seattle, WA

The above schematic covers the key points I make in the diatribe below, which also gets into the more specific political issues in the I-90 tolling debate as well as the more general issues of taxation vs profit-on-publicly-owned-assets.

Disclaimer: I say harsh things about the Washington Dept. of Transportation in the following comments.  They aren’t personal.  The folks who work for WADoT are dedicated professionals trying to do the best for their state.  Indeed, the horrendous decisions to toll 520 & particularly I-90 stem from their ardent desire to give us what they see as the best and spiffiest new bridge money can buy.

The text of the ad above that ran in the A-section of the Seattle Times Feb. 5, 2013 is as follows:

Tolls aren’t Green

 We already have a near-perfect* funding mechanism for highways–the gas tax.  Tolls in contrast are pollution-insensitve, inefficient, economically irrational. & manipulative.

 Here’s my thinking behind the words, and the last shall be first:

 Manipulative

 This is one crux of the current bridge-tolling issue.  To watch the Washington State Department of Transportation (WADoT) as it meandered its way to the current push for I-90 tolling over the last decade has been a veritable study in the art of manipulation.  The budget shortfalls that must now be addressed by tolling were meticulously planned into the process all along—including an overestimate of tolling revenue from 520 so the two tolls—on 520 and I-90–could be introduced in a step-by-step fashion.    

A Great Blue Heron, a sailboat, a dead branch and the soon-to-be-old 520 Bridge.

Amazingly, the 520 Project was conceptualized and its execution begun without a any funding plan whatsoever for the last $2 billion or so of its cost.  The project had to be rushed, it was claimed,  because it was getting old and in danger in an earthquake or storm. 

This turned out to be half-true:  the portion of the bridge that needed a safety-fix, the over-lake portion, could have been fixed in the absence of going over-budget if the entire makeover wasn’t included in the project.   But the DoT had no interest in staying within its own budget.  It was trying instead to get the mega-project rolling and create a fait accompli.  Nobody wants to pay tolls, but nobody wants a half-built- bridge with cars flying off the roadway into the deepest part of the Lake either. 

Tolls were chosen because the public had already rejected a gas-tax increase statewide, and what’s perhaps more important, the population could be segmented and communities could be played off against each other to defeat the tolling opponents (notice the nasty things that have already been printed in the Seattle Times against Mercer Islanders, including a letter blaming all of them for something that happened 30 years ago).  And the lingering prestige of tolling, which has occasionally and unfortunately sometimes received support from sections of the environmental community and which has an (I would argue) wrongly-deserved good reputation, works in favor of getting this revenue source written into law.

But tolls aren’t green (more on that later), and the public now should resolve to play as good a game of poker as the DoT and simply refuse the tolls and stand pat.  The DoT then should rewrite its budget so as to slow down the project and simply live within its means.  If the DoT wants more money it should ask the public to increase the gas-tax, and if the public won’t, then the DoT should get out of the manipulation-business entirely, take the public as its master and not plan deficit-funded projects. *

Economically Irrational

 “Tolls… are the epitome of the user fee,” Chamber of Commerce President Steve Leahy told the Seattle Business Journal.  Admittedly, and truly, they are paid by users and therefore do not dip into the category of atrocious—and there are people in this day and age who want to degenerate toward highway-funding mechanisms that aren’t paid by users.

But are they, really, conceptually, user-fees?  No, actually, they are road-monopoly fees—fees charged to people who have poor or no route-alternatives.  In our region’s road system as a whole, the two bridge tolls amount to pinch-point fees, not so much fees paid by users of the region’s roadways as fees paid by whatever poor unfortunate soul has no choice but to cross the pinch-points.  This view is being validated in slow motion as WA DoT is beginning the process of abandoning the idea of tolling the 99 Tunnel.  The difference between the Tunnel and the Bridges is not the degree of capital financing needed, but the difference in the degree of monopoly the tolled roadway commands.  People going north on 99 can simply scoot over to 5^th Ave or 1^st and avoid the tunnel, but going around Lake WA would be an arduous process for many who currently use the bridges.

Hwy99: It had similar capital requirements, but it had no georgraphical monopoly, hence tolls, the supposed user-fee, cannot and probably will not be deployed

Because it is a roadway-monopoly tax and not an egalitarian road-system-user-fee like the gas tax, it shares characteristics with irrational taxes the world over: Why not tax everyone with an L, H, T or S in their license plate? Let’s tax blue cars! Taxes that are inherently irrational create tax-avoidance behavior that is likewise irrational and has unintended consequences.  A very predictable consequence of these tolls will be to divide our region east and west of the Lake.  Have friends on the Eastside?  Give them a hug before the imposition, you may not see them soon.  And that’s only one of the negative consequences of an irrational tax.  To say, “no one is going to sell their house on Mercer Island or quit going there simply because of these tolls,” is to willfully ignore the fact that both of those behaviors will happen to some degree.  They will be directly incentivized at some level and the economy will begin to distort in those directions.

 Tolls are pollution-insensitive

There is a vast move afoot amongst DoTs everywhere to move away from the gas tax and toward various new funding schemes. The situation in Virginia is egregious.  There Governor Bob McDonnell wants to scrap the gas tax and raise the sales tax by .8% to pay for roads.  Says his Secretary of Transportation:  “The gas tax isn’t the moneymaker it used to be. Americans are driving more miles yet using less gas, thanks to more fuel-efficient cars.”  This guy hates what we all should be happy about—our transportation fleet is becoming more efficient and less polluting thanks to market forces and the market discipline of user-fees.  (No wonder the GOP lost every contested race.)  (McDonnell is GOP)  But make no mistake about it, this is bipartisan.  The  DoTs, whether their masters are Dems or Repubs, are chafing at the decreasing revenues the gas tax raises, and looking for new and usually evil new funding sources. 

Can you spot the perfect user-fee in this photo. And yes, I took it a while ago as the prices indicate.

This is a very unfortunate development.  As we learn more about the externalities of fossil fuels—(the costs they impose on society and the economy that are not paid by the buyer), it becomes more, not less important to put a price on the burning of carbon.  Gas tax does this implicitly, and also implicitly measures damage to the road surface.   A Geo Metro treads lighter than a Hummer on an asphault surface.  When they pay gas tax, the bridge, the Hummer pays more for these costs than a Geo, as it most certainly should.  But the two cars would pay the same toll.  Tolls provide zero or incentive to save gasoline and reduce your Carbon outlay, since you pay by the carload.  .

The gas-tax also is proportional to the crash-aggressiveness of a car.  If you get hit by a Geo Metro screaming through a red light at 80, that beats being hit the same way by a Hummer, and the gas tax more correctly reflects that relationship than tolls do.  If gas taxes actually under-tax extremely light vehicles such as bicycles, think of it as compensation for the externalities that extremely-light vehicles face in the way of crash danger.

The fact that the DoTs are so eager to move away from the gas tax should trouble us all.   It should concern us that our DoT is a “Captured Bureaucracy,” captured by the paving industry and other large interests who want to see money spent.   We must guard against the likelihood that the DoT’s primary goal is not to carefully steward transportation dollars but to get more of those dollars and spend them on lavish monuments that we don’t need.  Beware of a DoT cost-benefit analysis when for the DoT, the cost IS the benefit.

Inefficient

 Inefficient is a key reason why tolls are the wrong way to go. 

Let’s begin by stating the facts, which you rarely hear from the DoT or the Press.  The Gas-tax costs almost nothing to collect.  It does not need a new bureaucracy to administer, and it’s very hard to evade.  It doesn’t create a new class of criminals who are trying and in some cases succeeding in evading it.  It doesn’t require you to take the time and trouble to write an expensive check with an expensive stamp to send money to the state. 

By comparison tolls are about as ugly and inefficient a revenue source as you can get.  In one recent case, the state even successfully took the position that a woman owed the toll fee for crossing the 520 Bridge and fine ($400 plus or minus) even though it was determined that she never actually got the bill in the mail.   She should have simply known to pay it! 

One thing the press should be faulted for not ever reporting (unless I missed those articles, which is possible) is the tax efficiency of tolling.   What percentage of the money collected is used to administer the tolls?  Included in this on the cost side should be all the time devoted to this by public officials plus the time these tolls and tolling-non-payers take from the court system, which has its own funding shortfalls.

Near-perfect

 One last phrase I might explain from the ad is “near-perfect,” regarding the gas-tax.   Electric cars are on the way, some say, and they can’t arrive soon enough, in my opinion, to help slow down the destruction of the Tar-sands region, help the world climate and  to help end the scourge of biofuels on the rain forests of the world.  But if you listen to the DoT beat up on the gas tax, you’d think 40% of the people were already driving them.  I do not share the DoT’s pessimism, (it would be optimism if I believed it) that electric cars will make significant inroads in a hurry, but if they do, the gas tax could easily be fixed to accommodate electric cars.

Others have for over a century now criticized the fact that bicycles also get a free ride.   They do but I view this as compensation for the externality that they have to deal with more than the rest of us:  the danger of being hit by a non-law-abiding driver of a car. This is external to the market.  As soon as we solve this problem we should begin charging them for the roadway, but not before.

PS. Texas-style tolled highways

If you google tolling and environmentalists it’s easy to find cases all over  the country where greens are fighting tolled highway projects.  The various state DoTs have farmed-out new highway construction projects and are rewarding the private-sector builders with the right to collect tolls.  Or they are funding new projects they are doing in-house with tolls, ala the 520 bridge.

 At first glance all this looks like market discipline.  If the road weren’t going to be profitable, it wouldn’t be built.  A profitability test should be welcomed by environmentalists who have had to fight endless numbers of government projects in the past, be they water projects, highway projects, airports, etc. that would be able to pass a free-market profitability test. 

But look again.  In cases like these, the private road-builder is given eminent domain for free.   This is a huge gift if the free market value of the eminent domain power is not priced and charged as rent to the highway builder, which it never is. 

Another question to be asked is whether the highway operator is paying rent on the land used.  Also, are they paying property tax, and if not, why not?  It’s my belief that drivers should pay property tax on the roads.   Trains have to pay property tax.  Why should a rural county in Kansas not receive payments if they have to cede land to a divided Federal highway that people are whizzing by on?  Also, this would level the playing field and bring efficiency and integrity to our system of free-market pricing, the cornerstone of our wealth.

There are two more deficiencies in these toll projects in my opinion.   They don’t pay a profit to the owners, in this case the public, and they don’t pay a fee for the external costs that they generate.  The first idea is not yet on the radar for the body politic.  It should be.  No one thinks twice about the fact that Washington state’s publicly owned forests (Dept of Natural Resources lands) have to return a profit to the general fund.  That’s a case of public assets that are held in nature.  When our public assets are held in business infrastructure, for some reason people don’t expect them to return a profit to us.  Thus King County in a test of its gullibility actually tithes to the Port of Seattle every year—even though the Port of Seattle is essentially just a business and potentially very profitable– and the road system and water storage systems, among others, return nothing.

My ears are burning from what conservatives would say here– that I’m suggesting more taxation and a larger public sector, but that is not the agenda here.  It’s crucial that proposals like these are linked rigidly to reductions in existing irrational or regressive taxes such as sales and property taxes  so that the change is revenue neutral. 

In the case of the second idea, a Carbon tax, that is very controversial still but could and should also be revenue-neutral: the one in British Columbia was.    But I’m getting far-afield of I-90 tolling and in any case, it makes a whole lot more sense to zero out Federal subsidies for oil, gas and coal producers before we start seriously discussing a Carbon tax.  After all, our moronic disfunctionality in continuing to subsidize this entrenched industry with massive external costs can hardly be overstated.

The public owns the forests and they return a profit with the money flowing to the schools. The public owns the Port and the money flows from the people to the Port. Clever Port

PPS.  PR Barrier to getting the DoT to live within its means

PPS.  If the public asked the DoT to live within it’s means (continued from section 1 Manipulative)…

If the above scenario were to be enacted—and don’t laugh, it’s possible for the public to stand up to powerful bureaucracies—it would be in the face of a massive campaign from the DoT that would suggest that the delay of various projects around the state would cost lives as unsafe roadways would have to remain unsafe for much longer, until funds became available to rebuild them to modern safety standards.  This argument, favored by DoTs everywhere, might have more merit if it weren’t part of the DoT’s overarching strategy of manipulation—to let dangerous roads continue to kill people until public support and funding allows for some big DoT project.  The DoT seemed almost pleased to announce (in a sign at Snoqualmie Pass) that the stretch of road to be fixed had a much higher rate of fatalities than an average stretch of highway.  If that was so, which it no doubt was, then why didn’t the DoT immediately lower the ridiculously high speed limit on that stretch and strictly enforce the new speed?  Speed is the mother of traffic fatalities, and the DoT, when it identifies a dangerous roadway, should not allow time to pass before addressing such a situation.  Big Projects always mean a lot of time will pass.  Speed Limits can be changed, and lives can be saved, beginning right now.

Part of a sign that was at the top of Snoqualmie Pass preceding the repaving project.

DoTs should do more with speed limits on dangerous stretches of road, so that we don’t have to wait until projects get funded to have a safe roadway.