Article Thumbnail

The Free-Flowing Economics of Toll Roads

Uh, why do some roads cost money? And where the hell does that money go?

There are 5,000 miles of toll roads — also known as turnpikes — in the nation, snaking across 35 states. How do they work? Where the hell does all that money go? And in all honesty, knowing how this country is, how come there aren’t more of them? We’re driving at some real answers here. 

Have toll roads always been a thing?

Yep — they’re at least 2,700 years old. The earliest known one was in the Neo-Assyrian empire, and connected Babylon with Susa (in modern-day Iran). Throughout history, there have also been tolls at mountain passes and on rivers.

What about in the U.S.?

The first was the Pennsylvania Turnpike, built in 1792, connecting Philadelphia and Lancaster. In fact, up until the 20th century (when the federal government started footing the bill), most highways were toll roads because local governments simply didn’t have the money to build roads, much less maintain them, so, according to the University of California Transportation Center, they threw it to private industry to get it done. They would often float bonds, then aim to pay it back with toll revenue, but it didn’t always go as planned — many highways didn’t make enough money, or poor planning rendered them roads to nowhere. Also, toll evasion was a thing back then, too.

Were people always trying not to pay?

Oh yeah — toll evasion was apparently pretty popular. There’s even a term for it: “shunpiking.” Usually people would simply find routes around the tollbooth. 

So why are highways mostly free now?

You have President Dwight D. Eisenhower to thank for that. Let’s back up, though: According to the Federal Highway Administration, around World War I, the need for longer roads that connected to factories became clearer. And in 1921, the Federal Aid Highway Act brought federal dollars to states to help build roads and bridges. As the nation expanded and the growth of the automobile continued through World War II, and then suburbs proliferated, the need for an interconnected network of highways was clear.

Eisenhower signed the Federal Aid Highway Act of 1956, which implemented the Interstate Highway system we have now (as a young soldier, he traveled a very shitty Lincoln Highway across the country, and later marveled at the autobahn in occupied Germany, so he was a big fan). It was mostly funded by the Highway Trust Fund, which draws a lot of money from the federal fuel tax (currently 18.4 cents a gallon, which has remained unchanged since 1993). Nowadays, federal highways are owned by the states in which they’re built, though they’re still funded largely by federal dollars, and to a lesser extent, with state and local taxes.

This being the height of the Cold War, though, there was naturally a military application to this massive infrastructure move: In the event of a Soviet ground or air attack, nearly every Air Force base sits near an Interstate highway, as do most military bases. So… maybe thank the Russians as well?

It feels like these roads are always crowded — don’t toll roads offer a solution to congestion?

They do — in fact, some economists like to compare free highways to Soviet bread lines: an artificially low-priced good that inevitably becomes overused. But you’ll have to work hard to convince your fellow citizens of the libertarian merits of toll roads, because they are generally unpopular, politically. This may shock you, but it turns out that people generally don’t like to pay for stuff. Among the popular arguments against toll roads is the fact that, like a fuel tax, it’s regressive, i.e., a tax that disproportionately impacts poorer people.

What about all the toll roads that currently exist?

Many existing toll roads were grandfathered into the Interstate Highway system once the government realized it’d be much easier to simply keep them than building a free, parallel freeway, or paying off all the toll roads’ existing bonds. Some toll roads — looking at you, New York, New Jersey, Pennsylvania, Ohio, Indiana, Illinois, Kansas, Oklahoma, Massachusetts, New Hampshire, Maine and West Virginia — continue to collect tolls even though they’ve been paid for, for a while.

Do former toll roads ever become free?

Yes! Freeways in Connecticut, Kentucky, Maryland, Texas and Virginia, have been paid off and had the tolls removed.

So where’s the toll money go?

There are a few different possibilities. Often it goes to maintenance, highway improvement projects or into the state’s general fund. Sometimes it goes into the operator’s pocket (more on that in a bit). In other cases, it goes toward tangential things. A great example is the Golden Gate Bridge: Even though it’s a cash cow, the price is hiked every few years (it’s now more than $7 to cross) but only 36 percent of that money goes toward actually funding the bridge. The rest goes to the local highway and transportation district’s other modes of transportation — ferries and busses — which run deficits. The idea of subsidizing a costly, less-popular form of transportation rankles some people, but for one thing, the ferry and bus services are state mandated. Secondly, the effects of the bridge toll are, in theory, twofold: It funds the other stuff, which funnels commuters onto the other transport modes due to their subsidized prices — and, ideally, keeps the bridge traffic uncongested.

What about new toll roads? How do those work?

Let’s take Orange County, California, as an example. The Transportation Corridor Agencies were established in the 1980s by the California state legislature as two joint entities to plan, finance, construct and operate toll roads in the county. The funding came from tax-exempt bonds with the understanding that taxpayers aren’t responsible if they don’t earn enough revenue to pay back the bonds. They’re maintained by the entities and are scheduled to become free public freeways by midcentury.

In some cases, this arrangement, known as BOT (build, operate, transfer) allows the operator to keep all the profits generated by tolls. In the case of Orange County toll roads, they keep restructuring their debt and pushing back the pay-off date.

How much money is saved by eliminating manned toll booths?

That’s a sore subject to toll operators — some in New Jersey kept their jobs after agreeing to salary cuts back in 2011. But the savings can be huge: By converting to those electronic toll tags like E-ZPass or FasTrak, states like Florida saved $10 million a year; the Golden Gate Bridge is projected to save $16 million over eight years. 

Can the government just turn a freeway into a toll road?

Not currently. Federal law prohibits putting tolls on Interstate Highways, or at least tolling all lanes of the freeway. But the 2005 SAFETEA-LU Act allowed for the building of tolls for individual lanes, creating fast lanes that cost money, which often double as HOV (carpool) lanes. Groups like the Alliance for Toll-Free Interstates, however, warn that there are carve-outs in federal law that at least open the door for tolling in specific instances. 

So far, public opposition has kept these projects from getting approved. The public, it seems, largely wants to keep their freeways free (or at least, paid for by fuel taxes).