MAKING TOLLING TRANSPARENT: ANALYZING PROCESSES USED TO ALLOCATE & DISTRIBUTE TOLL HIGHWAY REVENUE IN MULTIPLE STATES David Weinreich, Ph.D. 1 MAKING TOLLING TRANSPARENT: ANALYZING PROCESSES USED TO ALLOCATE & DISTRIBUTE TOLL HIGHWAY REVENUE IN MULTIPLE STATES FINAL PROJECT REPORT By: Principal Investigator David Weinreich, Ph.D. Thomas Scott S. Matthew Reeves Shima Hamidi, Ph.D. University of Texas at Arlington Sponsorship (CTEDD) Center for Transportation, Equity, Decisions and Dollars (CTEDD) USDOT University Transportation Center The University of Texas at Arlington 601 W. Nedderman Dr. Suite 103 Arlington TX 76019-0108 United States Phone: 817-272-5138 | Email: [email protected] In cooperation with US Department of Transportation-Research and Innovative Technology Administration (RITA) 2 Acknowledgment This work was supported by a grant from the Center for Transportation Equity, Decisions and Dollars (CTEDD) funded by U.S. Department of Transportation Research and Innovative Technology Administration (OST‐R) and housed at The University of Texas at Arlington. We would like to thank CDM Smith, Inc. for use of their historic toll rate data, and Ron Davis for guidance in conducting our case selection. 3 Disclaimer The contents of this report reflect the views of the authors, who are responsible for the facts and the accuracy of the information presented herein. This document is disseminated under the sponsorship of the U.S. Department of Transportation’s University Transportation Centers Program, in the interest of information exchange. The Center for Transportation, Equity, Decisions and Dollars (CTEDD), the U.S. Government and matching sponsor assume no liability for the contents or use thereof. Interviews were conducted with the consent of the interviewee, and are cited only when interviewees agreed to be on the record. Interviewees were given the option to speak off the record. 4 Technical Report Documentation Page 1. Report No. 2. Government Accession No. 3. Recipient’s Catalog No. 4. Title and Subtitle 5. Report Date Making Tolling Transparent: Analyzing Processes Used to Allocate & Distribute 8-31-2019 Toll Highway Revenue in Multiple States 6. Performing Organization Code 7. Author(s) David Weinreich, Thomas Scott, S. Matthew Reeves, Shima 8. Performing Organization Report No. Hamidi 9. Performing Organization Name and Address 10. Work Unit No. (TRAIS) Center for Transportation, Equity, Decisions and Dollars (CTEDD) USDOT University Transportation Center 11. Contract or Grant No. The University of Texas at Arlington CTEDD 018-01 601 W. Nedderman Dr. Suite 103 Arlington TX 76019-0108 United States 12. Sponsoring Organization Name and Address 13. Type of Report and Period Covered United States of America Department of Transportation 14. Sponsoring Agency Code Research and Innovative Technology Administration 15. Supplementary Notes Report uploaded at www.ctedd.uta.edu 16. Abstract Transportation finance has become increasingly unreliable in recent years, due to the declining revenue available from the motor fuel tax, increasing auto efficiency, and political reluctance to raise taxes. Some states have relied on toll revenue and other user fees to overcome these revenue challenges. However toll roads are often unpopular, due to poor transparency stemming from uncertainty over whether tolls will be used to support the facility and the drivers who use it, or support other uses generally deemed to be socially equitable. Despite growing interest in toll finance, there is little understanding in the transportation literature of how independent local tolling agencies decide to raise and spend money. This study hypothesizes that different toll road governance models provide varying incentives to raise tolls and spend them on various purposes. This study catalogues toll roads from across the US, using state enabling legislation to classify toll roads by governance type (e.g. private, public-private-partnership, public corporation, independent regional/local special agency, independent state agency, state-managed, though there may be others). This study selects a representative sample of 60 toll roads across 20 US states, chosen based on their governance type, centerline miles, and rate of toll increase since 2007. This study examines meeting minutes, comprehensive annual financial reports and other primary sources to identify whether/how much tolls were increased/decreased, and for what purpose, identifying incentives for toll roads to spend money differently based on motivations like public or private status, geographic scope and level of government, among other motivating factors. This study also interviews staff members and elected officials from five toll road agencies, providing further details on why they made decisions to raise or lower tolls, how they intended to use the money, and their relationship to other state and local governments. 17. Key Words 18. Distribution Statement Toll, Managed Lane, Management, Governance No restrictions. 19. Security Classification (of this 20. Security Classification (of this 21. No. of Pages 22. Price report) page) Unclassified. Unclassified. 167 N/A 5 SECTION 1: ABSTRACT Transportation finance has become increasingly unreliable in recent years, due to the declining revenue available from the motor fuel tax, increasing auto efficiency, and political reluctance to raise taxes. Some states have relied on toll revenue and other user fees to overcome these revenue challenges. However toll roads are often unpopular, due to poor transparency stemming from uncertainty over whether tolls will be used to support the facility and the drivers who use it, or support other uses generally deemed to be socially equitable. Despite growing interest in toll finance, there is little understanding in the transportation literature of how independent local tolling agencies decide to raise and spend money. This study hypothesizes that different toll road governance models provide varying incentives to raise tolls and spend them on various purposes. This study catalogues toll roads from across the US, using state enabling legislation to classify toll roads by governance type (e.g. private, public-private-partnership, public corporation, independent regional/local special agency, independent state agency, state-managed, though there may be others). This study selects a representative sample of 60 toll roads across 20 US states, chosen based on their governance type, centerline miles, and rate of toll increase since 2007. This study examines meeting minutes, comprehensive annual financial reports and other primary sources to identify whether/how much tolls were increased/decreased, and for what purpose, identifying incentives for toll roads to spend money differently based on motivations like public or private status, geographic scope and level of government, among other motivating factors. This study also interviews staff members and elected officials from five toll road agencies, providing further details on why they made decisions to raise or lower tolls, how they intended to use the money, and their relationship to other state and local governments. SECTION 2: INTRODUCTION Highway finance has become increasingly unpredictable, with declining gas tax proceeds due to inflation and fuel efficiency. As many regions and states move towards greater use of tolls and public-private partnerships for their funding, toll road governance and its impact on funding decisions needs to be better understood. This report examines how the decision process over revenue distribution is related to the road ownership model itself. It examines whether there are incentives built into legislation and the system of ownership that might incentivize use of funds toward continual road construction, road maintenance, or more socially redistributive uses like support for public transit. This is a particularly pressing question because of the large amounts of money involved, the growing use of tolls, and the sometimes-limited access to toll revenue streams by non-tolling transportation providers like MPOs and transportation agencies. In particular, toll roads are known to create social inequities simply by denying use to people with inadequate income to pay the tolls. However, this could be rectified by using tolls to offer transit services. This study theorizes that some governance models may incentivize use of revenues for non-tolling purposes that promote equity, while other models may not. This report builds upon an existing literature on toll road finance, which has not previously examined the process for using funds in great detail, though tens of billions of dollars are at stake, and tolls are an increasingly important source of revenue as motor fuel tax revenues 6 stagnate due to inflation. Pitfalls for poorly managed toll roads can be costly, as seen from SR 91 in California, which cost public agencies hundreds of millions of dollars (the exact cost is unclear) to correct. This report provides insights that will help academics and practitioners better understand the connection between governance method and revenue allocation decisions. The results will help design toll road institutions that support intended policy goals and ensure transparent decisions over use of the money. SECTION 3: BACKGROUND LITERATURE Toll finance has continued to grow in importance as a revenue source for roads in the United States, as gas tax revenues have gradually declined due to increasing fuel efficiency, and inflation. Many states have turned to