Published in Economic Development

Toll roads in Michigan? Lawmakers and interest groups want a closer look

BY Sunday, December 08, 2019 07:05pm

Consensus is building in Lansing over studying the potential for toll roads as a future transportation funding source, but whether Michigan will join the nearly three-dozen states in doing so remains unclear.

Senate Bill 517 would require the Michigan Department of Transportation to study the feasibility of tolling interstate highways. An outside consulting firm would look at revenue projections based on optimal tolling rates, vehicle counts and types by state, and how much traffic might be diverted to local roads. If the governor “determines that tolling is the best means of achieving major interstate system improvements” in the state following the study, a strategic plan may be issued by March 2021, according to the bill.

Michigan Chamber CEO Rich Studley COURTESY PHOTO

The Senate Transportation Committee on Nov. 7 advanced the bill, which is sponsored by state Sen. John Bizon, R-Battle Creek. The Whitmer administration is supportive of the feasibility study.

“I’d very much like to see out-of-state travelers paying a few extra dollars for using our roads,” Bizon told MiBiz. “The intent is this will come back to the legislature to see whether we want to proceed down this road and to give us better information on a decision we’ve got to make going forward.”

‘Unlikely solution’

While a cost-benefit analysis could lead to action by the administration, interest groups appear divided over the concept. 

Some groups, including the Michigan Chamber of Commerce, are skeptical that the revenue from toll roads would outweigh the cost and potential effects on communities where traffic may be diverted. 

“While it might be timely for the legislature to do another study, (toll roads) are not a quick fix or a silver bullet,” said Michigan Chamber CEO Rich Studley. 

Another issue often raised is that Michigan — being a peninsula state — wouldn’t realize significant revenue compared to states like Ohio and Illinois that get cross-country traffic.

“We’re just not in that lower tier of pass-through states with a lot of east-west national traffic,” Studley said. 

While the group is open to tolling ahead of details from a study, “whether it’s still practical and would generate the revenue people would hope is a real hard question to answer,” Studley said. “It’s a fair question, but it isn’t going to provide a substantial increase in revenue, the kind that’s needed to adequately finance a statewide solution.”

The nonpartisan Citizens Research Council issued a road-funding report in February that calls toll roads an “unlikely solution” to the state’s infrastructure woes, particularly since Michigan isn’t a pass-through state.

According to the report: “As a result, revenues from tolls would primarily come from Michigan residents. Toll roads can also be somewhat regressive, as they are a flat user fee, which can be burdensome on low-income users. Finally, adding tolling infrastructure would be costly and inconvenient for drivers. Ultimately, these problems make tolling an unlikely solution for generating significant new revenues.”

Studley said a “more viable” option versus toll roads is giving municipalities the chance to raise revenue locally, likely through a registration fee.

“Some counties in Michigan would probably approve a local registration fee option,” he said.

Another option

While Michigan may not be a pass-through state, it does have substantial tourism and international truck traffic, Bizon counters.

The Michigan chapter of the American Council of Engineering Companies — whose members help design and inspect the state’s roads and bridges — takes a more optimistic view of tolling potential. 

“We need to study various alternatives,” said Ron Brenke, the chapter’s executive director.

Michigan’s gas tax and vehicle registration fees haven’t “kept up with the necessary cost of repairing, and they’re not very popular,” Brenke said. “(Tolls) could be a viable alternative.”

The Reason Foundation, a libertarian think tank in Washington and California, submitted testimony to the Senate Transportation Committee in support of the bill and tolling more broadly. The group calls the current gas tax formula outdated and less popular among voters.

Baruch Feigenbaum, Reason Foundation’s assistant director for transportation policy, notes that the cost of administering tolls in the 20th century was as high as 25 percent of the revenue collected. New tolling technology has brought collections down to around 10 percent.

“Most experts believe as tolling and technology improve, the overall cost will decline to less than 5 percent, roughly equivalent to the gas tax,” Feigenbaum wrote.

While other states actively explore toll roads, Brenke said more revenue options are needed as the interstate system further crumbles and reaches the “end of its design life.” 

Tolls would generate revenue for a particular interstate where they’re located, freeing up funds for other projects, he added.

“For us, it’s really not about where the money comes from. We’re concerned at what we see when we do inspections,” Brenke said of member companies. “We just want to see Michigan take care of these things that are so important to our economy.”

A fuel-efficient and electric future

Toll roads in Michigan have been considered for nearly 70 years, prior to the federal buildout of the interstate system in the late 1950s. While states have been mostly prohibited from converting federally funded interstates to toll roads, tolls can be used to fund new routes or replace free-access roads. States also can participate in a federal pilot program to add tolls.

In Michigan, much of the road-funding debate has centered on a proposal by Gov. Gretchen Whitmer to increase gas taxes by 45 cents per gallon, which would raise about $2.5 billion a year in new revenue.

However, a focus on raising the gas tax ignores the shift expected in the coming decades to fuel-efficient, alternative fuel and electric vehicles, critics say. Michigan automakers, particularly Ford Motor Co. and General Motors, have set ambitious plans to manufacture electric vehicles in the coming decade.

Feigenbaum notes the gas tax is an increasingly “unsustainable and unfair way to pay for roadways. The increase in electric vehicles, hybrids and more fuel-efficient conventional vehicles have made the gas tax increasingly complicated to administer.”

Bizon called a type of user fee “much more palatable to many people” compared to gas taxes.

“I think we do need to move away from having a fixed gas tax as our manufacturing makes automobiles much more fuel efficient,” he said. “That move to electric vehicles suggests a gas tax is not going to fund our roads for the long-term future.”

Whether tolls can generate enough revenue to meet Michigan’s multi-billion-dollar road-funding needs remains to be seen. While the Reason Foundation advocates replacing — rather than supplementing — the gas tax with tolls, others are skeptical tolls amount to that type of silver-bullet solution.

“I think this exploration of alternatives and local options is helpful, but it’s not a substitute for a comprehensive statewide solution,” Studley said. “That’s the dilemma.”

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