Many states, including neighboring Indiana and Illinois, have
been exploring ways to use the private sector to help build and maintain roads
and highways. Unfortunately, this hasn’t been happening in Michigan. If this
state wants to improve mobility — and reap the economic benefits that result —
we need to take advantage of public-private partnerships.
One way to accomplish this is through the use of toll roads.
Generally, toll roads make sense when they are able to catch drivers passing
through a region. But unlike Indiana and Ohio, where there is a high percentage
of through users making interstate journeys, most Michigan road users are state
residents. Florida also enjoys an advantage since many of its road users are
from out of state. Given Michigan’s geography, it simply doesn’t experience that
kind of out-of-state traffic. Tolls are also not a very efficient means of
collecting road taxes — it takes capital improvements, electricity and manpower
to collect tolls. A cents-per-gallon fuel tax is a much more efficient means of
collecting fees for road use as gas stations are able to collect and distribute
the revenue to the state without much additional cost. And like tolls, a gas tax
follows a user-fee principle. The more a person drives, the more they pay, and
the more fuel efficient a car they use, the less they pay, therefore promoting
Selling some of Michigan’s roads and using the proceeds to
invest in other roads is probably not a viable option. Neighboring states and
cities — like Indiana and Chicago — have pursued this option. For instance,
Indiana received $3.8 billion for a 75-year lease and Chicago has just received
$1.83 billion for 99 years for the 7.8-mile Chicago Skyway. A number of other
states have also pursued or are considering the sale of roads. But they either
are building brand new roads or had existing public toll roads to sell. This is
a critical difference. Roads built with federal money are required to be
toll-free, so Michigan would have to pay back federal funds — up to 80 percent
of the total cost in some instances — if it wanted to make an existing highway a
In addition, if Michigan were to convert entire existing roads
to tolls, it would have to add actual toll booths at exits since there would be
no way to require all users to have automated technology. Installing toll booths
would be very difficult given the space available at many exits. The resulting
changes in driving behavior and use or non-use of exits would be extremely
disruptive to businesses located at the exits and would likely bankrupt many of
them. The only other option would be to use a photo-based toll collection system that might be a hard sell given privacy concerns.
One possible opening in Michigan for selling or leasing an
existing public road would be the Mackinac Bridge. Federal aid would have to be
repaid, but only in 1950s value dollars, making the cost more manageable.
However, the price that could be obtained would be limited by modest traffic
levels. The new lease holder or owner would also have to raise tolls by enough
to pay back the cost of the bonding incurred to pay the state an upfront price.
There would likely be a considerable outcry in the Upper Peninsula about the
higher tolls and placing the bridge in private hands, because it is the only
traffic route connecting Michigan’s two peninsulas. Two other options involve
sale or lease of the Michigan-owned half of the Blue Water Bridge and/or the
Detroit-owned half of the Detroit-Windsor Auto Tunnel.
Should the sale of existing roads ever be considered, the level
of tolls would of course have to be part of that decision. Quite high toll
levels can be necessary to cover the debt costs that private firms incur. For
instance, in Indiana the consortium that is leasing the Indiana tollway is
paying the state $4.3 billion that will have to be recouped in tolls. And those
tolls will be over and above current rates that the state charges to recoup
construction and maintenance costs.
For these reasons, the sale of existing Michigan interstates is
probably not viable. However, should there be a need to construct major new road
segments, such as a U.S. 23 extension to the north or an expanded I-96 between
Grand Rapids and Grand Haven, then private toll roads could be considered. Since
Michigan is not growing, it is generally not in need of major new roadways.
Instead, from an expansion standpoint, it is more in need of new interchanges
and lane additions to address the congestion already present in some areas.
This is where one extremely viable toll option comes into play
for Michigan: adding lanes to existing southeast Michigan interstates under
federal tolled "express" or "hot" lane programs. With urban congestion in
southeast Michigan forecasted to increase by large percentages over the next 30
years, there is a critical need to address funding for additional lanes. These
funding requirements are very large. For instance, six miles of reconstruction
on I-94 has an estimated cost of $1.4 billion, with I-75 in Oakland County
costing $1 billion. Coupled with the need for additional lanes on these and
other roads, such as U.S. 23 north of Ann Arbor, it is clear that existing
funding sources cannot begin to meet the need.
The new federal tolling option allows for up to 15 demonstration
projects where the public or private sector can add a lane to an existing
interstate and charge tolls to fund the investment. Previously, tolls were not
allowed on federally funded interstates unless all previous public investment
was paid back to the federal government. These new toll lanes are not allowed to
use traditional toll booths and must instead utilize new transponder technology
to automatically invoice customers. Tolls can be fixed or variable for express
lanes that do not require high occupancy vehicles. For Michigan’s interstates it
would be advisable that these tolls be variable and based on congestion levels
at different times of the day. If the new lanes did not have to require high
occupancy vehicles, they might generate more use.
Overall, the automated tolling program is a tremendous
opportunity for Michigan to address major congestion problems along key routes
while generating at least $1 billion of additional highway revenue over time.
Michigan needs to seriously consider this kind of tolling program. Minneapolis
has already implemented a similar program on I-394. The Bush administration’s
budget proposal for fiscal year 2008 included $130 million in grants to help
states pursue this option. The proposal would make 10 grants to states under
this program, and recommends an additional $175 million in funding for fiscal
There is always a danger that tolls will not generate enough
revenue to make a project feasible. However, the idea should at least be
Using a somewhat different program, the U.S. Department of
Transportation announced a new "Corridors of the Future" congestion reduction
program, which will make available new financing options and expedite
permitting. Michigan should seek to have the interstates around Detroit
designated as Corridors of the Future this summer. The Chicago area, with
portions of I-80, I-90 and I-94 (including portions in Michigan), was just
selected for this program. Michigan needs to be next, and such a designation
might improve Michigan’s odds of being picked for one of the express lane
designations and grants.
It is time for Michigan to move forward with planning for
southeast Michigan lane expansion and express/hot lane options with automated
congestion tolling should be a key funding source. As part of this effort,
Michigan should also enact comprehensive legislation outlining the way these
toll programs would work, as a number of other states already have.
Dr. Taylor is associate professor of Marketing and Logistics at Grand Valley State University.