Financing Transportation Networks

Financing Transportation Networks

Transport Economics, Management and Policy series

David M. Levinson

Pollution, alternative fuels, congestion, intelligent transportation systems, and the shift from construction to maintenance all call for a reconsideration of the existing highway revenue mechanisms, especially the gas tax. David Levinson explores the fundamental theoretical basis of highway finance, in particular the use of tolls, and supports that theory with empirical evidence. The author examines highway finance from the perspective of individual jurisdictions and travellers, and considers their interactions rather than specifying a single optimal solution. Congestion pricing has long been a goal of transportation economists, who believe it will result in a more efficient use of resources. Levinson argues that if the governance were to become more decentralized, and collection costs continue to drop, tolls could return to prominence as the preferred means of financing roads for both local and intercity travel. An approach that creates the local winners necessary to implement road pricing is required before it can be expected to become widespread.

Chapter 2: History

David M. Levinson

Subjects: economics and finance, public finance, transport, environment, transport, urban and regional studies, transport


INTRODUCTION Transportation financing has been around since the beginning of organized transportation. The ancient Greeks placed a coin, Charon’s toll, in the mouth or hand of the dead person to pay Charon for ferrying the spirit across the River Styx to the Elysian fields. And it is still traditional in some places to place pennies on the eyes of a dead person prior to burial, as noted in the Beatles song ‘Tax Man’.’ Given the long history of paying tolls, the past, both ancient and recent, may have something to teach us about the future of toll road financing. In particular, fundamental factors in the historic rise and decline of turnpikes, such as transaction costs, jurisdiction size and trip length, and the nature of the free-rider problem (in both the original and modem sense of the term), need to be understood before new efforts are likely to succeed. Hybrid solutions which have been tried in the past and remain in limited current use, such as lower rates for local traffic and mixed financing between toll revenue and local tax rates, may enable new efforts, while theoretically efficient solutions such as pure usage charges remain politically infeasible or economically impractical. This chapter provides institutional background both to corroborate the free-rider hypothesis posed in this book and to show the complex issues which suggest that additional factors need to be considered to fully explain revenue choice. Explanations for the decline of turnpikes in the nineteenth century cite the new modes of transportation,...

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