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 7: Finance Choice on a Beltway

David M. Levinson

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

Extract

INTRODUCTION Cordon tolls are becoming a popular method of restricting traffic and financing new infrastructure in cities such as Singapore, Oslo, Trondheim, and Bergen. Imperfect cordons, such as tollgates on a major highway without entrance or exit ramp tolls, have traditionally been used both in the early days of turnpikes and in more recent times on limited-access highway systems. In both cases, local trips do not pay tolls, while through trips (trips crossing the cordon) do. On the other hand, tax financing has been common both historically (where initially the tax was in terms of labor), and more recently for local roads, which are typically not funded through usage taxes such as gas taxes.' Taxes also rely on a cordon, the boundary of the relevant jurisdiction within which they are assessed. The preference for either of these two revenue sources as financing mechanism can be modeled as a function of trip length, jurisdiction size, and collection costs. Earlier chapters argued that since jurisdictions try to do well by their residents, who are both voters and travelers, local effects are central to the choice of a financing mechanism. This chapter approaches the argument analytically in a specific context, that of a beltway. The choice of tax or toll, while being historically contingent, is a fhction of the length of trips, the size of the jurisdiction, and the costs of collecting revenue and providing infrastructure. These properties indicate the nature of the free-rider problem under the two different financing mechanisms (tax, toll)...

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