One of the most fundamental policy choices is to what extent one set of road users will be asked to subsidize other pieces of the highway system.
We note first that until technology (and public acceptance) permit an assessment of vehicle mile charges based on an exact measurement of miles driven on specific identifiable highways and streets, some degree of cross-subsidization is inevitable - regardless of the financing method used.
To some degree, all other mechanisms, whether tolling or the motor fuels tax, require motorists to pay for portions of the system they do not regularly use.148 Yet a small segment of highway only has value as part of a larger overall system.
While almost all would agree with this generalization, the precise definition of what encompasses a system lies at the heart of the policy debate. Does the system cover the entire state, a particular region, or perhaps even a limited subset of highways in a small corner of an urban area?
Under Texas's traditional system of highway finance, TxDOT collected the motor fuels tax on a statewide basis and allocated the funds as it saw fit. This led to inevitable complaints by various regions that they were being shortchanged - that their own motorists' fuel purchases produced far more revenue than eventually found its way back to the region in the form of highway construction.
In the past few years, a legislative consensus has emerged that funds generated by a region should remain in that region. SB792 specifically addressed this principle in the context of toll projects, requiring TxDOT to spend any concession payments generated by projects in the regions where the project was located.
In addition, SB792 provided a formula for the allocation of toll project funds within a region itself, mandating that TxDOT allocate these funds "to department districts in the region based on the percentage of toll revenue from users from each department district of the project."149
Yet the debate does not end here. Even within the smaller department districts, the committee heard testimony from various witnesses complaining that while their motorists regularly paid tolls into a tollway system, the projects critical to their localities remained on hold while those in another part of the district proceeded at a rapid pace.
We will address some of the proposed solutions in sections below. For now, suffice it to say here that the Committee is of the opinion that no "one size fits all" approach exists, and that each region will need to work out the allocation methodology that best suits its motorists and taxpayers.
At this point, we will address one additional issue regarding the impact of toll revenues: the desirability of up-front concession payments versus alternative schemes like revenue sharing. In general, we believe that the practice of seeking the maximum up-front concession payment suffers from three fundamental flaws:
• There exists the ever-present temptation for officials to not realize that short term gains are achieved at the expense of long-term value thus destroying value;
• High up-front payments can over-leverage a project and set it up for failure or renegotiation later; and
• High up-front payments impose a burden on the road's users - forcing them to subsidize other portions of the system.
We agree that certain regions may choose to cross-subsidize, and in this case, we believe
(as discussed in other sections of this report) that the revenue sharing model is a better and more value creation oriented practice.150
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148 For instance, a neighbor of one of the researchers involved in the drafting of this report complained that his tolls were higher than the sum needed to maintain the five mile section of the Dallas North Tollway that he utilized in his daily commute. This matter became particular contentious in the debate surrounding SH121, with motorists in the SH121 service area asking whether the rest of the NTTA system should be built on the back of their (expected) highly profitable road, with money generated by their toll payments.
149 Transportation Code, § 228.0055(b).
150 The New South Wales Parliament, in its First Report of the Joint Select Committee on the Cross City Tunnel (Feb. 2006), recommended that "any policy of charging private consortia a fee for the 'right to operate' a piece of infrastructure be expressly discontinued," primarily on the basis that such payments represent "an unnecessary imposition on road users, as the toll will necessarily be increased to recoup the cost of the fee."