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Should Tolls be used to pay for Transportation Infrastructure Projects?

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Using tolls to pay for roads and bridges has been around as long as children’s stories have been written. Meanwhile, in British Columbia, tolls have been a way of life for over twenty years for any traveler who has driven the Coquihalla highway. Some people argue that BC Ferries charges tolls to use their Ferries. However, what no one seems to agree on is whether tolls are fair, or just another form of taxation. Either way, tolls do impact a significant number of businesses, either directly through the paying of tolls to use the infrastructure, or through indirect impact in added costs for shipping. The question still remains unanswered; should we use tolls in British Columbia to pay for large infrastructure projects?

The argument for using tolls as a method to pay for transportation infrastructure projects is that the end user is the one who pays for the road to be built, relieving the burden from the general public. The widely held belief is that only users should pay for using the road or bridge. Another argument is that the project cannot be undertaken without the cash that the tolls will generate. In other words, without a toll the project cannot be supported.
This idea is no different than user fees charged by the city, such as ice rental fees, for the use of city facilities. The City of Prince George continues to increase the fees, or tolls, it charges to the users of its facilities because it believes those users are not paying their share of the costs.
However, one must remember that transportation infrastructure is the epitome of the public good. Which means, given a choice, individual businesses and taxpayers would not pay for the project, even though they receive direct and indirect benefits. In the case of the city user fees, we note that the users are composed of taxpayers of the city and that while taxpayers who not use the facilities receive no direct benefit from them, they do receive indirect benefits such as retail sales of sports equipment, visiting sports teams and a healthier and fitter community. In both cases the argument is around the issue of whether the public is better off with or without the infrastructure even if the taxpayer, or public as a whole, must absorb the cost.

Another issue around the use of tolls is that this transportation infrastructure may actually benefit those who choose not to use the road. For instance, the reduced traffic resulting on the other route will benefit the non-payers. An example of this is the Coquihalla Highway, which keeps traffic off of the Fraser Canyon and Highway 3 to Princeton. This allows the users of those highways to complete their trip quicker due to the reduced amount of traffic. Time is money, so the user saves, yet they are not charged a toll to do so. In these cases it may be more equitable to charge a toll for all of the possible routes.
Of course we haven’t even considered the effect on business on the routes that are now bypassed due to the new route. If tolls are an equitable method for procuring infrastructure funding, then perhaps a portion of those funds should find their way to the business owner who is sure to see a reduction in business due to the rerouting.

Another issue surrounding tolls is in regards to its comparison to other form of taxation. You could argue that the gas taxes on fuel are a form of tolls. However, we note the majority of those funds are either used to pay for infrastructure projects located within the city limits of major Canadian cities, or are being returned to the cities in the form of cash payments. Thus, while only a small amount of these tax dollars are being used to pay for the Coquihalla and other transportation routes, the taxes generated from the sale of fuel which vehicles use while driving these routes is actually being used to finance urban infrastructure. This is a similar issue as the US charging tariffs on softwood and giving the funds to the US competitors of Canadian forest companies.

Finally, the Coquihalla is the most efficient West East transportation route of the three routes available in it’s geographic area. By having a toll on it, we push traffic off to the more inefficient routes, thereby negatively impacting the economy of British Columbia and Canada. Possible solutions to the toll issue might be to increase fuel taxes to cover any infrastructure projects being considered for tolls, or to implement a provincial and federal tax that is only to be used for transportation infrastructure projects. This is similar to the provincial program currently in place where the funds are targeted to the geographic area from which the funds were derived.

Tolls do have their place. The Confederation Bridge between New Brunswick and Prince Edward Island is an example of an infrastructure project that uses tolls. However, we should note that this project replaced ferries that were slow and just as costly to use. Thus the economy of these two provinces benefited from easier and quicker access to their respective markets. Of course the bridge has also had a positive impact on the rubber tire traffic of both provinces as the bridge is considered a tourist attraction on its own, a status the Coquihalla Highway has yet to achieve. 

-Myron Gordon owns TMSG Management Services Group, which provides management and financial services to growing businesses.

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