Commentary: Tolling interstates impacts supply chains
The U.S. interstate system has facilitated the unrestricted movement of goods and materials quickly and efficiently throughout the country for over 50 years. For those of us working in the supply chain, it is indispensable infrastructure for the import and export of goods and materials, as well as intra-continental distribution. As an owner of a U.S.-based trucking company, I can say that efficiently moving goods and materials to port for export and from port to consumers is critical to keeping costs low for the entire supply chain, including consumers around the world. The U.S. trucking industry is a vital part of this supply chain, having carried more than 70 percent of the total cargo tons imported through West Coast ports and over 60 percent of such imports through East Coast ports in 2010.
Unfortunately, the interstate highway system has been underfunded for years. Long-term funding is currently being debated at both state and federal levels. The shipping and transportation industries, and businesses that rely on the supply chain to get their goods to market, must understand that it will take innovative thinking and tough decisions to improve roads while keeping costs affordable. However, some have suggested innovative thinking is not needed and advocate placing tolls on all existing interstate lanes is the panacea that will provide the funding to rebuild and maintain the federal interstate system for the future. In reality, as has been shown time and again, this notion of tolls as savior is fool’s gold and will be too costly for everyone in the supply chain, from manufacturers and shippers to distributors and consumers.
Even if you can get past the compromised principle of paying for the same road twice — both with a gas tax and a toll tax — there are other reasons why placing tolls on currently non-tolled interstate lanes will create costly inefficiencies in moving goods and materials on the roads. First, tolls are expensive to administer, collect, and enforce, with costs sometimes reaching 33.5 percent of the revenue generated. Compare that with the current cost to administer the gas tax, which is 1 percent of revenue generated, and it’s clear that tolls would be more costly to everyone. Second, some drivers avoid tolls by diverting onto secondary roads, leading to longer, less efficient routes and higher distribution costs. A 2009 study on the impacts of proposed tolls on Interstate 80 in Pennsylvania, a significant distribution artery, estimated shippers, truckers, and consumers would suffer a combined annual deadweight loss of between $8 million and $15 million per year due to tolls. The new toll charges, combined with diversion, would impact the whole supply chain. In North Carolina, projected traffic diversion from proposed tolls on Interstate 95 would have cost businesses along the corridor an estimated $1 billion in revenue between 2014 and 2050 due to toll-averse highway users bypassing their businesses along with the tolls. This decreased economic activity translates to lower aggregate demand for the shipment and distribution of goods.
While some federal and state officials believe tolling existing interstates is the answer to transportation funding challenges, others fully understand the consequences of this approach. Virginia, home to one of the largest ports in the United States, had the opportunity to place tolls on existing lanes on Interstate 95 as part of a transportation funding plan. However, the state passed a comprehensive transportation funding reform bill that included a provision effectively prohibiting I-95 tolls. Virginia rejected the notion of tolling as a cure-all, understanding tolling’s impacts on the shipping and distribution industries that are so vital to the economy.
The U.S. interstate highway system contains vital arteries for the movement of goods and materials throughout the country. There is no question that the long-term sustainability of this network must be a priority for the federal government, and 2014 may prove to be an important year in finding long-term funding. However, all of those directly and indirectly involved in the shipping and distribution industries must ensure the right funding decisions are made. There is an opportunity to find solutions that enhance the efficiency and effectiveness of the movement of goods and materials through the supply chain. Tolling existing interstates is not one of those solutions, and allowing this concept to take hold would be extremely costly to all of us who rely on an unrestricted interstate system to get goods to market in a cost-effective manner.
Owner, Golden Strip Transfer,