Download this column on toll roads in Alberta
Terms and Conditions of use
EDMONTON, CALGARY OUT
By Steve Lafleur
and Kenneth Green
The Fraser Institute
CALGARY, Alta. Dec 3, 2015/ Troy Media/ – Alberta Premier Rachel Notley needs to swiftly revisit her government’s decision not to implement road tolls to help pay for the province’s highway infrastructure.
Road tolls are not only a socially just form of taxation – ensuring that those with the means to travel the most pay the most – they are also a perfect fit with the NDP government’s environmental agenda. Indeed, such tolls were among the recommendations made after the Premier commissioned a report on infrastructure financing by former Bank of Canada governor David Dodge. Released in tandem with the October budget, that report gave a comprehensive overview of how Dodge believes the province should manage infrastructure issues.
But while Finance Minister Joe Ceci was quick to latch on to the advice given regarding increased infrastructure spending, he was equally quick to dismiss arguably the most important part of the report: the recommendation to introduce toll roads. As outlined below, that was a bad idea.
As Dodge confirmed, using general tax revenue to fund roadways means all taxpayers pay for specific roads whether they use them or not. Those subsidies can be very regressive, with lower-income people paying to fund mobility for higher-income people. Consider the roads leading to ski resorts. If they’re built using general revenue, many thousands will pay for the roads although they will rarely if ever use them. Similarly, Highway 63 to Fort McMurray has historically carried the most tonnage per kilometer in Canada and yet the cost of its twinning and maintenance is born by users and non-users alike.
Failing to charge drivers at the point of consumption also gives them an incentive to over-use roads – particularly at peak times. This creates a drag on urban economies by contributing to gridlock that costs Canadian municipalities billions of dollars per year. Dynamic (time-of-day) road-pricing can internalize the costs of gridlock, ensuring that drivers can’t cavalierly contribute to excessive congestion and pay for it with their own time, while forcing others to do the same.
Further, relying on tolls rather than general revenue funding creates market incentives that can help public officials determine whether a proposed expansion will generate enough volume to justify moving forward. As Dodge – no slouch when it comes to public policy – noted, “by forcing highway planners to make estimates of both revenue potential as well as construction costs, cabinet can make an assessment of the strength of the economic rationale for a new project.”
Environmental benefits are plentiful. Implementing a fee on drivers directly for their roadway use is the most likely manner in which government can incent people to reduce discretionary automobile use and encourage them to carpool or use public transportation, both of which are vital if Alberta is to reduce its carbon emissions. Studies have shown that simply building public transportation doesn’t have a significant impact on driving. Road-pricing does.
Some will legitimately raise the concern that tolls could be used as mere revenue grab. To address that, the government could reduce taxes commensurately, ensuring genuine revenue neutrality that can be further reinforced by mandating all toll revenue be directed to specific roadway improvements, ideally at the point of use. For instance, the government could toll Calgary’s Southwest Ring Road and use the revenue to pay for its construction, as suggested in the Dodge Report. It is more reasonable to ask those who use the Ring Road to pay for it than to spread that tax burden to people in Grande Prairie or Lethbridge.
Dodge made a wise recommendation supported by a compelling argument for toll roads. Premier Notley should have taken – and hopefully will still take – his advice.
Steve Lafleur is a Senior Policy Analyst and Kenneth Green is the Senior Director of Natural Resource Studies at the Fraser Institute.
Steve and Ken are Troy Media contributors. Why aren’t you?