Truck Tolling: Understanding Industry Tradeoffs When Using or Avoiding Toll Facilities (2012)

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1 | P a g e Executive Summary There is a long history of using tolls to finance roads, bridges and other infrastructure. In America, toll road financing diminished in the 1950s, in favor of using fuel taxes to fund the Interstate Highway System and other freeway/expressway facilities. Toll road financing has reemerged in recent years, due in part to severe limitations of these fuel tax revenues. While toll financing offers a way to finance critical infrastructure in lieu of fuel tax revenue, shippers and the trucking industry represent some of the most ardent critics of toll road finance. There have been forums sponsored by the Transportation Research Board and the Federal Highway Administration to build understanding of toll road financing and the views of the trucking industry. This research project was sponsored to foster a further understanding of trucking industry’s tradeoffs when using or avoiding toll facilities. The objective of this research is to identify the value that goods movement businesses seek from the transportation roadway network and their willingness to pay tolls for that value. To explore this objective, the research team developed a classification of the primary “actors” in the trucking transaction, including shippers, trucking companies, and truck drivers. Further, the trucking business was classified by different attributes, such as the type of trucking services. These parameters are described below. Position in the Trucking Transaction • Driver (representing the employee who has the primary interface and decision with tolling) • Dispatcher/fleet manager (representing management) • Shipper/receiver/third-party logistics agent (3PL): representing the cargo owner, and/or the entity that arranges freight transportation, including cost and service parameters, and possibly accessorial charges such as for fuel and tolls. Type of Trucking Service • Local delivery • Drayage • Specialized • Local LTL • Private Fleet TL • For hire TL, Carrier/contract • For hire TL, self employed Owner Operator Other Factors • Toll reimbursement policies • Party responsible for trip routing (owner, dispatcher, driver) • Industry Tenure • Typical Haul Mileage

2 | P a g e • Typical Driving Environment • Opportunity/Familiarity with Toll Roads To execute this research project, three primary modes of data collection were used: 1) extensive literature review and outreach to leaders representing trucking companies, shippers, and third party logistics providers. This outreach provided insight and helped to develop survey instruments for the next phases of data collection; 2) an electronic web based survey was distributed to a broad range of trucking industry and shipper interests; 3) truck drivers were interviewed at industry trade shows. Findings The research effort gathered data points from more than 1,000 individual surveys, plus structured interviews with carriers, third party logistics companies, shippers and truck drivers. The findings were overwhelmingly negative across all strata of the trucking industry: there is not a single segment of the trucking industry which showed any positive attitudes about toll roads or the benefits they might offer, either in congestion relief, time savings or reduced shipping cost. The negative opinion of toll roads and tolling as a finance method were so strong, it was determined that some respondents are “principled objectors” to toll roads, meaning that their passionate opinions could affect their attitudes about using toll roads. This passion is reflected in the overwhelming agreement to the following statements: • “Toll roads are too expensive” • “Toll roads exist mainly to make money for the government” • “Toll roads are too expensive for what they provide” • “I avoid toll roads whenever I can” Conversely, there was overwhelming disagreement with these positive statements about toll roads: • “Toll roads are a more fair way of funding maintenance and construction” • “Toll roads help drivers comply with hours of service rules” • “Toll roads improve on time performance” While it is simplistic to state that “truck drivers do not like toll roads,” the finding was stated so passionately that it colored all other research findings. The “willingness to pay” survey construct, for example, sought to examine the elasticity of toll prices for three typical truck driving scenarios, which provided time and cost savings. Overwhelmingly, the vast majority survey respondents expressed an unwillingness to pay any toll for various time and cost saving scenarios. Thus the research method could not identify a particular segment of the trucking industry which is more likely than another to pay tolls. Research revealed a few instances where certain types of truckers, trucking operations, or other attributes, provided some more likelihood to use toll facilities. A “familiarity” with toll roads (drivers with the opportunity to use a toll road more than 10 percent of the time) showed some willingness to pay a toll; and in a congested urban situation, both dispatchers and drivers expressed willingness to pay

3 | P a g e for the time savings offered by a toll facility. These findings provide an opportunity to expand the understanding of toll road benefits, leveraging users who are already familiar with toll facilities. Shippers received particular emphasis in the interview and outreach portion of this research, even though they did not respond to the internet survey in significant numbers. Shippers generally expressed no interest or involvement in a trucking company or driver’s decision to use toll roads, even though the shipper would ultimately be paying for toll charges (theoretically) in the freight charges for a shipment. Rather than taking interest in toll road charges or dictating whether or not to use toll roads, shippers expressed that they simply wanted a rate quote for the their freight shipment, given the service parameters they specified, and have all accessorial charges (such as tolls) included in the rate quote. Shippers did not care whether or not a toll was included in the rate quote. If there was any opposition from tolls expressed by the shipping community, it was that they wanted rates to be all inclusive, and minimize accessorial charges, like tolls, which had to be accounted for separately. Conclusions Trucker’s perceptions of the value of toll roads is likely a direct reflection of the nature of their system of compensation, particularly toll road reimbursement, or lack thereof. For a great many drivers, there is no reimbursement for tolls paid “out of pocket” and those toll costs cannot be passed on to a shipper or third party broker. There are trucking companies that can assess toll costs and evaluate the costs and benefits of using tolled routes. These are likely larger carriers, with company drivers that are reimbursed for their tolls. On the other hand, there is a vast population of smaller trucking firms and independent owner- operators, who seek loads from brokers on an ad hoc basis. For this population, the choice of using a toll road is not just time savings, but the ability to monetize those time savings. In other words, if payment is being made by the mile or by the load, is time savings worth anything to the individual driver? Depending on the length of haul and driver’s hours of service limits, even a large time savings (e.g., one hour) might not have value to a driver, if that driver cannot otherwise productively use that hour of time savings for another customer. Public policymakers should also be mindful of the cost of truck tolls compared to drivers’ wages. From an academic perspective, the toll road decision is a straightforward cost/benefit calculation, where the cost-per-hour of truck operation (capital depreciation, driver wages, and other variable costs) clearly justifies the time savings of a toll road alternative. From the perspective of a truck driver, a trip on toll roads between Chicago and Philadelphia could incur toll charges of about $238 for the trip. With two trips per week, toll charges could easily exceed $800. If one considers the average salary for a truck driver being $35,000 to $50,000 annually, the out of pocket cash burden of toll charges is a very real issue, whether or not the driver receives reimbursement.

4 | P a g e Possible Options The research findings highlight the depth of passionate opposition to truck tolls, perhaps more clearly than surmised at the beginning of the effort. Policy makers will face opposition from the trucking industry in any discussion of expanded toll finance policies, or individual toll road proposals. The least resistance to truck tolls come from where truck toll facilities make intuitive sense to the trucking industry—either through the clear and convincing identification of time savings, and/or where the toll facility offers a clear value proposition; e.g., allowing longer combination vehicles, or heavier loads, as opposed to tolling existing capacity. Even where the value proposition of toll facilities can be clearly demonstrated, policy makers will face opposition from truck drivers who have a “principled objection” to tolling. To address such principled objection, or otherwise ease the industry into a greater acceptance of toll roads, a state department of transportation or toll authority might seek greater flexibility in charging commercial vehicles. Some options could include: • Being as flexible as possible in charging trucks for tolls, such as through the free distribution of transponders; ease of creating an account with the toll authority; and flexibility in payment terms. • For new toll facilities, developing a multi-year (for example, 10 year) “ramp up” period for truck tolling, where trucks are first charged no tolls to use the facility, but tolls gradually increase over time to develop the trucking industry’s experience and acceptance of tolling. The public sector could subsidize such a “ramp up” period through availability payments. • Cross subsidies between automobiles and commercial trucks. While economic cross subsidies are anathema to many economists and policy makers, there may be other public considerations (such as congestion and safety of parallel routes) that make a cross subsidy more palatable.