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

Below is the uncorrected machine-read text of this chapter, intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text of each book. Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.

52 | P a g e Chapter 4 Conclusions and Suggested Research The research revealed a number of intriguing findings and helped to identify some niches in the goods movement industry where there is willingness to pay tolls. The findings might have been tempered, however, by overall negative attitudes about toll roads. Opportunities and constraints emerging from this research are discussed below. Negative Attitudes about Toll Roads Across all segments of the trucking industry—including different types of drivers, and different types of trucking operations—there are overwhelmingly negative attitudes about toll roads. These attitudes were so pervasive that they might have negatively affected receiving a true response to willingness to pay scenarios. As this report is being developed, there are forecasts for drastic decreases in the federal-aid highway program, which would leave toll finance as the most viable alternative to a fuel-tax finance system. In addition, there are a number of innovative proposals for truck lanes to segregate traffic flow, which could be toll-financed. Truck drivers’ attitudes about toll roads create a significant constraint to industry acceptance of such toll road proposals and policies. The negative perceptions of toll roads reflect some long-standing biases: • That the highway system “has already been paid for,” which ignores the investment needs in pavement and bridge reconstruction, and new capacity • Tolls are just a way to raise revenue for the government, which ignores that nearly all tolls are directly linked to finance a road or bridge—i.e., a direct user fee Current federal law is a reflection of political attitudes toward tolling. Expanding toll finance for existing interstate highways is limited to three projects under a “pilot” program. This is not a widespread embrace of tolling by the body politic. On the other hand, advocacy for toll financing is limited to only a few institutions, such as some academics, free-market advocacy organizations, and financial advisory companies. Where negative attitudes are a constraint to expanding toll financing, there is also the need—if not opportunity—for a sustained policy and public education effort, which would attempt to make toll finance more palatable to certain user groups. User Groups with some Amenability toward Tolls Research revealed a few instances where certain types of truckers, trucking operations, or other attributes, provided some more likelihood to use toll facilities. • Those drivers familiar with toll roads (opportunity to use a toll road more than 10 percent of their time) were willing to pay some token amount for a toll • In a congested urban situation, both dispatchers and drivers used to an urban driving environment, expressed willingness to pay a “real” toll amount for the time savings offered by a toll facility

53 | P a g e The research team’s supposition is that “familiarity” with toll facilities produced a greater willingness to pay tolls. This finding is drawn from the fact that drivers who could take a toll road for 10 percent or more of their trips, were willing to pay a token toll amount, which probably reflects that this population does indeed use toll roads. Similarly, drivers in an urban setting expressed a strong willingness to pay a real amount for the time saved in the “bridge tolling scenario,” which again could be a reflection of familiarity with toll roads. These findings provide an opportunity to expand the understanding of toll road benefits, leveraging users who are already familiar with toll facilities. Toll Payment and Reimbursement The research team thought that the ability to pass toll charges onto customers, or the ability to be reimbursed for tolls by customers, would positively impact toll road acceptance. This decidedly was not the case, as reimbursement or pass through had no effect. Apparently, the transaction of paying the tolls, then waiting for reimbursement, remains a burden to overcome. Interviews conducted in the first part of the research effort indicated that some drivers and/or drayage companies experience a high incidence of “short payment” of invoices by shippers. Essentially, shippers were refusing to pay for tolls, either in attempt to cut their costs, or because the trucking company did not offer proper documentation of toll charges. While there was no investigation of how widespread this practice is, its negative effect on toll road acceptance would be understandable. Also, the research considered how tolls charges represent cash out-of-pocket for truckers and trucking companies. For example, a fully loaded, five axle tractor trailer, traveling from Chicago to Philadelphia by way of the Indiana, Ohio and Pennsylvania toll roads, would experience cash toll charges of about $238 for the trip. Toll charges could easily exceed $1,000 per week. 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 must be considered, whether or not the driver receives reimbursement. Electronic toll collection certainly makes it easier to pay for tolls, and many industry observers believe that the market penetration of electronic toll collection (and trucks equipped with transponders) will increase in the coming decades. It is possible that electronic toll collection will improve the ability to pass toll charges through to shippers, but it is difficult to estimate this impact. Shippers Ultimately, the cost of transportation is reflected in all the goods produced and consumed. Somehow, cargo owners “pay the freight,” and pass that cost onto the ultimate consumer. To the extent that a trucking company is unable to pass toll costs onto the shipper, toll charges become more than just an administrative nuisance and in fact reduce a trucking company’s revenue, profit, and owner’s equity. In the course of this research, shippers made it very clear that they do not oppose toll roads, but rather, they prefer all toll charges to be reflected in the trucking company’s bid. If such toll “pass through” to shippers could be made easier for drivers and trucking companies, toll roads might become more palatable.

54 | P a g e Concepts to Aid Toll Road Acceptance and Development in the Freight Community From the research, there emerge a few concepts to overcome the opposition to toll roads by different segments of the freight industry. “Transition” to Toll Facilities for Trucking Companies The research shows that there is greater acceptance of toll facilities, where the trucking industry has more familiarity with them—either in driving in urban environments with toll roads, or having the opportunity to use them on a regular basis. Many policy changes, such as the imposition of tolls, provoke negative reactions due to a psychological “status quo bias.” Such would be the case if imposing tolls on an existing facility, or developing truck lanes. A potential solution would be to develop a transition period to “ramp up” tolls on a new facility. While some toll roads have used a short ramp up period (e.g., one month), the vision suggested here is to have a long ramp up period, on the order of five to 10 years, before truck tolls were fully implemented. The intent would be to impose very low tolls at first to get the trucking industry more familiar with the concept of tolling, transponder equipment, and toll accounting. Truck tolls would be fully imposed at the end of a long (5 or 10 year) ramp up period. The cost of such an implementation could be included in the overall cost of a long term concession, or covered by the public sector through an availability payment structure. Offering Additional Value over the Status Quo It is fairly clear that the general public and trucking companies do not want to pay tolls for highways and bridges that they once received for “free.” This partially explains the reason that some sectors of the transportation community accept the concept of tolls for new capacity, but not for existing capacity. Additional benefits could make toll roads attractive to trucking companies; for example, a clearer value- for-money benefit for trucking companies, by developing toll roads with higher weight limits and/or longer combination vehicles. A concept for a network of heavy/long combination trucks was developed by the Reason Foundation, and has been embodied at least in part in some FHWA “Corridor of the Future” plans. Toll Policy Awareness, Education and Outreach The transportation community faces a perennial challenge in “making the case” for adequate transportation investments. The American Association of State Highway and Transportation Officials, the American Road and Transportation Builders Association, and other organizations provide regular analysis of investment needs and estimates of the economic return on investment. A similar advocacy for toll funding and financing is basically nonexistent in most transportation policy development, as constituent groups seem content to finance roads through traditional grant programs, and turn to toll finance as a last resort. In contrast to the aforementioned efforts to advocate for tax-based funding programs, there appears to be a clear need and opportunity to communicate the benefits of toll facility finance and development, those being:

55 | P a g e • Faster and more certain delivery of critical infrastructure • Congestion relief • More expansive truck service facilities • Higher weight limits and allowance for longer combination vehicles Suggestions for Additional Research The survey method used in this research sought to determine specific price points at which various actors in the trucking transaction would use or avoid a toll road. By using hypothetical scenarios, however, survey respondents expressed virtually no willingness to pay a toll, and thus the value of a toll road could not be determined. The stated preferences of survey respondents—especially truck drivers—run counter to empirical observations. Specifically, there are various parts of the country with both toll roads and expressways which are optional routes for trucks, and the use and avoidance of toll roads can be observed. There are two possible deficiencies with asking trucking companies or truck drivers their stated preference to pay a toll: • Some trucking companies and truck drivers cannot calculate, implicitly or explicitly, the value of a toll road option; • For some trucking operations—especially large private fleets and TL carriers—the cost of tolls is readily calculated and figured into the rate structure, such that the truck driver does not have to consider toll road costs. To provide granularity in the value derived from toll roads, three types of additional research are suggested: 1. Truck driver intercept interviews. In this survey method, researchers would intercept truck drivers at known locations which offer a decision between a toll road and a “free” route. Examples would include a rest area or truck stop. Researchers would intercept truck drivers and ask for voluntary responses to key profile questions, using the industry parameters developed in this report; and short questions for the route they are choosing for their trip, and justification for route choice. Research conducted over two or three days should produce at least 200 valid responses. Locations for the research should include at least six different geographic areas of the county, with probable locations including the greater Chicago area, the New York metropolitan area, and points along rural toll routes which are known diversion points. This survey methodology would generate a sample size of at least 1,200, which should be valid for statistical analysis. 2. Focused interviews with officials in the accounting and/or pricing departments of large private fleet and TL carrier operations. With this survey method, the appropriate accounting/pricing personnel from six to ten trucking operations would be identified and contacted for a focused interview to determine how toll rates are calculated in freight rates, and how the routing

56 | P a g e decision (toll road or other) is communicated to the operations unit of the companies— dispatchers and truck drivers. 3. Focused interviews with six to ten independent owner-operator trucking operations, which have a relatively small fleet of trucks (less than 20). While the interview would be similar to ones with officials from larger private fleet and TL carrier operations, a further objective of these interviews would be to understand the accounting and cash flow restrictions of smaller companies, which is thought to lead to toll road diversion. Also, the research would seek to understand the methods used by smaller companies to formulate rate quotes, how tolls are taken into consideration in those rate quotes, and the companies’ ability to monetize the benefits of toll roads. 4. Specific impacts of electronic tolling: electronic tolling technology has reached a high level of viability and market penetration at most major toll facilities. As trucking firms increase their deployment of toll tags, it is worthwhile to estimate specific impacts on toll road use, and forecasting additional toll road utilization as truck tolling becomes even more ubiquitous.