Funding roads (taxes, user fees etc)

[ijmorlan]

Indeed. Today everyone (driving an ICE vehicle) has to pay gasoline taxes -- and pay the annual licence renewal fee. I would expect that the fee/tax could be scaled to the level of wear and tear on the roads, based on mileage, weight and possibly other factors.

My one issue, though, is that people will find a way.

Take for example water: We were told to conserve. We were given rebates on toilets, etc.  End result? People did exactly as asked, not enough money was coming in to take care of infrastructure, and now we have this infrastructure deficits for our pipes. Now our rates are triple of what they were.

Part of the problem is an unwillingness to charge the needed rates. All those rebates, lawn-watering limitations, etc. are just over-complicated ways of doing what higher water rates would do. Instead, just raise the rates until total use fits within what is available. If a capacity expansion is economically warranted, the higher rates will bring in the money to pay for it.

Take electricity: We were told to conserve, given money to update appliances, ToU, etc. End result, we're paying jurisdictions money to take our electricity and have some of the highest rates in North America. Now are rates are triple of what they were.

Same deal here, except even worse. First, for political reasons, we charge rates that don’t even cover the costs of running the system. Then, we run advertising campaigns, rebate programs, etc. to encourage conservation. Then for political reasons we pay enormous prices to people to run small solar installations. You can tell our solar program isn’t really worthwhile by the way you have individual solar panels dotted here and there. If it was really worthwhile, the owner would put up another next to the first one, and another and another until a whole field was full of them, over whatever area is actually a good location for a solar installation. Perhaps I should say “where it is worthwhile” instead of “If it was really worthwhile” because large fields full of solar panels are seen in other places.

The right way to do this is the same as for water: just charge more. If it’s actually economically worthwhile to update appliances, etc., then people will do it in order to reduce their electricity bill. Similarly if a solar installation is worthwhile then people will build it for business reasons, the same as they build grocery stores. Notice that there is no “grocery store grant program” to ensure that enough grocery stores get built.

I see the same issues with pay to drive. More car pooling, more walking, more e-bikes, more transit riders (these are good things), families visiting each other less, small towns losing tourism, stores further away from main street losing business. Same costs to keep roads in order, but funding no longer there.

There are always consequences. Some good, some bad. For me personally, a pay as your drive model, I am not going to the beach and driving through small town anymore. I am not going to St. Jacobs anymore. I'll give more business to businesses closer to my house. I'll keep my costs static. I used to drive 60-70K per year. Last year was 14K. I am sure I can get 'er done to 10K.

People talk with their wallet. You try to take it from them, they'll find a way to keep it.

I think you’re prematurely saying what you would do. You don’t know how much it would cost to drive to St. Jacobs, to take one of your examples. I would say that if it’s no longer worth it to you to drive to St. Jacobs once road prices are introduced, then you yourself are judging that the trip is not really high enough value to be worth doing. If on the other hand you decide to take the trip, then you are deciding for yourself that it’s money well spent, just like you decide the same about paying for a movie ticket or an amusement park ride. And there are lots of businesses selling some pretty expensive things that are clearly not necessities of life, so I think it’s pretty short-sighted to assume that road pricing would just cause everybody to stop doing stuff.

In other words, right now we as a society have decided that driving is so worthwhile that we’ll pay for it for everybody (at least the road component of it), rather than let people decide for themselves when and where it is worth the cost.

What you do have right though is that the charging mechanism has to be aligned to economic realities. It should not just be a knee-jerk political reaction (“must soak drivers”). The costs of having the road system fall into at least the following categories:

1. Capital expenditure: cost of construction; depends on how much road is built and to what standard. Does not depend on how much traffic uses the road once built. Of course a road built for high traffic will cost more because it will be wider and/or to a higher standard, but any road built to a particular standard will cost the same, whether it ends up choked with traffic or totally unused.
   
2. Fixed maintenance costs: things like snow clearing, which are the same no matter how much traffic uses the road.
   
3. Marginal maintenance costs: costs related to actual use of the road. In particular, maintenance to repair damage caused by vehicles using the road. This is especially important for trucking because heavy vehicles cause an unbelievable amount of damage.
   

Different mechanisms may be appropriate for funding each of these categories of expense. In addition, there is the concept of a congestion charge, which is a fee charged specifically to keep the usage down to a manageable level.

It may surprise some to find out that I actually favour no-cost use of local roads and even 2-lane rural roads for small vehicles (i.e., the current system, ignoring the small contribution from the gas tax). The theory is that in any reasonably foreseeable future, we needs roads reaching pretty well every destination. So the costs in the first two categories above are unavoidable and are an appropriate use of general funds. We need them just like we need schools and hospitals. For small vehicles, the third category is relatively small also. In addition to these considerations, I also just don’t like the idea of tracking everybody all the time for the purpose of billing them for trivial trips. And I don’t really like the odometer idea either for a number of reasons.

Where I think road pricing should apply is to the large and fantastically expensive roads required to carry large volumes of traffic, and to heavy vehicles that cause almost all of the road damage. For certain I believe superhighways should be funded entirely out of user fees. They are a luxury good, and if you actually need them, you can afford to pay your share for your portion of the use. Having said that, the fee schedule should be based on sound economic principles. In particular, for a small vehicle to use a highway during quiet times, the marginal cost to the highway is only the third category above and by definition there is no need for a congestion charge. So tolls would be quite small. On the other hand somebody commuting would have to pay a congestion charge, and a truck at rush hour would have to pay for the damage it causes and also for the congestion charge. Economic principles should be used to allocate the fixed maintenance charges.

In between I’m less sure, but I think it’s reasonable to consider that a road expansion from 2 to 4 lanes should generally have the additional lanes as congestion-charged lanes. They’re only needed because of large volumes of people wanting to travel the road at the same time, so it’s reasonable to give people a reason to consider when and where they travel. I’m glossing over the practical difficulties of implementing such a scheme because I’m just writing an Internet post, not an economic policy paper.

To use a food analogy, free bread for all, but if you want steak, you’re paying for it yourself.

And finally, a comment about the poor and less well-off: it is broadly agreed that those people need help. If that is so, the simplest way of doing so is to send a certain amount of money to everybody. This will give them the economic resources to pay the normal market rates for the different things they need. This is a much more efficient way of helping these people, avoids making them complete all sorts of bureaucratic paperwork the more well-off don’t need to bother with, and gives them the dignity of making their own decisions. Instead of deciding that everybody needs a certain amount of electricity and home heating oil and water and road access and just giving it to them or trying to rebate it, or charging everybody a sub-market price, give them money and let them decide how to spend it. Some people might work hard to economize on their electricity bill and spend money driving to their job. Others might avoid car ownership altogether but take as many baths as they want. And still others will make different decisions. Some of those decisions won’t be to my taste, but that’s OK because we’re all different people with different preferences.