Professor and Transportation Finance Expert: Tolls “Inefficient, Regressive Tax”

Professor of Finance for the College of Staten Island and Research Fellow at The University Transportation Research Center Johnathan Peters says if Connecticut lawmakers are looking to raise revenue for transportation, they might be better off looking somewhere else besides highway tolls.

“Tolls, generally, are expensive to collect,” Peters said in an interview. “It’s not free. There’s a lot of technology and a lot of equipment, and that equipment will have to be maintained and replaced over time.”

Peters — whose area of expertise and study involves regional planning and road and mass transit financing — says tolls are more expensive to collect than the gasoline tax and is a regressive form of taxation that affects lower income individuals.

“This is a regressive form of taxation. This can be very, very painful for a low-income household,” Peters said. “It could be the straw that breaks the camel’s back for the working poor.”

Although 2019’s tolls debate has just begun, it started out with a bang as the newly-elected Democratic senator from Greenwich, Alexandra Bergstein, filed the first bill authorizing the Connecticut Department of Transportation to install tolls on Connecticut’s highways. Bergstein is also chairwoman of Connecticut’s Transportation Committee.

The latest study from the CT DOT posited 82 tolls on nearly every Connecticut highway, combined with a pricing system offering discounts for in-state commuters.

The DOT study estimates the state could take in nearly $1 billion per year in toll revenue, after accounting for $100 million per year in operating costs, or about 10 percent of gross revenue.

Peters says this number “seems a bit low,” and that operating costs typically approach closer to 20 percent.

The state study also estimates $372 million in start-up costs, which range from installing fiber optic lines, to the cost of equipment, gantry construction and a “toll collection system.”

Peters says the start-up and operating costs make tolls an “inefficient” taxation method. “You’re going to have millions of transactions and then you have the costs of enforcement.”

The CT DOT study posited an electronic tolling system in which commuters with an E-Z Pass would have funds automatically deducted from their accounts, but those without an electronic pass would have their license plates photographed and be mailed a bill. This raises the issue of enforcing compliance.

“Not everyone will pay,” Peters said, “but in order to make the system work, you have catch some of them.”

Other states have wrestled with toll non-compliance. Massachusetts for instance, loses between $15 and $16 million per year in tolls from drivers who have not paid to use the Massachusetts Turnpike. The loss is known as “leakage,” and forces the state to make efforts to collect.

Failure to pay the toll bill received by mail can come with a hefty fine for the driver. New York levies a fine up to $100 for not paying a toll bill on time – a fine replicated in a 2018 Connecticut tolling bill.

Failure to pay tolls and fines over a certain amount can result in vehicle registration suspension in New York.

Toll proponents maintain that tolling the highways is the best way to generate the revenue the state needs to maintain and expand it infrastructure to make the state more attractive to businesses and families.

Bergstein said in a series of town hall style public meetings that tolls would lessen highway congestion and allow Connecticut to invest more in public transportation, particularly the Metro-North line which runs from New Haven through Fairfield County and into New York City.

However, Connecticut’s public transportation costs are already covered by Connecticut drivers. The vast majority of transportation funding comes from the gasoline tax, the oil companies tax and motor vehicle registration and fees – all of which are born by car owners.

Part of those funds are used to subsidize trains and buses to make up for costs not covered by ticket sales. In 2018, Connecticut spent $376 million on buses and trains, according to state comptroller’s Open Checkbook website.

Connecticut’s spending on public transportation has risen faster than any other transportation cost besides fringe benefits for DOT employees.

Peters says the toll debate might be missing a major component: namely, what specific projects the toll revenue would be used for.

To date, the debate over tolls has largely hinged on the conditions of Connecticut’s roads and bridges, the Special Transportation Fund’s budget and the suspension of 400 infrastructure projects by Gov. Dannel Malloy in 2018.

For now, anyway, the STF is projected to finish out the next few years with a surplus and revenue to the transportation fund is projected to grow by $310 million by 2022.

Whether that will be enough to meet some lawmakers’ demands for transportation and infrastructure spending remains to be seen and the tolling debate remains far from over as protesters start to push back against the biggest and most hotly-contested item so far in the Democrats’ top five legislative agenda items.

“You want people to go to work, but how much do you want to make them pay?” Peters says. “If they [lawmakers] just want the money, there’s lots of ways to raise the money by relying on the existing tax system. The question is: how do you do it in a way that is fair and just?”