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Are Tolls the Answer?

by Jim Park

We desperately need more highways here in Canada. And we need to upgrade and rehabilitate most of the ones we already have. The problem is, nobody wants to pick up the tab.

To suggest that the money to upgrade the roads doesn't exist is inaccurate. What we don't seem to have is the political will to make the necessary investment. There seems to be plenty of will, however, to impose tolls as a means of paying for highway projects. Federal Transport Minister David Collenette insists that toll roads through public/private partnerships are the way to go.

But tolls are a slippery slope. Governments of all stripes must have been watching closely for any dramatic signs of public disapproval when Nova Scotia announced plans to build the Cobequid Pass toll highway. That disapproval simmered, but never came to a boil. And once the public says it's willing to tolerate tolls, governments will be less reluctant to use that method of funding future developments.

Back in 1986, the B.C. government decided tolls would be necessary on the Coquihalla Highway as a temporary measure to recapture the cost overruns incurred in completing the highway in time for the opening of the Vancouver World's Fair. In 1992, the British Columbia Automobile Association (BCAA) approached the provincial government asking that the tolls be lifted, reasoning that the initial cost overruns had already been recovered.

But the government told the BCAA that the tolls were intended to recapture the capital costs of not only phase one of the project, but also the Merritt-to-Kamloops extension and Hwy. 97A, the Okanagan Connector. Revenues from the Coquihalla Highway have now surpassed $415 million, the total cost of phase one, and the tolls aren't expected to be lifted until the full $925 million cost has been recovered. That'll be just in time to extend the toll scheme again to fund the rehabilitation of the highway. You know where this is going...

Dig Deeper

Since funding highway construction from existing revenue isn't a popular idea with politicians, and the public seems mostly willing to accept toll roads, are there any real alternatives?

One report to Transport Canada recommended establishing a U.S.-style highway trust fund based on an amount equal to the revenue generated by two cents per litre of fuel consumed for road use each year. It said the plan would raise about $1 billion a year for highway improvements. But treasurers and finance departments in Canada don't like the idea of dedicated road taxes.

"It's not a matter of whether we can afford to upgrade our national highway system," said Boris Hryhorczuk, former Manitoba deputy transport minister and co-author of the report. "We can't afford not to do it... We're so far behind on this, it's not funny."

All major construction in the recent past has been done via public/private partnerships. The Cobequid Pass highway through Nova Scotia's Wentworth Valley was one of the first such ventures, followed by the Confederation Bridge linking New Brunswick and Prince Edward Island, and then Ontario's electronic toll road, Highway 407. New Brunswick's Fredericton-to-Moncton highway was conceived as a toll road and started life that way, but in that case the public outcry ultimately made it a free road.

Supporters say public/private partnerships allow governments to develop and renew infrastructure in times of fiscal restraint, and to free up capital for other things. Critics argue they rely too heavily on user fees to generate revenues, and elevate the interests of private investors above those of the public. Without a strong national highway policy, some fear Canada's road system would be ripe for cherry-picking, with private companies taking the most profitable projects and leaving the rest for government.

In Britain, the solution is called a 'shadow' toll, where private companies bid to design, build, and operate new highways in exchange for payments from the government based on how many vehicles use the road over the life of the contract.

"If your formula for assessing costs and risks is really sound, the shadow toll is ideal, given how people feel about paying user fees," says Frank Switzer, spokesman for Canadian Highways International Corp., a consortium that designed and built Ontario's Highway 407 and the Cobequid Pass toll road. "Commuters aren't confronted by a visible toll. It's an imaginative way to fund highways."

It remains to be seen if such imagination can be drummed up here. At a meeting in July, 1998, western premiers tore a strip off Ottawa for failing to support highways with the revenue collected in federal fuel taxes. They called it "outrageous" that $5 billion in fuel taxes a year brought only a few hundred million on highway spending (the United States historically spends about six times as much per kilometre on its interstate network as Canada has on its national highway system). Later, the premiers agreed to defer their call for the renewal of the national infrastructure program after the feds promised to restore funding for health care.

The Liberals assure us that's been taken care of. Let's see what happens now.

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