Toll Futures on I-405 & Beyond

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Most Prominent Transportation Initiatives in Puget Sound

By William Hillis

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William Hillis

Broker & Research Editor, Realogics Sotheby's International Realty

"Conversion of free interstate highways to a toll-based system transforms the state from a trustee of the highway system to a rentier." 


During its first 18 months of operations with effect from September 2015, I-405 carried nearly 21.2 million trips on its express toll lanes: 53,000 each weekday, of which 36,000 were for tolled use. By the 24th month, toll lanes were required by their enacting legislation to (a) generate revenues that meet operating costs, and (b) allow peak hour speeds of 45 mph in the tolled lanes 90 percent of the time. That did not happen: only 81 percent of vehicles met the target speed, although revenue expectations were achieved. Some state legislators now want the tolls removed, while the Washington State Department of Transportation (WSDOT) insists that the tolls stay as long as revenue objectives are met. This disagreement foreshadows how, barring further legislative action, future tolls might be imposed for their revenues and not for their effects on system performance.


The tolling of I-405 is a direct outcome of a study conducted by Cambridge Systematics in 2006 for the Washington State Transportation Commission (“the Commission”), whose findings are consistent with long-held objectives of planners inside WSDOT to compensate for the revenue shortfall from the state motor fuel tax (the “gas tax”). Up until that time, there was widespread public and interest-group resistance against tolling existing facilities, particularly the interstate highways. The tolls imposed on I-405 with the Legislature’s acquiescence meet the first recommendation of that report: to “convert HOV lanes to HOV/tolled express lanes to optimize performance and maintain free-flowing service for transit, vanpools and carpools.” The Commission is the state’s toll authority, and toll revenues are dedicated under state law to the facilities from which they are collected.

WSDOT and the Commission have understood for decades that the gas tax will not be a sustainable source in the face of electric and other alternatively fueled vehicles. Other Commission reports detail plans for phasing out the gas tax by 2040, replacing it with tolls and mileage taxes. These plans coincide with the proposal of an autonomous vehicle corridor (AVC) on I-5, put forward by Madrona Venture Group in September 2017.

The convergence of tolls and mileage charges with the AVC will convert the highway system from an entrusted asset to a rented asset. When a motorist pays a gas tax at the pump, that fuel is available for use on any road used by that vehicle. The revenues from the tax are appropriated for projects statewide by the elected members of the State Legislature.

In contrast, tolls are fees paid by each driver for use of a specific asset, with the rates to be paid set by the Commission. Conversion of free interstate highways to a toll-based system transforms the state from a trustee of the highway system to a rentier. (The substitution of mileage fees for the gas tax doesn’t avoid the challenge of where those mileage charges were incurred, which is going to provoke many arguments about appropriation of those revenues.) The phase-out of the gas tax will impact municipal roads as well. If authorized by the Legislature, rather than rely on legislative appropriations of mileage fee revenues, local governments may lobby the Commission to impose road charges on their local streets and arterials as a substitute for phased-out state revenue sources and overburdened sales and property tax streams.

In the absence of fuel tax revenues, a toll-funded system, in which revenues can only be applied to the facility that produces them, must be supported by mileage fee revenues that are widely allocated to projects in less-traveled areas. Otherwise, it cannot meet system needs in these areas without raising tolls, fees, or both beyond the users’ ability to pay. Exurban residents will not be able to bear the system’s costs. These facts destine WSDOT and the Commission for conflict with rural residents and their district legislators.

Impact: Due to high traffic volumes, urban and suburban residents can bear the tolls and mileage fees, so that the impact on real estate in populous areas is minimal. However, exurban real estate values will come under increasing pressure if the system is rolled out as planned. More likely, legislators will step in to preserve system-wide funding and indirectly, rural property values.