Premier Notley should reconsider toll roads for Alberta
Premier Notley recently commissioned a report on infrastructure financing by former Bank of Canada governor David Dodge. The report, which was released in tandem with the budget, gave a comprehensive overview of how Mr. Dodge believes the province should approach infrastructure funding.
While the finance minister was quick to latch on to the recommendation for increased infrastructure spending, he was equally quick to dismiss arguably the most important part of the report: the recommendation to introduce road tolls. Rejecting toll roads is a bad idea for several reasons.
First, using general tax revenue to fund roadways means that all taxpayers pay for specific roads whether they use them or not. Those subsidies can be very regressive, with lower-income people paying to fund mobility for higher-income people. As an example, consider the roads leading to ski resorts in Calgary or Edmonton. If they’re built using general revenue, many thousands of people will pay for the road who will rarely if ever use it. Charging roadway users directly for using particular roads at particular times can reduce those regressive subsidies.
Second, failing to charge drivers at the point of consumption gives them an incentive to over-use roads—particularly at peak times. This creates a drag on urban economies by contributing to gridlock that costs Canadian municipalities billions of dollars per year. Dynamic (time-of-day) road-pricing can internalize the costs of gridlock, ensuring that drivers can’t simply contribute to excessive congestion and pay for it with their own time, while forcing others to do the same.
Third, road-pricing is the single best way to mitigate the environmental impact of driving. Charging drivers directly for their roadway use can reduce people’s discretionary driving, shift their driving habits to work around peak times, and encourage them to carpool or use public transportation. Studies have shown that simply building public transportation doesn’t have a significant impact on driving. Road-pricing does.
Fourth, relying on tolls rather than general revenue funding creates market incentives that can help ensure more efficient provision and maintenance of roadways. This can entail scheduling maintenance at times that are least disruptive to traffic flow or perhaps determining that a proposed expansion simply won’t generate enough toll volume to justify moving forward with the project. As Mr. Dodge noted, “by forcing highway planners to make estimates of both revenue potential as well as construction costs, Cabinet can make an assessment of the strength of the economic rationale for a new project.”
While the benefits of road-tolling are clear, there is the legitimate concern that tolls could be used as a revenue grab. To address that concern, the government should reduce taxes commensurately if it opts to introduce road tolls. Moreover, it should dedicate toll revenue to specific roadway improvements, ideally at the point of use. For instance, the government could toll Calgary’s Southwest Ring Road and use the revenue to pay for the construction costs, as suggested in the Dodge Report. It is more reasonable to ask people who use the Ring Road to pay for it rather than people in Edmonton or Lethbridge.
The Government of Alberta should revisit its quick dismissal of the Dodge Report’s recommendation for using road tolls to finance the province’s highways. Charging drivers at the point of consumption would not only give them the mobility they need but would create better incentives for environmental protection, while moving away from potentially regressive subsidies to drivers.
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