The Roadway Expansion Paradox

Motorists want expensive roadway expansions provided that somebody else foots the bill, but when required to pay directly through tolls, the need for more capacity often disappears. What should planners do?

November 28, 2021, 6:00 AM PST

By Todd Litman


Empty Road

Samer / Flickr

When people purchase a motor vehicle they expect governments to provide roads for their use, and when those roads are congested motorists want bigger roadways, provided that somebody else foots the bill. However, if required to pay directly for the added capacity, the justification for those projects generally disappears. Motorists are like a rude restaurant guests who order the most expensive menu item but disappear when the check arrives, forcing others to pay.

My friend Joe Cortright recently illustrated this in his City Observatory column, How to Solve Traffic Congestion: A Miracle in Louisville? After tolls ($2.21 per trip or just $1.10 for frequent users) were imposed on the I-65 Ohio River bridges in Louisville, Kentucky in 2017, traffic declined by more than half, from 135,000 to 60,000 average daily vehicles. A similar thing happened in reverse here in British Columbia. After tolls (CA$3.15 for cars and CA$9.45 for trucks) were eliminated on Vancouver-area bridges in 2017, traffic increased about a third on the Port Mann Bridge, from 112,000 to 150,000 average daily trips, and 38% on the Golden Ears Bridge, from about 40,000 to 55,000 average daily trips.

In these and other examples, governments spent billions of dollars to subsidize highways, but the need for those projects generally disappeared if users are required to pay directly, evidence that most motorists are cheapskates who will choose alternative routes, modes or destinations to save a few dollars. This has bankrupted many private, for-profit highways.

A basic economic principle is that, to maximize efficiency and equity, consumers should “get what they pay for and pay for what they get” unless subsidies are specifically justified to achieve strategic goals. Urban highway expansion projects that cannot be financed by user fees are economically inefficient – their costs are greater than their benefits. This means that governments often spend two dollars to provide facilities that users only value at one dollar, and because roadway expansions induce additional vehicle travel, this increases external costs such as downstream congestion, crash risk and pollution emissions. As a result, these contradict other community goals and are bad investments.

Most people assume that traffic congestion can be solved by expanding roadways, but no government can afford to build enough lanes to meet all potential demand, and doing so is inefficient and unfair. Urban traffic congestion tends to maintain an equilibrium in which delays discourage additional peak-period trips, and roadway expansions allow more peak-period trips. You’ve probably done this yourself: When traffic is light, you drive across town to save a few dollars at a big-box store, but if roads are congested, you shop nearby. Similarly, after a new highway is completed, you’ll consider a home in a more distant community. These additional vehicle-trips fill the added capacity and result in more driving.  

A century of experience demonstrates that new urban highways provide only temporary congestion relief, and by inducing additional vehicle travel, they exacerbate traffic problems overall. Economists recognize that congestion reflects underpricing: driving is so cheap that it becomes inevitable. You can have free roads or you can have free-flowing traffic but it is economically infeasible to have both.

Urban highway expansions represent a huge public subsidy to a relatively small number of future users. Anybody who will not drive regularly on these new facilities should protest this inequity.

This creates a planning paradox. Motorists want larger roads if they are subsidized but not if they must pay directly. Should communities continue expanding roads or would other types of transportation improvements provide greater total benefits?

Most people have no idea what roads actually cost and greatly underestimate roadway expansion total costs. The table below summarizes U.S. highway expenditures, user payments and subsidies in 2018. It indicates that in that roadway costs averaged 6.9₵ per mile of which about half (3.3₵) was paid by user fees, such as fuel taxes) with the remainder funded by general taxes, which can be considered a subsidy of driving.

US Roadway Expenditures and User Payments (2018)

 

Expenditures

User Payments

Subsidies

Total

$223 billion

$107 billion (48%)

$116 billion (52%)

Per Capita (327 million U.S. residents)

$682

$327

$355

Per Vehicle (275 million vehicles)

$811

$389

$422

Per Vehicle-Mile (3,240 billion)

6.9₵

3.3₵

3.6₵

In 2018, governments spent $223 billion on roads of which about half was paid by user fees.

 

This reflects the average cost of existing roadways. Adding urban roadway capacity has much higher marginal costs. The US Federal Highway Administration’s Status of the Nation's Highways, Bridges, and Transit Conditions & Performance, Appendix A provides typical costs of various roadway improvements. Adding a traffic lane usually costs $10-45 million per mile for an urban arterial and $15-65 million per mile for a large-city freeway.

To determine appropriate cost-recovery charges for roadway expansions I built the Cost Recovery Toll Calculator, a simple spreadsheet that calculates the tolls required to pay for additional traffic lanes. The table below shows the tolls required assuming 4% annual depreciation over 30 years, with 6,000 peak-period vehicles per lane for 300 days per year.

Cost-Recovery Tolls for Urban Highway Expansions

 

Cost Per Lane Mile (Millions)

Toll Per Vehicle-Mile

Small Urbanized

$5.3 - $17.3

$0.19 - $0.62

Large Urbanized

$8.8 - $29.7

$0.32 - $1.07

Major Urbanized

$17.7 - $73.8

$0.64 - $2.65

This table shows the tolls per peak-period vehicle-mile to repay typical urban highway expansion costs.

 

This indicates that urban highway expansions would typically require tolls ranging from $0.19 to $2.65 per peak-period vehicle-mile to repay their incremental costs, but such tolls tend to eliminate the need for the roadway expansion. As a result, those projects require huge subsidies from people who seldom drive under urban-peak conditions to motorists who do. A typical suburban automobile commuter receives thousands of dollars in annual roadway subsidies, consisting of the costs of their roadways not paid by their user fees.

It’s time to consider more efficient and equitable solutions. During the last century, governments spend the majority of transportation infrastructure dollars to serve them. Current demographic and economic trends – an aging population, and increasing concerns about affordability, public health and environmental concerns – justify more multimodal transportation planning in order to create a more diverse, affordable and efficient transportation system.

For example, a rail line or bus lane that offers fast and convenient transit service will attract some commuters out of their cars, reducing highway congestion. Commute-trip reduction programs (which encourage commuters to shift from driving to more resource-efficient modes), decongestion pricing (road tolls that are higher during congested conditions, and lower or free off-peak) and other transportation-demand management strategies reduce traffic problems in ways that provide other economic, social and environmental benefits. Congestion does not disappear, but becomes significantly less than what would otherwise occur, and these solutions reduce consumer costs, crashes and pollution.

Rational analysis compares the total costs of expanding urban highways, providing parking, owning and operating automobiles, plus any external costs (congestion, crash risk and pollution emission) with the costs of other mobility options on the same corridor. Considering all impacts and community goals, public transit improvements are generally cheaper and more beneficial overall. For more information see my report, Evaluating Public Transit Benefits and Costs.

Many cities around the world already apply these approaches. For example, Seattle has reduced automobile trips through a combination of public transit improvements and commute-trip reduction programs. New York is redesigning streets to improve walking, bicycling and bus travel. Paris is converting half of its public parking spaces into wider sidewalks and lanes for bikes and buses. The European Union requires towns and cities to develop Sustainable Urban Mobility Plans that identify specific ways to increase transportation system efficiency. These solutions allow cities to accommodate more people and business activity without increasing vehicle traffic, resulting in more efficient, equitable and livable communities.

This is a timely issue. As the COVID pandemic ends, vehicle traffic is increasing, creating traffic congestion, and the $1.2 trillion U.S. federal infrastructure bill will provide more funding for transportation improvements. Highway advocates want that money to subsidize more urban highway expansions, but there are good reasons to refrain, particularly now as new technologies threaten to further increase vehicle travel demand.

With the current policies, ride-hailing services, electric cars and autonomous vehicles are likely to stimulate more vehicle travel and traffic problems. For example, if parking is priced but roads are free, autonomous vehicle owners will rationally program their cars to drive home or continuously circle the block to avoid parking fees. It would be wasteful and unfair to spend billions of dollars on roadway expansions to accommodate this unnecessary additional traffic. We will need new policies that manage roads for efficiency before adding more capacity.

Our challenge as planners is to help communities identify the most cost-effective and beneficial transportation improvements. Only if peak-period tolls can repay all roadway expansion costs can additional lanes be justified. Since that seldom occurs, we should help communities develop better alternatives.

 

For More Information

ITF (2021), Travel Transitions: How Transport Planners and Policy Makers Can Respond to Shifting Mobility Trends, International Transport Forum.

David Levinson and David King (2020), Transport Access Manual: A Guide for Measuring Connection between People and Places, Committee of the Transport Access Manual, University of Sydney.

Todd Litman (2020), Towards More Comprehensive and Multi-modal Transport Evaluation, Victoria Transport Policy Institute.

Todd Litman (2021), Smart Congestion Relief, Victoria Transport Policy Institute.

Wesley Marshall, Daniel Piatkowski and Chris McCahill (2019), “[Re]Evaluating How We Value Transportation,” Research in Transportation Business & Management.

David Metz (2021), “Economic Benefits of Road Widening: Discrepancy Between Outturn and Forecast,” Transportation Research Part A, Vo. 147, pp. 312-319.

SSTI (2018), Modernizing Mitigation: A Demand-Centered Approach, State Smart Transportation Initiative.

 


Todd Litman

Todd Litman is founder and executive director of the Victoria Transport Policy Institute, an independent research organization dedicated to developing innovative solutions to transport problems.

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