Financing Transportation Networks

Financing Transportation Networks

Transport Economics, Management and Policy series

David M. Levinson


Chapter 7: Finance Choice on a Beltway

David M. Levinson

Subjects: economics and finance, public finance, transport, environment, transport, urban and regional studies, transport


INTRODUCTION Cordon tolls are becoming a popular method of restricting traffic and financing new infrastructure in cities such as Singapore, Oslo, Trondheim, and Bergen. Imperfect cordons, such as tollgates on a major highway without entrance or exit ramp tolls, have traditionally been used both in the early days of turnpikes and in more recent times on limited-access highway systems. In both cases, local trips do not pay tolls, while through trips (trips crossing the cordon) do. On the other hand, tax financing has been common both historically (where initially the tax was in terms of labor), and more recently for local roads, which are typically not funded through usage taxes such as gas taxes.' Taxes also rely on a cordon, the boundary of the relevant jurisdiction within which they are assessed. The preference for either of these two revenue sources as financing mechanism can be modeled as a function of trip length, jurisdiction size, and collection costs. Earlier chapters argued that since jurisdictions try to do well by their residents, who are both voters and travelers, local effects are central to the choice of a financing mechanism. This chapter approaches the argument analytically in a specific context, that of a beltway. The choice of tax or toll, while being historically contingent, is a fhction of the length of trips, the size of the jurisdiction, and the costs of collecting revenue and providing infrastructure. These properties indicate the nature of the free-rider problem under the two different financing mechanisms (tax, toll)...





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