Let truckers pay more on highways

The Toronto Star- BILL ROWAT- Jan 9, 2004

Toronto Mayor David Miller recognizes that congestion and gridlock are at the top of the Greater Toronto Area's list of long-term challenges. He has targeted public transit as an integral part of the solution. Canada's rail industry agrees that more should be done to support commuter rail and urban transit.

Toronto's congestion and gridlock problems do not just relate to the movement of people though, but also to the movement of goods.

The facts are striking. From 1990 to 2001, for-hiring trucking has increased in revenue by 120 per cent, activity is up more than 140 per cent.

In Canada, growth rates in trucking are significantly outpacing our neighbour to the south. Other modes (rail and marine) have grown at a rate of one-fifth of trucking.
The lion's share of this growth is in cross-border traffic going through Ontario border gateways and along the 401 corridor.

Why, after massive spending on highways, do we still have ever-increasing congestion and gridlock? Statistics Canada estimates the capital stock of publicly owned highways and roads to be $82.3 billion.

Public investment in highways helps reduce the cost and improves the service of commercial road users. By doing so, it induces traffic to shift from other modes contributing to increases in congestion and gridlock.

This new dilemma begets additional spending, resulting in more traffic, and inducing more highway building etc. It is a core reason why our major urban centres and key trade corridors are congested.

The fact is that highways in Canada continue to be underpriced (often free) for users, with society and the taxpayer bearing the resultant direct and hidden costs. This "free rider problem" is at its greatest for the most intensive (often the heaviest and largest) highway users.

Heavy axle vehicles do the vast majority of damage to roadways. Other capital-intensive modes - rail, for example - build, own, finance and maintain their own networks. This makes it difficult for rail to compete for freight business, especially over relatively shorter distances.

But can the "free rider problem" be fixed? There are two intertwined solutions - "full-cost accounting" and "user pay" - that have been endorsed in principle by a recent independent review of Canada's transportation system and by other countries.

Full-cost accounting refers to the practice of government calculating the full cost of financing, long-term cost of capital, and land use costs of investments in highways, instead of the pure cash basis used today.

When such an approach is adopted and the true costs calculated it is clear that fuel taxes and other fees do not cover the real costs of highway infrastructure.
Nor do governments attempt to apportion the "external costs" that private vehicle and truck use imposes on society and taxpayers.

In surface transportation, these costs relate to the costs of congestion in terms of delayed deliveries; the impact of air pollutants from idling engines; the toll of accidents (injuries and fatalities) and their associated health-care costs and insurance payouts; the health issues around high levels of ambient noise; and the general aesthetic impacts of the construction of massive highway infrastructure.

The absence of user pay and full cost accounting - and the failure to recognize "external costs" - has given rise to significant market distortions in surface transportation. In commercial freight markets, serious market imbalances between truck and rail have arisen.

Trucking has grown at an explosive pace in the wake of NAFTA. Trucks run over publicly provided highway infrastructure and have no proprietary interest in the roadway upon which they operate. Furthermore, a great deal of the truck traffic travels the GTA on its way to destinations south of the border or elsewhere in Canada. Toronto's major arterial roads and highways have become akin to one gigantic parking lot.

The result of all this unfettered heavy truck and private vehicle use is rundown highways, congestion, and serious questions about the sustainability of surface transport in its current form.

There is another way. Railways are self-financing entities that operate their own rights of way. Furthermore, as a recent report by the Organization for Economic Cooperation and Development points out, "Road freight's external costs per unit are almost 10 times higher than those from rail freight."

In an open market, where competing modes such as rail cover their full costs, user pay would ensure that commercial road users pay their full cost, reflecting the wear and tear they impose, for the use of public highways.

To get there though, governments must reassess how they finance road building and consider the imposition of charges for road use by category of vehicle. For example, the Swiss Heavy Vehicle Fee (HVF) is driven by the principle that user charges should cover both infrastructure costs and external costs such as accidents, pollution and noise.

There are a range of other worthy public policy solutions to the problem of rampant vehicle use, including a surcharge on parking, a 1 or 2 cent surcharge to the price of fuel that might go to municipal governments, or adding a transit tax to the cost of a new car.
These initiatives take time, and considerable work has to be done to implement them. In the meantime, a simpler alternative is to not limit public investment to public assets. There is merit to "public private partnerships," where industry and government come together to invest in private assets, like rail, that is a viable alternative to more highways.

Bill Rowat is president and CEO of the Railway Association of Canada.

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