	Introduction

Since FY2008, federal highway user taxes and fees have been inadequate to fund the surface transportation program authorized by Congress. New federally assisted roads, bridges, and tunnels may be tolled. The vast majority of existing federally assisted roads, bridges, and tunnels may be converted to toll facilities but must meet reconstruction or replacement requirements. This report explains current federal policies governing tolling and discusses issues related to increasing the use of tolls as a source of revenue for surface transportation projects. Over time, toll roads came to be regarded as obstacles to the free flow of commerce. Section 1 of the Federal-Aid Road Act (39 Stat. 355) provided that "all roads constructed under the provision of this Act be free from tolls of all kinds." Federal Conditions for Tolling of Highways, Bridges, and Tunnels

The legal ability to toll is based on exceptions to the 1958 "Freedom from Tolls" provision of 23 U.S.C. 100-17 ) requires that bridge tolls "shall be just and reasonable." The FAST Act involved the federal government in toll rates for the first time, mandating that intercity buses serving the public have the same access to and pay the same rates as public transportation buses, and requiring public authorities operating high-occupancy toll lanes on the Interstate System to consult with affected metropolitan planning organizations on the placement and amount of tolls

		Use of Toll Revenues

Although the requirement for upfront tolling agreements under Section 129 no longer exists, there continue to be restrictions on the use of toll revenues. Section 129(a)(3), which requires that the public authority with jurisdiction over a toll facility use toll revenues only for
debt service with respect to the projects on or for which the tolls are authorized, including funding of reasonable reserves and debt service on refinancing; a reasonable return on investment of any private person financing the project, as determined by the state or interstate compact of states concerned; any costs necessary for the improvement and proper operation and maintenance of the toll facility, including reconstruction, resurfacing, restoration, and rehabilitation; payments that the party holding the right to toll revenues owes another party under a public-private partnership agreement; or any other purpose for which federal funds may be obligated by a state under Title 23 (including certain transit projects), provided the public authority certifies annually that the tolled facility is being adequately maintained. Financial Realities of Toll Roads

Whether it is built or operated by a government agency or by private investors, a toll road must have sufficient traffic willing to pay a high enough toll to cover construction, maintenance, and toll collection costs if it is to be financially successful. Most roads on the federal-aid system are not likely to pass that test. In rural areas, highways often do not have enough traffic to cover the cost of building toll-collection infrastructure and collecting tolls. Collecting federal motor fuels taxes is estimated to cost less than 1% of the amount collected. However, a major expansion of tolling might reduce the demand for federal expenditures on roads. These factors suggest that imposing tolls on individual transportation facilities is likely to be of only limited use in helping states overcome reductions in federal grants should Congress deal with the shortfall in motor fuels tax revenue by reducing the size of the federal surface transportation program. Hypothetically, if all Interstate highways could be instantly converted to a self-sustaining toll network and received no further federal funding, expenditures under the remaining federal-aid highway program would fall from an average of about $45 billion per year to around $33 billion. In recent years, Congress has encouraged the use of innovative financing mechanisms such as P3s, which may use toll revenues in several ways. The creation of a well-funded National Infrastructure Bank could thus lead to an expansion of toll roads. This approach would have the advantage of assuring that all states would begin imposing tolls at roughly the same time, and federal leadership would likely not allow the outbreak of "toll wars" among the states, whereby states attempt to impose toll rates in a way that shifts the burden of the toll to their neighbors or interstate travelers generally. Emerging Issues

Some states may be tempted to collect tolls at state borders rather than at internal locations where more residents would be affected, effectively taxing interstate travel at higher rates than in-state travel and in some cases putting out-of-state companies at a competitive disadvantage against local companies.
The Federal-Aid Road Act of 1916 (39 Stat. 355), which provided federal funds to states for highway construction, included the requirement that all roads funded under the act be "free from tolls of all kinds." Following the funding of the Interstate System in 1956, the "freedom from tolls" policy was reaffirmed (23 U.S.C. §301). Although the provision still exists, exceptions to the general ban on tolls now cover the vast majority of federal-aid roads and bridges. New roads, bridges, and tunnels may be tolled, and most existing roads, bridges, and tunnels may be tolled if they are reconstructed or replaced. Yet growth in the extent of toll facilities has been slow, and some new toll projects have struggled financially.
The failure, beginning in 2008, of federal highway user taxes and fees to provide sufficient revenues to fund the surface transportation program authorized by Congress has renewed interest in expanding toll financing. The Congressional Budget Office (CBO) projects that annual highway revenues, mostly from motor fuels taxes, will fall an average of $20 billion short of the amount needed to sustain the current federal surface transportation program between FY2021 and FY2025, and some Members of Congress see an expansion of tolling as a way to reduce the need for federal expenditures on roads.
Congress could achieve an expansion of tolling in several ways. At one extreme, it could simply encourage tolling pilot projects on Interstate System highways, of which relatively few have been implemented to date. At the other extreme, Congress might authorize states to toll federal-aid highways as they see fit, or even require that Interstate highway segments be converted to toll roads as they undergo reconstruction, eventually turning all Interstates into toll roads.
One obstacle to increased use of tolling is that tolls are a relatively inefficient way of raising revenue. The costs of toll collection on many existing toll roads exceed 10% of revenues even if all tolls are collected electronically, not including the cost of toll collection infrastructure. This compares unfavorably to the cost of collecting the existing federal motor fuels tax, estimated to be less than 1% of revenues. In addition, many roads may not have sufficient traffic willing to pay a high enough toll to fully cover financing, construction, maintenance, and toll collection costs. Due to these factors, as well as their political unpopularity, tolls are likely to play a limited role in funding surface transportation projects in the near future.
Beyond a requirement that toll rates on bridges "shall be just and reasonable" and a provision limiting tolls on over-the-road buses, current federal law provides no role for the federal government in regulating toll rates or practices. States do not need to ask for permission from the Federal Highway Administration (FHWA) prior to imposing tolls but must be careful to adhere to the legal requirements, especially in regard to the use of revenues. However, there have been controversies in a number of states over toll schedules that favor in-state residents over others; over attempts to collect tolls at state borders, where more nonresidents would be affected, rather than at internal locations; and over trucking industry complaints that truck tolls are excessive compared to auto tolls. If tolling becomes more widespread, the extent to which tolling should be subject to federal oversight may become a more prominent question.