A crazy toll structure that encourages more driving.

Kentucky and Indiana have just put the finishing touches on two new bridges crossing the Ohio River.  Built at a cost of about $2.6 billion, the bridge project also includes a rebuilding “Spaghetti Junction” an elaborate system of on- and off-ramps in Louisville, where I-65 and I-64 intersect near the city’s downtown.  An impressive set of aerial photos of the newly completed project proudly produced by the Louisville Courier-Journal set off a predictable chorus of derision in the urbanist community earlier in the week.

But there’s another feature of the new bridge project that we think may be even more egregious than the concrete pasta of the re-built interchange:  the new tolling structure that will repay the cost of building the new bridges.  On Friday, motorists crossing the Ohio River in Louisville will start paying tolls to help cover the costs of  the two newly built bridges.

The bridges—and the tolls—are the culmination of a decades-long effort to expand highway capacity connecting Louisville with suburbs in southern Indiana. The project has a long and complex history–you can read Aaron Renn’s recounting here–but we can summarize it briefly as follows:  Since the 1960s, Interstate 65 has been carried across the Ohio River on the six-lane Kennedy Bridge, which has been approaching capacity for some time.  The region debated two alternatives for adding freeway capacity, a twinning of the Kennedy bridge near downtown and a second bridge, several miles to the East, which would complete a beltway around Louisville. After much conflict, Indiana and Kentucky compromised and decided to build both crossings (and nixed a plan–called “86-64“–to tear out the downtown freeway).  The two states have just completed the new downtown Abraham Lincoln bridge adjacent to the Kennedy Bridge as well as the suburban East End Bridge. In addition, two other highway bridges also cross the Ohio River in the Louisville area:  the I-64 Sherman Minton Bridge to the west and an older 2-lane Clark Memorial bridge downtown. As a result, the Louisville area now has five bridges crossing the Ohio.

The two states have had to set up a brand-new tolling system, because previously all these Louisville area crossings were toll free. Tolling will be all electronic, and barrier-free, and the bi-State RiverLink will use a combination of transponders and license plate readers to enforce tolls. Car owners that registered their license plates in advance and create a debit account will pay $3 per crossing; those who don’t register will be billed $4 per crossing. Motorist who buy transponders will pay $2 per crossing, but can qualify for a discount if they’re a regular user. But tolls will be charged only for the two Interstate 65 Bridges (the new Lincoln and the re-habbed Kennedy) and the new East End Bridge; the I-64 Minton Bridge and the downtown Clark Memorial bridge will continue to be free. So right off the bat, we have a strange mix of tolled bridges crossing the same river very near un-priced bridges. That’s likely to produce some interesting traffic patterns, as drivers re-route to avoid tolls.

Discounts for more driving

But here’s where things get very strange: As mentioned, there is a discount for regular commuters.  To qualify for the toll discount, you have to have an account and a transponder, and take at least 40 trips across the river each calendar month. For your first 39 trips, you are charged $2 each, up to a total of $78. But when you take your 40th trip, you are given a $40 toll credit, and your total bill falls to $40 dollars for 40 trips ($1 per trip). And thereafter, you pay $1 per trip for the rest of the month. Louisville Courier-Journal reporter James Bruggers wrote about this odd feature of the tolling system early last year.

This produces some unusual incentives: Once you’ve taken 20 trips in a month (at a cost of $40), you can take 20 more trips essentially for free—provided of course you take all 20 before the end of the month. And if you’ve taken 25 or 30 trips, you’ll actually pay a financial penalty if you don’t get to 40 trips.

So what this is likely to mean, especially toward the end of the month, is that motorists will be driving across the bridges to make sure that they save money. It would be economically rational, for someone with 34 trips across the river on the 31st of the month to make sure that they did 3 or 4 laps across the river to make sure that they got their discount. Failing to do so would cost them $25 or more.

The folks at RiverLink have an interesting spin on this: They’re urging people to take extra trips across the river to make sure they qualify for the discount:

What if you’ve made, say, 38 trips in a calendar month? You’d pay $76. So you would want to consider taking at least two more trips across one of the bridges, perhaps for dinner or shopping. Then, the 40-crossing threshold would be met, taking your payment down to $40 for the month.

At City Observatory, we generally all in favor of road pricing.  In theory, what tolls ought to do is send signals to motorists about whether, when and where to drive, leading them to make socially useful decisions. For example, peak hour pricing (charging steeper tolls during rush hour) gives motorists who can postpone trips a financial incentive to do so—freeing up capacity and saving travel time for those who really need or value traveling during the peak.

But since the proposed Louisville tolls don’t vary by time of day, you pay the same price whether you use one of the new bridges at the height of the rush hour, or in the wee hours of the morning when no one else is one the road. This flat-rate tolling structure misses a major opportunity to better manage demand and improve the overall functioning of the transportation system.  Instead, what Louisville has is a toll structure that essentially pays motorists to take extra trips in order to qualify for a discount could easily lead to more congestion, more pollution and more wear and tear on cars and bridges. It is effectively paying motorists to waste time and fuel.

We’re sure that this is not the result that the Kentucky and Indiana DOTs had in mind when they designed the system. What they probably wanted to do was encourage motorists to self-select for the discount—only regular bridge users would sign up. But they’ve created an odd set of incentives to generate more peak period traffic on the bridge. What this will do—it’s pretty clear—is goose traffic counts on the bridges, especially toward the end of the month. But it won’t provide any more revenue.

From the standpoint of reducing congestion—the stated goal of the project—this toll structure makes little sense. The tolls seem designed primarily to give state officials the re-assuring talking point that tolls will cost regular commuters no more than a dollar a day.  The big risk here is that the toll structure may undermine both the financial and traffic performance of this very expensive investment.  The presence of nearby un-tolled bridges may prompt many users–especially occasional and off-peak travelers to avoid the tolls altogether, undercutting revenue. Meanwhile, regular travelers may both over-use and under-pay for use of the new bridges:  there’s no difference in price between using the bridge 20 times and using it 40 times.  In addition, providing cheap toll discounts for very regular commuters also promises to undercut the market for transit, and car-pooling.

The tolling of the Ohio River Bridges promises to be an interesting experiment in high finance and travel behavior. We’ll be watching to see what happens next.

Note: This post was revised on January 6 to change an image used in the story, and to add a reference to a press story addressing the incentive effects of the toll system.