February 27, 2001
Ontario Premier Mike Harris is revving up for what could become the biggest highway building program in the country’s history.
He’s expanding his very successful Highway 407, an electronic toll road north of Toronto’s Highway 401. He’s planning to relieve congestion on Highway 401, the world’s busiest highway, by building a parallel route north of Highway 407. He’s planning to help Toronto-area residents get to their summer cottages with a north-south highway. He’s planning to aid the huge influx of trucks crossing the Canada-U.S. border by building a major highway through the Niagara peninsula.
He’s promising to finance these new highways through road tolls. The one thing Mr. Harris has promised he wouldn’t do is toll Ontario’s existing highway system. That’s the one thing he should do.
Mr. Harris justifies his massive, multi-billion-dollar road expansion – part of what he calls making “tough” decisions – based on three of his government’s long-term forecasts. First, he predicts that southern Ontario will be housing two million more people – equivalent to the populations of Manitoba and Saskatchewan – over the next 15 years.
Next, he predicts that most of those two million will choose to live in the sprawling suburban areas surrounding Toronto – not within the City of Toronto and not within Hamilton, London, or other cities in southern Ontario.
Finally, Mr. Harris predicts that users of his new highways won’t balk at financing the highways through toll charges.
Predictions of what people will need 15 years from now can fail. Throughout North America, people have begun to return to cities.
But Mr. Harris is doing more than placing his bets on necessarily fuzzy forecasts of continued suburban sprawl. He’s also ignoring hard historical evidence from the financial world.
As Robert Muller of the J. P. Morgan Bank explained last month to the Transportation Research Board in Washington, D.C., the conventional toll-road-builder’s wisdom – that you can simply “build ’em and people will come” – has hit a brick wall. Mr. Muller examined the history of 16 U.S. toll road projects to find that all 16 had significantly lower demand, and lower revenues, than the transportation planners had forecast. Forecasts of more recent projects among the 16 – those since 1995 – were more accurate, but even there revenues fell short of forecasts by 50% to 80%. Part of the problem came from wildly inaccurate assumptions – such as believing politicized projections of where future housing developments will occur. The other part came from failing to realize that people drive much less when they must pay a market price for their use of the road.
Pre-building a highway is not being “bold” or “visionary,” as Mr. Harris claims, but being blind to financial risks. Tolling the existing highways, on the other hand, involves no financial risk. More importantly, Mr. Harris wouldn’t need to wait many years, until the roads are built, to relieve congestion – the relief would occur the instant tolling started.
If Highway 401 were tolled, for example, some vehicles which had been avoiding Highway 407’s tolls would immediately stop doing so, utilizing Highway 407’s extra capacity. Some freight would switch to rail from road, and other shipments would disappear altogether as purchasers became willing to pay a little more for locally produced goods to avoid paying a lot more in transportation charges. When people changed jobs, or moved homes, they’d more often seek a locale that minimized transportation costs. And car pooling would soar, as it has on toll roads elsewhere.
But while tolling existing highways is a no-brainer in almost all respects – it relieves congestion, it protects the environment, it increases economic efficiency and it avoids large taxpayer risks – it does require that Mr. Harris make a truly tough decision. He would face intense opposition from commuters who now depend on the free expressways, and intense opposition from those living along alternative routes, which would bear increased traffic as people tried to avoid paying tolls.
Fortunately, Mr. Harris’s preferred toll-road technology – electronic tolls such as those used on Highway 407 – provides him with a ready-made solution to political opposition. The electronic technology would allow him to exempt existing commuters from toll road charges for as long as they continue to live at the same address. As people did move over time, they’d tend to locate closer to work, contributing to a lasting solution.
Because changes in road use would now occur slowly, the neighbouring communities’ fears of spillover traffic would ease. While many would remain unsatisfied, their outcry would be as nothing compared to the outcry that would come of Mr. Harris’s Plan A – expropriating vast tracts of land, some of it through already suburbanized areas – from communities that would suddenly have expressways for neighbours.
“We must be bold … we must think of the big picture … and we must plan ahead,” he told a Rotary Club in the Niagara Peninsula Friday.
Quite right. Be bold. Think of the big picture. Plan ahead. But also do the right and courageous thing. Don’t pre-build highways at enormous risk and expense. Toll the existing highway system instead and discover – in likelihood – that Ontario needs none of the planned highways.
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