Canada's largest city councils are beginning to recognize the inherent problem with the current system of fuel taxes: Those who collect the bucks for building roads and transit systems aren't in charge of getting the systems built.
The buck stops elsewhere.
There are only three ways to pay for roads: Through taxes, fees or wait times. The most common of these is taxes. And most of the tax burden falls on municipalities, which are notoriously regressive taxers in that they don't tax on income, mostly just on property value, and rates are pretty high already.
The federal and provincial governments are also involved in the road business, in theory, but we have seen that "commitment" come and go with the whims of political hot air.
Collecting ordinary taxes to build roads is the most ancient method. An online newsletter called TollroadsNews (www.tollroadsnews.com) offers an excellent history of road economics. Up until a century or two ago, citizens were expected to grab a shovel and help dig stones themselves, by corvee, or forced labour. Anyone who didn't show up for duty was assessed a financial penalty by the local authority.
"Like other kinds of taxation, the corvee was seen as unfair and oppressive," Peter Samuel writes on the Tollroads website. "And enlightened thinkers argued for the user-pays principle."
Other than taxation, "user pay" is the only option, which has two sub-options.
The first of these "user-pay" methods involves NOT building, thereby making people pay by how long they wait in the queue. It's the Canadian health-care model of road economics.
As a way to "build" a road, "not building" sounds absurd, I know, but it's common. This is a user-pay system in that the users are the poor schmucks who get stuck trying to travel on roads that are under-maintained, or too small, or simply not where they are supposed to be. The potholes in downtown Toronto that ruined the shocks on my old Ford Fairmont stationwagon testify that this is an expensive way to (not) build roads.
But the final, and most ideal, user-pay method is the one where the roads actually GET built and maintained. This is commonly known as "tolling," although it has also been called "congestion charging."
And while ignorant people dismiss it out of hand, it is the ideal situation - access to roads is treated as any other commodity in life, where the price fluctuates with the level of demand and cost of service.
There are only half a dozen cities in the world that have taken this notion all the way by tolling entire zones. (In Canada, only a few bridges and highways, such as Toronto's Highway 407, are experimenting with the technology). Not a single city in North America has tried going all out yet.
But that will most certainly change, because cities worldwide that have tried it are reaping huge benefits in the form of far more efficient public transit and improved business traffic.
The only question that remains is: Who will lead the way?
Toll roads don't have to be government-funded, but they can be, and they don't have to be privately built or maintained, like the 407.
All that matters is that those who build and maintain the road/bridge/tunnel recover the costs from those who use it. Adam Smith, the father or modern economics, praised this in principle as the purest way of funding roads. But not until recent times has it been so practical to do.
When I last wrote about this topic a couple of years ago, I pointed to the amazing, inexpensive transponder and surveillance technology that destroy any arguments about slowing drivers down or wasting money on administrative costs.
Since that writing, the City of London (England) has completed what is hailed as a huge success in tolling every road into the downtown. Plans are reportedly in the works to expand the cordon there to include a larger area.
So, then, aren't gas taxes essentially "user-pay" fees? Not so, for two reasons. First, there is no guarantee that "users" of the road buy gas where it's used, or that they pay more when roads are busier, as tolls so elegantly can. A municipal gas tax would simply chase gas vendors outside the city limits.
Therefore, a senior level of government (provincial or federal) must collect gas taxes. And as we've seen, that booty doesn't trickle down to the local level very effectively.
Lately, with premiers Canadawide and Prime Minister Paul Martin promising more fuel taxes "back" to the cities, things might sound fine. However, the new about-turn illustrates how badly cities were bled in the lean years, when they needed the revenue most.
Gas taxes are a fickle way of funding roads.
Besides, Calgary aldermen have yet again foisted a 10-per-cent tax hike on inner-city citizens such as myself who cycle to work and put no strain on roads. Residents of suburbs such as McKenzie Towne, who have received three new $35-million overpasses in the past few years, will see their tax bills actually drop.
This kind of obviously regressive taxation and anti-common sense policy cannot continue. But how? Only with tolls.
This isn't a left-wing or right-wing issue. Ill-informed people on both sides hate tolls, and the enlightened on both support them.
London's famously left-wing Mayor Ken Livingstone has been one of toll-roads' biggest champions of late. But so has Vancouver's Fraser Institute, a think-tank that few people would define as left-wing.
As the London experience has shown, you might not like the sound of this idea now, but when your business needs those supplies pronto, or that $1,000 contract is about to die, the few extra bucks you complained about for the toll will make economic sense.
Or, maybe your child will need to be picked up from school in a hurry or that $30 late fee will kick in.
Suddenly, even a $10 toll for the guarantee you'll make it seems like a bargain.
A well-planned toll system may have many initial detractors, but the idea is winning the world over - one reassured user at a time.
(Ian van de Burgt can be reached at ian@businessedge.ca)
