Changing lanes

| July 05, 2007

Electronic toll lanes (right) were among the first upgrades made by Skyway Concession Co., the new private operator of the Chicago Skyway.

Truck tolls on the Indiana Toll Road rose again on April Fool’s Day – no joke. It was the second of four annual April 1 increases for all vehicles agreed upon by the state and the road’s new private operator. The road’s per-mile five-axle truck toll will reach 20.3 cents on April 1, 2009. It was around 9 cents before the first increase on April Fool’s Day 2006.

Why April 1? “It’s probably [Indiana Gov.] Mitch Daniels’ birthday,” quips Todd Spencer, executive vice president of the Owner-Operator Independent Drivers Association – a leading critic of highway privatization.

Daniels was the prime proponent of the Indiana Toll Road lease, which was met with widespread public opposition. The deal netted the state a $3.85 billion windfall – and a long-term contract emblematic of privatization’s potential pluses and minuses for owner-operators.

By 2009, if all goes according to the 75-year lease agreement, the Indiana Toll Road Concession Co., a partnership of two foreign companies, will have instituted fully automated toll collection, saving owner-operators time and fuel and decreasing congestion – all on a road with state-of-the-art maintenance. And the state’s $3.85 billion will go toward county road projects and paying off toll-road bonds.

On the other hand, critics argue, steadily escalating tolls will force many owner-operators to quit using the road. Congestion on alternate routes will increase as truckers and motorists avoid the tolls. Toll increases beyond 2009 could exceed what the state would have enacted had it kept the toll road.

Since the 1991 federal highway bill began liberalizing their regulation, 168 new toll roads (not including bridges), most of them planned as publicly owned facilities, have entered various stages of development, according to a 2006 U.S. Department of Transportation report. Long-term privatization is the latest wrinkle in the trend.

To date, the Indiana Toll Road is the only significant haul route converted to a fully private operation, though its Chicago connection, the commuter-heavy Chicago Skyway, is on a 99-year lease to the same investors, the Spanish firm Cintra Concesiones de Infraestructuras de Transporte and the Australian Macquarie Infrastructure Group.

Still, with more than 20 states considering or having enacted statutes that make the practice legal for new-road funding, owner-operators likely will be forced to spend more money or more time to get from Point A to Point B. Here are some of the developments owner-operators can expect.

HIGHER TOLLS. Owner-operator James Hartsfield of Baltimore, leased to C.R. England, is paid 89 cents a mile but not reimbursed for tolls. “If I get a trip out of New York, I might as well say I’ll be doing that free,” Hartsfield says. “After the fuel hits me, and the tolls hit me, I don’t have anything.”

The highest allowable tolls will be charged, critics say. “The public-private partnerships that are being promoted are those that come with the needs of investors put first,” says Spencer of OOIDA, which has called for an owner-operator boycott of the Indiana Toll Road. In its first year, the Indiana Toll Road Concession Co. has increased truck tolls nearly to the maximum allowed by the contract.

The initial dramatic yearly hikes allowed by the contract “were part of a deal to make the concession more attractive,” says Peter Samuel, a senior fellow at the pro-privatization Reason Foundation and longtime editor of Tollroadsnews.com. “The political muscle of commuters tends to be higher than that of truckers.” As a result, he says, “The truckers suffered larger toll increases.”

Skyway car and truck tolls are scheduled almost to double by 2017. If the concession exercises its lease option to increase truck tolls an additional 40 percent, the Skyway’s 7.8 miles will cost an owner-operator $1.85 per mile in 10 years – more than most owner-operators gross today.

Independent owner-operators will face the tricky task of trying to pass the increased toll costs to customers, but many of their leased counterparts may be somewhat better off. Most dry van fleets (64 percent) reimburse leased owner-operators for all road tolls, but this is done only by 39 percent of flatbed carriers and 33 percent of refrigerated carriers, says Gordon Klemp of the Transportation Research Institute, publisher of the National Survey of Driver Wages.

REROUTING. As privatization brings more and higher tolls, “You will likely see truck traffic diverted to other local roads that aren’t designed for that kind of traffic” and that will be less safe than controlled-access roads, says Clayton Boyce, public affairs vice president for the American Trucking Associations. ATA, OOIDA and other groups have formed an anti-privatization coalition, Americans for a Strong National Highway Network.

“Most companies will make every effort to route trucks on non-toll routes,” says Spencer. “It’s generally not difficult, because there’s software for mapping, routing and everything else.”

“The only way I will travel on a toll road is if it’s the only way to get to where I need to go,” says independent owner-operator Michael Goodman of Chattanooga, Tenn.

On the Pennsylvania Turnpike, Goodman “spent $28 for about 50 miles,” he says. “I just about had a cow when she told me how much that would be.” The increase added around 4 cents a mile in costs to his entire 777-mile route that day.

To avoid the Indiana Toll Road, both Goodman and owner-operator Johnnie Bond, leased to Landstar Ranger, take U.S. 20 instead. “The difference is only five miles,” says Bond, whose fleet does not reimburse him for tolls. A trip into Chicago via the I-80/90 Indiana Toll Road/Chicago Skyway route adds 19 cents a mile for a five-axle vehicle.

The privatized Chicago Skyway itself has become an alternate route in recent years for many motorists seeking to avoid the widening and reconstruction of the Kingery, Borman and Dan Ryan expressways into the city. But many truckers still shun it.

Roehl Transport, based in nearby Marshfield, Wis., encourages the use of E-ZPass transponders among its 117 owner-operators and reimburses them for most of their tolls, says program manager Dan Bennett. The Skyway is an exception, and not only because its toll is expensive. “It’s not a driver-friendly or equipment-friendly road,” Bennett says of the 49-year-old elevated roadway.

Building and maintaining those free alternate routes, however, may be ruled out by the “non-compete” clauses of some privatization contracts. The Chicago Skyway deal has no such clause, but the Indiana agreement sets up a 10-mile competition zone alongside the toll road. Within that zone, the state can add short, limited-access parallel roads, but it must compensate the private sector for lost toll revenue if it builds a long-distance road within the zone. U.S. 20 itself is barred from large improvements over any 20-mile section until 2061. Most current private projects in the early stages of development, including many in Texas, do the same.

TOLLING TO MANAGE TRAFFIC. For some carriers, toll routes have their advantages. The public Illinois Tollway Authority has implemented open-road tolling on I-294, the Tri-State Tollway, which loops around Chicago’s downtown, a move that Roehl’s Dan Bennett says has provided a fast alternate to the more direct, high-traffic route through downtown on I-94. On the Tri-State, “You’re adding 62 miles, but you eliminate 60-90 minutes” during high-traffic periods, Bennett says.

Via “congestion pricing,” the Skyway Concession Co. offers truckers incentive to run by night rather than by day. The peak-time five-axle toll of $1.08 per mile drops to 77 cents per mile from 8 p.m. to 4 a.m.

Congestion pricing has been advocated by the U.S. Department of Transportation in recent years as a tool for reducing congestion without adding lanes or building roads. It can also be applied beyond toll roads. For example, at the ports of Los Angeles and Long Beach since June 2005 the PierPass program has imposed a “traffic mitigation fee” on shippers for the movement of containers during peak daytime hours and has begun the OffPeak Program, an incentive for moving cargo in the evening.

Congestion pricing is ill-advised “social engineering,” says OOIDA’s Spencer. “People will adjust their habits of their own accord.”

NEW MAINTENANCE STANDARDS. The lease contracts on the Indiana Toll Road and Chicago Skyway stipulate detailed maintenance performance standards that, if not met, would be grounds for a state resumption of control. Potholes, for example, must be temporarily patched 24 hours from time of identification and permanently fixed within a month.

Initial maintenance results in Chicago are encouraging. When a spilled load of mozzarella cheese closed the southbound Skyway in April, the entire clean-up and removal of truck and trailer was done in nine hours.

Roehl owner-operator Tony Martin of Newnan, Ga., who calls his E-ZPass transponder well worth the investment, thinks privatization might be a good idea for new roads if the private operator would “understand the expectations of that road 20 years down the line.” Outside Chicago, Martin says, “I-80/94 has been in ongoing construction for years, and now they’re tearing I-94 into the city up. … It would make sense if they said, ‘We are building the future,’ and really did it, laid the foundations right, and left space for additional lanes.”


TOLL DISCOUNTS AVAILABLE FOR OWNER-OPERATORS
Commercial discounts on toll roads come with volume, says Bill Joyce, president of the New York State Motor Truck Association and CEO of BestPass, a recently launched discount tolling service for owner-operators and small fleets. But before his service, he says, you had to run up $1,000 a month in tolls to get these discounts.

BestPass, however, has negotiated the maximum commercial discounts with the Pennsylvania, Maryland, New York and Ohio turnpike authorities, so that most of those savings can be passed along to the owner-operator. Those using the service also get the benefit of partner PrePass’ nationwide weigh-station bypassing service, Joyce says.

The only cost is a yearly $100 bonding fee and the cost of the transponder, which ranges from a one-time $45 in Maryland to a monthly $1 rental in New York, Joyce says. “And in New York, we give a minimum of 2.5 percent in volume discounts, in Pennsylvania a minimum of 5 percent, and in Ohio a minimum of 7 percent,” in addition to built-in E-ZPass discounts.

Owners of Muffet Trucking Express, a nine-truck refrigerated fleet out of Uniontown, Ohio, use BestPass, says co-owner Laura Muffet. Savings on the Ohio and Pennsylvania turnpikes and the New York Thruway run about $50 to $60 a month, she says.

Privatization raises the possibility, however, of BestPass having to renegotiate discounts with new, private operators. Discount services such as BestPass won’t last long in a privatized world, says Todd Spencer of the Owner-Operator Independent Drivers Association.

“There are no prohibitions against discriminatory pricing,” he says. “We expect to see big carriers and others getting sweetheart deals on these roads and small businesses paying full price.”

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TOLL SURCHARGE NEEDED?
Angie Bruskotter of owner-operator business services provider ATBS recently asked independent clients whether they ever applied any kind of toll surcharge.

“The general consensus was that shippers would resist,” she says, and it’s likely that toll charges get “layered into” the overall rate.

But the Reason Foundation’s Robert Poole thinks customers would ante up in the spirit of improved productivity. “When I talk to shipper groups, they say, ‘Holy smoke, we need better performance, we’re willing to pay,'” he says.

An independent who negotiates directly with shippers should take an itemized approach when explaining toll rates to customers, says Chris Brady of Commercial Motor Vehicle Consulting. “When the shipper receives the bill, at least he has a greater understanding of what’s there,” he says. “He might not accept it, but at least he has the numbers to help make him a little more comfortable.”

Indexed to published rates, toll fees might be noted as a lump sum or computed over the entire route and added to a per-mile rate like a fuel surcharge.

Just as fuel-savvy owner-operators can profit from fuel surcharges based on 6 miles per gallon, so toll-savvy owner-operators might be able to profit from toll surcharges, particularly in high-toll regions such as the Northeast. E-ZPass, the electronic tolling service in operation in most toll states between Illinois and Maine, offers truck discounts of 5 percent on the New York State Thruway, for instance. With BestPass, an E-ZPass-compatible discount tolling service for owner-operators and small fleets, even larger commercial volume discounts are possible.

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