Eliminating tolls comes with a price for NDP

Tolls, be they on a bridge, or road or a waterway, are effectively a tax aimed at a particular target: the people who use the facility.

Whatever has a toll attached to it usually was constructed to provide a solution to a problem. For example, the Welland Canal in Ontario between Lake Erie and Lake Ontario was built to allow material to be shipped by boat from Montreal to Chicago.

Many highways in the United States and some in Canada are tollways and are used by both truckers and individuals because these roads offer a more direct route and often less congestion; paying the toll is worth the gain in time.

Tolls on bridges tax the users who find a particular bridge offers a more efficient route compared to less convenient, longer and often more congested toll-free alternatives.

But tolls have what economists call externalities, both positive and negative.

With a new toll bridge, for example, you can expect reduced usage of the tolled route and more on less convenient substitute routes.

That, in turn, will have ripple effects on all those using the toll-free facility.

On the positive side, a toll can also encourage car-pooling to minimize the cost by the user and so incidentally reduce congestion on an efficient route.

Tolls can be also used as a deterrent to certain less desirable behaviours. Singapore, for example, imposes a tax on any vehicle entering the downtown region in an effort to ease the problem of too many cars for limited road and parking space. This measure works in Singapore because it has an extensive and efficient urban transit system.

In B.C., the previous provincial government placed tolls on the Port Mann and Golden Ears bridges for two reasons.

First, the debt incurred in building both could be placed in the category of “self-financing debt” and thus not included in “taxpayer-supported” debt.

Second, the revenue collected, (estimated at about $250 million for the current fiscal year) was well in excess of the cost of servicing the debt and maintenance of the structures. The new bridges were convenient cash cows needed to prop up the fiction that the provincial budget was “balanced.”

The lack of adequate public transit in B.C.’s Lower Mainland, a result of deliberate planning by the Liberal government, made avoiding the toll bridges by leaving the car at home difficult. Commuter dissatisfaction was therefore high.

Ending the tolls as of Sept. 1 allowed the new NDP provincial government to fulfil one of its key election promises, especially important since it was the Lower Mainland that provided the bulk of the electoral support for the NDP.

But this reward comes at a high cost. It means, among other things, a probable lowering of the provincial credit rating as the rating agencies scramble to avoid being tagged with having overlooked key bricks in the entire provincial debt structure.

And, of course, it means all BC taxpayers, including those who never use the two bridges, will now be paying the bill.

The loss of $250 million in revenue is significant. There are a number of financial time-bombs looming over the NDP because of the glaring mismanagement of the former government.

ICBC’s desperate financial position is the most immediate, and similar problems with BC Hydro and the education budget will soon tick loudly.

So, having managed to get themselves between a rock and a hard place by pledging to not raise taxes while also balancing the budget, the NDP will have to renege on some of their other campaign pledges.

Looking on the bright side, this may provide an opportunity to facilitate the introduction of a “mobility tax” as in Singapore.

Living, say, in North or West Vancouver and driving to work in the congested downtown you would need a sticker saying you paid a mobility fee for the privilege.

This might be the perfect way to finance effective urban transport.

David Bond is an author and retired bank economist. Email: curmudgeon@harumpf.com.