Highway Financing in the United States

Funding Construction and Maintenance of Highways in the United States

This article provides a brief history of the development and financing of America's Interstate Highway System, and provides a discussion of future modes of financing highway construction in the United States.

History of Highway Financing in the United States

Early Turnpikes

The oldest roads in America, which were built during the British Colonial Period and the early years of the United States were built, owned, and operated by private entities. Owners of these roads charged users a toll upon entering the road. The toll houses of the time featured a long pole that was set across the road to block access until the toll was paid, thus acting as a gate. The horizontal pole was mounted to a vertical pole that rotated, enabling the gate to be swung open once the toll was paid. Because the gate functioned in the same manner as a large turnstile, the name "turnpike" quickly became associated with the early toll roads of America.

National Road: First Federally-Funded Road

Several roads during the early 1800s were built and financed by the states or the federal government. The National Road, which runs from Baltimore Maryland to Vandalia, Illinois, is one of the earliest federally-funded roads in the United States. Established by Congress and signed into lay by President Thomas Jefferson in 1806, the National Road utilized existing turnpikes between Baltimore and Cumberland Maryland. The federally-funded portion of the National Road ran from Cumberland, Maryland westward through southwestern Pennsylvania, West Virginia (then part of Virginia), Ohio, and Indiana before terminating at Vandalia, Illinois.1

Transition from Privately-Financed Roads to Government-Funded Roads

During the late 1800s, states became more active in the construction of roads and many of the private turnpikes began to cease operations as more toll-free routes became available. Thepace of road construction began to accelerate around the turn of the 20th century with the advent of the automobile.

Wisconsin was the first state to develop a system of state highways and assign numbers to its state routes in 1917.2

The federal government became actively involved in roadbuilding in 1916 whenCongress passed the Federal-Aid Highway Act of 1916. Unlike future federal legislation, the Federal-Aid Highway Act of 1916 and the Federal-Aid Highway Act of 1921 provided federal funding to states for the purpose of building state highways within major corridors. Neither of these laws had provisions for a national highway system or federal route numberings. The American Association of State Highway Officials (AASHO) was founded in 1914 to help states coordinate on the planning and construction of multi-state routes. The AASHO (later AASHTO) would become the coordinating and approval authority for U.S. numbered routes and Interstate route designations through subsequent federal legislation.

The six New England states and New York were among the first to establish a system of "interstate" highways. The New England Interstate System was established in 1922, encompassing roads in New England and in New York State east of the Hudson River. Under the New England Interstate System, even-numbered routes went north-south and odd-numbered roads went east-west. Route 8 through Connecticut, Massachusetts, and Vermont is a vestige of the old New England system, being formerly designated New England Route 8.

The federal government began initial planning for a national system of numbered highways in 1924. On March 2, 1925 the Joint Board on Interstate Highways convened, which drew up the tentative federal highway network. The board also designed the federal highway shield and adopted the term "U.S. highway" for roads in the federal network. After the U.S. routes were finalized on November 11, 1926, states began erecting U.S. highway signs along their respective portions of the new U.S. highway system.

Until the establishment of the National Highway System in 1995, the U.S. Highway network was financed in the same manner as state routes, with the individual states paying most of the costs for maintaining and upgrading the roads.

Emergence of Parkways and Modern Turnpikes

As more Americans owned automobiles and traveled longer distances, demand larger roads that could handle higher speeds increased. The first experiments with limited-access freeways and expressways was in 1909 with the Long Island Motor Parkway. Many more controlled-access parkways would be built between 1925 and the 1960s under the direction of famed roadbuilder Robert Moses. The New York State Legislature established several "public authorities" to finance Robert Moses' parkways and bridges. Public authorities had the ability to sell bonds to private-sector investors to finance road construction, then collect tolls to pay off the construction bonds, with the excess toll revenue being used to maintain and upgrade the parkways. This made the parkways financially self-sustaining, thereby requiring no new or increased taxes and only the users of the parkways would pay for their construction and upkeep.

The first modern freeways were the Merritt Parkway in Connecticut, which opened between 1938 and 1940, and the Pennsylvania Turnpike, which opened in 1940. The Pennsylvania Turnpike was financed through a public authority known as the Pennsylvania Turnpike Commission, while the Connecticut Highway Department sold bonds to private investors to finance construction of the Merritt Parkway. Freeway construction ceased during the early 1940s as all available resources were diverted to win World War II. After the war was over, freeway construction resumed, with public authorities overseeing tollways and toll bridges in Connecticut, Delaware, Florida, Illinois, Indiana, Kansas, Kentucky, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Ohio, Oklahoma, Pennsylvania, and West Virginia. All of these turnpikes offered motorists efficient high-speed travel over long distances, while being financially self-sustaining through the collection of tolls.

Era of Interstate Highways and the Federal Highway Trust Fund

Planning for a national system of freeways had been ongoing since the 1930s, but the first legislation that designated specific routes for future Interstate highways was the Federal Aid Highway Act of 1944. The 1944 Highway Act called for a 40,000 mile (64,000 km) network of Interstate highways linking every part of the United States. The 1944 law however, did not mention any funding mechanism for building and maintaining the Interstate system.3
Because the 1944 Highway Act lacked a clear plan to finance the construction of the Interstate highway system, several states began constructing toll roads in anticipation that they would eventually be integrated into the Interstate system. Most of the pre-Interstate toll roads did in fact, become part of the Interstate Highway System.

On June 29, 1956 President Dwight D. Eisenhower signed the Highway Act of 1956 which allocated $25 billion over a 12-year span between 1957 and 1969 to construct a 65,000 km (41,000 mile) network of Interstate highways. Title II of the Highway Act established the Federal Highway Trust Fund, setting aside money collected through the federal gasoline tax to finance highway construction and maintenance. It further stated that Interstate highways would be financed 90% by the federal government and 10% by each state.4

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