After slow start, I-77 toll lane revenue is surging
After generating little revenue during the height of the pandemic, the privately-managed Interstate 77 toll lanes are making enough money to meet or exceed revenue projections.
The toll lanes generated $2.16 million in the second quarter of 2021, according to the N.C. Department of Transporation. That was in April, May and June — a time when businesses were closed and many people were working from home.
In the fourth quarter of 2021, however, the toll lanes brought in $11.5 million. If that pace continues in 2022, the toll lanes will generate about $45 million for the year — $10 million more than projected before construction began.
The increase in revenue is not only due to more people using the lanes.
I-77 Mobility Partners — the private company that built and manages the lanes — is now making more money for each transaction, the result of setting higher rates than when the lanes first opened.
During the first part of the pandemic, the average toll transaction was 72 cents. At the end of 2021, that had increased to $1.34. (A toll transaction only covers part of the entire 26-mile project. If you drive from Charlotte to Mooresville, you will be charged several times, counting as several different transactions.)
I-77 Mobility Partners said in a statement that it’s “cautiously optimistic” about the increase in revenue.
Toll lanes, or managed lanes, are designed to give motorists a reliable travel time, no matter how many people are on the highway.
The goal is for vehicles to always be able to travel at nearly 50 mph in the toll lanes. If traffic in the toll lanes increases to a point at which traffic slows down, the tolls are increased. In theory, that pushes some drivers back into the general-purpose lanes.
There are similar toll lane projects with fluctuating prices throughout the country, in places like Washington D.C., Denver, and Miami.
But the I-77 toll lane project was one of the most controversial transportation projects in North Carolina.
Some Lake Norman residents opposed having any toll lanes.
Others said they were OK with the concept of toll lanes, but they wanted the state to widen I-77 first — just as the DOT has done for other highways throughout the state. Much of I-77 through Cornelius, Davidson and Mooresville was only two lanes in each direction and had never been widened.
And others objected to the project being turned over to a private company. Spanish infrastructure company Ferrovial is the majority owner of the toll lane project.
The DOT under the direction of then Gov. Pat McCrory went with a private company because it said there wasn’t enough money to expand I-77 with free lanes. The state said a private company could borrow money easier and build the project faster.
High tolls, even with little traffic
As the toll lanes enter their third year of operation, it’s clear that I-77 Mobility Partners has set toll rates that are much higher than other state-managed toll roads in North Carolina.
For instance, it costs $2.72 to drive the full 20 miles of the Monroe Expressway in Union County, a publicly funded and publicly managed highway. Though the Monroe Expressway is not a managed toll lane project, it’s similar in that it parallels U.S. 74 and gives motorists a faster trip through Union County.
It costs $3.71 to drive the full 19 miles of the Triangle Expressway outside of Raleigh. That highway is also publicly financed and managed.
At about 11:30 a.m. Tuesday, there was no congestion on I-77 in the Lake Norman area. Traffic in the general-purpose lanes was moving at least 70 mph.
Yet driving 26 miles from Charlotte to Mooresville on the toll lanes cost $8.40. I-77 Mobility Partners estimates the tolls for the same northbound trip at 5 pm would be $13.41.
“The strategy is to maximize revenue,” said Cornelius resident Kurt Naas, who was a leader in the opposition to the toll lanes. “If you have 10 cars willing to pay $9 and you have one car willing to pay $100, you kick out the other cars. It’s not about moving traffic or moving congestion.”
He added: “They are looking to find that maximum price elasticity and charge as high as you can without reducing demand.”
I-77 Mobility Partners wouldn’t agree to an interview about how they set their prices. They said in a statement that “for those who do opt to utilize the express lanes, the cost has proven to be very reasonable. On average, our customers pay $15 a month — or a little more than the cost of a 44 cent stamp each day — to use the express lanes.”
The company added: “The express lanes provide drivers a reliable travel option when they want it, and the majority of our customers do not drive the entire length of I-77 Express. The average trip is nine miles, and the average number of transactions is three. Drivers always have the choice to travel the entire length of the 26-mile corridor for free, unlike those on other traditional toll roads who must pay a toll to travel the corridor.”
It added that since the lanes opened at the end of 2019 congestion on I-77 has decreased, although congestion has decreased on most highways because of the pandemic.
No subsidies requested
The state’s contract with I-77 Mobility Partners calls for the DOT to give the company up to $75 million if it can’t meet its debt service payments. I-77 Mobility Partners has not asked for that money.
The project was also late to open. The DOT withheld $8.23 million from the company as penalties for being late.