DETERMINATION OF A "REASONABLE AND JUST" BRIDGE TOLL

DETERMINATION OF A "REASONABLE AND JUST" BRIDGE TOLLAuthor(s): Roland MorrisSource: Administrative Law Review, Vol. 30, No. 3 (Summer 1978), pp. 409-422Published by: American Bar AssociationStable URL: http://www.jstor.org/stable/40709051 .

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409

DETERMINATION OF A "REASONABLE AND JUST" BRIDGE TOLL

Roland Morris*

INTRODUCTION

legislative delegation of broad authority to regulate rates to administrative agencies using the standard "reasonable and just"

has a long and well settled history at both federal and state levels. Federal agencies, such as the Interstate Commerce Commission and the Federal Power Commission, as well as State Public Utility Commissions and Insurance Commissions, have wrestled with the appropriate application of the terms "reasonable and just" to their various administrative responsibilities for many years.1 Until recently, however, the concept of "reasonable and just" as the General Bridge Acts2 invoke these

•Member of the Pennsylvania Bar. iSee Wisconsin v. FPC, 373 U.S. 294 (1963) where the Court said: "It has been

repeatedly stated that no single method need be followed by the Commission in con- sidering the justness and reasonableness of rates." Id. at 309; Texas Eastern Trans- mission Corp. v. FPC, 543 F.2d 757 (D.C. Cir. 1974) for a discussion of the Commis- sion's duties and responsibilities in determining just and reasonable rates for gas dedicated to interstate use; EPC v. Texaco, Inc., 417 U.S. 380 (1974) where the court held that an FPC order exempting sales by "small producers" from direct regulation did not satisfy statutory requirements that the sale price for gas sold in interstate commerce be just and reasonable, and that the FPC lacks authority to rely exclu- sively on market prices as the final measure of "just and reasonable"; and Westing- house Elec. Corp. v. U.S., 388 F. Supp. 1309 (W.D. Pa. 1975) where the court held that the ICC had abdicated its discretionary expertise in determining whether a freight rate was "just and reasonable" because the Commission did not consider traditional ratemaking criteria.

2General Bridge Act of 1906, Pub. L. No. 59-65, 34 Stat. 84, 33 U.S.C. §§ 491-98, and the General Bridge Act of 1946. Pub. L. No. 60-601, 60 Stat. 847, 33 U.S.C. §§ 525-33.



410 ADMINISTRATIVE LAW REVIEW

words to regulate motor vehicle tolls on interstate bridges has received sparse attention by the responsible agencies or the courts.

For a number of reasons, including at the most fundamental level the increasing need of municipalities for funds to underwrite public services and current inflation, tolls on interstate bridges have been re- garded and used as a source of revenue for new public projects, including some only partially related or wholly unrelated to the bridges gen- erating the toll revenues.

The federal agency responsible for overseeing interstate bridge tolls, presently the Federal Highway Administration,3 has recently engaged in a series of bridge toll proceedings and appellate litigation of which the focus has been the interpretation of the words "reasonable and just" as used in the General Bridge Acts to regulate the right of bridge owners or authorities to charge tolls over interstate facilities subject to these Acts.

It is the thesis of these remarks that the current initial tendency of the agency, the litigants, and the Courts has been to interpret the terms "reasonable and just" in accordance with doctrines and traditions developed in other contexts, including transportation and utility contexts which are inappropriate in the context of bridge tolls. Specifically, a "return on invested capital" test is attracting unwarranted evidentiary emphasis and reliance in the interpretation of "reasonable and just" bridge tolls.

I. THE APPLICABLE STATUTES

Prior to 1906, Congress passed special enabling acts individually authorizing the construction of every bridge crossing navigable waters. The legislation usually provided for the regulation of toll rates, and the standard of regulation was usually that the tolls be "reasonable."

The General Bridge Act of 19064 created one general policy for all bridges over navigable waters with respect to tolls; namely, that such tolls be "reasonable and just." The statute authorized the Secretary of War to prescribe reasonable tolls "from time to time."

In 1926, the Senate Committee on Commerce and the House Com- mittee on Interstate Foreign Commerce suggested modification of Con- gressional policy on bridge tolls to a policy encouraging tolls limited

3The General Bridge Act of 1906 provides that the Secretary of the Army may prescribe reasonable rates. 33 U.S.C. § 494. In 1967, this power was transferred to the Secretary of Transportation, 49 U.S.C. § 1655(g)(4), who in turn delegated it to the Federal Highway Commission. 49 C.F.R. § 1.48(i)(l).

4Supra note 2.



DETERMINATION OF A BRIDGE TOLL 41 1

to amortizing the cost of the bridge, looking toward toll free bridges or bridges with tolls simply sufficient to maintain and operate the bridge.5 The primary reason was to assist the "free roads" policy of the First Federal Road Act of 1916. However, it was twenty years before such a policy found some expression in legislation. That legislation was the General Bridge Act of 1946.6

Meanwhile, in 1930 the General Bridge Act of 1906 was amended twice. The first amendment provided that bridges authorized prior to June 10, 1930, over which Congress had reserved the right to regulate tolls, would thereafter be subject to the provisions of the General Bridge Act of 1906 with respect to the regulation of tolls.7 The second amendment extended the coverage of the General Bridge Act of 1906 to toll bridges authorized prior to the 1906 Act.8

The General Bridge Act of 1946 applies only to interstate bridges over navigable waters of the United States whose construction was approved after August 2, 1946, and which span waters whose navigable portions lie within more than one state. The 1946 Act requires, as does the 1906 Act, that tolb be "reasonable and just." However, the 1946 Act effectuated the policy previously discussed in 1926 with provisions limiting tolls to the amount necessary to pay for the maintenance and amortization of a bridge within twenty years from the owner's acquisition.9 Such a bridge is thereafter to be operated free of tolls.10

Although the 1946 Act requires that all publicly owned interstate toll bridges subject to the Act must eventually become toll free, Con- gress has authorized exceptions to this policy and to the toll limitations of the Act. For example, the Delaware River Port Authority has congressional approval, inter alia, "to fix ... tolls ... for the use of any bridge or tunnel heretofore or hereafter established ... by the Author- ity and combine any one or more of such bridges or tunnels with any railroad, rapid transit systems or other properties of facilities for transportation, terminal, or port improvement purposes" with certain other restriction.11 Congress also partially exempted that Authority from the

δ67 Cong. Rec. 8,572, 8,531 (1926). eSupra note 2. 7 Act of June 10, 1930, Pub. L. No. 46-330, 46 Stat. 552, 33 U.S.C. § 498a. 8Act of Tune 27, 1930, Pub. L. No. 46-454, 46 Stat. 821, 33 U.S.C. 8 498b. »The Act permits either of the states in which the bridge is located to acquire any

private interstate toll bridge by condemnation. 33 U.S.C. §§ 527-29. io/d. In 1948 the time limit was increased to thirty years. Act of May 25, 1948,

Pub. L. No. 62-550, 62 Stat. 267, 33 U.S.C. § 529. HAct of July 17, 1952, Pub. L. No. 66-573, 66 Stat. 746, approving an amendment

to the 1932 interstate contract between Pennsylvania and New Jersey which had created the Delaware River Joint Authority.




provisions of the 1946 Act limiting tolls to the amount necessary to maintain and amortize the bridges owned by the Authority.12 Thus, the tolls imposed by the Delaware River Port Authority are presently subject only to the 1946 Act's "reasonable and just" test.13

The bridges of the New York, New Jersey Port Authority were constructed under the 1906 Act, and thus are also subject only to the "reasonable and just" test, as well as to the terms of the interstate compact between New York and New Jersey.

II. THE NATURE OF THE REGULATED ENTITIES

The entities charging tolls subject to one of the General Bridge Acts and therefore regulation by the federal agency range from very simple one-bridge facilities, owned or operated by a local commission or authority,14 to large multi-modal authorities, such as the New York Port Authority which charges tolls over bridges and pools these tolls with revenues from other sources such as airports, bus terminals, and transit lines to achieve complex municipal goals. There are approximately 100 such entities, the great majority of which are "public" as opposed to private.15 In the case of entities with complex authority structures, the federal regulation is made additionally complex by the fact that congressional consents to the existence of such authorities have in some cases permitted them, under varying conditions and circumstances, to pool toll revenues to support other projects. This effectively modifies the application of the General Bridge Acts without providing any legislative clarification of the relationship between the application of the statutory terms "reasonable and just," and the application of the concept of pooling tolls with other revenues to support a variety of projects.16 Some of the terms of the congressional consents to state compacts make it clear that the Federal statutes and regulations are

12/d. I3in 1948 Congress consented to the pooling of revenues from the operations of

bridges owned by the Delaware River Joint Toll Commission. Act of June 30, 1948, 62 Stat. 1183.

liSee City of Burlington v. Turner, 471 F.2d 120 (8th Cir. 1973). i$See Report of the Secretary of Transportation of the United States App. I and II

(1974). leSee Delaware River Port Compact, Pennsylvania, 1951, Act No. 214, P.L. 1010;

New Jersey, 1951, c.288, R.S. 32:3-5, approved by the United States Congress, July 17, 1952, Pub. L. No. 66-573, 82d Cong., 2d Sess., as supp. For Congress' consent to the powers of the New York Port Authority, see 42 Stat. 174 (1921) consenting to C.154, Laws of New York, 1921; and c.151, Laws of New Jersey, 1921.



DETERMINATION OF A BRIDGE TOLL 413

generally intended prevail over any terms in the compacts which might be interpreted as otherwise conflicting.17

Bridge authorities with broad powers have a great impact upon the public welfare of the region surrounding the bridges. For example, the New York Port Authority, the Delaware River Port Authority and the Burlington City Council, have been or are currently engaged in bridge toll litigation which affects each entity's power to underwrite and maintain important public services or facilities quite distinct from their bridges. The New York Port Authority has pooled bridge toll revenues with revenues from tunnels, buses, bus terminals, airports, real estate rentals, and the like, to develop the ports of New York and Newark. The work of the New York Port Authority over many years has been a major factor in the development of the port and the metropolitan region of New York City. The Authority's power has affected matters as diverse as containerized cargo to the landing of the Concorde air- craft. Significant portions of the funds necessary to support these enter- prises have been generated from tolls on the bridge crossings controlled by the Port Authority.

The Delaware River Port Authority in the Delaware Valley Region has conducted itself similarly but with less diversification. In addition to the major bridges which it built in the late 1960s, it now operates a major urban high-speed electric rail line and supports a world trade division to encourage development and commerce in the port facilities of the Delaware Valley Region.

On yet another scale, toll revenues of MacArthur Bridge to Burling- ton have been used, insofar as they exceeded the needs of operating and maintaining the bridges, for municipal purposes including street maintenance, sanitation, airport construction, municipal pay raises, and the like. It is apparent that any interpretation of the "reasonable and just" test for the legality of tolls imposed by these various authorities will significantly affect their ability to contribute to other regional or municipal efforts ranging from transportation to environmental consideration.

In addition to the problem of interpreting the Federal Bridge Stat- utes in light of the state compacts consented to by Congress when a

i7The consent given by Congress in 1952 to the New Jersey-Pennsylvania Supple- mental Compact provides, inter alia: "The consent of Congress is hereby given to the Supplemental Compact . . . provided, that nothing therein contained shall be construed to affect, impair, or diminish any right, power, or jurisdiction of the United States . . . over . . . any . . . bridge . . . forming the subject matter of such compact

" Act of July 17, 1952, Pub. L. No. 66-573.




challenge to the reasonableness of tolls is presented, there must also be considered the fact that some authorities finance part of their operations through municipal bond issues. Such municipal bonds contain covenants pledging toll revenues (and toll adjustments in some cases) to repay the principal and interest of the bonds. Typically, the particular toll schedules so pledged as revenues have not been adjudicated "reasonable and just" by any federal reviewing authority prior to the issuance of the bonds. There also exist some state legislative covenants protecting bond investors by restricting projects which the issuer may undertake.18

In summary, the establishment of bridge tolls requires consideration of a broad range of federal, state, and local policies relating to the impact of tolls on environment, nearby mass transit systems, fuel conser- vation, metropolitan commuter needs, discrimination between drivers and public transportation users, and a host of similar imponderables.

III. THE DEVELOPMENT OF THE LAW

Although the first of the bridge acts using the words "reasonable and just" as a measure of the propriety of toll charges was enacted in 1906, there was scant meaningful litigation prior to 1970 regarding the application of the Act or the interpretation of the words "reasonable and just" in this context.19

In 1968, the Delaware River Port Authority raised its tolls and the Federal Highway Administration, by then the delegated regulatory agency, convened hearings. During these hearings a number of tests of the concept "reasonable and just" in the bridge toll context were discussed. These tests included comparability with other tolls, the tolls that the public would be willing to pay rather than cease using the bridge, the propriety of using bridge tolls to support non-bridge func- tions, and the asserted needs of the Authority to charge tolls which would provide sufficient revenues to service existing debt (bonds) as well as provide a reasonable cushion (bond coverage in excess of 1.0). However, in this proceeding concerning the Delaware River Port Au- thority's new toll schedule, the rate base/return on investment concept was essentially ignored, and the final decision of the agency20 was prin-

18U.S. Trust Co. v. New Jersey, 134 N.J. Super. 124, 338 A.2d 833, affirmed, 69 N.J. 253, 353 A.2d 514 (1975).

i»See Clarksburg-Columbus Short Route Bridge Co. v. Woodring, 89 F.2d 788, 794 (D.C. Cir. 1937), reversed as moot, 302 U.S. 658 (1937); and Report of the Secretary of the Army, May 4, 1954, regarding Camden Bridge Tolls.

20Opinion of the Administrator, September 11, 1968. The case was not further litigated.




cipally based on a holding that the increased toll level imposed by the Authority (with minor exceptions) was necessary and appropriate to support the municipal bond financing in which the Authority had engaged.

Subsequently, in 1970, tolls on the MacArthur Bridge were reviewed and the Federal Highway Administration ordered a reduction in the tolls upon a finding that the tolls were unreasonable and unjust. In this case, the agency made one of the first comprehensive attempts to articu- late an overall rule which it might seek to apply to bridge toll adjudi- cations. Essentially, the agency concluded that the terms "reasonable and just" as applied to interstate tolls there at issue under the 1906 Bridge Act, limited the bridge owner to discharge any debt within a fifty-year statutory period similar to that period expressly provided in the 1946 Bridge Act, thereafter, to achieving sufficient revenues to pay operating and maintenance expenses. The agency appeared to disap- prove the use of revenues in excess of debt service, operating and maintenance expenses, for other municipal and local government purposes.

On administrative appeal to the District Court, the agency was reversed on the grounds that it had sought to apply the standards of the 1946 Bridge Act with respect to debt service and amortization to a bridge concededly subject to regulation under the 1906 Act which provides no such limitation.21 The District Court also expressed the notion that bridge toll determinations under the 1906 Act are governed by the same principles as railroad rate making; e.g., profit structures of com- peting bridges must be taken into account. Also, as was held in the Woodring case,22 the District Court held that the bridge owner was entitled to a fair and reasonable return on its investment. The Court listed a number of factors to be considered by the Federal Highway Administration in determining whether bridge tolls were "reasonable and just." These factors included transportation conditions and flows, uses of bridge revenues, relevant public interest, as well as a fair return on the owner's investment and comparison with other bridge tolls.

The agency then appealed to the Eighth Circuit Court of Appeals which affirmed the District Court's holding with modification.23 The Circuit Court expressly adopted the lower court's opinion with regard to the factors which should be considered by the Federal Highway Ad- ministrator in determining whether tolls were "reasonable and just." The court specifically stated that the Administrator should be directed to modify his definition of "reasonable and just" to include the addi-

2iCity of Burlington v. Turner, 336 F. Supp. 594 Ü972V 2289 F.2d 788. 23471 F.2d 120 (8th Cir. 1973).




tional factor of a reasonable return on invested capital. Then, in a startlingly specific footnote given the unsettled state of agency interpretation, the court proceeded to describe what it meant by "invested capital" as follows:

the amount, if any, which the City paid in acquiring the bridge in 1923, plus the amounts which it has paid subsequent to that date for addition to and reconstruction of the bridge; it shall not include amounts spent for interest on revenue bonds or for normal maintenance and repair since acquisition; and replacement costs shall not be a factor in such determination. . . .24

The case was remanded to the agency. The agency and the bridge commission subsequently reached an agreement on an appropriate schedule of tolls in the MacArthur Bridge matter, and it was litigated no further.

A case tried as a companion case to the MacArthur Bridge Toll case, the Keokuk25 toll proceeding was decided by the agency on the grounds that the Keokuk Bridge tolls satisfy the Eighth Circuit's "return on investment" test and the tolls were maintained without further litigation.

As the MacArthur Bridge case was coming to a conclusion, another bridge toll controversy was brewing in connection with Delaware River Port Authority bridge tolls. In the late sixties and early seventies, the Delaware River Port Authority had undertaken the planning and construction of two new major toll bridges. The Authority generated the capital for these undertakings through revenue bond financing. Con- cluding that it needed additional tolls to support its new undertakings and its recent capital financings, the Authority raised tolls for all categories of vehicles and types of passage, (e.g., fifty cents to sixty cents for passenger car casual use).

Complaints were received by the agency, an investigation was conducted and lengthy hearings were held. This proceeding was formally commenced in 1972, and disposition was not achieved until 1977. Dur- ing the proceedings a number of tests of the reasonableness and justness of bridge tolls were discussed, including the return on invested capital test discussed in the MacArthur Bridge case by the Eighth Cir- cuit. Unfortunately, the administrative and the judicial opinions ren- dered in these proceedings were treated largely of evidentiary matters and the controlling nature of certain Authority financing covenants. The opinions did not effectively analyze what tests of reasonableness and justness might appropriately be applied to bridge toll determina-

24/d. at 123. 25As in the MacArthur Bridge case, tolls from the Keokuk Bridge were used, in

part, to defray municipal expense.




tions.26 During the Delaware River Port Authority proceedings, the Authority asserted that its toll schedule met the return on invested capital tests announced in the MacArthur Bridge case. On oral argument, counsel for the agency agreed but indicated to the court that the agency had chosen not to utilize that test in the Delaware River case.27 The litigation developed no further analysis of this test.

As the Delaware River Port Authority proceedings reached a conclusion by way of a negotiated litigation settlement between the agency and the Authority, proceedings were underway in New York to review an increase in tolls implemented by the New York-New Jersey Port Authority. The Authority had increased, inter alia, passenger automobile tolls (two-way trip) from $1.00 to $1.50 during the time that the Delaware River bridge toll proceedings were in hearing. As the review of the increased New York Port Authority bridge tolls proceeded by way of investigation, written interrogation, submission of written testi- mony and oral hearings, both the New York Port Authority and the agency gave evidentiary emphasis to economic analyses of the return on invested capital test and the various ways it might be applied to the New York Port Authority proceedings.28

The New York Port Authority, like the Delaware River Port Author- ity, was and is a multi-modal authority, but a much larger one. It operates and owns, in various configurations, airports, bus terminals, bus transit operations, the World Trade Center, tunnels, bridges, rail transit facilities, port cargo facilities, and related public works. Conse- quently, an attempt to apply the return on invested capital test immedi- ately raised the question of the selection of the appropriate facilities which were to constitute the rate base or capital investment. Fur- thermore, the construction of correlative depreciation tables required detailed and extended expert analysis. As was to be expected, wide differences of opinion were expressed in the process of the hearings as to what facilities should constitute the rate base and which depreciation tables should be used. The briefs of the major parties to the proceedings, including staff counsel to the agency who appeared as "public counsel/' counsel for the Authority, counsel for automobile clubs, and others, extensively analyzed the application of the return on invested capital test as if it were a controlling test to be applied in these bridge toll proceedings. Indeed, the initial administrative decision gave emphasis to this test by discussing its application at great length.29 The

2640 Fed. Reg. 22,869 Ü975V 27Tuly 18, 1975. Transcript at 70. 28Briefs of the parties. FHWA Docket No. 76-9. 2942 Fed. Reg. 42,937 (1977).




final decision and order of the Federal Highway Administrator in these proceedings was filed on November 7, 1977, and determined that the toll schedules on the bridges owned by the New York Port Authority were reasonable and just.30

In arriving at this conclusion, the Federal Highway Administrator discussed several arguments raised by opponents of the bridge toll schedule. The first argument was that the rate base (or invested capital) could not be any broader than that consisting of all of the bridges and tunnels owned by the Authority. The Administrator rejected this contention, stating that the Port Authority was not restricted in the number or type of facilities that may be included in the investment base used by the Administrator in assessing the reasonableness and justness of the tolls.31 The Administrator also rejected the contention that a method of setting tolls based on the financial needs of the bridge owner extrinsic to bridge activities is unreasonable and unjust per se under the General Bridge Act of 1906.

However, in going on to state that the nature of bridge toll determinations pursuant to the General Bridge Act of 1906 requires consideration of a variety of factors (including the financial needs of the bridge owner, fairness to the bridge user, history of tolls on the crossing, comparability with tolls on similar crossings in the area, the 1.3% debt service coverage agreement with the Authority's bondholders, and other considerations), little substantive analysis was forthcoming and it is difficult to escape the conclusion that the return of invested capital test was significantly determinative.32

Based on this administrative history, and on the pronouncement of the Eighth Circuit Court of Appeals in City of Burlington v. Turner,33 it currently appears that the legal formulation being achieved on a case-by-case basis may result in extensive use of the return on investment capital test as an evidentiary measure of the reasonableness and justness of bridge tolls. The question then arises whether or not this is an appropriate test warranting extensive evidentiary emphasis in light of the goals sought to be achieved by the Bridge Acts and their modi- fied application to various commissions, boards, and authorities which own or operate toll bridges subject to either of the General Bridge Acts.

3042 Fed. Ree. 58,813 (1977}. BUd. 3242 Fed. Reg. 42,937 and 58,813 Ü977). 33471 F.2d 120 (8th Cir. 1973).




IV. DISCUSSION OF THE RETURN ON INVESTED CAPITAL TEST

The return on invested capital test has both advantages and disadvantages as it may be used in bridge toll proceedings. However, the disadvantages outweigh the advantages.

Among the advantages of the test based on return on invested capital in bridge toll proceedings are:

First, the test, as it has been developed in the regulation of utilities and common carriers is familiar to administrators and to agencies.

Second, the test is arithmetically discreet and precise once one overcomes some initial difficulties relating to the construction of depreciation tables and to the determination of which facilities should be included in the investment base. Therefore, the test of return on invested capital can be somewhat mechanically applied, reducing administrative discretion to a minimum, and advancing the administrative ease of decision-making.

Third, the test has the appearance of being fair in that it places an outer limit at generally acceptable percentage levels to the income to be derived from toll bridges after the expenses of their operation, maintenance and debt service have been paid. The additional income, if it is a return on the investment at a generally acceptable percentage level, would not then seem exorbitant at any given time by comparison to the economic returns in industries receiving public attention at the same point in time.

However, the disadvantages of the return on invested capital test are substantial in determining whether bridge tolls are reasonable and just.

First, the warrant for having income from tolls exceed the cost of maintenance, operation and debt service of a bridge does not wholly lie in the need to attract capital, as typical in the area of public utilities and common carriers where the return on invested capital test may be used to limit profits. The reason that utilities and common carriers are permitted to make a profit is to attract capital investment so the utility or carrier can improve its services. Therefore, allowing a reasonable return on invested capital has a clearly logical relationship to the rates charged by the utility or the carrier. However, in the case of income from tolls, the income over and above operation, maintenance and debt service expenses may be used variously to develop port facilities, operate rapid transit lines, make new transportation studies, and the like. There is no necessary relationship between the amount of income needed to operate such port related




facilities and a reasonable return on the investment in the bridge. The concepts simply are not necessarily related.

Two simple hypothetical will demonstrate this conclusion: A small bridge charging a low toll of ten cents could be realizing

a twenty percent return on invested capital and contributing significantly, but not in large amounts of money, to a municipal budget. On the other hand, a large bridge charging a high toll of seventy- five cents may be achieving a very low return on invested capital and likewise contributing significantly, to non-bridge public services in the surrounding geographic area. In neither case does a return on invested capital test suggest any conclusion with respect to the fairness and reasonableness of the tolls involved.

Similarly, the adoption of a return on invested capital test as a measure of reasonableness and justness of tolls does not in any way reflect the legitimate needs of the public traveling by automobile and other modes across the bridged river barrier. For example, where alternative modes of crossing the bridged river barrier are few, and the bridge is new and expensive, the return on invested capital test might inappropriately suggest a high level of tolls. On the other hand, the return on invested capital test might suggest a low level of tolls on a largely depreciated bridge where alternatives exist for crossing the bridged river barrier and regional needs for other projects supported by tolls are persuasive.

Second, the application of a return on invested capital test requires the construction of depreciation tables for bridges which, in most cases, have no real base in actuality and cannot be validated by current engineering or accounting studies. One hundred years has been mentioned34 as a test for major bridge facilities, but as yet there has been no demonstration that one hundred years is an appropriate test as opposed to fifty years or two hundred years, in the sense that a responsible expert can give an opinion which is meaningful mea- sured by the impact of the opinion on the final mathematics of the test. In short, nobody knows how long a bridge will last for depreciation purposes in the sense of generally accepted accounting principles.

Third, in large multi-modal authorities, such as the New York Port Authority, the determination of the investment base may give rise to extensive controversy, and indeed in that case did. If one is going to allow a specified return on invested capital, the question then becomes which facilities owned by a multi-modal authority are properly included in the investment base and which facilities should

z*See New York-New Jersey Port Authority Toll Proceedings, FHWA Docket No. 76-9.




be excluded. In the New York case, the range of options included the selection of individual bridges as the investment base, and ranged all the way to the inclusion of bridges, rapid transit facilities, bus terminals, airports, office buildings, and port facilities. Restriction of the investment or rate base to a single bridge or bridges was probably inappropriate. On the other hand, inclusion of every facility owned and operated by that Authority is probably not realistic in determining the investment or rate base. Within the two extremes, there are numerous difficult choices to be made as to which facilities should be included in the investment or rate base, and these difficult choices may largely determine the resulting toll schedule in a mathe- matical sense once the return on investment test is applied.

Fourth, many large bridges subject to one of the Acts are initially constructed through capital raised by issuing and selling revenue bonds. Revenue coverage of debt service after bridge operation and maintenance is typically negotiated by the underwriting financial in- stitutions, and the extent of the debt coverage depends upon a number of factors, including the condition of the municipal bond market, the history of the issuer, the public credibility of the revenue and expense estimates, the location of the bridge, and similar factors. None of these factors is directly related to a computation of return on investment, since what is sought is security and the return on investment for the revenue bond purchaser is the interest rate stated on the bond. Indeed, strict application of a return on invested capital concept might limit bridges financed through revenue bonds to some average interest rate payable if security (coverage) provisions were ignored.

Fifth, a return on invested capital test does not provide any indi- cation or gauge relative to social and environmental problems related to the use of bridges crossing major river barriers. For example, in a metropolitan area served by vehicular crossings, as well as numerous other river crossing modes such as mass transit where auto exhaust pollution is a major problem, very high tolls might well be warranted. On the other hand, in a pair of communities connected by one automobile bridge and by no other convenient mode of transit, where pollution is not a critical problem and there is a need for an economically disadvantaged element of the population to travel across the river barrier, very low tolls might be warranted. In neither case does a return on invested capital test or computation provide any information regarding the fundamental policy considerations underlying the toll rate decision.

Sixth, tolls may on occasion provide a method of encouraging traffic to use certain regional routes in preference to others and




thereby have impact beyond the purely environmental effects relating to traffic flow. Bridge tolls may therefore on occasion also have impact on public financing in quite distant communities.

CONCLUSION The authorities, boards and commissions which operate bridges,

often with related facilities, and set tolls must make the initial determination of toll rates. To date, the Federal Highway Administrator has exercised his regulatory powers over bridge tolls by making a kind of de novo determination as to what toll rate would be "reasonable and just"35 and, on occasion, has fine-tuned tolls on bridges by minor amounts36 or in minor categories.37 Reliance on a mechanical test, such as a return on invested capital formula, may have the tendency to ac- centuate this approach without a satisfactory substantive rationale to justify it.

It is submitted that the agency's appropriate role in addressing bridge toll questions should rather comprehend the following: 1) a determination of what specific factors require analysis in setting tolls on a given bridge or bridge system (such as regional economy, environment, new bridge projects and the like); 2) a determination of whether the toll setting authority board or commission has given the appropriate factors consideration; and, 3) a determination of whether the con- clusions reached by the entity setting tolls is within the bounds of reason based on analysis of the relevant factors. Wide latitude of judgment should be accorded the entity setting tolls because the Federal Highway Administration cannot hope to be as sensitive to the balance of specific regional and local needs as the regional or local entities charged with setting tolls in most instances. The relevant factors may differ from case to case (for example, in some cases environmental considerations may not exist) but no mechanical formula, such as a return on invested capital test, can replace the need for hard judgments bal- ancing all relevant factors in particular bridge circumstances.38

This conclusion does not mechanically simplify the problems of federal review, however appropriate deference to the judgment of the toll setting agency of first impression at once lightens the task of the federal reviewer and provides reassurance that local and regional sensitivities in all their nuances have been accorded appropriate weight.

ZSSee 49 C.F.R. 88 310.1- .113 U976V 36Opinion of the Administrator, Sept. 11, 1968 (truck and bus tolls). 3740 Fed. Reg. 22, 869 (1975) (five cent reduction on automobile tolls). 38The Final Decision and Order of the Administrator in the New York-New Jersey

Toll Proceedings, 42 Fed. Reg. 58,813 (1977), makes a start at acknowledging this principle, but amounts only to lip service in light of the underlying record and the initial decision, 42 Fed. Reg. 42,937 (1977).



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DETERMINATION OF A "REASONABLE AND JUST" BRIDGE TOLL

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