Reforming surface transportation funding and financing
1. Marc Scribner
Land-use and Transportation Policy Analyst
Competitive Enterprise Institute
mscribner@cei.org
National Taxpayers Conference: August 21, 2012
2. • Problems Facing Current Road
Funding/Financing Mechanisms
• Potential Solutions
• Massachusetts Case Study
• Conclusion
National Taxpayers Conference: August 21, 2012
3. • Much of the Interstate Highway System is nearing 50 years in
age
• A sizable portion will need to be completely reconstructed
from the roadbed up
• Existing transport infrastructure funding mechanisms (e.g., fuel
taxes) are inadequate
• Federal fuel tax rates unchanged since 1993
• Construction costs have increased
• Highway VMT are no longer increasing at past rates
• The vehicle fleet is expected to become significantly more
fuel efficient in coming decades
• Mission creep
National Taxpayers Conference: August 21, 2012
4. • About 90 percent of Highway Trust Fund revenue is generated
through federal excise taxes on motor fuel that have not been
raised since 1993
• 18.4 cents per gallon of gasoline
• 24.4 cents per gallon of diesel
National Taxpayers Conference: August 21, 2012
5. • As the economy recovers, construction costs are expected to
increase as public infrastructure spending must compete more
with the private sector for materials and labor
• PB Highway Construction Cost Index outpaces CPI
National Taxpayers Conference: August 21, 2012
6. • National Vehicle Miles Traveled (VMT) peaked in 2004
• Rural-to-urban population sorting, along with weak economy,
have made the downward VMT trend even stronger
National Taxpayers Conference: August 21, 2012
7. • Vehicle fleet is becoming more fuel efficient, and is likely to
become significantly more so in the coming decades
National Taxpayers Conference: August 21, 2012
8. • Since 1983, a portion of federal Highway Trust Fund revenues
are explicitly dedicated to mass transit
• While total FHWA authorizations from HTF account for 80.34%,
after subtracting Transportation Enhancements and other non-
construction and maintenance spending, core functions are
only receiving 68.85% of HTF revenue (FY 2004-2008)
National Taxpayers Conference: August 21, 2012
9. • The “user-pays/user-benefits” funding principle should guide
decisions on revenue collection
• It offers several advantages over “taxpayer pays” funding:
• Fairness: Highway users benefit from the improvements
their user taxes or fees generate
• Proportionality: Users who drive more pay more. Users
who impose disproportionate costs, such as heavy trucks,
are charged more
• Funding Predictability: Highway use and therefore
highway user revenues do not fluctuate wildly in the
short-run
• Signaling Investment: Revenue roughly tracks use, which
provides policy makers with an important signal as to how
much infrastructure investment is needed
National Taxpayers Conference: August 21, 2012
10. • Advantages to expanded all-electronic tolling
• More direct user-charges and interoperability (E-ZPass)
• No toll plazas—no queuing like manual tolls, lower capital
and labor costs, more future construction flexibility
• Capture revenue from more fuel-efficient vehicles
• Easily track and segregate revenue within facilities
• Can implement congestion pricing
• Disadvantages to expanded all-electronic tolling
• Up-front transponder cost
• Toll lane use depends on current price elasticities of travel
demand and general purpose lane conditions
• Administrative costs far greater than those of fuel taxes
• Political opposition from powerful trucking interests
National Taxpayers Conference: August 21, 2012
11. • Advantages to mileage-based fees (VMT fees)
• Most direct link between user and payment
• Can charge variable rates across entire road networks, not
merely facilities
• Capture revenue from more fuel-efficient vehicles
• Easiest to implement comprehensive equity adjustments
• Disadvantages to mileage-based fees (VMT fees)
• High up-front costs
• High administrative costs
• Privacy concerns
• Potentially reduces appeal of P3 options
• Potential for “double taxation” (not phasing-out fuel tax)
National Taxpayers Conference: August 21, 2012
12. • Advantages of the public-private partnership (P3) model
• Avoid new bonding (preserve bond ratings)
• Build new capacity with low initial public investment
• Reduce general taxpayer burden by charging users
directly
• Shift operating/revenue risk from government to private
sector (hedge against future economic, fiscal, and
workforce conditions)
• Shift financing risk from government to private sector
(hedge against capital market performance, existing
state/local debt loads)
• Increase speed of project delivery (avoid budgeting and
procurement battles—Allows for concurrent design, right-
of-way acquisition, and construction activities)
National Taxpayers Conference: August 21, 2012
13. • Ranks 29th for highest fuel taxes in the nation (23.5₵, G&D)
• Less than half of highway revenue is collected from users
• INRIX 2011 Traffic Scorecard: I-93 Northbound in Boston metro
ranks as 15th most congested corridor in the U.S.
• INRIX/TTI 2011 Urban Mobility Report ranks Boston metro 9th
most congested urban area in the U.S., costing each peak
travel auto commuter $980 a year in wasted fuel and time
• Total area commuting congestion cost estimated at $2.2
billion—excludes costs to freight/business trips, which
may be another $2 billion
• According to a 2007 survey of toll road “cost-takes,” the
Massachusetts Turnpike ranked last in the nation at 79%
(Public national average: 42.6%; Private global average: 27.6%)
National Taxpayers Conference: August 21, 2012
14. • Driving and vehicle registration trends will likely worsen
existing problems
• VMT per capita and per driver has plateaued
• The vehicle fleet composition is shifting away from
personal auto and toward heavy trucks
National Taxpayers Conference: August 21, 2012
15. • What to do?
• Expand existing FAST LANE electronic tolling network
• Convert I-93 HOV lanes to HOT lanes and integrate with
FAST LANE
• Northbound HOV lanes suffer from underutilization
(comparing GP and HOV lane throughput)
E-Tolling in Massachusetts
72
70
68 % Transactions
66
64 % Revenue
62
2009 2010 2011
National Taxpayers Conference: August 21, 2012
16. • What to do? (cont.)
• Authorize transportation P3s. Currently, 33 states have
authorized P3s in some form or another.
• Use Virginia’s 1995 Public-Private Transportation Act
as a model
• More capacity can be added for less and cost-take
figures can improve dramatically.
• 2009 MassDOT consolidation has not improved outcomes
• Strengthening “user-pays” is imperative
• Relying on non-user streams is dangerous—need
tolls and increased transit fare box collection
• The dedicated sales tax revenue expected by MBTA’s
2000 Forward Funding Financial Plan grew at 1/3 the
rate projected
National Taxpayers Conference: August 21, 2012
17. • Federal system is broken—entering a period of de facto
devolution
• Adopting innovative revenue collection mechanisms is a must
• Reforming institutions sooner rather than later will save time
and money
• Relying on non-user revenue increases fiscal risks and
therefore increases inefficient facilities deployment and
management
• Consolidation/streamlining may not be effective if it
increases potential for cross-subsidization across facilities
and modes
National Taxpayers Conference: August 21, 2012
18. Marc Scribner
Land-use and Transportation Policy Analyst
Competitive Enterprise Institute
mscribner@cei.org
National Taxpayers Conference: August 21, 2012