AASHTO Journal, 25 October 2013
The first of two finance track sessions (see related AASHTO Journal story on vehicle miles traveled fees here) at the AASHTO Annual Meeting, held earlier this week in Denver, contained a spirited debate regarding funding options for the future of surface transportation, featuring Bob Poole of the Reason Foundation and Joshua Schank of the Eno Center for Transportation.
Poole focused on the nation’s interstate system, saying that a viable option to pay for interstate repairs and maintenance was interstate tolling. That thought was the main focus of his study, “Interstate 2.0: Modernizing the Interstate Highway System via Toll Finance,” published in September. The study intended to estimate the cost of reconstruction of the entire interstate system over a two-decade span, estimate the cost of needed lane additions based on traffic criteria, and assess the feasibility of financing the entire effort by means of all-electronic tolling.
“The Interstate is clearly important—2.5 percent of all lane-miles [account for] 25 percent of vehicle miles traveled,” Poole said. “We have to be sure it has another 50-100-year life as it is nearing the end of its original 50-year design. Many of the corridors need widening, based on conservative traffic projections. Many of the designs that are embedded date from the 1950s and are obsolete. We know there a couple hundred interchanges that need reconstruction.”
In his study, Poole applied an identical toll rate across the United States, with an annual consumer price index adjustment of the rates. With that, the net present value of reconstruction and widening came out to just under $1 trillion. “Compared to fifty years ago, when the decision was made to not use toll financing, this is an extremely positive result… It turns out that a large majority of states could do [tolling] on their own, as long as they had permission to,” Poole said.
He noted an important aspect was “value-added tolling,” which would need to include: A better level of service than today; begin tolling a corridor only after it is reconstructed; use toll revenues only for modernizing and maintaining, and later improving as needed, the Interstate; use tolls to replace fuel taxes on those toll corridors, if fuel taxes are still in place when those toll corridors are completed, to address the trucking industry’s concern regarding double taxation; the toll rates would be modest because of the high volume.
Schank, the session’s second speaker, discussed funding transportation through the general fund, and problems facing the current funding situation: the idea that our entire transportation system is very siloed by mode (and that we are not making good decisions about how to integrate those modes); the “donor versus donee” issue, which leads states looking out for themselves only instead of looking at the system as a whole and; inadequate resources.
The short-term fix in recent times has been to take general fund revenue, put it into the Highway Trust Fund, and wait until it becomes a problem again.
“If we’re not going to do that, what is it that we could do that might actually work?” Schank said. “The general fund is becoming the policy of the United States… we are going to spend both general fund revenue and gas tax revenue to fund our transportation system. It is the most likely outcome going forward, as it continues to be where Congress is looking to solve this problem. Almost every other [developed nation] uses general fund revenues for their transportation networks. There are a lot of embedded interests making sure that the Trust Fund stays in place and is funded by gas tax revenue, because if it is funded by general fund revenues, the authorizers lose ability to make decisions.”
He explored the positives of both the Highway Trust Fund and general funds toward transportation.
“The Highway Trust Fund has real benefits to this country,” Schank said. “First is the idea of contract authority, which in addition to allowing authorizers to make funding decisions, also allows us to make sure that we know that states are going to get paid. The second is the idea of dedication—the general fund has benefits too, and one is that because it is not tied to the gas tax, you do not need to go and ask people to increase the gas tax to get money for transportation. The second big benefit of general funds is lack of geographic battles… you worry less about geography and more about national interest. Finally, you would not keep those modal silos and not focus on one element of the system, but instead make better multimodal funding decisions.”
Eno will have a paper out on this topic early next year.