Reforming surface transportation funding and financing

236 views

Published on

Published in: Business
  • Be the first to comment

  • Be the first to like this

Reforming surface transportation funding and financing

  1. 1. Marc Scribner Land-use and Transportation Policy Analyst Competitive Enterprise Institute mscribner@cei.orgNational Taxpayers Conference: August 21, 2012
  2. 2. • Problems Facing Current Road Funding/Financing Mechanisms• Potential Solutions• Massachusetts Case Study• Conclusion National Taxpayers Conference: August 21, 2012
  3. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 18. Marc Scribner Land-use and Transportation Policy Analyst Competitive Enterprise Institute mscribner@cei.orgNational Taxpayers Conference: August 21, 2012

×