Category Archives: financing

The Transportation Empowerment Act vs. Phasing in Devolution One EV at a Time

Reihan Salam at The Agenda discusses The Transportation Empowerment Act as a Model for Conservative Policymakers

In short the TEA would ” lower the federal gas tax while shifting virtually all responsibility for funding existing and new roads to state governments over five years”.

This is in contrast with current law, which would keep the federal gas tax the same (and thus decreasing in buying power), or proposals to raise the gas tax to maintain buying power in the face of declining fuel sales due both to fuel economy and declining vehicle travel. This problem will worsen with fleet electrification.

The vast majority of travel is within the same county, and thus certainly the same state (See The Hierarchy of Roads, the Locality of Traffic, and Governance for data from GPS from Minnesota), especially for big states in the western half of the US. Thus the problem is largely a state not national problem. Where there is a large share of interstate travel, states are fond of tolls (as in the northeast corridor) [See my dissertation: On Whom the Toll Falls for theory and Why States Toll for empirical evidence].

I am very empathetic with the idea of Subsidiarity, that we should deal with problems at the lowest reasonable scale of government.  This mismatch (or correspondence problem) of jurisdictional authority and the locale of the problem leads to many inefficiencies. Just as the federal government should not fix potholes on my local street, and my homeowners association should not have a nuclear policy, roads should be dealt with, and funded, closest to the user without incurring excess costs due to losing economies of scale. States should (and in many case did) raise their gas taxes, and further share that revenue with local levels of government (replacing local property taxes and other sources of general revenue), to fix today’s potholes and weak bridges. (Or perhaps there would only be one level of government operating and maintaining all levels of roads in states, which might be more efficient – it is what many other utilities do).

However, I am also empathetic with the idea that there is an existing source of revenue (the existing level of federal gas tax) on which there is consensus, which should not be thrown away so that 50 more difficult political fights can be had to achieve the same level of revenue. Most of the federal gas tax is returned to the states in proportion to the amount that was generated in those states, and while there are federal government rules and regulations and stipulations that add to the cost of doing business, most of those rules and regulations are well-intentioned.

The conclusion I have come to is we should keep the federal gas tax at the level it is at, dedicate it to specific national purposes (Maintaining and Rehabilitating the National Highway System - i.e. Fix-it-First) and allow it to fade away in importance over time. While of course it is technically possible to make this change in five years, I think it needlessly accelerates the process. (I am also aware of the Overton Window, and staking out a more extreme position helps move the dialog in that direction.)

There will be inevitable change in highway funding with electrification, and little would be lost waiting until EVs and HEVs are, say, 25% or 50% of the fleet, and the country is ready for some form of state-based mileage fee in lieu of gas taxes, administered with an emergent national standard so there don’t have to be 20 transponders in each car or 50 vignette stickers on your door.

In the end not all problems are federal problems and not all solutions are federal solutions. But there are real problems, and immediately lowering the federal gas tax exacerbates the short run problem in transportation. I am not convinced that this cold turkey strategy of phasing out gas taxes in 5 years (or at at least luke-warm turkey) outweighs the negative effects of federal funding, such as building a more capital intensive system than states themselves could justify if they bore all the costs, and raising costs all around.

See also: Fix It First  and Enterprising Roads

The Transportation Empowerment Act as a Model for Conservative Policymakers | The Agenda

Reihan Salam at The Agenda writes  The Transportation Empowerment Act as a Model for Conservative Policymakers. He quotes Enterprising Roads. He writes:

Meanwhile, other conservatives states might eventually establish public road enterprises, as the University of Minnesota transportation economist David Levinson has proposed:

The United States should follow Australia and New Zealand’s lead, and transform its state Departments of Transportation (or the highways divisions thereof) into separate, publicly regulated, self-financing corporate entities. Full-cost accounting—as already performed by Arizona’s Department of Transportation—constitutes a necessary first step in this direction. In making the transition, policymakers should strive to impose regulation only where absolutely necessary, to minimize the anti-competitive effects of any such regulation, and to leave social objectives to the government, thereby freeing road enterprises to focus on economic ones. Accordingly, road enterprises should be permitted to pursue cost-effective contracting and public private-partnerships as they see fit.

The new road enterprises should also be given latitude to make greater use of user fees—as opposed to general revenue—for funding their activities. Such charges are not just more efficient and equitable than traditional funding sources; if properly designed and implemented, they are also better suited to reducing congestion through effective pricing. Vehicle-miles-traveled charges, weight-distance charges and electronic tolling are all options that road enterprises should be free to pursue.

Over time, states will develop transportation strategies tailored to their particular circumstances. Densely-populated states like New York and New Jersey might choose to devote resources to creating Helsinki-style mobility networks while a state like Utah might instead choose to invest in a more expansive road network to support exurban development. States would no longer be hampered by the imperatives of national politics, and the most cost-effective, consumer-friendly state transportation bodies will find eager imitators across the country.

 

Cars Are Getting Greener. Here’s A High Tech Alternative To The Gas Tax. | ThinkProgress

ThinkProgress has an article about road pricing: Cars Are Getting Greener. Here’s A High Tech Alternative To The Gas Tax.. They quote me about Minnesota’s Gas Tax and I-35W:

“Like the rest of the country, Minnesota’s gas tax barely made a dent in the costs to repair the state’s abysmal infrastructure. Attempts to raise the state tax repeatedly failed in the legislature, in large part because the state’s Governor at the time, Tim Pawlenty (R-MN), had pledged to veto any tax increases whatsoever. That extra revenue might have generated more money to inspect and repair the I-35 bridge and others in similar condition. But since the Minnesota gas tax had not been raised since 1988, David Levinson of the University of Minnesota noted, ‘its purchasing power had diminished significantly, while the network was expanded and aged, and traffic levels increased.’

‘There [were] actually several proposals that year to do some repairs on that bridge,’ Natale said. But the legislature ‘defeated that. They just didn’t allow it to happen. The end result is, how much money did we spend replacing the bridge, and how many people were killed?’

The I-35 catastrophe rattled lawmakers’ attitudes. Sen. Amy Klobuchar (D-MN) called the bridge disaster a ‘wake-up call’ to raise the alarm over infrastructure deficits all over the country.

Even Pawlenty wavered. ‘After the bridge collapsed, he initially said that we need to do something about the funding for inspections and repairs,’ Natale said. ‘That was what he said day 1. On day 4, he said, well we can fund this if we can find other things not to do.’”

Funding the future of transportation (audio)

The audio is now available for the MPR Daily Circuit Friday Roundtable:

The Daily Circuit 9:06 AM · Jun 20, 2014

LISTEN Story audio

50min 42sec

The Green Line is up and running, but building a rail line and maintaining it are separate battles. How will we pay for the existing mass transit choices, create new options and not go broke? Our three Roundtablers offer their proposals for funding transportation.

 

The Future of the Federal Role in Transportation | Council of State Governments

Sean Slone at Council of State Governments writes about The Future of the Federal Role in Transportation

When the current federal surface transportation authorization bill, known as MAP-21, expires at the end of September, it likely will be replaced with a status quo plan.
Both the Obama administration and the Senate Environment and Public Works Committee recently have opted for a status quo approach to the role the federal government traditionally has played in sustaining the nation’s transportation system.
But a chorus of voices is once again advocating for a radical rethinking of those traditional federal and state roles in the transportation arena. Some see 2014 as a turning point since the federal Highway Trust Fund, which finances more than $50 billion a year in highway, bridge and transit projects, also appears past due for restructuring.
“The problem is the gas tax,” Rohit Aggarwala, an adviser to former New York City Mayor Michael Bloomberg and professor at Columbia University, wrote in a piece for Bloomberg View last year.
“(The gas tax) has declined in value drastically since it was last increased in 1993—even as the price of gas itself has tripled. As a result, both the main Highway Trust Fund and its transit account (often called the transit trust fund) are bankrupt.”

David Levinson, a professor at the University of Minnesota, also believes Congress should rethink and reprioritize what the Highway Trust Fund is used for. Levinson, another participant on this month’s webinar, co-authored a brief for the Brookings Institution’s Hamilton Project in 2011 with a title that gives a good idea of his position: “Fix It First, Expand it Second, Reward It Third: A New Strategy for America’s Highways.”
Levinson and co-author Matthew Kahn of UCLA propose that all revenues from the existing federal gas tax and tolls be redirected away from construction of new transportation projects and go “primarily to repair, maintain, rehabilitate, reconstruct and enhance existing roads and bridges.”
But new projects wouldn’t be left entirely high and dry under their proposal. They proposed a Federal Highway Bank to provide state funding to build new and expand existing roads. Funding would be contingent on strict performance criteria, such as a cost-benefit analysis.
“States would be required to demonstrate an ability to repay the loan through direct user charges and by capturing some of the increase in land values near transportation improvements,” they wrote.
The third prong of the duo’s proposal would involve rewarding states and local governments that exceed performance standards and achieve socially desirable outcomes on transportation projects in such areas as capacity, safety, equity and environmental improvement. A newly created Highway Performance Fund would reward states with subsidized loans and performance bonuses.

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