Paying for transportation

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If you watched President Obama’s “State of the Union” speech last night, about halfway through, he discussed a new transportation infrastructure funding initiative called the “Fix-It-First” program. [You can watch that part of speech below.]

“Ask any CEO where they'd rather locate and hire; a country with deteriorating roads and bridges or one with high-speed rail and Internet, high-tech schools, self- healing power grids,” Obama said.

“The CEO of Siemens America – a company that brought hundreds of new jobs to North Carolina – has said that if we upgrade our infrastructure, they'll bring even more jobs. And that's the attitude of a lot of companies all around the world,” the President added. “And I know you want these job-creating projects in your district; I've seen all those ribbon-cuttings.”

Thus, the “Fix-It-First”' program: a $50 billion effort to focus on what Obama called “our most urgent repairs,” such as “the nearly 70,000 structurally deficient bridges across the country.”

While many groups quickly backed the President’s spending proposal, the stark fact remains that it comes at a time when the federal government’s annual deficit topped $835 billion for fiscal 2012 – after racking up nearly $5 trillion in additional debt over the past four years.

So just where will that suggested $50 billion (far less than what many believe is necessary to truly fix just the nation’s highways and bridges) come from?

From increased taxes on diesel and gasoline? That’s proven to be controversial, although the American Trucking Associations (ATA) believes it’s the simplest way to generate the additional revenue desired to both expand and rehabilitate America’s roads and bridges. [ATA’s CEO Bill Graves discussed some of the reasoning for this with The Washington Times newspaper over a year ago.]

What about a “pay-per-mile” user fee? That’s a concept getting a serious look from many states right now (you can read more about that by clicking here) but it’s also something that got floated at the federal level four years ago by the National Surface Transportation Infrastructure Financing Commission.

According to the Commission, the total number of miles traveled by automobiles increased 97% from 1980 to 2006 while the miles traveled by trucks increased 106%, but the total number of highway lane miles has grown only 4.4% while real highway spending per-mile travelled has decreased nearly 50% since the late 1950s (in no small part because today’s vehicles are far more fuel efficient.)

While the Commission did call for boosting fuel taxes – some 10 cents more per gallon for gasoline and 15 cents more per gallon for diesel – it’s long-term recommendations called for eliminating current fuel and vehicle-related charges as the primary funding source for the surface transportation system, which it termed “unsustainable,” to be replaced a “user-based” fee. (Read more about all of that by clicking here).

Other proposals go even further. Take the argument by David Levinson of the Reason Foundation – offered back in January – that organizations in charge of managing roads should be able to finance road construction and maintenance through the sale of bonds, without requiring direct consent from higher political authorities, and they should be able to cover the costs of those bonds by charging for road use.

“One way to achieve this, while maintaining overarching political control—and thereby prevent abuses of monopoly power—is to convert existing government operated road management organizations, such as the state Departments of Transportation, into regulated public utilities,” he explained.

Within such a framework, Levinson said, a wide variety of ownership structures are possible, ranging from municipal- or state-ownership to mutual- and investor-ownership.

“Each structure has its own set of advantages and disadvantages, but all are superior to the existing system in one crucial respect: they clearly orient the road enterprise away from day-to-day politics and toward providing value to their users,” he emphasized.

In the short term, however, Robert Poole (at right) of the Reason Foundation argued that the federal government could free up an additional $10 billion a year to spend on crucial highways if it simply stopped diverting federal gas tax money to “non-highway” projects.

“The federal gas tax was supposed to be used to build and maintain the interstate system [but] today auto and truck drivers pay federal gas taxes that are diverted to ferryboats, trails and mass transit programs,” he said in a paper published two years ago.

“Since these other programs are unable to generate significant user revenues and require large subsidies, they should be funded by state and local governments [while] the 18.4 cents a gallon federal fuel tax should be refocused on rebuilding and modernizing the aging but vitally important interstates,” Poole pointed out.

It’s tough stuff, no doubt, but it all ties back to the major issue underlying almost every effort undertaken by government these days: where will the money come from? And in a lot of respects, it’s becoming much harder to solve that part of the transportation funding equation. 

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