Highway and transit financing needs immediate, future attention

News AASHTO Journal February 17, 2006
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The funds now sustaining highway and transit spending are likely to start dipping into the red ink within the next few years, which will require the short- and long-term attention of federal, state and local officials, speakers told transportation officials at the AASHTO Washington Briefing.

The federal Highway Trust Fund (HTF) may face deficits—possibly as early as fiscal year 2008—Cambridge Systematics Inc. Senior Associate Gary Maring said. However, shortfalls may be stemmed if innovative and potentially thorny approaches are employed. Maring was presenting the findings of a study recently released by the U.S. Chamber of Commerce Foundation on the future of the Highway Trust Fund.

In discussing the study, Maring said ways to address the shortfall in the short term include indexing of the federal 18.4 cent per gallon fuel tax to inflation to recoup lost revenues due to rising gas prices and downturn in demand; the addition of more alternative fueled vehicles and the rising costs of construction materials and labor. A $100 sales tax on alternative and hybrid vehicles may be an option to consider. Other short-term options to offset HTF revenue shortfalls include closing tax exemptions and adding interest to the fund, as well as charging a customs tariff to address the immediate crisis while longer-term solutions are implemented.

Maring said states, with federal support, will likely have to take the lead in finding innovative solutions for maintenance and future construction. Oregon, for example, is currently studying a voluntary vehicle miles traveled (VMT) taxing program. Another experiment now underway in Germany involves fitting freight trucks with electronic transponders to tax their mileage.

Maring said the federal government should support research and the architecture of innovative solutions and see successful programs through to long-term implementation. Such approaches, however, face issues such as equity, privacy, legal and administrative enforcement as well as political and public acceptance.

For the mid-term from 2010 to 2015, the Cambridge report laid out the following options:

• An annual vehicle tax on hybrid and non-petroleum-powered vehicles;

• Subsidies of hybrid and non-petroleum-powered vehicles would be paid for from the U.S. Treasury’s General Fund instead of the HTF; and

• Supplementing the diesel fuel tax by increasing the Heavy Vehicle Use Tax—an excise sales tax on heavy vehicles and tire taxes paid into the HTF.

Long-term financing strategies from 2015 to 2030 include the following recommendations:

• Sates and local jurisdictions implement a mileage-based transportation revenue system to address long-term revenue shortfalls, which includes a state VMT fee and a local option VMT fee;

• All users would be charged a VMT fee as a supplement to and perhaps an eventual replacement for state motor vehicle taxes; and

• The local-option VMT fee could be implemented at state and local levels to address urban congestion and local transit needs.

The recently enacted Safe, Accountable, Flexible and Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU)—which expired 22 months before it was signed into law in August 2005—was “evolutionary instead of revolutionary,” said Ruth Van Mark, Senate Environment and Public Works Committee staff director. She added the process was bogged down over the many revenue-sharing debates between legislators, but that eventually the legislation passed, preserving budgetary firewalls.

Another positive from SAFETEA-LU were the creation of two commissions to examine future transportation financing policy and revenue sources. The next surface transportation authorization, she said, will have to address future shortcomings of the HTF.

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