The Transportation Conundrum

A looming fiscal crisis sets the stage for a highway-funding showdown

By Rob Bhatt

>SAFETEA First!
>Corporate Highways
>Life in the Fast Lane
>Pay as You Go

When politicians use the phrase, “where the rubber meets the road,” they are typically speaking metaphorically. But as this summer’s campaigns for Congress and the presidency heat up, voters should pay attention to candidates’ positions on issues related to tires and pavement in the literal sense. After all, a growing number of cities are feeling the stranglehold of gridlock at a time when the primary federal source for building and maintaining the nation’s highways, bridges and transit systems is failing to keep pace with demand. AAA presents this primer on some of the key issues.

SAFETEA First!

The five-year, $244.1 billion federal transportation spending law known as SAFETEA-LU (an acronym for Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users) expires in 2009. The reauthorization process, which resumes after the new president and Congress are sworn in next year, promises to be a far cry from business as usual. Agencies such as the Congressional Budget Office (CBO) warn of an impending deficit for the federal Highway Trust Fund.

The account draws most of its revenues from the 18.4 cent per gallon tax on gasoline (and 24.4 cents per gallon on diesel) that motorists pay at the pump. Though it boasted a $20 billion surplus as recently as 2001, the trust fund’s revenues have since grown at a slower pace than spending. The CBO expects the fund to exhaust the last of its reserves this year and rack up growing negative balances beginning in 2009.

In the past, Congress has overcome revenue shortfalls such as these by increasing the fuel tax rate, which has grown in increments from 4 cents per gallon in 1956 to its current level in 1993. Some lawmakers, including Rep. James Oberstar (D.-Minn.), chairman of the U.S. House Committee on Transportation and Infrastructure, support increasing the fuel tax again to account for inflation.

However, any such proposal is likely to meet resistance. Some lawmakers are reluctant to risk the political consequences of asking voters to pay more to fill their tanks when gasoline prices are already at record highs. Some contend that the current highway-spending program is inefficient. Others believe that, as cars become more fuel efficient and vehicles powered by alternative fuels enter production, the tax on gasoline will become obsolete. These are just some of the reasons why Congress created two commissions to evaluate the nation’s future transportation needs—and ways to pay for meeting these needs. One panel, the National Surface Transportation Policy and Revenue Study Commission, has already recommended raising the fuel tax rate in conjunction with the removal of barriers to new funding alternatives. The other panel, called the National Surface Transportation Infrastructure Financing Commission, will release its recommendations later this year. Based on the interim report that this commission released in January, it is expected to also encourage the pursuit of alternative funding sources. Congress and the president will consider recommendations from both panels and other parties as it crafts a successor to SAFETEA-LU. As the process moves forward, privatization, congestion pricing and mileage fees are likely to emerge as the funding alternatives that generate the most passionate debate.

Corporate Highways

The private sector is eager to enter America’s infrastructure industry. Twenty-three states have already adopted legislation allowing companies to either build or manage highways, and the number of private toll roads across the country is on the rise.

Proponents of these arrangements, often called public-private partnerships (P3s), contend that market dynamics such as competition and earnings pressure force companies to manage highways more efficiently than government agencies. However, some observers caution that P3s do not always serve the public interest as well as advertised. Cintra’s $1.8 billion deal to take over the Chicago Skyway allows the company to double tolls (to $5) in the first 12 years of its 99-year lease and continue increasing them after that.

Life in the Fast Lane

A growing number of private companies and public agencies are turning to congestion pricing in conjunction with tolls to either finance new highways or simply manage traffic. Also known as variable pricing, congestion pricing makes it more expensive to drive during heavy traffic periods. Part of the growing allure of congestion pricing, and tolls in general, stems from advances in wireless communications technology that make it relatively easy to collect tolls via transponders mounted in vehicles without stopping motorists. On California’s State Route 91 Express lanes, which were built by a private developer in 1995 and acquired in 2003 by the Orange County Transportation Authority, motorists pay $1.20 to use the eastbound lanes before 5 a.m. on weekdays. The same drive costs $10.50 during peak commute hours on Friday afternoons.

The Washington State Department of Transportation is converting existing carpool lanes along a nine-mile stretch of State Route 167 just outside of Seattle into High Occupancy Toll (HOT) lanes. Carpoolers will still be able to use the lanes for free, but solo drivers also can use them if they pay a toll. Sensors along the highway will automatically adjust the toll to a rate expected to vary between 50 cents and $9, depending on traffic volumes at any given time. Similar programs have been implemented or are under consideration in other parts of the country.

Pay as You Go

Some contend that the most equitable way to make motorists pay for the demands they create and the wear they place on highways is to tax them on the distances they drive, possibly at higher rates in congested regions or during peak traffic times. Last year, the Oregon Department of Transportation (ODOT) completed testing on a program to use GPS and wireless communications technology to create just such a fee. Like every other state in the Union, Oregon charges a state fuel tax that is added to the federal fuel tax at filling stations. Based on the results of its study, ODOT concluded that it could replace its state gas tax with a “Road User Fee” within 10 years, if state lawmakers are so inclined. Congress has sought input on the feasibility of implementing such a fee on a national basis.

These and the other issues that Congress and the president tackle in the next highway bill promise a spirited round of discussions. Time will tell whether the policies that come out of this process prove to be as profound as the 1956 law that President Eisenhower signed to create the Interstate Highway System. The only thing that seems certain for now is the prospect that the ability to use this system is about to get more expensive.

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Transportation Funding: The Debate Continues

As the debate about the future of transportation and how to fund it continues in Washington, AAA is working to ensure that the voice of the motorist is not an afterthought in the discussion.  Motorists will likely be asked to reach deeper into their wallets to pay for transportation going forward, so it is imperative that those who pay understand what is being proposed.

The future of the nation’s transportation system cannot be approached with the mindset that we can simply repeat, or re-authorize, what we have done in the past.  AAA has called for a new vision and purpose for the federal transportation program before motorists are asked to pay more.   Among the principles that will guide our advocacy are the belief that motorists must receive direct and recognizable improvements to their travel experience; transportation officials must demonstrate that they are managing resources wisely through transparent decision-making and efficient use of funds; and revenues generated through taxes, fees and other charges to motorists must be fair and equitable and should be dedicated solely to meeting identified transportation needs.

Delivering on a new vision will ensure the continuance of what we all know as the American way of life.  It is premised upon our ability to go from where we are to where we want to be, at the time we want, via the route we prefer, on the transportation mode that best serves our needs.