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More on paying for roads and other forms of transportation

Given that the private toll road debate is set to gear up again in Texas, it is fortuitous that the Texas Public Interest Research Group, a/k/a TexPIRG, chose last week to release a report called Do Roads pay For Themselves? You can read the whole report, or you can skip to their press release for a preview of the answer to that question.

Among the findings of the report:

  • Federal gasoline taxes were originally intended for debt relief, not roads.
  • Highways, roads and streets have received more than $600 billion in subsidies over the last 63 years in excess of the amount raised through gasoline taxes.
  • The amount of money a particular driver pays in gasoline taxes bears little relationship to his or her use of roads funded by gas taxes. Drivers pay gasoline taxes for the miles they drive on local streets and roads, even though those proceeds are typically used to pay for state and federal highways.
  • Most state gas taxes are partly offset by subsidies that exempt gasoline from sales taxes.

“Texas needs to make difficult choices about how to fund our states’ troubled transportation system. The first task is to discard common myths about how roads are paid for,” said Slatter at TexPIRG.

The transportation finance system in Texas is broken. Officials at the Texas Department of Transportation (TxDOT) have admitted there isn’t enough money for basic road repairs. The process by which the gas tax is allocated is corrupt and lacks transparency.

“The state’s gas tax has been placed in a cookie jar and lawmakers help themselves to as many as it takes to pretend they’ve balanced the budget,” said Slatter. “The process discourages transparency or accountability.”

“This dishonest charade only encourages state officials to seek indirect and short-sighted methods to fund road projects,” Slatter continued. “In Texas, that means pushing the same unpopular private toll road agenda the state has been pushing for close to a decade.”

While toll roads are the closest thing to a user fee, in Texas, the state has turned to privatizing toll roads in order to fund most major highway projects. Privatization deals are fraught with problems and characterized by the same leveraging of debt, reckless shifting of risk and conflicts of interest that caused the financial meltdown on Wall Street.

“Looking ahead to the 2011 legislative session, Texas lawmakers will be faced with serious challenges to fund smart transportation projects,” concluded Slatter. “This report shows that highway spending has been wrongly portrayed as financially conservative. Sound transportation policy requires honest investment in transportation infrastructure that advances long-term needs, rather than continuing on the wrong path towards more debt and waste.”

I should note that there’s already some thought being given to alternatives to the gas tax, and as there has been many times before there’s talk about ending the diversions of the gas tax to other things like education and the Department of Public Safety. Given the extreme unlikelihood that a suitable alternate funding mechanism for DPS would be found this session, I wouldn’t bet on anything happening, but there you have it.

The question of tolls is addressed in a sidebar on page 10:

What About Tolls?

There are, of course, real “user fees” assessed on some American roads: tolls. Unlike gasoline taxes, tolls are true user fees—users pay them, non-users don’t, and users generally pay in proportion to the amount of the service they consume.

The problem with tolling, however, is that only a small portion of the nation’s highways could truly “pay for themselves” in this way. In other words, if the true cost of building, say, Boston’s Big Dig or a rural highway in Idaho were to be charged to its users, the tolls would be so high that they would deter some or all drivers from using them—defeating the purpose of building the highway in the first place.

The recent track record of privately financed toll roads in the United States—which includes the financial struggles of roads such as California’s SR-91 express lanes and Texas’ Camino Columbia toll road—underscores just how iffy a proposition it can be to self-finance modern highways with toll revenue—especially since the private companies have relatively high capital costs and must skim off a profit
share to investors.

The inadequacy of tolling for building a truly national system of highways was recognized by the architects of the Interstate Highway System. A 1938 federal report found that the amount of expected long-distance traffic was insufficient to support toll highways. In the 1950s, experts estimated that no more than 9,000 miles of highway (compared with the more than 3 million miles of highway in existence at that time) could support themselves with tolls.

Just some more data to keep in mind when and if the toll road issue resurfaces. The national PIRG organization has also touted this study, mostly as a way to advocate for a bigger and better funding mechanism for public transportation, a goal with which I heartily agree. Grist has more.

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