Blog No Federal Bailout: States, Regions Confront Transpo Funding Woes

When Congress passes a new $450 billion six-year surface transportation reauthorization sometime in the next 18 months or so, it would directly yield $90 billion per annum, split nationwide over its term. That probably sounds like a lot of money, but it’s not. As the House Transportation and Infrastructure Committee’s blueprint for the reauthorization bill notes on p. 7, needed U.S. road and transit projects require $225 billion to $340 billion per year in public and private investment over each of the next 50 years – this according to the National Surface Transportation Policy and Revenue Study Commission. Even scaled-down needs identified by the National Surface Transportation Infrastructure and Finance Commission – also cited in the committee’s reauthorization blueprint – are sizable: $200 billion per year in public investment to maintain and improve the most essential components of the nation’s highway and transit systems.
The expected $48 billion in 2009 ARRA stimulus bill spending on transportation
makes only a minor dent in either amount. Despite the possibility of some additional leveraged funding via an envisioned infrastructure bank that could be rolled into the reauthorization bill, it’s increasingly clear that manna from Washington – though important – isn’t a stand-alone solution.
That’s because of deepening maintenance and construction needs resulting from four decades of robust growth in passenger and freight vehicle miles traveled, plus simultaneous under-investment in infrastructure, and continuing population growth. And so across the U.S., more and more states and regions are grappling with difficult political choices to pay for fixing eroded transportation infrastructure, and for building new capacity and instituting other strategies to ease traffic congestion as the economic recovery unfolds in the next several years.
The first step is realizing you have a problem. There’s a fair amount of that going around.

The South Florida Sun-Sentinel reports that the Palm Beach Metropolitan Planning Organization projects $13 billion in needed projects over the next 25 years but only $5-7 billion in expected revenues, leaving important roads projects and an envisioned countywide bus system underfunded. A modest leveling off in vehicle miles traveled tied the to the economic downturn isn’t expected to present any long-term solution and planners are expecting major growth in traffic congestion unless new funding is secured. Possible tools identified include a county sales tax hike, express toll lanes or a vehicle mileage tax.
The Las Vegas Review-Journal reports that in Nevada, vehicle miles traveled grew from 10 billion in 1990 to 22 billion in 2005, while the buying power of the portion of the state’s per-gallon gas tax used for road repairs has dropped 43 percent since that tax was last raised. A $7 billion transportation funding shortfall is projected for Nevada in the next decade alone. Pavement maintenance is now funded at only half the recommended level, raising the likelihood of repaving projects which can be four times costlier than more timely, basic repairs. The Review-Journal notes national experts stress bumpy roads harm tires and suspensions, cut fuel efficiency and speed depreciation of vehicles. Finding new state funding sources is a political third rail in Nevada, according to the article. The governor vetoed formation of an expert advisory group that would have reported remedies to the legislature in 2011, and also turned aside suggestions from an earlier blue ribbon panel to index the gas tax to inflation and examine more closely public-private partnerships, toll roads, and higher fees for vehicle registration and drivers licenses. A vehicle mileage tax, or VMT, is seen by some as a potential long-term solution.
The Washington Post reports that as gas tax revenues decline due to improved fuel efficiency and a leveling off of fuel gallons purchased during the recession, Virginia has eliminated 1,400 transportation projects, closed 18 highway rest stops and sees an increasing portion of its state highway construction funds diverted to roads maintenance. The commonwealth needs $1 billion to $2 billion more per year than it can now raise, for top priority roads maintenance work and to replace deficient bridges. One gubernatorial candidate will offer no firm transportation funding plan before the election; the other proposes to divert funds from education and other spending areas. Observers suspect that ultimately, the trend toward electronic, time-variable highway tolling and public private partnerships (P3s) may have to play a large part in funding new construction and easing congestion in the state’s most populous regions. One major highway P3 in Virginia, for high occupancy and toll (HOT) lanes on I-95/395, was recently postponed due to tight money markets, but another, on the I-495 Capital Beltway, is proceeding as planned.
New York State
Funding the maintenance of state roads is also bedeviling elected officials in Colorado, who are $500 million per annum short for that responsibility, to say nothing of system expansion to meet future growth. In New York, State Comptroller Thomas DiNapoli recently issued a report projecting a public infrastructure funding gap of up to $80 billion in the next 20 years – with transportation occupying center stage, followed by wastewater treatment and clean water delivery systems. Among the report’s warnings were that almost one-third of the state’s road and highway miles were in “unacceptable” condition, while only 20 percent were in good condition, and the rest are currently rated “acceptable.” The report highlighted dwindling federal and state infrastructure funding, and made recommendations including a greater emphasis on long-term capital planning, creation of regional vehicles for capital investment in infrastructure, and public-private partnerships. Another report released June 1 by Gov. David Patterson’s New York State Commission On State Asset Maximization recommended pursuit of P3s to replace, rehab and maintain New York’s bridges and the Gowanus Expressway (I-278). Other transportation-related recommendations in the report included pursuit of a P3 between NYDOT, railroads and private investors for development of up to three designated high-speed rail corridors in the state. Additional P3 candidate projects related to higher education, energy, information technology and underutilized property.
In California, the San Francisco Business Journal reports the state projects a $50.3 billion funding gap for needed transportation projects in the next ten years. The state’s infrastructure was designed to serve only about half the current 38 million residents, a figure which could grow to 60 million by 2050. Without new tools, the transportation funding backlog would grow precipitously. Assembly Bill 4, passed earlier this year by the state legislature, opens the door wide to public private partnerships in transportation, and the state’s new Public Infrastructure Advisory Commission has just begun its work to identify projects, and seek proposals from qualified partners. This commission brochure (pdf) distributed to members at a July 29 meeting gives an overview of several potential candidates, including the I-710 freight corridor to serve the Long Beach and Los Angeles ports; the Gerald Desmond Bridge replacement in L.A. County; the rebuilding of 1.6 miles of congested Doyle Drive on U.S. 101 in San Francisco south of the Golden Gate Bridge; the planned 800-mile Bay Area HOT lane network; and express toll lanes on busy State Route 91 and I-15 in Riverside County, to ease congestion as traffic volumes rise sharply in coming years. Several additional possible candidate projects are mentioned in another meeting handout (pdf).
Officials say Southern California alone has some $500 million in (largely unfunded) transportation project needs, according to this report on the July 29 meeting by the Press-Enterprise, of Riverside and San Bernardino Counties.

The commission’s goal is to help Caltrans and regional planning agencies such as San Bernardino Associated Governments develop agreements with private companies for infrastructure projects statewide. Transportation officials have identified more than $500 billion in road and transit needs in Southern California but are well short of paying for all of them with local, state and federal tax dollars.
“They are not going to carry us in terms of where we need to get,” (commission member Fran) Inman (pictured, above right) said of government coffers. She said that is why she is encouraged the state is to seek help from the private sector.
…Teaming public needs with a way for companies to make money is a possible way to repair California’s crumbling roads, (commission member Jon Husing) said…There are various degrees of partnerships under consideration in California, but most projects proposed in the Inland area involve transportation agencies partnering with firms to build projects, then tolling to pay off the project without handing control of the road over to the business sector. The Riverside County Transportation Commission is preparing to hire a consulting firm to guide it through the process of extending the 91 Express Lanes in Orange County east to Pierce Street in Riverside.

Obama Administration Leaning Toward Support Of Transpo P3s
At its resource page, the California Public Infrastructure Advisory Commission links to a major report issued in March 2009 by the Federal Highway Administration titled, “Public Private Partnerships for Highway Infrastructure: Capitalizing On International Experience.” The report examines experience in Lisbon, Madrid, London, Sydney, Melbourne and Brisbane and concludes P3s are a valuable tool, but with nuances and conditions that need to be properly understood. The report recommends a series of specific steps that should be taken to advance their consideration and use to address U.S. highway infrastructure needs. This report’s issuance begins to put the Obama Administration’s stamp of approval on transportation P3s, which is important, considering undercurrents in Congress to add new federal oversight powers of P3s and tolling when proposed for federal aid highways.
In the last several years, no U.S. elected official has done more to promote P3s than California Gov. Arnold Schwarzenegger, through his advocacy of “performance based infrastructure.” One particularly useful short report compiled as part of the Guvernator’s offensive detailed common misconceptions about P3s. Many state policy-makers would do well to read it.
But while public-private partnerships will be a critical component of funding improved transportation systems – and often, mega-projects – they are applicable only about 15 to 20 percent of the time. Along with hoped-for federal largesse, new and increased regional and state taxes and fees, and tolls, must be part of the mix. One farsighted approach gaining visibility is the concept of the vehicle mileage tax, which could ultimately be adopted by states after Congress has mandated that GPS units be built into all new vehicles driven on U.S. roads and retrofitted into older cars at annual license renewal or emission inspections. The so-called VMT might also be imposed by the federal government on all interstate highways. The tax could allow discounted charges for vehicle use during times of less congestion, as well as discounts for lighter weight vehicles or those with higher fuel efficiency.
Vehicle Mileage Tax In 12-City, Federally-Funded Trial Run
Already beta-tested in Puget Sound and Oregon, the mileage tax is getting renewed attention now, in a federally-funded national field study directed by University of Iowa researcher Jon Kuhl. This presentation by Kuhl, at an April VMT symposium in Austin sponsored by the Texas Transportation Institute, highlights some important aspects of the field study.

As the vehicle travels, the on-board computer uses the GPS system to
determine the current vehicle location and distance traveled. The GIS database and rate table are interrogated to determine the current jurisdiction and charge rate. Accrued charges are maintained for each jurisdiction in which the vehicle travels. Charges are periodically uploaded to a billing and dispersal center via the wireless communication link. A variety of payment options could be used ranging from sending of a billing statement to automatic deduction from a credit card or bank
account. Updates to GIS database and/or rate table can downloaded to the vehicle
via the wireless link as necessary. The on-board unit stores and reports only the total amount owed for each jurisdiction. No detailed route or time information is collected. Data encryption techniques are used to further enhance system privacy and security. Any number of vehicle classes can be created, each with their own per mile charge rates, thus enabling a wide range of public policy options. The system can handle multiple levels of (user charge) jurisdiction–e.g. federal, state, county, city, etc. This system could be integrated with other road financing and traffic management options including congestion pricing and electronic tolling. The system could be implemented on any type of vehicle regardless of propulsion system or fuel type.

Year One field testing in San Diego, Boise, Austin, Eastern Iowa, Baltimore and Raeigh-Durham is concluded. Year Two field testing is soon to begin in Portland (Maine), Miami, Chicago, Wichita, Albuquerque and Billings; it will be concluded in early fall, 2010, after which a final report will be issued. Current technology allows geographical distinction of broad sectors, or parts of a region, in which a vehicle travels, with the possibility of varying (higher) rates for more congested sectors. It will be important to develop the capability for more precise route tracking to calibrate charges for congested versus less-congested routes in major metro regions. This would raise additional privacy concerns to be addressed.
Time For States And Regions To Show Mettle
Broad adoption by states of VMT charging frameworks is at least a decade off. States that are only dipping their toes in the P3 waters need to pick up the pace. And major metro areas should move to develop comprehensive plans for corridor-length, time variable electronic tolling via highway express toll and/or HOT lanes, coupled with creation of new corridor-specific transportation taxing authorities. These bodies – or full-on regional transportation authorities, where they are allowed to exist – can devise other supplemental funding strategies, and integrate management of the highways, major state routes and transit systems within their jurisdictions. This approach will at least give major metro regions a leg up, as states and the federal government continue to pursue more sustainable ways to pay for the maintenance, operations and expansion of our nation’s worn out, overburdened surface transportation infrastructure.