As fuel efficiency standards drive gasoline taxes down, who pays to fix the highways?

Source: Julia Pyper, E&E reporter • Posted: Wednesday, April 17, 2013

As the federal Highway Trust Fund inches closer to empty, toll operators are promoting user fees as the solution to America’s infrastructure woes.

The federal gas tax, which supports the highway fund, hasn’t been raised since 1993. Meanwhile, vehicle fuel economy has continued to increase, spurred by market demand and new federal fuel efficiency standards. Collectively, these have kept tax revenue low while the need to repair the nation’s aging roadways has increased.

According to a recent report by the American Society of Civil Engineers, the United States needs to spend $3.6 trillion by 2020 to restore and upgrade the nation’s infrastructure. Roads alone need $170 billion in capital investments per year to improve their condition and performance so the United States can stay economically competitive. Current federal, state and local investments total $91 billion per year.

“Without a viable revenue stream, the status of our nation’s surface transportation will continue to deteriorate,” said Steve Morello, tolling expert at D’Artagnan Consulting and chief organizer of a symposium hosted yesterday by the International Bridge, Tunnel and Turnpike Association (IBTTA) in Philadelphia.

“The transition to some alternative to the current gas tax … with a user-based principle is picking up steam and is no longer a pipe dream,” Morello added.

Rebuilding the interstates

IBTTA and its supporters are looking to inject tolling and other user fees into the national conversation about surface transportation funding with current federal highway legislation set to expire in September of next year.

“One of our major goals is to ensure that as Congress considers funding options for surface transportation, tolling should be an option for state and local governments. They should have the flexibility to fund and finance America’s transportation system in ways that are most appropriate for them,” said Patrick Jones, executive director and CEO of IBTTA.

Specifically, states need greater flexibility to implement tolls and other forms of road-user charges systematically across interstate highways. User fees only require those who use a piece of infrastructure to pay for it. But if the tolling network isn’t widespread across multiple roadways, users will start to push back against their roads being targeted first, said Barry Schoch, Pennsylvania’s secretary of Transportation.

“The flexibility we need from the federal government is so we can systematically toll the interstates, all of them, at a low enough rate to simply rebuild those interstates and keep the money there, keep the money on those interstates,” he said. “If you do that, you can take away the political fight of ‘Why us? Why not the others?'”

There is no way that a tax of any kind, whether it is on fuel or on sales and services, is going to meet the nation’s infrastructure financing needs, said Hon. Luis Fortuño, the former Republican governor of Puerto Rico and a partner at the law firm Steptoe and Johnson. “If the federal government were to allow states and major cities to toll, it would open up the floodgates for new investment.”

States may be able to get the federal support they need. House Transportation and Infrastructure Chairman Bill Shuster (R-Pa.) said yesterday via video address, “I don’t consider anything in, anything out” with respect to replenishing the Highway Trust Fund.

“I think we need to find some new innovative ways to fund the trust fund, because it’s essential we continue to maintain and build the capacity that we need,” he added.

Truckers say to raise the gasoline tax

But while some may be opening up to the idea of user fees, others are vehemently opposed.

Sean McNally, vice president of communications at the American Trucking Associations, said that the trucking industry would be unfairly targeted by more widespread tolling with no option to drive less or switch transportation modes. He also called them an inefficient means to raise capital.

“When I say inefficient, I’m not just talking about people stopping at tollbooths and slowing down and creating congestion, so not physical inefficiency, but financial inefficiency,” he said.

According to McNally, for every dollar collected by the gas tax, 99 cents goes toward rebuilding infrastructure. With a toll, that amount is closer to 75 cents in order to cover the cost of the tolling system, workers and technology upgrades.

IBTTA Executive Director Rob Horr admitted that raising 75 cents on the dollar with tolling is probably accurate today but said that as the industry moves to advanced, all-electronic tolling, the split will greatly improve.

But even with electronic tolling is in place, McNally warned that if interstates are tolled, it will provoke truckers to opt for secondary roads to avoid fees, causing congestion in neighborhoods and increasing emissions and safety concerns.

ATA instead calls for raising the gas tax. “Until somebody comes up with a better replacement, it’s still our best shot at a well-funded transportation system,” McNally said.

Per-mile tax on high-mpg vehicles

There’s also been some controversy over proposed legislation in Oregon to impose a per-mile tax on vehicles that get at least 55 mpg.

Automobile manufacturers worry that the fee would discourage the purchase of highly efficient vehicles such as electric cars, which are making a slow entry to the market. Some users also have privacy concerns, since some of the technology used to implement a per-mile tax tracks the vehicle with GPS.

Fees based on vehicle miles traveled are user-focused, like tolls, but instead of charging for the use of a specific piece of infrastructure, they charge for distance covered. This mileage-based approach still has to overcome a number of technological hurdles but could be a more equitable replacement for the gas tax.

In Pennsylvania, home to one of the country’s oldest and largest transportation systems, Gov. Tom Corbett (R) has committed to raising $1.8 billion per year to fund transportation infrastructure. The state estimates it can rely on the fuel tax for the next decade, but ultimately, it alone won’t be sufficient, particularly as fuel economy increases.

“As fuel efficiency became a priority for our environment, our revenue declined,” Corbett told the IBTTA conference via video message. “In the future, we only expect [fuel efficiency] standards to become more strict, so now is the time to act to ensure the long-term stability of our system.”