Highway Funding Revisited

Transcription

1 Highway Funding Revisited A Quick Look at Ohio Highway Funding

2 In Search of Sustainable Transportation Funding The message resounds from the halls of Congress to the local news desk: The U.S. needs a long term transportation plan! Now, as the Highway Trust Fund faces insolvency once again, ideas for increasing transportation funding have taken on a new life. Many funding proposals have surfaced in Congress and legislators from around the country have suggested alternative funding methods for their states as well. The discussion is long overdue, and Ohio should be part of it. With the 4th largest interstate system and the 2nd largest bridge inventory in the nation, Ohio needs dependable highway funding for the long term. Highway Trust Fund insolvency would rapidly quash infrastructure projects across the county. Without federal dollars to supplement state gas tax revenues, the negative impact on state Departments of Transportation, the highway construction industry and local economies would be immense. But another funding extension that keeps the Highway Trust Fund going for an additional six to nine months isn t the answer. Short-term fixes fail to solve the long term challenge building a sustainable transportation program that will carry America forward for decades. A motor fuel user fee in the form of a gas tax is the primary funding source for highway construction and maintenance in America today. It is also the most reasonable alternative currently available. It s time to revisit!

3 A Glance at History and a Look Ahead The gas tax has served America very well for many years. Fuel taxes collected by the federal and state governments helped create a robust highway system that propelled the U.S. economy, expediting commerce between states and giving the general public unprecedented mobility. And over the years, motor fuel tax revenues supported millions of construction industry jobs throughout the country, bolstering local economies and helping families plan for a secure future. Periodic increases until the early 1990 s kept up with inflation and made the gas tax work. Things have changed. In the 2013 Report Card for America s Infrastructure, the American Society of Civil Engineers estimates that nearly one-third of America s major roads are in poor or mediocre condition. ASCE also reports that 43% of major urban highways are congested and that one in nine of the nation s bridges are rated as structurally deficient. The Federal Highway Administration estimates that $170 billion in capital investment would be needed annually to significantly improve conditions and performance of roads and bridges throughout the country. In Ohio, the Ohio Department of Transportation projects road and bridge needs of $47.1 billion through ODOT estimates revenues of $36.5 billion for the same period, a funding shortfall of $10.6 billion. At current highway funding levels, the U.S. faces difficult times ahead. Rather than building for the future, we are struggling to make ends meet today. Ohio is a U.S. Transportation Leader... 2nd largest inventory of bridges 3rd largest freight payload 4th largest Interstate Highway system 5th highest Vehicle Miles Traveled 7th in transportation construction industry employment...and faces a $10.6 billion revenue shortfall by 2040! Source ODOT Facts Book 2014 Why Did the Revenue Engine Stall? First and foremost, motor fuel taxes have not increased for many years. The federal gas tax has remained at $0.184 per gallon since It is a fixed rate assessment with no built-in adjustment for inflation. As a result, AAA reports that the federal gas tax has lost nearly 40% of its purchasing power since 1993.

4 Similarly the Ohio gas tax has stood at $0.28 per gallon since 2006, also with no automatic adjustment for inflation. As a result, tax receipts have experienced diminished purchasing power over time. ODOT forecasts that highway revenues generated between 2014 and 2040 will lose more than 30% of their value based on the Consumer Price Index with a 2.5% annual inflation rate. Changes in automotive technology and driving habits also have a negative impact on revenue generation. Improved fuel efficiency and an overall decrease in Vehicle Miles Traveled (VMT) equate to fewer gallons of gasoline sold annually and fewer gas tax dollars. But although the economics are disturbing, the gas tax can and should be fixed. Ohio Motor Fuel Tax vs. Inflation Fiscal Year 2011 Cents Per gallon Purchasing Power of Federal Gas Tax (1993 Dollars) Federal Gas Tax Federal gas tax adjusted for inflation Source AAA 2014 Ohio Actual Tax Rate Tax Rate Adjusted for CPI Tax Rates Adjusted for ODOT analysis of construction bids* Tax Rate Per Gallon *ODOT Bid Analysis Review Team (BART) Source Access Ohio Still the Single Best Option for Increasing Revenue Despite the current trends, increasing the gas tax remains the single best option for boosting revenue in the short term and creating a sustainable plan for long-term revenue growth. There are powerful reasons for doing so! The gas tax collection mechanism is already in place. By increasing the tax rate and indexing it for inflation, the gas tax will become more productive immediately. The gas tax is an inherently fair user fee. Those who use the roads pay for better and safer roads. Supplemental fee structures are needed to ensure that hybrid car owners and alternative fuel users pay their fair share for highway use as well.

5 The gas tax is the only identified revenue source at the present time that supports necessary funding on a long term, sustainable basis. Additional revenue mechanisms, such as tire taxes and registration fees, will increase the stability of the Highway Trust Fund. But these mechanisms will likely supplement the primary gas tax rather than replace it. Life After the Gas Tax In the distant future, the gas tax will no longer produce the funds needed to maintain and improve America s highway system. The combined forces of improved vehicle fuel economy, alternative fuel sources, shorter commutes and more work-at-home opportunities will result in less fuel consumption and diminished gas tax revenues. What happens next? User fees based on Vehicle Miles Traveled, known as VMT fees, hold the most promise as a stable alternative or supplement to the gas tax in the long term. Generally, implementation of a VMT fee system would involve use of an onboard vehicle device to capture the distance driven by the vehicle via GPS or similar technology. Methods of fee collection could range from manual cash payments to automatic deductions from a prepaid customer account. Although VMT fee opponents cite potential privacy issues, the fact is that VMT methodology tracks how far a vehicle travels rather than where it goes. VMT measurement is based on distance not location. While much more testing is needed, and implementation is many years away, now is the time to begin a robust discussion about the potential contribution of VMT fees to highway funding. Regardless of what funding methods the future brings, the case for increasing the gas tax today remains strong. The advantages are clear. Now is the time to act at the federal level and right here in Ohio. The gas tax sensible, proven, fair to all. Your Highway Information Source For more information about Ohio s highway infrastructure, visit us today at ocianews.com Sources: Access Ohio 2040, Ohio Department of Transportation, 2014 Access Ohio 2040, State of the System, 2013 Access Ohio 2040, Finance, 2013 Making America Stronger Highway Trust Fund, AAA, 2014 Report Card on America s Infrastructure, ASCE, 2013 ODOT Facts Book, Ohio Department of Transportation, 2014 ODOT Revenue & Budget Forecasts, OTEC, 2014 U.S. Transportation Construction Industry Profile, ARTBA, 2012

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