New Transportation Revenue Streams or Distracting Safety Hazards?

In case you missed it, two news items in recent weeks may demonstrate the increasing desperation of state governments in trying to pay for transportation improvements.

The Associated Press reported that Pennsylvania is among several states asking the federal government to allow the sale of advertising on those electronic highway signs that warn drivers of accidents, traffic tie-ups and construction. Officials there hope the advertising could generate $150 million annually to help fix roads and bridges.

Perhaps not to be outdone, California’s state legislature is considering a bill that would allow the state to examine the feasibility of electronic license plates that could also be used for paid advertising, the AP reported.

These developments came around the same time USA Today reported that Americans are paying the lowest gasoline taxes since the early days of the automobile—just $19 for every 1,000 miles driven. Gasoline taxes have been a traditional primary revenue source for infrastructure spending. But in inflation-adjusted dollars, drivers are paying just half of what they paid in 1975. Whereas Americans spent $1.18 in gas taxes out of every $100 of income earned in 1970, they spent just 46 cents on gas taxes for every $100 during the first quarter of this year. According to the Commerce Department’s Bureau of Economic Analysis, motorists are expected to spend an estimated $56 billion on federal, state and local gas taxes this year, down from $69 billion in 2000 after adjusting for inflation. That’s despite the fact that Americans are driving more miles than they did a decade ago and consequently causing more wear and tear on the nation’s highways and bridges.

Two national transportation commissions chartered by Congress—the National Surface Infrastructure Financing Commission and the National Surface Transportation Policy and Revenue Study Commission—along with the American Association of State Highway and Transportation Officials and numerous other groups have in recent years urged the federal and state governments to increase gasoline taxes. But concerns about a still struggling economy have prompted the Obama administration to oppose raising fuel taxes at this time and anti-tax sentiments around the country have made gas tax increases a tough sell at the state level as well. Due to those political realities, legislation to reauthorize federal transportation programs—which could include a gas tax increase and other revenue enhancements—appears unlikely to win support in Congress until next year at the earliest.

States meanwhile are tapping dwindling Recovery Act funds and selling bonds to finance highway projects. And they are actively seeking potential new revenue sources like ad sales on highway signs and license plates.

But concerns about traffic safety could ultimately derail those plans. Traffic safety advocates including the AAA Foundation for Traffic Safety argue that ads on highway signs could distract drivers and pose a road hazard. In order for plans to go ahead in Pennsylvania and the other states looking at electronic sign ads (including Florida and California), the Federal Highway Administration would have to waive several regulations that bar advertisements on overhead and roadside signs. Then state lawmakers would have to sign off on the plan. In Pennsylvania, state laws also bar commercial advertising on traffic signs. Efforts to seek new ad revenue in Pennsylvania are not unprecedented however. Since 2000, the Pennsylvania Turnpike has allowed ads on tollbooth windows and ticket machines, which generated about $519,000 in 2009.

California’s effort to consider electronic license plates faces a difficult political path as well. The bill, Senate Bill 1453, passed the state Senate in May and is under consideration by the state Assembly. The legislation would authorize the state to begin researching the feasibility of a program in which the state Department of Motor Vehicles would work with advertisers on the placement of their ads on license plates. Supporters hope to open a new revenue stream in a state that is facing a $19 billion deficit. But Gov. Arnold Schwarzenegger has said he would veto any legislation permitting a feasibility study, according to the Los Angeles Times.

“The legislature needs to focus on passing a budget that lives within our means instead of distracting drivers to raise revenues,” a statement from the Governor’s office said.

So while it remains to be seen if these new ad revenue streams along the nation’s highways will ever come to fruition and play a major part in solving the infrastructure finance puzzle, it is clear that states facing huge budget deficits, crumbling infrastructure, eroding gas taxes and uncertainty at the federal level are willing to try just about anything.

Read CSG’s Transportation Policy Task Force recommendations for the next transportation authorization bill here.