State Transportation Revenue Debates Likely to Continue into 2014

I have a new Capitol Research brief out this week looking at the “Changing Face of Transportation Revenues.” In it, I talk with university research professors and other transportation experts about the strategies states have pursued this year to fund transportation investment. In honor of the report’s release, I thought I’d pass along a few updates on what’s happening in a few other states. I also have updates below on tolling, public private partnerships, infrastructure conditions and performance measurement.

  • Illinois: Doug Whitley, the President and CEO of the Illinois Chamber of Commerce, is traveling the state to make the case to lawmakers, newspaper editorial boards and others about the need to find a new source of funding for transportation infrastructure, The Southern Illinoisan reported this week. As other states have in recent years, Illinois faces an impending fiscal cliff. The Illinois Jobs Now capital program of 2009 funded numerous projects around the state, the construction of which can still be seen today. But the program expires next year and the funds available for transportation-related construction will decline by $2 billion. Without a new funding source, construction jobs would be cut in half and 5,000 miles of state roads and 10 percent of states bridges would go into disrepair. The Illinois Chamber is part of the Transportation for Illinois Coalition which is pushing for the passage of House Bill 3637 and Senate Bill 2589. The legislation would abolish the state motor fuel tax and replace it with a wholesale fuel tax. It would also increase registration and title fees and drop the ethanol tax credit. Motorists could end up paying 13 cents more per gallon and an additional $10 annually to register their vehicles.  
  • Maryland: As part of Maryland’s Transportation Infrastructure Investment Act, the Maryland General Assembly approved a provision that would see a new 3 percent sales tax rise to 5 percent if Congress fails to pass the Marketplace Fairness Act, which would allow states and localities to collect sales tax on online purchases. Governing’s Ryan Holeywell wrote recently that the act faces an uncertain future in the U.S. House of Representatives.
  • Michigan: Some state legislators told local officials in Grand Valley last week not to expect any resolution of the transportation funding debate until well into 2014, the Grand Rapids Business Journal reported.
  • Minnesota: I’ve written here before (see here , here and here) about how Minnesota Transportation Commissioner Charlie Zelle has been charged by Gov. Mark Dayton with making the case to Minnesotans and policymakers for transportation investment. In the interviews for my newly released brief on the “Changing Face of Transportation Revenues,” I had a couple of transportation experts weigh in on whether there is any danger of state DOTs becoming politicized if they’re no longer required to be agnostic on the revenue issue. “I think the goal should be to educate coming from a state DOT rather than advocating but we do at the same time have to push the envelope a little bit and perhaps that could raise some questions about are you just really interested in educating or are you moving into this politicized advocacy role here,” said Joung Lee, associate director for Finance and Business Development at the American Association of State Highway and Transportation Officials (AASHTO). “But certainly you’re not going to get the results you want to see in a significant way if you don’t take any kind of risks out there. That being said, I think that states should still be careful to remain in their more educational role in explaining the needs and benefits to maintain their credibility.” Lee Munnich, director of the State and Local Policy Program at the University of Minnesota’s Humphrey School of Public Affairs, had this to add: “I think what a commissioner or secretary of transportation has to do is to explain to the public what they’re getting out of the transportation system and if they can do that better, then maybe the legislators and the governors will be able to deal with whether the taxes should be raised or not. I think people like Charlie Zelle, who comes from business himself (he ran a bus company for many years), has to market and sell the system that he’s responsible for delivering. I think that’s what Gov. Dayton is saying. And maybe if the public and business community feel they’re getting their money’s worth out of it, then it might be time to invest some more. I think that’s kind of the bottom line. If the (transportation) secretaries don’t do it, who is going to do it? … The other kind of example you can look at is Jim Whitty in Oregon, who has been working for 10 years (and was) hired by the state DOT specifically to develop a road user charging system and his full-time job is to develop the system and work with the advisory group and work with legislators to put something in place. That’s another model where somebody specifically is given the responsibility to develop and promote that kind of a system. If state DOTs aren’t going to take the lead on it, I don’t know who else is.”
  • Pennsylvania: House Republicans last week floated a new transportation funding plan that is much smaller than previous proposals from lawmakers and the governor, WITF reported. The legislature left Harrisburg for their summer break earlier this year after a roughly $2 billion funding plan stalled in the House. The new plan is said to be a nearly $500 million plan, with revenue coming from raising the cap on a tax paid by gas stations, the effect of which would be a seven cents-per-gallon increase at the pump. Lawmakers are due to return to the state capital September 23. Meanwhile, the Southeastern Pennsylvania Transportation Authority (SEPTA), the Philadelphia area’s transit provider, announced last week it’s running out of money to maintain its system and will have to shut down nine of its 13 regional rail lines by 2023. While that dire prediction was aimed primarily at state officials, it also got the attention of U.S. Senator Bob Casey, who at a press conference this week was suggesting it’s time for Congress to come up with a more permanent plan to fund public transit agencies, The Delaware County Daily Times reported. Casey also indicated that Congress should consider increasing the federal gas tax to provide more money for roads, bridges and transit, the Philadelphia Inquirer reported. The U.S. Senate Environment and Public Works Committee will reportedly examine a potential fuel tax increase during a hearing next week to discuss the solvency of the Highway Trust Fund. The trust fund relies on gas tax revenue and is expected to be insolvent by 2015. Casey, by the way, is also the co-sponsor of a bill that would amend last year’s federal authorization bill, MAP-21, to establish a dedicated revenue stream for county-owned or “off-system” bridges, The Williamsport Sun Gazette reported.
  • Washington: Gov. Jay Inslee was in Snohomish County last week to make the pitch for an increase in the gas tax to fund transportation projects in the area, The (Everett) Herald reported. The governor told local officials that without additional money for road and bridge improvements, there will be a 52 percent decrease in funds spent on maintenance in the next two years and another 71 bridges will become structurally deficient. Inslee said investment in transportation projects is key to the state’s economic development and will allow employees to get to work and products to move across the state. But Inslee said the political reality is that the tax increase faces an uphill climb after not making it across the finish line in either the legislature’s regular or special sessions this year. He said he won’t call legislators back to Olympia for another special session this fall unless he thinks the votes are there to pass the transportation bill. Senate Republicans want to see the voters have the final say on any tax increase. State lawmakers began a ten-stop, statewide “listening tour” this week to get feedback from Washingtonians on the transportation revenue issue, KING 5 TV reported.

Tolling & Public-Private Partnerships

  • Reason Study: Robert Poole at the libertarian Reason Foundation is out with a new study that’s getting a lot of attention. It’s called “Interstate 2.0: Modernizing the Interstate Highway System via Toll Finance” and in it Poole makes the case that 90 percent of the $1 trillion needed to modernize the interstates could be financed by replacing the gas tax with tolls (3.5 cents-per-mile for cars, 14 cents-per-mile for trucks, indexed for inflation). Poole, Reason’s Director of Transportation Policy, argues that higher toll rates could cover a portion of the remaining 10 percent. But tax and grant funding might still be required in five or six rural states. The feasibility study offers a number of reasons why per-mile tolling is a better highway user fee than per-gallon taxes, including: per-mile tolls can be tailored to the cost of each road and bridge, rather than being averaged across all types of roads. Poole believes it would take at least one state leading the way to implement the toll plan. Congress would also have to authorize additional permissions to toll existing interstate facilities. There are a variety of summaries and assessments of Poole’s study online, including the following:

        --- Tollroadsnews: “Rebuilding the U.S. Interstate network with tolls—Reason’s Bob  Poole details a plan for switch from taxes to tolls.”

        --- McClatchy: “Study proposes tolling interstate system to pay for reconstruction.”

        --- Pat Jones, International Bridge, Tunnel & Turnpike Association CEO: “Interstate 2.0: Bringing Home the Urgency of Tolling.”

        --- Governing Magazine: “How to Toll Every Interstate Highway in America.”

        --- American Trucking Association: “’Report’ Distorts and Exaggerates Utility of Tolls for Highway Finance.”

  • Moody’s Special Report: Moody’s Investors Service said in a special report last week that road tolls in the United States will need to increase in the coming years to cover rising debt, but the nation’s slow economic recovery will make it difficult to do that. Tollroadsnews had more on the Moody’s report.
  • GAO Report: A report last month from the Government Accountability Office found that the transparency and oversight of bi-state tolling authorities is sometimes lacking. “Differences in states’ laws and disagreements between the bi-state authorities and state audit agencies have raised questions about the authority of several states to provide oversight,” GAO said. Here is Tollroadsnews’ take on the report.
  • Midway Airport Privatization: Chicago Mayor Rahm Emanuel said this month that plans to privatize Midway Airport to raise money are on hold for “the foreseeable future” after one of the two bidders for the airport dropped out, The Chicago Tribune reported.
  • Illiana Expressway: The Chicago-based nonprofit Metropolitan Planning Council (MPC) recently offered its assessment of the Illiana Expressway, a proposed 47-mile corridor between I-55 in Will County, IL and I-65 in Lake County, IN that transportation officials hope would reduce congestion by creating an alternate route to I-80. MPC found that the expressway, which is proposed as a public-private partnership, “would yield few benefits in exchange for high—and uncertain—costs.” The organization opposes the inclusion of the project in the GO TO 2040 regional plan (which is set for an October 9 vote by the Chicago Metropolitan Agency for Planning) arguing “Financing for the Illiana Expressway is uncertain and would put other regional projects prioritized by GO TO 2040 at risk.” MPC said that although the Illiana is proposed as a P3 with tolls, “it is not evident that private funds will cover all capital and long-term maintenance costs.” Moreover, the organization said, “Similar rural toll roads recently built in other U.S. regions … have suffered from lower-than-expected revenues and several have gone bankrupt.”

Infrastructure Conditions

  • An analysis by the Associated Press found that of the 607,380 bridges in the most recent National Bridge Inventory, 65,605 were classified as structurally deficient, 20,808 as fracture critical and 7,795 as both.
  • As a corollary to that story, the AP also recently detailed the efforts by Minnesota to rehabilitate or replace structurally deficient or fracture critical bridges in the years since the 2007 collapse of the I-35W Bridge in Minneapolis. In response to the disaster, which killed 13 people, lawmakers raised the state gas tax to finance a 10-year bridge construction program. Some $1.2 billion has gone into the effort so far. But the extra money for bridges is due to run out in about five years. State lawmakers weren’t able to advance a major transportation funding plan during the 2013 session but, as noted above, Minnesota officials are now trying to make the case for transportation investment in advance of the 2014 session.   
  • In the wake of the recent devastating flooding in Colorado, Gov. John Hickenlooper called on Vermont transportation officials to share their expertise in rebuilding roads and bridges that was gained following 2011’s Tropical Storm Irene, the AP reported.

Performance Measurement

  • Deron Lovaas of the Natural Resources Defense Council had a piece last week about the reaction of some state DOT officials to a sentence in the U.S. Department of Transportation’s newly proposed strategic plan for 2014-2018 concerning the movement toward a performance measurement- and management-based transportation system. The sentence reads: “[DOT will] use the system performance information to drive programmatic and legislative linkages between system performance and Federal funding.” Lovaas pointed to comments posted by Florida Transportation Secretary Ananth Prasad on the DOT website, where stakeholders can comment on the plan. Prasad argues that “performance measurement must not be linked to funding” and that “tying performance measurement to funding would prove to be counterproductive to MAP-21’s policy direction.” Other state DOT officials from around the country echoed the sentiment on the DOT website expressing concern that the linkage “would penalize” them. Lovaas’ take on the reactions: “Tough or not, the 21st century is a new age of accountability for government agencies at all levels – and that should include state DOTs. As a commenter tartly put it when reacting to Wyoming’s plea that funding and performance not be linked, ‘We are in a period of constrained funding for all activities. If funding is not producing results, it should be sent elsewhere.’ I couldn’t agree more. It’s time to measure performance, and manage it as well by linking it to meaningful incentives. State DOTs putting up roadblocks on the road to accountability is the last thing hardworking American taxpayers need.”
  • Performance measurement/management, by the way, will be a focus for us this week at the CSG National Conference in Kansas City. On Friday, members of the CSG Transportation Public Policy Committee will have the chance to hear from Mara Campbell, Customer Relations Director for the Missouri Department of Transportation. She’ll talk about how Missouri became a leader in performance management, what other states can take away from Missouri’s experience and what’s ahead for all states in implementing the performance measurement provisions of MAP-21. You can read my recent article previewing the session, which includes my interviews with Campbell and MoDOT Director Dave Nichols here (also check out Campbell’s presentation from a MoDOT meeting in May here). And look for a full report on the session when I return.

“I went to Kansas City on a Friday / By Saturday I learned a thing or two…”                --Rodgers & Hammerstein, “Everything’s Up to Date in Kansas City.” (from “Oklahoma”)