CSG Transportation Policy Academy Part 3: Oregon Department of Transportation’s Matt Garrett

The opening dinner of CSG’s Transportation Policy Academy in Portland, Oregon included remarks by Oregon Department of Transportation Director Matt Garrett. He talked about a time of change, uncertainty and opportunity at his agency and previewed the next day’s presentation on Oregon’s new mileage-based road user fee, which he sees as the continuation of the state’s historical role as an innovator in transportation finance.

But Garrett began his remarks on July 18th with a quote that he said showed how the more things change, the more they stay the same. It was from Oswald West, Oregon’s 14th Governor, who in 1915 told state lawmakers:

“In my short experience as a member of the state highway commission, this has convinced me of three things: the first, that good roads are our greatest need and no material development can come without them. Second, many favor better roads but few are willing to pay for them. And third, that he who undertakes construction of roads gets damned for the cost but no credit for his effort.”

Garrett told policy academy attendees that 2013 is a “hinge moment” for the Oregon Department of Transportation.

“We stand at an intersection of the traditional ways of doing business versus the transformational ways of doing business,” he said. “I think it is incumbent upon me as director—and I am blessed with great people at the department of transportation—to make sure that those concepts converge rather than collide. We have a charge given to us where we are to integrate and to align various policies and investment strategies. Transportation policy alignment with economic policy with environmental policy with energy policy with health policy as well as the land use disciplines here. So we find ourselves in a new landscape. We find ourselves in a new fiscal reality as well, which demands I think a very disciplined approach in terms of aligning the expenditures with our revenues. Those realities have demanded a different approach and a willingness to make some very difficult decisions. The willingness to prioritize and the courage to understand and accept that there’s going to have to be trade-offs if you’re going to align your expenditures with your revenues here.”

Garrett noted that a number of factors are playing out that are having a huge impact for the state of Oregon.

Jennifer (Dill, the evening’s other keynote speaker) showed the chart in terms of (declining vehicle miles traveled),” he said. “Now, there are a lot of positive aspects to that but if you’re in the transportation field and you’re relying on the gas tax and you’re seeing a dip in terms of vehicle miles traveled, it will normally equate with fewer gallons purchased, which means I have fewer gas tax dollars that are going into the highway trust fund, which allows me to reinvest in the system as a whole.”

Debt service is another fiscal concern, Garrett said.

“There were policy decisions made over the last decade to bond monies to jump start and accelerate significant programs whether they were specific to bridges, basic preservation and maintenance of the system. But debt service comes with a price. It locks up monies for 25 or 30 years creating cash flow rigidity.”

Federal uncertainty revolving around the future solvency of the Highway Trust Fund is giving Garrett and other state DOT leaders around the country concern as well.

“As we move out to 2015, we have significant exposure on the federal level if nothing is done to increase and align revenues with expenditures,” he said. “We are 440 days away from the expiration of MAP-21. … That 27-month bill … provided what I thought was a very good policy framework dealing with freight planning, creating high-priority corridors in terms of the movement of commerce, goods and services, opportunities for big projects--projects of national significance, of regional significance that would bring I think a little more discipline to the federal aid system in terms of investment, a greater investment in research, a more disciplined approach in terms of performance measures focusing on the outcomes. But it was nothing more than a framework because they forgot to bring the resources to truly animate some of these activities.”

Garrett said it’s incumbent upon state officials to make sure Congress stays on task to pass MAP-21’s successor and determine the trust fund’s long-term future.

“So as we start to engage—and we should engage right now—going back to D.C. to write the next chapter of MAP-21 because October of 2014 (when the bill expires) is going to come very quickly,” he said. “Let us shape our own future rather than react to something that’s volatile and unknown. So as we have our conversations with our various delegations, I would hope that you would remind them that they must increase revenue because right now the federal Highway Trust Fund, the expenditures and the revenues are out of alignment to the tune of $12 to $15 billion. If it wasn’t for dipping into the General Fund to the tune of $55 billion, those lines would continue to skew and move apart.”

It is also important that Congress allows states to continue to innovate, Garrett said.

“We are where things happen,” he said. “We are where creativity happens. … Allow those states that are looking at funding mechanisms that transition from the gas tax to a new way to invest in transportation infrastructure. Help us pay for that. Put a little skin in the game. But allow the laboratories of the state to develop and tailor those opportunities. …We need to promote flexibility and focus on outcomes rather than process.”

One such innovation is on the way in Oregon, he noted.

“What I thought was a transitional and transformational change took place in the Oregon legislature this year,” Garrett said. “That was the movement to a mileage fee charge—the first step to truly implement a transition from the gas tax.”

But the state has already had a history of innovations in transportation finance. In 1919, Oregon became the first state in the nation to adopt a gas tax, with the nation following suit a few years later. Then in 1933, Oregon pioneered the weight mile tax for heavy vehicles, something that failed to catch on across the country. Garrett thinks states should still consider following Oregon’s lead on that front, calling the tax the “most fair and equitable way to charge for the damage to and use of the roads.”

Garrett believes Oregon has another winner in the per mile charge for vehicles.

“Much like the gas tax in 1919 I submit to you that as goes Oregon, so goes the nation,” he said. “We have worked for over a dozen years seeking a solution to the challenges of the decline in the gas tax. And it was a workhorse and it was equitable for a long time. But the world has changed. The composition of the fleet has changed. Technology has changed. Policy—the (Corporate Average Fuel Economy) standards have changed. The revenue issue will continue to decline.”

Garrett then introduced Jim Whitty, who manages ODOT’s Office of Innovative Partnerships & Alternative Funding and who would address the policy academy attendees the next day.

“What you’re going to hear from Jim tomorrow is what was needed in terms of leadership, what was needed in terms of a structure,” Garrett said. “We had a task force of many different interests and forming a menu of options but narrowing it down to what would work in the state of Oregon. Again, allow the states to tailor solutions. He’s going to tell you about the pilot programs that we had. We’ve done two and we’ve learned a tremendous amount. He’s going to tell you about the platform and the system that we now have in place here. Maybe most importantly, he’s going to share with you the insights of how other states might proceed on this endeavor.”

“You’re going to hear about the recent legislation that animated this—Senate Bill 810. It passed about two weeks ago. It allows us to do the per mile charge. We (initially) thought we would go after those high fuel efficient vehicles, vehicles that get 55 miles per hour and above. During the legislative conversation, we had to make a pivot to a voluntary or opt-in (program) for 5,000 (vehicles) but we’re moving forward as a first step here.”

Garrett concluded by noting that Oregon hopes to attract other state partners to the cause.

“The bottom line is the state of Oregon doesn’t intend to do this alone,” he said. “We don’t have the critical mass. We have smart people (who are) dedicated and passionate but we can’t carry this load by ourselves. So what we’re going to do is next month, the first week of August when we’re down in San Francisco at the Western Association of State Highway Transportation Officials with my friends from the Washington State Department of Transportation, we are going to announce the formation of the Western Road Usage Charge Consortium. And we will invite our Western state brothers and sisters to engage in a formal arrangement and work together, take advantage of the decade long work that we have done, the questions that will come, the answers that we have refined over and over again, take advantage of this and let’s create this Western states consortium, which will now provide the critical mass to answer all the questions that need to be asked and maybe animate this conversation across the nation and allow our federal partners to jump into this in a more aggressive lean in terms of bringing skin to the game to help us move forward. I think the Western part of this country will be formative in making this transition.”