Future Transportation Challenges, but Yesterday's Solutions

America’s transportation system is in trouble.

The American Society of Civil Engineers’ most recent report card gave the U.S. transportation infrastructure a D and estimated the five-year need of system upgrades will require $2.2 trillion. The current system of fuel excise taxes only meet a fraction of that need.

Brian Pallasch, managing director of government relations and infrastructure initiatives for the group, told the Transportation Task Force Saturday that even flat funding will deeply impact gross domestic product, decrease exports and lead to substantial job losses.

Federal uncertainty is adding to the transportation pain felt by the states.

James Bass, chief financial officer for the Texas Department of Transportation, said state agencies are having problems with planning, environmental studies and design work because the federal transportation laws are set to expire in less than two years. Texas is planning projects for 2015 and 2016, he said, but is unsure of federal funding.

Bass noted that nearly two-thirds of the state transportation budget is devoted to existing operations, maintenance and debt service, which doesn’t leave large pots of money to meet future needs. To meet that challenging budget situation, Texas has looked for different revenue sources. One tool that has proved successful, public-private partnerships, will help states chip away at much-needed infrastructure projects when combined with state bonding authority and toll roads, Bass said.

He said the expanded funding in the most recent federal transportation reauthorization bill for the Transportation Infrastructure Finance and Innovation Act also is an innovative way to raise capital for projects. The program provides federal assistance with transportation projects of national and regional significance in the form of direct loans, loan guarantees and lines of credit. Traditionally, funding for the program was roughly $120 million per year, but the most recent reauthorization provided $1 billion in loan financing.

Trey Baker, associate transportation researcher with the Texas Transportation Institute, said more work is needed before many states will try shifting to a vehicle-miles-traveled tax that could potentially replace the current excise tax on fuel. This concept charges consumers for actual miles traveled rather than fuel consumption. Baker said federal policies—like increasing fuel economy standards—and high gasoline prices are discouraging drivers and starving the Highway Trust Fund of its traditional source of revenue

Baker said the idea of charging drivers for the miles they travel faces some challenges.

Many opponents believe the policy discriminates against rural drivers, punishes consumers that drive hybrids or more fuel-efficient vehicles, and can be viewed as another tax by a spendthrift government. Others share concerns with the tracking and monitoring technology needed to ensure accuracy, which could potentially violate privacy rights.

Mileage-based user fees are not likely to be enacted soon, Baker said, but policymakers can start laying the groundwork. First, he said, the public needs to be educated about how the transportation system works and the inherent limitations in the current funding mechanism. States interested in imposing new user fees, he said, should approach it from a perspective of being a matter of fairness.