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H O W T O F I N A N C E T H E N E X T T R A N S P O RTAT I O N P R O G R A M 33 ages a modal split in freight transport. It provides an revenue will have political problems. If there are free incentive to shift long-distance hauls from trucks to rail. riders, they are the beneficiaries that are not required to Molnar explained that road funds acknowledge the pay for the capital assets. utility function of transportation but limit the govern- ment's fiscal redistribution function and can limit Martin then raised the question of what we should expenditure management. Alternatives to road funds think about for the future. What are our long-term include goals for the system? He stressed the importance of the following: Promoting commercialization of road agencies with revenue from toll collection, The need to think about equity and how we equi- Application of a commercially managed motorway tably distribute the cost of investments (e.g., through agency, such as one instituted in Slovenia that received user fees, beneficiary fees); earmarked funding and makes concession contracts for The need for a consistent and reliable stream of maintenance; and revenues; and Attempts at privatization, which are numerous The need for simple and transparent mechanisms. but small in scope. Discussion topics for this session included the following: Molnar addressed the mix of roles of government, the private sector, and road users today and in the future. Current funding is entrenched in the gas tax. It She predicted the following mix of roles for the future: will take 10 years to develop something new, and by that time alternative fuels will be more than a threat. In Government will have bargaining, negotiating, the next 6 years, we will need to build a framework for and enabling functions. Its roles will include policy and consensus around the future funding and financing maker, regulator, contract manager, and provider of last mechanisms. resort. There will be increased accountability, with One could look at the highway network as a util- funding being a part of transportation policy. ity, with pricing not only a means of raising revenue but The private sector will make a slow transition from also an indicator of where and how much to invest. its role as contractoroperator to one of investoroperator. To what extent are variable-rate pricing, tolls, and Users will cover part of the costs. other user fees publicly acceptable? Should we let the public sector earn a profit from its assets? Discussion How could the system be changed to guarantee that user fees are directed to highways, and spending is Michael Martin associated with performance? Should revenue be discussed on a project basis Michael Martin initiated the discussion period by pre- rather than a program basis? senting four myths in transportation funding: If moving freight and moving passengers are really the issues, then why not focus on some sort of unified 1. "We're raising revenues to maintain a system." trust fund that acknowledges that people and goods According to Martin, systems are not treading water; move with multiple modes? the real question is how quickly they are sinking. Congestion is more than commuters. Freight should be as much of the story, and we need to think about a SESSION 2: EXAMINING CURRENT AND needs-based system. POTENTIAL USE OF TAX INCENTIVES IN 2. "The current system is a user-fee system." Users PROMOTING SURFACE TRANSPORTATION pay for the amount of fuel they use, not road use. INVESTMENT Martin raises the question, do we need a system where the beneficiaries pay? Bryan Grote, Mercator Advisors, LLC (Moderator) 3. "Spending on roads is an expenditure." Scott Bernstein, Center for Neighborhood Technology According to Martin, it is not. It is an investment: the (Discussant) creation of a capital asset. We do not have good Dennis Anosike, Chicago Transit Authority research on the return on those investments. Karen Hedlund, Nossaman Guthner Knox & Elliott LLP 4. "There is a free-rider problem." According to James (Rocky) Query, Morgan Stanley Martin, from a political perspective, the motor fuels tax Janet Friedl, American Association of State Highway has certain advantages. Some other means of generating and Transportation Officials