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51 PLENARY SESSION 6 Emerging Issues Steve Van Beek, Eno Transportation Foundation (Moderator) Craig Lentzsch, National Surface Transportation Infrastructure Financing Commission Anne Canby, Surface Transportation Policy Project The session synthesized the findings from preced-ing sessions in the conference, with forward-looking perspectives provided by a panel of leading policy practitioners. The discussions examined the achievement of true modal integration through funding and finance tools that help direct policy, identi- fied an array of feasible revenue mechanisms to meet investment needs, and attempted to help participants understand the unpredictable funding and financing landscape for federal transportation reauthorization. The panel also examined short- and long-term implica- tions of a transition to distance-based fees, a national infrastructure bank, the linking of the motor fuels tax with climate change efforts, and creative solutions to be considered in the surface transportation reauthorization process, among others. multimodal Policy integration Steve Van Beek expressed the opinion that transporta- tion policy and funding are at a turning point and sug- gested that there are three contexts in which this can be viewed: funding and policy, modal challenges, and a framework for systems solutions. He indicated that the current juncture is a dynamic moment where greenhouse gas emissions, energy, and funding need to be addressed. Transportation policy must change, and the delays in advancing a new transportation act reflect todayâs chal- lenges. The new administration has focused on transpor- tation and supported a $48 billion, 16-month stimulus bill outside the trust fund. From a short-term perspec- tive, transportation investment has become a priority, but the longer term remains uncertain. If current trends continue, he indicated that the lim- ited revenues accruing in the Highway Trust Fund will result in a 50 percent reduction in highway funding after 2012 and a 40 percent reduction in transit funding in 2013. Mr. Van Beek stated that whether there will be a third infusion of taxpayer dollars into the trust fund is unknown. He stated that the economic recovery is unstable and that destimulus pressures could result in the loss of 1 million jobs. The aviation trust fund is also moving toward default, and modernization of air traffic control is going to require a massive investment in the next decade. Mr. Van Beek stated that the current administration is emphasizing spending transportation funds âsmarter,â through the use of less formulaic programs, more discre- tion, and performance measures. Several programs have been identified, but funding remains largely unidentified: ⢠High-speed rail: $8 billion dedicated to date, with $57 billion in requests and no identified funding source beyond taxpayer money; ⢠Transportation Investment Generating Economic Recovery grants: $1.5 billion awarded out of $57 bil- lion in applications, with another $600 million for FY 2010 with no identified funding source beyond taxpayer money; and ⢠National Infrastructure Innovation and Finance Fund: $4 billion proposed in the FY 2011 budget to cap- italize a bank providing support to high-value projects, toward an eventual goal of $25 billion.
52 FINANCING SURFACE TRANSPORTATION IN THE UNITED STATES As these programs are being advanced, the administra- tionâs stance is that there will be no increase in the motor fuel tax, no surface transportation fees, no aviation user fees, and no tolling of existing Interstate highways. This leaves the following funding options: unprecedented and disproportionate taxpayer funding, a shift to new mod- els of user fees, nonfederal funding options, or a combi- nation of the above. For the past 50 years, Mr. Van Beek noted, the United States has made transportation policy by mode rather than by national mobility goals. We have walled off trust funds and relied on a supply center system that is imploding. Since the passage of the Intermodal Surface Transportation Efficiency Act in 1991, we have tried to think multimodally, and today our modal and intermo- dal systems face the challenge of climate change. Europe is following a much different comodality approach that uses different modes on their own and in combination with the aim of obtaining an optimal and sustainable utilization of resources. He commented that the United States needs to break out of its modal framework and develop transportation policy that is mode-neutral. evaluating tHe Potential of availaBle fundingârevenue oPtionS Craig Lentzsch discussed the findings of the report of the National Surface Transportation Infrastructure Financing Commission, which was released in February 2009. The commission was created by the Safe, Accountable, Flex- ible, Efficient Transportation Equity Act: A Legacy for Users to assess transportation investment needs and pro- vide Congress with findings and recommendations. As a commissioner for the study, Mr. Lentzsch summarized our current problems in a single word: revenue. Today high- way users pay only 60 percent of the cost of providing our highway infrastructure. Motorists pay 3 cents per vehicle mile traveled (VMT) in motor fuel taxes, and heavy vehi- cles pay proportionally less. Transit users pay anywhere from 20 to 70 percent of their costs. Regardless of mode of travel, Americans do not pay for their full transporta- tion costs. The current debate hinges on whether the user should pay or whether transportation is a public good. The commission adhered to six guiding principles in its approach to its work: ⢠Enhance mobility of all system users. ⢠Generate sufficient funding on a sustainable basis. ⢠Cause users to pay the full cost of system use to the greatest extent possible. ⢠Encourage efficient investment. ⢠Incorporate equity considerations. ⢠Support broader public policy goals (i.e., energy and environment). Revenue options were evaluated primarily on the basis of their ability to fill the federal funding gapâwhich is $54 billionâor facilitate state and local revenue options. One of the most obvious choices would be to raise the federal motor fuel tax. Increasing the motor fuel tax by 1 cent per gallon would raise $1.8 billion in annual rev- enue. On the pro side, an increase in the motor fuel tax could generate significant revenue in the short term, but on the con side it is only an indirect user fee, it is regres- sive, it raises equity issues, and it lacks sustainability. A VMT fee could also generate significant amounts of revenue. A per mile fee of 0.06 cents is equivalent to a 1-cent motor fuel tax. Many issues would need to be resolved. Would a federal VMT tax be charged for travel on all roads? Would there be different fee structures for different types of roads? Would trucks pay higher fees? If VMT fees were only charged on the Interstate high- way system, they would have to be four times higher to generate the same levels of revenue as charging for travel on all roads, and diversions to local routes could prove problematic. Vehicle registration fees have revenue potential, but the federal government should not obstruct the ability of states to use this revenue tool. This fee would be simple to impose. Together, vehicle registration fees of $5.00 for cars and $10.00 for trucks would generate as much revenue as a 1-cent gasoline tax. A national sales tax of 0.06 percent would be equivalent to a 1-cent gasoline tax. Developing a mechanism to levy a national tax together with state and local sales taxes would be complex, but it could be com- bined easily if there were a national value added tax. This would be a highly regressive approach and would support the notion that transportation is a public good, which is contrary to the commissionâs guiding principles. Tolling the Interstate system could generate signifi- cant revenue levels but introduces the complex question of how much money would be raised, where it would be spent, and what would happen if money generated in one location or state were spent elsewhere. These issues tend to dictate that the money raised would need to be spent on the Interstate system only and would divert traf- fic to local routes, which would not be desirable. A freight waybill tax could be used to replace the motor fuel tax for heavy-duty vehicles. A tax of 0.3 per- cent would generate revenue equivalent to a 1-cent gaso- line tax, but the tax would have no relation to use or weight of trucks or the fact that half of all goods shipped in the United States travel on company-owned trucks. The freight sector does not currently pay its fair share of transportation, since axle weight comparisons alone sug- gest that trucks generate 5 to 10 times the maintenance demand of passenger vehicles. Combinations of options can be used to mitigate the various issues that individual measures may trigger. According to Mr. Lentzsch, if an intelligent combina-
53emerging issues tion of revenue options is used, the result will be more sensible and sustainable. The commission recommended protecting the Highway Trust Fund. If a VMT tax is implemented nationwide, it would take a fee of 2 cents per mile to fund the current program. The United States will pay in the end, either by not having the infrastruc- ture it needs or by paying to maintain what it has and putting the needed improvements in place. Financing is not the solution, it just affects the timing of the solutions. Funding is the issue. cryStal Ball calculuS Anne Canby of the Surface Transportation Policy Project observed that the world is different today. Some envision a smaller federal role, and the conversation is focused on how much money needs to be raised rather than on how those resources should be allocated. There is a shift in the national interest with new priorities and new players at the table. The KerryâLieberman climate change discus- sion is a new paradigm throwing a wrench in the way the United States has traditionally approached transporta- tion funding and policy. The emerging idea is that there may be new ways to pay for transportation. There has never been a connection between what we pay and what its costs to provide transportation. The motor fuel tax depends more on use rather than costs. The user system is mixed and contrary to transportation goals. We have not agreed on what we need more money for and at what level of government it should be paid. Ms. Canby urged us to think more about manag- ing demand and to consider how to pay for operations and maintenance costs once the infrastructure is built. Sprawl is not sustainable. She questioned whether the federal-aid system is still relevant and said that there is a need to develop a new relationship with private rail and aviation suppliers and tap into the value that can be captured in other modes. But doing so will not tap into money at the federal level. This raises the following ques- tion: Why should the federal level be involved in paying for bad local decisions? Ms. Canby offered a number of interesting possibili- ties for guiding transportation finance and policy in the future: ⢠To the extent that there are user fees, the United States also needs a unified, broad-based trust fund, but perhaps it should be focused on issues such as new capac- ity or maintaining a state of good repair rather than on mode. ⢠The National Surface Transportation Policy and Revenue Study Commission suggested approaching transportation from the perspective of a utility. ⢠By commingling demand management and revenue generation, congestion pricing should play a role. ⢠The climate bill offers some interesting ideas, as do partnerships. queStionS and anSWerS Question: If it is clear that the federal government will not be able to supply the same level of funding for trans- portation as in the past, should the states fill the void? If so, the federal government should allow states to toll the Interstate. Answer: Voter understanding and support put state funding at risk. Question: Was the commission charged with solving everyoneâs problems? Did it consider reducing the fed- eral role in funding our transportation needs? Answer: The majority of the members of the com- mission support a narrower federal role in funding the nationâs transportation program, but this kind of recom- mendation was not within the commissionâs purview. The commissionâs role was to identify options that will allow us to generate revenue that will cover the cost of delivering the program the nation needs. Question: Maintaining the economic competitiveness of the United States is critical. If responsibility for transpor- tation funding were devolved to the states, how could we maintain competitiveness in the face of 50 independent policies? Answer: Tolling the Interstate is not a suitable fund- ing option for all of our transportation needs, but doing so is a viable and an appropriate way to maintain the Interstate system, which is integral to our economic competitiveness.