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Suggested Citation:"6 Investment Funding Options." National Academies of Sciences, Engineering, and Medicine. 2019. Renewing the National Commitment to the Interstate Highway System: A Foundation for the Future. Washington, DC: The National Academies Press. doi: 10.17226/25334.
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Suggested Citation:"6 Investment Funding Options." National Academies of Sciences, Engineering, and Medicine. 2019. Renewing the National Commitment to the Interstate Highway System: A Foundation for the Future. Washington, DC: The National Academies Press. doi: 10.17226/25334.
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Suggested Citation:"6 Investment Funding Options." National Academies of Sciences, Engineering, and Medicine. 2019. Renewing the National Commitment to the Interstate Highway System: A Foundation for the Future. Washington, DC: The National Academies Press. doi: 10.17226/25334.
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Suggested Citation:"6 Investment Funding Options." National Academies of Sciences, Engineering, and Medicine. 2019. Renewing the National Commitment to the Interstate Highway System: A Foundation for the Future. Washington, DC: The National Academies Press. doi: 10.17226/25334.
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Suggested Citation:"6 Investment Funding Options." National Academies of Sciences, Engineering, and Medicine. 2019. Renewing the National Commitment to the Interstate Highway System: A Foundation for the Future. Washington, DC: The National Academies Press. doi: 10.17226/25334.
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Suggested Citation:"6 Investment Funding Options." National Academies of Sciences, Engineering, and Medicine. 2019. Renewing the National Commitment to the Interstate Highway System: A Foundation for the Future. Washington, DC: The National Academies Press. doi: 10.17226/25334.
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Suggested Citation:"6 Investment Funding Options." National Academies of Sciences, Engineering, and Medicine. 2019. Renewing the National Commitment to the Interstate Highway System: A Foundation for the Future. Washington, DC: The National Academies Press. doi: 10.17226/25334.
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Suggested Citation:"6 Investment Funding Options." National Academies of Sciences, Engineering, and Medicine. 2019. Renewing the National Commitment to the Interstate Highway System: A Foundation for the Future. Washington, DC: The National Academies Press. doi: 10.17226/25334.
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Suggested Citation:"6 Investment Funding Options." National Academies of Sciences, Engineering, and Medicine. 2019. Renewing the National Commitment to the Interstate Highway System: A Foundation for the Future. Washington, DC: The National Academies Press. doi: 10.17226/25334.
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Suggested Citation:"6 Investment Funding Options." National Academies of Sciences, Engineering, and Medicine. 2019. Renewing the National Commitment to the Interstate Highway System: A Foundation for the Future. Washington, DC: The National Academies Press. doi: 10.17226/25334.
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Suggested Citation:"6 Investment Funding Options." National Academies of Sciences, Engineering, and Medicine. 2019. Renewing the National Commitment to the Interstate Highway System: A Foundation for the Future. Washington, DC: The National Academies Press. doi: 10.17226/25334.
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Suggested Citation:"6 Investment Funding Options." National Academies of Sciences, Engineering, and Medicine. 2019. Renewing the National Commitment to the Interstate Highway System: A Foundation for the Future. Washington, DC: The National Academies Press. doi: 10.17226/25334.
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Suggested Citation:"6 Investment Funding Options." National Academies of Sciences, Engineering, and Medicine. 2019. Renewing the National Commitment to the Interstate Highway System: A Foundation for the Future. Washington, DC: The National Academies Press. doi: 10.17226/25334.
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Suggested Citation:"6 Investment Funding Options." National Academies of Sciences, Engineering, and Medicine. 2019. Renewing the National Commitment to the Interstate Highway System: A Foundation for the Future. Washington, DC: The National Academies Press. doi: 10.17226/25334.
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Suggested Citation:"6 Investment Funding Options." National Academies of Sciences, Engineering, and Medicine. 2019. Renewing the National Commitment to the Interstate Highway System: A Foundation for the Future. Washington, DC: The National Academies Press. doi: 10.17226/25334.
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Suggested Citation:"6 Investment Funding Options." National Academies of Sciences, Engineering, and Medicine. 2019. Renewing the National Commitment to the Interstate Highway System: A Foundation for the Future. Washington, DC: The National Academies Press. doi: 10.17226/25334.
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Suggested Citation:"6 Investment Funding Options." National Academies of Sciences, Engineering, and Medicine. 2019. Renewing the National Commitment to the Interstate Highway System: A Foundation for the Future. Washington, DC: The National Academies Press. doi: 10.17226/25334.
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Suggested Citation:"6 Investment Funding Options." National Academies of Sciences, Engineering, and Medicine. 2019. Renewing the National Commitment to the Interstate Highway System: A Foundation for the Future. Washington, DC: The National Academies Press. doi: 10.17226/25334.
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Suggested Citation:"6 Investment Funding Options." National Academies of Sciences, Engineering, and Medicine. 2019. Renewing the National Commitment to the Interstate Highway System: A Foundation for the Future. Washington, DC: The National Academies Press. doi: 10.17226/25334.
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Suggested Citation:"6 Investment Funding Options." National Academies of Sciences, Engineering, and Medicine. 2019. Renewing the National Commitment to the Interstate Highway System: A Foundation for the Future. Washington, DC: The National Academies Press. doi: 10.17226/25334.
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Suggested Citation:"6 Investment Funding Options." National Academies of Sciences, Engineering, and Medicine. 2019. Renewing the National Commitment to the Interstate Highway System: A Foundation for the Future. Washington, DC: The National Academies Press. doi: 10.17226/25334.
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Suggested Citation:"6 Investment Funding Options." National Academies of Sciences, Engineering, and Medicine. 2019. Renewing the National Commitment to the Interstate Highway System: A Foundation for the Future. Washington, DC: The National Academies Press. doi: 10.17226/25334.
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Suggested Citation:"6 Investment Funding Options." National Academies of Sciences, Engineering, and Medicine. 2019. Renewing the National Commitment to the Interstate Highway System: A Foundation for the Future. Washington, DC: The National Academies Press. doi: 10.17226/25334.
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Suggested Citation:"6 Investment Funding Options." National Academies of Sciences, Engineering, and Medicine. 2019. Renewing the National Commitment to the Interstate Highway System: A Foundation for the Future. Washington, DC: The National Academies Press. doi: 10.17226/25334.
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Suggested Citation:"6 Investment Funding Options." National Academies of Sciences, Engineering, and Medicine. 2019. Renewing the National Commitment to the Interstate Highway System: A Foundation for the Future. Washington, DC: The National Academies Press. doi: 10.17226/25334.
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Suggested Citation:"6 Investment Funding Options." National Academies of Sciences, Engineering, and Medicine. 2019. Renewing the National Commitment to the Interstate Highway System: A Foundation for the Future. Washington, DC: The National Academies Press. doi: 10.17226/25334.
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Suggested Citation:"6 Investment Funding Options." National Academies of Sciences, Engineering, and Medicine. 2019. Renewing the National Commitment to the Interstate Highway System: A Foundation for the Future. Washington, DC: The National Academies Press. doi: 10.17226/25334.
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Suggested Citation:"6 Investment Funding Options." National Academies of Sciences, Engineering, and Medicine. 2019. Renewing the National Commitment to the Interstate Highway System: A Foundation for the Future. Washington, DC: The National Academies Press. doi: 10.17226/25334.
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Suggested Citation:"6 Investment Funding Options." National Academies of Sciences, Engineering, and Medicine. 2019. Renewing the National Commitment to the Interstate Highway System: A Foundation for the Future. Washington, DC: The National Academies Press. doi: 10.17226/25334.
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Below is the uncorrected machine-read text of this chapter, intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text of each book. Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.

6 Investment Funding Options Chapter 5 provides estimates of the annual investment needed to renew and modernize the Interstate Highway System over the next 20 years under a nominal and two excursions of traffic growth rates. As discussed in that chapter, if investments are made in all improvements that are cost-beneficial, spending in the nominal case will be $57 billion annually, with higher and lower derivative cases of $45 billion and $70 billion, respectively, or in the range of 2 to 3 times current spending. The nominal figure assumes vehicle-miles traveled (VMT) will increase at approximately 1.5 percent per year. The lower figure assumes that VMT will grow at 0.75 percent per year, about the same pace as population growth. The higher figure assumes VMT will grow at 2 percent per year, which is more in line with historical growth. The present chapter considers how such spending levels might be accommodated.1 Funding for the federal-aid highway program has traditionally been based on a pay-as-you-go system,2 with revenues obtained from users be- ing dedicated to the federal Highway Trust Fund (HTF). Federal motor fuel taxes have traditionally accounted for most of the revenues to the HTF and have long been levied as a fixed amount per gallon—18.4 cents per gallon of gasoline and 24.4 cents per gallon of diesel fuel since last increased in 1 The chapter does not consider specific financing instruments, such as bonds, but rather the taxes and other user fees that can generate the underlying revenues needed to pay for highway investments. 2 The pay-as-you-go approach means that construction would proceed only at the same pace as revenues were received. 169

170 NATIONAL COMMITMENT TO THE INTERSTATE HIGHWAY SYSTEM 1993. However, HTF receipts have been stagnant, failing to keep pace with inflation and growth in motor vehicle travel in recent years (see Figure 6-1). Part of the reason for this circumstance is that the gasoline tax has not been increased in a quarter of a century—that is, since 1993. From the time the HTF was created in 1956 until 1993, Congress increased the fuel tax eight times, or about once every 4 to 5 years over a 37-year period, to offset the effects of inflation and support the demand for funds. Since 1993, however, the fuel tax rate has not changed, even as the price of motor fuel has increased considerably. In 1993, the federal tax accounted for about 17 percent of the average retail price of a gallon of gasoline, whereas in 2017 it accounted for only 8 percent (Statista 2018). The purchasing power of the 18.4 cent federal gasoline tax has eroded by more than 35 percent since 2003 (see Figure 6-2). Another contributor to stagnation in HTF revenue is that the motor vehicle fleet has become increasingly more fuel-efficient, meaning that mo- torists are paying less in taxes per mile traveled even as they travel more and place more demands on the system. Since 1993, VMT fleetwide average fuel economy has increased by more than 7 percent (FHWA 1993, Table VM-1; 2017b, Table VM-1). To meet the growing demand for funding the federal-aid highway system’s maintenance and operations, Congress has increasingly turned to general revenues to supplement the user taxes and fees flowing into the HTF. By 2020, Congress will have transferred $143.6 billion from general revenues to the HTF (Kirk and Mallett 2018).3 3 There have been more recent transfers of fuel tax receipts originally intended for deficit reduction to the HTF such that all federal gasoline and diesel taxes are now available for highway and transit programs. FIGURE 6-1 HTF revenues from federal fuel taxes, 1993–2016. SOURCE: FHWA 2017a, Table FE-210. 0 5 10 15 20 25 30 35 40 R ev en u es f ro m f ed er al m o to r fu el t ax es ( B ill io n $ )

INVESTMENT FUNDING OPTIONS 171 Concerned about a pending shortfall in fuel tax revenues to the HTF, Congress established two separate commissions in 2005 to examine future surface transportation funding needs and recommend options for fund- ing the system in the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU). These commissions con- sidered many different means of addressing the funding gap but settled on a relatively small number as being suitable. The recommendations of these commissions, as well as other funding options, are discussed and evaluated in this chapter and in Appendix J. The chapter begins with some historical background and briefly reviews the recommendations of the two commissions. It then presents criteria developed by the present committee to evaluate funding options. Next, candidate funding options—those based on user fees as well as some ad- ditional options—are described. For each option, pros and cons and insti- tutional and policy considerations are presented. This review sheds light on opportunities and challenges presented by the different funding options. While these options could be applied individually or in combination—with the latter approach being more likely—each is considered separately to highlight its effects. The chapter closes with a summary of the more plau- sible choices for funding the renewal and modernization of the Interstate Highway System. 0 5 10 15 20 25 30 35 s n oilli b $ ,e u neve R FIGURE 6-2 Federal motor fuel tax revenues adjusted to 2003 dollars using the National Highway Construction Costs Index (NHCCI), 2003–2016.

172 NATIONAL COMMITMENT TO THE INTERSTATE HIGHWAY SYSTEM BACKGROUND Beginning in 1916, the federal government began sharing in the cost of investing in new highways with the states on a 50/50 basis. In 1956, as described above and in Chapter 2, Congress established the HTF to pay for the federal government’s new commitment to build an Interstate Highway System in partnership with the states. The federal share for new construc- tion was set at 90 percent federal, 10 percent state, and new projects were funded on a pay-as-you-go basis with funds derived from fuel and other user fees (excise taxes) paid into the HTF. (In a few states, existing tolled highway facilities were grandfathered into the system; otherwise, tolling was prohibited on general-purpose lanes receiving federal aid.) As the pri- mary source of revenue to the HTF, a new federal tax on motor fuels was set at 3 cents per gallon, an amount that was increased to 4 cents in 1959. At that time, the average price of gasoline at the pump was 31 cents per gallon (DOE 2016). The original vision of Congress was that the HTF would exist only tem- porarily until the Interstate program was completed. Over time, however, the HTF grew to cover a variety of programs beyond the Interstates, such that the Interstate Highway System currently receives only about 30 percent of total federal aid to states for highways.4 Today, the HTF funds highway capital and maintenance; federal en- vironmental, safety, and planning programs; and 2.85 cents of the federal gasoline tax is set aside for the Mass Transit Account (Kirk and Mallet 2018, 7–8). Thus, options to fund the Interstate Highway System depend on the manner in which Congress chooses to allocate funds for surface trans- portation programs overall. Over the course of previous authorizations for surface transportation spending, Congress has provided the states with more discretion over how federal aid is invested. The current authorization, for example, has no specific set-aside for the Interstates. Interstate spend- ing, does, however, retain its favorable federal funding ratio for individual projects (90 percent federal), compared with other categories of federal aid for highways (80 percent federal). 4 Federal highway legislation offers states considerable flexibility on how they spend federal aid (it is not allocated by highway class). In fiscal year 2014, state obligation of federal aid to the Interstate Highway System totaled about $11.2 billion (31 percent) of about $35.4 billion of federal highway aid provided to the states (see FHWA 2016a, Table FA-4C). Because about 15.5 percent of the federal gas tax is dedicated to transit, the share of total federal fuel taxes allocated to Interstates would be less than one-third of total federal aid for surface transporta- tion derived from fuel taxes.

INVESTMENT FUNDING OPTIONS 173 NATIONAL COMMISSION RECOMMENDATIONS At a Glance • Under the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users, Congress created two com- missions that made recommendations for funding federal-aid highways. • Both commissions focused their recommendations on fuel taxes and other user fees, including raising and adjusting of taxes for inflation, evaluation of mileage-based user fees, and updating of truck-related fuel and excise taxes. In 2005, Congress created the National Surface Transportation Policy and Revenue Study Commission (Policy Commission) within SAFETEA-LU with a mandate to consider funding options for all surface modes, but the Policy Commission also made recommendations specifically for funding federal-aid highways (National Surface Transportation Policy and Rev- enue Study Commission 2007). Congress also created the National Surface Transportation Infrastructure Financing Commission (Finance Commis- sion) in SAFETEA-LU, with a mandate to consider funding options for both highways and transit (National Surface Transportation Infrastructure Financing Commission 2009). The Finance Commission evaluated roughly 30 different federal tax and user fee options against 14 different criteria. A summary of the Finance Commission’s evaluation of revenue options appears in Appendix J, which includes an exhibit illustrating the revenue potential of the options considered. Both SAFETEA-LU commissions focused their recommendations on user fees—for obvious reasons. The fuel tax and tolling are examples of user fees, and seek to relate the use of highways to payment for that use. They have the advantages of being generally equitable as well as relating user demand to the generation of revenues needed to supply that demand, in this case with highway capacity. Additionally: • In recognition that federal fuels taxes, as applied, have been flat taxes whose value has been eroded by inflation, both commissions recommended adjusting the taxes in some fashion to account for inflation. • Because fuel taxes also become less reliable as a revenue source as motor vehicle fuel economy improves and as more vehicles use electricity or alternative fuels, both commissions recommended

174 NATIONAL COMMITMENT TO THE INTERSTATE HIGHWAY SYSTEM evaluating mileage-based user fees (MBUFs) to augment or replace fuel taxes. • Both commissions recommended updating truck-related fuel and excise taxes to ensure that trucks pay user fees commensurate with the disproportionate pavement and bridge damage they produce. • Recognizing that most Interstate congestion occurs on urban In- terstates, where options to physically expand capacity are limited, both commissions recommended allowing states and metropolitan areas to toll new Interstate lanes and charge congestion tolls on existing lanes. The tolls would thus raise funds to support the addition of new capacity and provide a pricing mechanism to manage highway demand and supply more efficiently. Concerned that tolls on Interstates could be set in a manner that discriminates against out-of-state traffic and through traffic, both commissions recommended federal policies and procedures to guard against such practices. EVALUATION CRITERIA The committee developed the following criteria against which the various funding options reviewed in this chapter can be evaluated: • Revenue potential—includes the ability to raise the large sums required for highway capital and maintenance and to sustain that revenue stream. • Administrative burden—refers to the expense of collecting taxes and enforcing compliance. • Efficiency impacts—considers whether the option encourages ef- ficient use of the Interstate System and generates revenues that can cover investments in the system. • Equity issues—cover a range of potential interest for policy mak- ers, including disproportionate fee expenses in comparison with income, geographic fairness in how funds are raised and allocated, and allocation of fees or taxes in proportion to costs imposed by any party. • Public acceptance potential—can be difficult to gauge, but may be indicated by such means as opinion polls and experience from prior applications.

INVESTMENT FUNDING OPTIONS 175 USER FEE–BASED OPTIONS At a Glance The committee evaluated the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users commissions’ recom- mendations for user fee–based solutions. The recommended options include • Increasing motor fuel taxes and other existing federal user fees; • Allowing states and metro areas to toll existing general-purpose Interstate highways; and • Instituting mileage-based user fees for Interstate use to replace other user fees. In the present committee’s view, the two commission reports made a strong case for user fee–based solutions to fund the federal-aid highway program. Such solutions could also raise the revenue needed to fund Interstate High- way System renewal and modernization. These options could take the form of (1) traditional user fees (motor fuel taxes and excise taxes that apply to trucks) or other types of fees that involve direct charging for system use, namely (2) tolls, and (3) MBUFs. Option 1: Increasing Motor Fuel Taxes and Other Existing Federal User Fees Motor Fuel Taxes Fuel taxation has proved invaluable over six decades by providing a source of revenue that is tied to use of the highway system, but its revenue-raising value has become imperiled by a reluctance over the past three decades, at least at the federal level, to raising taxes of any kind and especially fuel taxes. Nevertheless, one option for Congress to consider is a fuel tax increase sufficient to support the additional funding needed to renew and modernize the Interstate Highway System over the next two decades. If the goal is to raise approximately $20 billion in new revenue to aug- ment current annual spending on the Interstate System (increasing spend- ing from $25 billion to $45 billion per year), an approximation developed in Appendix J indicate that the federal gasoline tax would need to be increased from 18.4 cents per gallon to nearly 30 cents per gallon within

176 NATIONAL COMMITMENT TO THE INTERSTATE HIGHWAY SYSTEM 10 years, assuming that VMT grows 1.5 percent per year (making certain other assumptions regarding changes in fleetwide average fuel economy and form of energy used by vehicles in the fleet). Diesel fuel tax rates for trucks would have to increase from 24.3 cents per gallon to approximately 40 cents per gallon. These rate increases would be roughly 60 percent over existing rates. Pros: The fuel tax is a proven funding mechanism for generating revenue—particularly if adjusted periodically to account for inflation and improving fleetwide fuel economy. Motor fuels taxes continue to have majority public support as long as the funds derived are dedicated to the highway system (Agrawal and Nixon 2018).5 Moreover, the motor carrier industry voiced support in early 2018 for a 20-cent per gallon increase (a near doubling) in motor fuels taxes to help fund improvements to the highway system (ATA 2018), as did the U.S. Chamber of Commerce (2018). The American Automobile Association (AAA) has also endorsed a fuel tax increase to pay for highways (AAA Newsroom 2015). Since 1993, when federal motor fuel taxes were last increased, three-quarters of the states have raised their fuel taxes (see Figure 6-3) (ITEP 2017). Twenty-six states raised fuel taxes in just the 4 years before mid-2017 (Quinton 2017). A major advantage of the fuel tax is its very low administrative cost for collecting revenue—most estimates indicate collection costs are less than 1 percent of total revenues. Fuel taxes generally encourage efficient behavior insofar as the taxes paid are generally proportional to system use, but they may not be as efficient as a toll that relates the fee to a specific route used, or a congestion fee that relates the amount paid based on de- mand for a given facility at a specific time. Motor fuels taxes can be viewed as being equitable in the sense that users of gasoline- and diesel-fueled vehicles generally pay in proportion to their use of the overall highway system—although owners of vehicles that are more or less fuel-efficient will be impacted differentially. Equity with respect to income is discussed in the “con” section below. Cons: Congress has been reluctant to raise federal fuel taxes. More- over, federal fuel tax increases have in the past always been fixed dollar amounts (i.e., cents per gallon), which were eroded by inflation over time, although this shortcoming could be corrected if the rates were indexed, as recommended by the national commissions described above. (A percentage rate tied to the price of fuel is another option, but experience with this 5 The survey results show that a majority of Americans would support higher taxes for transportation—under certain conditions. For example, 78 percent of respondents supported a gas tax increase of 10 cents per gallon to improve road maintenance, whereas support dropped to just 36 percent if the revenues were to be used more generally to maintain and improve the transportation system.

INVESTMENT FUNDING OPTIONS 177 approach suggests it could lead to large swings in revenue because of retail fuel price volatility.) Fuel tax revenues, however, are becoming increasingly decoupled from highway use, both because of rising vehicle fuel economy in general and increased use of electric power and alternative “fuels” that are not now subject to federal taxes for transportation purposes. The an- nual Corporate Average Fuel Economy (CAFE) light duty fleet (automobiles and light trucks) for new vehicles is scheduled to double that of the existing fleet by 2025 (Kirk and Mallett 2018, 2).6 Whereas these erosion effects are gradual and small on an annual basis, they become quite substantial over the span of a decade or more. Despite these disadvantages, it merits recognition that the federal fuel tax still generates revenues of more than $30 billion annually. Even over a period of years of increasing vehicle fuel economy, the taxes would continue to provide a significant revenue stream 6 Future CAFE standards are currently being reconsidered. If standards for model years 2021 to 2026 were to be frozen at 2020 level as proposed, and consumers purchased less fuel efficient new vehicles, then fuel tax revenues would increase compared with the existing CAFE requirements. Without certainty about when or whether the proposed changes to CAFE standards would be modified, the analyses in this chapter are based on the current standards. FIGURE 6-3 States that have raised fuel taxes since 1993, when the federal fuel tax was last raised.

178 NATIONAL COMMITMENT TO THE INTERSTATE HIGHWAY SYSTEM (though diminishing over time) that could be dedicated to specific aspects of the highway federal-aid program. Regarding income, fuel taxes are regressive; lower income motorists pay a higher proportion of their income for fuel when they drive than do higher income motorists. Geographic equity depends on how the revenues are allocated relative to where they were generated, which is relevant to other funding options as well. Although gas taxes are perceived as fair because they relate consumption of highway use to taxes paid, unlike a toll that applies to a specific facility, the fuel tax generates revenues from motorists using the entire road system, and it can be difficult to assure that the revenues from the tax will be spent on the road systems where most of the fuel combustion took place. Truck Taxes Federal taxes other than fuel taxes whose revenues are dedicated to the HTF include the existing heavy vehicle use tax (HVUT), heavy truck and trailer sales taxes, and a tax on truck tires (see Appendix J). Collectively, these taxes contribute about 13 percent of total user-fee revenues to the HTF, most of which is derived from the sales tax on trucks and trailers. The HVUT and tire taxes increase with the rated weight of the vehicle, which is intended to correspond to the damage that heavy commercial trucks impose on pavements and bridges. For example, pavement damage associated with load rises exponentially (roughly at the third power); hence, the heaviest vehicles impose a vastly disproportionate share of wear and tear on high- way infrastructure compared with the lightest vehicles (Small and Winston 1989). In addition, there are inequities in the incidence of the levies within and across classes of vehicles. For example, the current federal rates (ana- lyzed by the Federal Highway Administration [FHWA]), result in pick-up trucks and vans significantly overpaying for their cost impact on federal-aid highways, as do heavy trucks weighing 50,000 lb. to 70,000 lb., with the heaviest trucks (more than 75,000 lb.) significantly underpaying for their share of the damage they cause.7 The share that commercial trucks would need to pay to equitably balance their impact on highways across truck classes has been estimated periodically by FHWA in cost allocation studies. Pros: Both national commissions noted that the HVUT has not been increased since 1983 (35 years at the time of the present report) and recom- mend that it be adjusted to account for inflation and increased heavy truck 7 FHWA periodically assesses the damage that classes of vehicles cause to highways through cost allocation studies. The last study was completed in 1997, but updated in 2000 with an addendum. See FHWA (2000, Table 7) for estimated payment based on damage caused by class and weight.

INVESTMENT FUNDING OPTIONS 179 travel. The tire tax is an amount that varies across weight categories that applies to specific vehicle weight ratings. Truck and trailer taxes are sales taxes that rise with the value of the goods sold. Collectively, these taxes have considerable revenue potential but most of the revenue would come from the HVUT and the truck/trailer tax. The Finance Commission esti- mates that a 50 percent increase in revenues from the HVUT would yield an additional $500 million to the HTF, a 10 percent increase in revenues from the truck/trailer tax could raise $330 million annually, and a 10 percent increase in revenues from the tire tax would raise only $4 million annually (see Appendix J). The Finance Commission noted compliance and enforce- ment costs of truck/trailer and tire sales taxes are minimal, but that there have been occasional evasion issues with the HVUT. Cons: The SAFETEA-LU Finance Commission indicated that there are disadvantages with raising additional highway revenues through the exist- ing tax structure. The HVUT is subject to evasion and this might increase if the fee were increased substantially. Truck and trailer sales taxes already account for 12 percent of the purchase price of new vehicles and trailers, thus an increase large enough to generate substantially more revenue would likely face significant opposition. Finally, truck tire taxes generate little revenue. Moreover, as indicated, some classes of trucks overpay for their share of pavement and bridge damage, whereas the heaviest vehicles underpay. Both efficiency and equity arguments can be made for correcting these rates of miss-payment. The tax on diesel fuel by itself does not fully capture the exponential effects of truck axle weights on infrastructure wear and tear, thus a tax that reflects pavement and bridge loadings can be argued as ap- propriate. The most recent Highway Cost Allocation study (FHWA 1997) conducted by FHWA was last revised in the year 2000 and warrants up- dating to reflect the character of the current fleet and the share of highway costs attributable to different classes of vehicles. Institutional and Policy Considerations Federal motor fuel and truck taxes currently dedicated to the HTF include important incentives to increase efficiency and, for the most part, have rela- tively minor enforcement and compliance costs. States also depend heavily on fuel taxes for their own highway investments. Fuel taxes, as fixed-rate excise taxes, have the disadvantage of not rising over time to account for inflation and increasing vehicle fuel economy, but this could be addressed through indexing. Their revenue potential will continue to erode over time as fuel economy improves, but they will still offer very significant revenue potential over the coming decade or so. Keeping the share of taxes that

180 NATIONAL COMMITMENT TO THE INTERSTATE HIGHWAY SYSTEM trucks pay consistent with the costs they impose on the system is important for both efficiency and equity reasons. Federal fuel taxes and truck taxes are integral parts of the existing federal–state partnership for funding highways that serve state and inter- state travel and increases in fuel and other related taxes would build on this long-standing relationship. The share of federal tax revenues from fuel and truck taxes allocated to Interstates by the states (31 percent) is consistent with the share of federal fuel tax revenues generated by Interstate travel (29 percent) (derived from FHWA [2015, Table VM-1; 2016a, Table FA-4C]). Raising fuel and truck taxes specifically for Interstate investment may prove challenging, as the public may not accept a tax policy that requires users of all roads and highways to pay disproportionately more for Interstate renewal and modernization relative to their use of the system. Adjusting upward those federal taxes that apply to the heaviest vehicles would continue to serve the policy goal of all users paying for the infra- structure damage they cause, and set a standard that states could follow with their own taxes and fees. An updated federal cost allocation study to determine appropriate cost responsibility for different classes of highway users is warranted in this regard. Option 2: Allowing States and Metro Areas to Toll Existing General-Purpose Interstate Highways Tolls on Interstate highways could provide the revenue stream needed to repay debt incurred to improve the Interstate Highway System. In southern Europe and Japan, tolling is prevalent for financing motorways (roughly equivalent in concept to U.S. interstates) (see Appendix J). MBUFs, a type of toll described in the next section, are increasingly common in northern Europe for heavy truck use of motorways and other major national high- ways (see Appendix J; Doll et al. 2017). However, in the United States, when federal funding for highways began in 1916, the authorizing legisla- tion included a blanket prohibition on tolling highways supported with federal funds. Subsequently, many exceptions were allowed, particularly in recent years as fuel tax revenues fell short of funding federal-aid program authorized by Congress (Kirk 2017, ii). As a system, the Interstates have the highest volumes of any class of U.S. highways, so if the practice of tolling to generate revenue would be effective anywhere, its promise would seem to be greatest on the Interstates, particularly high-volume congested urban segments. Indeed, 60 percent of current U.S. toll roads are on the Interstate System and the number of tolled miles is growing—750 miles of tolled highways, bridges, and tun- nels were converted or added to the Interstate Highway System between 1990 and 2015 (Kirk 2017, 10). Federal restrictions on tolling, however,

INVESTMENT FUNDING OPTIONS 181 are most applicable to Interstates (as explained below). If those restrictions were lifted, toll options for Interstate highways could be introduced gradu- ally in a variety of ways. Tolling is already permitted on any new segments of highway mileage added to the Interstates. If tolls could be collected to pay for the reconstruction of existing Interstate mileage, a system of tolled Interstates would emerge over time, the development of which could be ac- celerated through bonding tied to toll revenue streams and public–private partnerships (Poole 2013). The revenue potential from tolling is substantial. Poole (2013) esti- mates that, in aggregate, tolls somewhat below the average rate per mile charged on existing long-distance toll roads could pay for the roughly $1 trillion investment that would be needed to widen and reconstruct the In- terstates. (This $1 trillion estimate is generally consistent with the 20-year, $45 billion to $70 billion per year scenario to renew and modernize the Interstates described in Chapter 5.) Poole’s analysis indicates that toll rates for passenger cars and light trucks (in 2010 dollars) would be 3.5 cents per mile and 14 cents per mile for heavy trucks, compared with then existing average rates on long-distance toll roads of 4.9 cents per mile for passenger vehicles and 19.9 cents per mile for heavy trucks. Pros: Tolling targets specific consumers’ use of specific highways, tunnels, or bridges, thereby encouraging efficient use and allocation of such assets. It also allocates costs to the system’s beneficiaries. Although only a small share of highway facilities is tolled currently (0.6 percent of federal aid-eligible highway mileage (centerline) [Kirk 2017, 9]), 7 percent of the Interstate System mileage is tolled, including very prominent sections such as major bridges and tunnels on the East and West coasts and turnpikes in the Northeast and Midwest. In addition, the existing roughly 40 High-Occupancy Toll (HOT) and Express lanes,8 most of which are on Interstates, are expanding awareness of toll options and acceptance of tolls on Interstates. The majority of public opinion polls show majority support for tolls compared with other alternatives such as higher fuel taxes, and support grows with familiarity with toll roads, when funds collected are dedicated to specific highway improvements, and as an alternative to other forms of taxes to support highways (Zmud 2008; see also Zmud and Arce 2006). Interstate tolls would likely cause some shifts in motorist behavior, including the time, routes, and modes selected for travel, and could cause a small amount of truck freight to shift to rail at a net social benefit (Austin 2015). Cons: Most evidence indicates that tolls are more complicated and costly to collect than fuel taxes. Even for the toll roads that have exten- sive electronic tolling, Kirk (2017, Table 1, 7) reports that collection costs 8 See https://managedlanes.files.wordpress.com/2017/07/0-ml-database-green-yellow-blue- key-march-2017.pdf.

182 NATIONAL COMMITMENT TO THE INTERSTATE HIGHWAY SYSTEM consume 8 to 13 percent of gross revenue. However, Fleming and colleagues (2012) argue that toll roads using all-electronic tolling (and only allow pay- ment by credit card) have reduced collection costs to 5 percent. Fleming and colleagues (2012) also argue that there are hidden costs in the collection of fuel taxes (e.g., the administrative costs of collecting and reporting these taxes incurred by distributors and retailers). When accounted for, accord- ing to these authors the difference between the collection cost of motor fuels taxes and all-electronic tolling is small. However, there would be a substantial cost to add toll-collection technology to existing Interstates.9 Although the estimates show that tolling rates required to fund renewal and modernization of the Interstates, on average, would be below rates on existing toll roads, rates would need to be higher on urban routes sustain- ing high improvement costs. Moreover, rates on some rural routes with light traffic would be too high to be practicable (Poole 2013, Appendix A). He estimates that six rural states would likely be unable to fully fund their Interstates with reasonable tolls and would require additional federal aid or state funds. The motor carrier industry has expressed strong opposition to toll roads, although its argument about the high administrative cost of toll collection is not indicative of the efficiencies achieved by advances in toll collection technology (Short 2017). Independent owner-operators would be particularly affected unless shippers agreed to begin reimbursing them for tolls (Wood 2011). Tolling might, however, encourage heavy trucks to divert to untolled routes that could be less safe and are less prepared to accommodate large loads. Studies of route diversions and their consequences are fairly scarce. Studies based on measured route diversions on the Ohio Turnpike following toll rate increases indicate that the results of increased crashes could outweigh the economic benefits of tolling (see Swan and Belzer 2010, 2012). Diversions of passenger traffic to other highways in order to avoid Interstate tolls could also adversely affect safety and congestion. Tolling also raises equity concerns—as tolls fall proportionately more heavily on those with low incomes—although these concerns can be allevi- ated in part by using some of the toll revenue to support alternatives such as public transportation, as is done in most express lane high-occupancy vehicle toll (HOT) arrangements. Opposition to tolling includes the issue of 9 As cited in Poole (2013, 14), Fleming, an electronic tolling expert, estimates a cost of converting existing rural Interstate miles to an all-electronic tolling system at $250,000 per mile and urban Interstates at $2.5 million per mile. For the 48,473-mile Interstate System, this indicates a conversion cost on the order of about $7.3 billion for rural Interstates and $48.2 billion for urban Interstates, for a total of roughly $55.5 billion. Whereas these are large figures, so is the amount of travel. For urban Interstates, the 525 billion miles of annual VMT would pay for the conversion cost at less than 1 cent per vehicle mile over 10 years.

INVESTMENT FUNDING OPTIONS 183 “double-taxation,” whereby users pay both a fuel tax and a toll, although the rationale for using only one type of funding mechanism to achieve a given revenue stream is not obvious and there are means by which this specific concern could be addressed. For example, fuel taxes paid on toll facilities could be rebated to consumers, although this would increase the administrative cost of tolling. In addition, a more widespread system of tolls, even if limited to urban Interstates, could raise the need for federal regulation to keep states from setting tolls that unduly impede flows of interstate commerce. (Existing regulations restrict toll revenues collected from users of federal-aid highways from being diverted by states or local governments for non-transportation purposes, but do not address the toll rates themselves.) Finally, whereas Congress has expanded the ability to toll federal-aid highways over the years, it has been reluctant to ease restrictions on tolling of existing Interstate lane-miles.10 Institutional and Policy Considerations Financing Interstate reconstruction and widening through tolls could en- courage efficient use of the Interstates and better align projected increases in travel demand with system capacity. It would, however, entail major changes in institutional relationships between the federal government and the states and would impose various other policy trade-offs. If states used toll financing to generate only the revenues needed to pay for improvements to specific segments financed by bonds, funds would not be generated to help pay for improvements to other segments of the Interstates that may be unable to generate substantial revenue through tolls. (In typical bonding arrangements, the funds generated by the facility are restricted to collection and enforcement costs, maintenance, profit, and repaying bond holders.) Therefore, funds would not necessarily be generated to help pay for other segments of the Interstates that may be unable to generate substantial revenue through tolls. A general, wide-spread system of tolls across the Interstates, however, could include a requirement for high-traffic segments to share revenues with low-traffic segments, much as fuel tax revenues are used to subsidize low-volume routes. Both national commissions cited above encouraged wider use of elec- tronic tolling, but indicated that the potential problem of instituting regu- lations to prevent charging excessive rates to trucks and through-traffic 10 The FAST Act allows all new Interstate highways, tunnels, and bridges to be tolled; exist- ing bridges and tunnels to be tolled if reconstructed or replaced; and added lane capacity in existing corridors can be tolled; but the existing toll-free lane-miles must be maintained toll free. Revenues from tolls are distributed among the owners and operators of the toll facilities.

184 NATIONAL COMMITMENT TO THE INTERSTATE HIGHWAY SYSTEM would need to be mitigated.11 To date Congress has not granted authority to the U.S. Department of Transportation or any other federal agency to regulate toll rates. (Disputed cases are typically adjudicated in the courts.12) FHWA does have authority to oversee the use of toll revenues and can veto proposals that divert funds to purposes not consistent with federal law. Federal regulation of toll rate setting would entail a change in legislation to avoid interfering in state and local tolling arrangements, but Congress most likely would have Constitutional authority to do so under the Commerce Clause (Kirk 2017, 14–17). Although tolling would have the benefit of shifting a modest amount of truck freight to rail, another major policy consideration of tolling involves diversion by truck drivers to untolled roads that can be both substantially less safe than the Interstates and not constructed to withstand the wear and tear of heavy trucks. States and toll authorities can attempt to account for such problems in the setting of toll rates. Avoiding this problem sug- gests that tolling of the Interstates might need to be accompanied by some form of charging or taxing heavy trucks’ use of all highways, as is done in Germany and Switzerland (see Appendix J). This option, however, would greatly expand the complexity of policy issues already encountered. Addendum: A Hybrid Approach Possible hybrid approaches to tolling merit consideration. Already men- tioned is the option of allowing states to toll existing Interstate segments in need of rebuilding and/or widening. Over time, this could lead to sub- stantially more segments of the Interstates that are funded directly by us- ers. Any proposed upgrades of National Highway System (NHS) routes to Interstates could be required to fund this cost through tolls (this option is already available). Variable tolls, or congestion pricing, could also help urban areas manage demand on existing urban Interstates, which may be particularly important in areas with extremely high expansion costs. To ad- dress equity concerns, some of the revenues earned could be used to provide transit alternatives, as is done in many HOT-lane and express lane projects. Allowing states or metropolitan areas to toll existing lanes after rebuilding would require a change in law by Congress. 11 The Policy Commission recommends that Congress set strict criteria for the imposition of tolls on Interstate highways, including a requirement that “rates be set so as to avoid discrimination against Interstate travelers or any other group of users” (National Surface Transportation Policy and Revenue Study Commission 2007, 47). 12 See Kirk (2017, 14–17) for a review of court interpretations of the Commerce Clause.

INVESTMENT FUNDING OPTIONS 185 Option 3: Instituting Mileage-Based User Fees for Interstate Use to Replace Other User Fees The SAFETEA-LU national commission reports both recommend evaluat- ing and moving toward VMT fees to ultimately replace motor fuels taxes. Since those reports were published in 2007 and 2009, the term “VMT fee” has been replaced by “mileage-based user fees” (MBUFs) in the United States. MBUFs are revenue-raising mechanisms similar to tolls, but with- out tollbooths. The concept is to charge users for the distance they travel, which could range from basing the charge on odometer readings to using more complex approaches (some using GPS) that would allow charges to be based on type of road, fuel economy, and road wear (with vehicle weight being a proxy) among a range of other possibilities. An important distinc- tion between a typical toll (which is often distance-based) and MBUF is that tolls are typically used to repay bond holders. Revenues from MBUFs could do the same, but could also generate funds for the HTF that would not be tied to a specific facility but could be dedicated to the Interstates. MBUFs are a relatively new approach for most of the motoring public, but experimentation with, and evaluation of, the concept has been under way for more than a decade in the United States (two decades in the case of Oregon) and several new pilot projects are under way at the time of this writing (see Appendix J). In addition, variations on MBUFs are in place in some European countries (for heavy trucks) and have been used for many years in New Zealand (for trucks and cars using diesel fuel) (see Appendix J).13 A federally supported, state-applied MBUF could one day replace mo- tor fuels taxes and the revenues currently used to support the Interstates as well as the rest of the federal-aid highways. In the FAST Act of 2016, Congress approved a $92 million pilot program in which many states are participating, as described in Appendix J. Interstate Mileage-Based User Fees A two-pronged proposal has been put forward by Schenendorf and Bell (2011) for an Interstate-specific MBUF that could be implemented for passenger vehicles with existing technology would require trucks to use 13 According to Kirk and Levinson (2016), Switzerland, Germany, and Austria, among a few other European Union member countries, impose per mile fees on heavy trucks cross- ing national borders that can be as high as $1.33/mile for a heavy truck in Switzerland and range from 20 to 82 cents per mile in Germany and Austria. Switzerland’s fees are designed to encourage modal shift of through traffic to rail. In lieu of a diesel tax to support road use, New Zealand has charged a MBUF for diesel fueled trucks and cars since 1977. The fee is designed to reflect the marginal cost of road wear. Truck fees can be as high as 40 cents per mile and fees for passenger vehicles are about 7 cents per mile, roughly equivalent to what a gasoline-powered vehicle would pay (see Kirk and Levinson 2016, 10–17).

186 NATIONAL COMMITMENT TO THE INTERSTATE HIGHWAY SYSTEM similar systems on all roads. In this proposal, passenger and freight users of the Interstates would be required to have an electronic transponder, such as used by E-ZPass, TxTag, Fastrack, and other vendors, to gain access. Users would then be charged a mileage fee upon exit. Interstate access and exit ramps would be retrofitted with gantries such as those used by toll roads with electronic charging. In order to avoid the problem of trucks diverting to non-Interstate highways free of tolls but not suitable for such traffic, trucks would be charged for use of all roads. This can be done by deploying GPS-based systems or other similar systems such as those large carriers already use in their fleets to monitor driver and truck performance. This proposal for trucks would be similar to the systems used in Austria, Germany, and Switzerland that charge trucks for use of motorways and other main highways (see Appendix J). Funds collected from Interstate users would be provided to the states for Interstate maintenance and upgrades and allocated in a fashion similar to the present federal-aid program. Fees collected from motor carriers op- erating off the Interstates would be used to fund freight intermodal projects that relieve bottlenecks anywhere on the federal-aid system. Under this plan Congress would establish an independent body to annually set fees that would vary with geography. Other than these revisions, the authors state that their proposal would not change the rest of the federal-aid program or the existing user fees imposed. If this option were pursued, the amount of additional revenue that would needed to renew and modernize the Interstates would be higher than the levels estimated in Chapter 5 because of the cost of converting the Interstates to all-electronic tolling (AET) system. This one-time investment, as estimated above, would be about $55 billion. For simplicity, it is assumed this investment would have a replacement cycle of 10 years and would be amortized over that period; hence adding $5.5 billion per year to the cost of converting the Interstate System to AET. The cost of administration is esti- mated to be 10 percent of revenues earned (or another $2–$3 billion annu- ally). As a result of converting to AET and administrative costs, about $28 billion in revenue would be required to raise $20 billion in new revenue for Interstate renewal and modernization. As described in Appendix J, the ap- proximate per mile fee required for passenger cars to produce such revenues would need to be 2.7 cents per mile. Truck rates would be approximately 3.3 cents per mile. By way of comparison, these rates would be lower than the per-mile equivalent tolls currently charged on urban and rural Interstate toll roads, which average about 8 cents per mile for passenger cars and 30 cents per mile for trucks (see Appendix J). Pros: Directly charging for the use of the Interstates would enhance throughput efficiency and help manage demand by shifting some traffic to the off-peak or other modes. Shifting more freight from highways to rail

INVESTMENT FUNDING OPTIONS 187 could be socially beneficial (Austin 2015). Requiring users of the system to pay for road use would be equitable across highway users in terms of paying their fair share, but would be more burdensome to low income us- ers. The existing system of electronic toll collection is well established and accepted by most motorists, with a proven system of billing. Acceptance by interstate truck operators, however, is another matter. Such a system would not track passenger vehicle drivers’ entire trips, as would a full-scale MBUF, thereby mitigating privacy concerns, but would record entries-to and exits-from the Interstate Highway System. It could be implemented within a few years, far sooner than a general MBUF, al- beit with a significant investment (about $55 billion). As proposed by the authors of this concept, the revenues generated from the Interstate MBUF would be returned to the HTF and redistributed to states for Interstate improvements on a “pay-as-you-go” basis. Doing so would address the cross-subsidy that would be necessary to fund rural Interstate segments that could not be self-supporting through MBUFs. The proposed two-pronged approach would avoid the problem of trucks diverting from Interstates to other NHS routes or state roads to avoid paying a mileage fee, and it would create a self-sustaining fund for renewing and modernizing the Interstates. It would also create a specific fund for addressing intermodal freight bottlenecks that have proven partic- ularly difficult for Congress to address in recent reauthorizations of surface transportation legislation. The federal fuel taxes and other user fees would remain in place and would be used for non-Interstate federal-aid highways. This could potentially depoliticize rate setting. If a MBUF worked for the Interstates, it could be a model for a system of MBUFs that could, in time, replace, rather than supplement, motor fuel taxes. Cons: Whereas electronic billing is accepted by many highway users, a substantial proportion of toll-road users prefer to pay in cash and most U.S. highway users do not use AET charging toll roads on a regular basis. Thus, general familiarity with, and acceptance of, an all-electronic charging approach is not ensured. Previous surveys indicate relatively little public awareness or understanding of MBUFs and, to the extent it is understood, offer little support for MBUFs as a replacement for fuel taxes (Agrawal et al. 2016).14 Collection costs could consume a greater share of the revenue acquired than fuel taxes, although an AET system, if possible, would nar- row the difference considerably. (Estimates of the cost of collecting MBUFs are in the range of 5 to 13 percent compared with about 1 percent for the 14 Note that the surveys summarized in this report were conducted before the MBUF pilot programs funded through the FAST Act were initiated. One purpose of these pilot projects is to increase public awareness and understanding of the concept, as described in Appendix J.

188 NATIONAL COMMITMENT TO THE INTERSTATE HIGHWAY SYSTEM fuel tax [Kirk and Levinson 2016, 4; see also Appendix J].15) An AET ap- proach, however, may not be acceptable to the public. To include those without access to banks and credit cards would require an alternate means of paying, which would further increase cost. Although many trucks are already outfitted with technologies that would allow charging mileage fees while off the Interstates, a substantial proportion of heavy trucks (about 10 percent) (U.S. Special Delivery 2017) are operated by independent owner- operators who would undoubtedly resist the added cost, and potential scrutiny, of their operations—much as they have long opposed electronic log books. The motor carrier industry overall could be expected to strongly oppose an MBUF that charged trucks for highway use. As with tolling, shifting of passenger traffic to alternate highways to avoid the fee could adversely affect safety and congestion on those routes. Institutional and Policy Considerations The Schenendorf/Bell proposal retains much of the existing federal–state partnership, thus funding the Interstates on a pay-as-you-go basis through an MBUF would not entail substantial institutional change. The viability of some elements of the proposal, however, are questionable, including the public acceptability of an independent body to set rates. Given the great diversity within the country, designing a fee that would vary by geography and be adjusted annually and be perceived as fair and acceptable, while also generating sufficient revenue, would be a challenge for any organization. Thus, composition of the proposed independent rate-setting body and the appointment process could be highly charged politically. Moreover, Con- gress may be loath to defer to an independent authority to set rates affecting its constituents, and if Congress retained the right to review and veto the independent authority’s decisions on rates, as it does with the analogous Postal Regulatory Commission, the process could be almost as difficult as approving fuel tax increases. This problem could potentially be addressed by having Congress set the fee initially, based on estimated revenue needs, and then allowing the rate to be adjusted annually by some measure of inflation. Although the authors argue that their proposal would not affect the basic structure of the federal-aid highway program, it would require some changes. For example, a new means of allocating Interstate fees collected from users back to the states would be necessary, since the existing federal- aid program does not set aside funds for the Interstates nor allocate federal aid for the Interstates to the states on the basis of Interstate usage. 15 Germany’s cost of collection is about 13 percent and New Zealand’s is about 2.5 percent, but New Zealand’s system has higher evasion rates than Germany’s and New Zealand does not have to address substantial cross-border truck traffic.

INVESTMENT FUNDING OPTIONS 189 The proposal to add a mileage fee to trucks for use of all roads could have ramifications for the share of freight moving on highways compared with rail. For a 500-mile trip today, the typical truck pays about $19 in fed- eral diesel taxes. The cost of such trips that would be needed to provide an additional $20 billion annually beyond today’s revenues (for the purpose of renewing and modernizing the Interstates) would be about $55. As a result of such additional costs, some freight would shift to rail and some would continue to use highways, but at a higher cost to motor carriers, shippers and, eventually, consumers.16 OTHER FUNDING OPTIONS At a Glance In addition to the Safe, Accountable, Flexible, Efficient Transporta- tion Equity Act: A Legacy for Users commissions’ recommendations, Congress might consider policies for providing the funds needed to renew and modernize the Interstates that do not involve new or re- vised user fees, including • Dedicating more of existing federal aid to the Interstates; • Continuing the status quo (with General Fund transfers); and • Applying a carbon tax or cap-and-trade fees in part to highway funding (as a potential future strategy). While an investment of $20 billion or more per year to renew and modern- ize the Interstates would seem implausible in the absence of new user-based revenues sources, as discussed above, Congress could consider options for funding at least part of this investment. For example, Congress might consider policies that do not involve new or revised user fees. This section reviews three such options: (1) giving states less discretion over their federal aid and allocating a larger share of existing federal aid to the Interstates; (2) continuing to rely on General Fund transfers to make up for shortfalls in revenues from motor fuels and other taxes dedicated to the HTF; and (3) over the longer term, using revenues from carbon taxes and cap-and- trade programs as supplemental funding sources were Congress to imple- ment such taxes and programs. 16 The shift to rail would not necessarily be large. A recent working paper from the Con- gressional Budget Office estimates that truck rates of greater magnitudes than those described herein would cause about 3 percent of truck freight to shift to rail (see Austin 2015).

190 NATIONAL COMMITMENT TO THE INTERSTATE HIGHWAY SYSTEM Option 4: Dedicating More of Existing Federal Aid to the Interstates If it proves impracticable to raise user fees significantly to sustain the Interstates, one option would be to shift federal-aid funding eligibility in favor of greater investment in the Interstate System at the expense of other programs. In recent federal surface transportation authorizations, Congress has moved away from funding specific highway systems to more of a “block grant” approach, in which states have a great deal of discretion in the types of projects to which funds are allocated, as long as they are devoted to eligible facilities. In the FAST Act, Congress authorized $43 billion in fiscal year 2016 to contract authority for highways, an amount that increases to about $47 billion in fiscal year 2020. Of this amount, about $35 billion annually, on average, under the FAST Act is made available to the states for a broad set of improvements to eligible highways, including the Interstates, NHS, and for transit improvements (FHWA n.d.). As noted previously, in 2014, the most recent year for which data are available, states obligated about $11.2 billion of their federal-aid funds to the Interstate Highway System out of $35.4 billion (31 percent). Note that many states spend considerably more on their Interstates than the federal aid they allocate. Total state outlays on Interstates in 2014 were $29 billion (including capi- tal investments and maintenance costs), making the state share 62 percent compared with a federal funding share of 38 percent (FHWA 2016b). This reflects the focus on maintenance as opposed to new construction for which the federal/state share is 90/10. Pros: The Interstates represent the most important highways for mov- ing interstate commerce and arguably should, in general, be of greatest priority among various highway classes. Supporting an Interstate System that connects the entire country with high-quality controlled-access Inter- state highways was the original purpose in creating the HTF and federal-aid program. Relying on existing user fees would avoid the cost and disruption of converting the Interstates to toll roads or for collecting MBUFs. Cons: The main disadvantage of the reallocation of resources ap- proach is that, depending on the rate of VMT growth and the investment required to renew and modernize the Interstates, it could consume half (in the $45 billion annual Interstate re-investment case) to more than the entire amount of current federal highway aid to states (in the case of the $70 billion case) to meet the future funding needs of the Interstates. If so, this would require states to spend more of their state-generated revenues on the rest of the federal-aid highways, including routes that are primar- ily interstate in function. Moreover, because the transportation system is a network, it can be difficult to separate national from local interests. For example, many routes on the NHS serve as essential feeders onto the Interstates and, to the extent that transit funding moves local traffic off of

INVESTMENT FUNDING OPTIONS 191 the Interstates and other NHS routes during peak periods, it frees up these highways for through traffic. Institutional and Policy Considerations Because of the likely magnitude of funds needed for renewing and modern- izing the Interstate Highway System, reallocating more federal aid for this specific purpose would not be sufficient overall if the required Interstate investment significantly exceeded $40 billion per year. Although the ex- isting federal funds could be sufficient for the Interstates, the rest of the federal-aid highways, many routes of which serve as important connectors to the Interstates, would have to be funded by states alone—which could have broad implications for the future of the federal-aid highways and the connectivity it provides. Option 5: Continue Status Quo (with General Fund Transfers) As indicated in the introduction to this chapter, in recent reauthorizations of surface transportation legislation, Congress has opted to increase trans- fers from the General Fund rather than increase motor fuels taxes or other user-type fees. In the deficit budget context of recent years, this implies that the supplemental funding is acquired through Treasury borrowing. Pros: The advantages of relying on borrowing are that it maintains the status quo, avoids the problems associated with raising user fees, and, at least in the recent past, has made substantial funding available for the federal-aid highways. Furthermore, Congress has long used the General Fund for other transportation purposes, such as public transportation and bicycle lanes. Cons: Transfers from the General Fund, made possible by borrowing, is a hidden tax on the economy and ultimately on the general public. Gov- ernment borrowing during periods of economic growth drives up interest rates and potentially crowds out access to capital from its most critical potential uses. Borrowing to pay for highway infrastructure and repaying through general taxes also undermines opportunities to enhance efficiency. Users perceive that use of highways is underpriced relative to the benefits they receive and therefore are encouraged to overconsume highway travel. Moreover, the trend is unsustainable. The federal government in 2018 en- acted tax cuts that will increase the aggregate deficit, potentially by as much as $1 trillion, and thereby further increase pressure to reduce reliance on the General Fund to provide funds for the rest of the discretionary budget (CBO 2018). In addition, as more General Fund revenue is allocated to the HTF, it raises equity concerns. Some large urban states contribute sub- stantially more to the General Fund than they receive back in total federal

192 NATIONAL COMMITMENT TO THE INTERSTATE HIGHWAY SYSTEM spending at the state level. As the General Fund contribution to the HTF grows, the “donor” states to the federal treasury may be expected to exert pressure for HTF allocations to match individual states’ contributions to the General Fund. Institutional and Policy Considerations A combined system of partial reliance on user fees and increased transfers from the General Fund would continue to sustain the federal–state partner- ship on highways, since, other than the transfers, the rest of the institutional relationship remains intact. Asking for an additional $20 billion or more per year for an Interstate rebuilding program without expecting highway users to pay for it directly, however, may well be unacceptable to the pub- lic. Moreover, it could further sever the tradition of funding the federal-aid highway program through user fees, which has already become tenuous because of the increasing scale of General Fund transfers to the HTF in recent years. Option 6: Applying Carbon Tax or Cap-and-Trade Fees in Part to Highway Funding (as a Potential Future Strategy) Many national governments and states are considering either carbon taxes or cap-and-trade programs as they grapple with controlling carbon emis- sions from transportation (see Appendix J). The implementation of these strategies differ: their principal effect of taxing or pricing carbon emissions would be to discourage use of fossil fuels, which, depending on size of the tax or price, could have a profound effect on transportation because of its heavy reliance on petroleum-based fuels. In the near term, pricing or taxing carbon would surely reduce demand on Interstate highways and shift more traffic to other modes. Over the longer term, requiring transportation to internalize the cost of carbon emissions would facilitate shifts to alterna- tive fuels and electrification of the vehicle fleet and possibly re-balance the shares of freight moved by highway, rail, and water. During the transition to alternative fuels and modes, both carbon taxes and cap-and-trade revenues would generate substantial new revenues as many highway users would have little choice but to pay higher fees or taxes until alternatives could be found. It would be speculative at this point in time to estimate potential revenue sources from taxing or pricing carbon or how such revenues might be used. California’s cap-and-trade program provides some insight about the latter. California currently dedicates some of the revenues earned from its cap-and-trade program to transportation, but not to highway facilities. A case could be made, however, for dedicating some future carbon tax or

INVESTMENT FUNDING OPTIONS 193 cap-and-trade revenues to the Interstates to facilitate adoption of zero- or low-carbon emission electric-drive technologies, including hydrogen fuel cells. For example, such revenues could be used to subsidize the cost of recharging and refueling stations (as is the case in California [Green 2018]), the lack of which is an impediment to more wide-spread adoption of zero- or low-emission vehicles in intercity transportation. It is not possible to forecast what national or state policies might be adopted in the future regarding controlling transportation carbon emissions, but as some states follow California’s lead with cap-and-trade programs, creative options that are not apparent or politically acceptable currently may emerge and be suit- able for renewing the Interstate system. SUMMARY Key points regarding application of the funding options detailed in this chapter are summarized below. Combining funding options. Fuel taxes today generate 87 percent of the revenues for the Highway Trust Fund, but are a declining revenue source as internal combustion vehicles become more fuel-efficient and will decline precipitously as electric vehicles become commonplace. There are no easily implemented choices for funding Interstate renewal and modernization, but combining options, phased in and out over time, is a promising approach. As the two national commissions established by Congress concluded one decade ago, few options can generate sufficient funds to pay for rebuild- ing and expanding the Interstate System while meeting other appropriate criteria; rather, all options have advantages and disadvantages. Given the magnitude of the funds needed for the Interstates and the importance of the system to the overall economy of the nation, a promising option is to combine elements of some of the options described herein to maximize the advantages and minimize the disadvantages of each. Relying on user fees. Highway programs have long been funded by user fees that have both efficiency and equity merits. Only a limited number of revenue sources can generate the $35 billion or more in federal aid now devoted annually to the overall federal-aid highways. A combination of in- creasing motor fuel taxes and highway user fees, allowing states and metro- politan areas to impose tolls on selected segments of existing Interstates, and instituting Interstate-specific user fees could raise substantial funds for Interstate renewal and modernization and help state and local jurisdictions manage highway demand. Increasing user fees. Increasing motor fuel taxes and other user fees would have advantages, especially for the near term. Fuel taxes have long been the principal source of federal highway funding and have been an ef- fective, efficient, and equitable form of user-fee funding for decades. These

194 NATIONAL COMMITMENT TO THE INTERSTATE HIGHWAY SYSTEM fees, however, are far past due for an increase to account for inflation, ris- ing fuel economy, and increased use of highways. Congress could address the disadvantages of the current flat taxes (e.g., gasoline and diesel taxes) by indexing them to inflation and increases in fuel economy and phase in tax increases over time as an Interstate renewal and modernization effort expanded. Given the nature of the federal-aid program as it has evolved over the decades and the diminishing use of fuel with an electric-drive fleet, dedicating any resources derived from any increased fuel taxes to the Inter- states may have to be a part of a strategy for increasing Interstate funding in the near term. Phasing in higher taxes and increasing fees paid by heavy trucks. The Interstates benefit everyone directly or indirectly and were originally funded to reflect this relationship, and increasing fuel taxes represents a reasonable near-term option until other revenue sources can be developed. If motor fuel taxes are increased, it would be appropriate to consider phasing in the higher taxes and increasing the Heavy Vehicle Use Tax and other fees paid by heavy trucks at the same time so as to ensure that all users pay a share that fully reflects the costs they impose on the system. A new federal cost- allocation study is warranted to address this approach. Allowing states to impose tolls on Interstate segments. States would benefit from having the option to impose tolls, with the receipts being used to rebuild and improve existing high-cost Interstate segments and manage demand on routes too costly to expand. Tolling has a long history in the United States, and about 7 percent of the Interstate System is already tolled. Tolling to finance freeways is common in southern Europe and Japan, and the Interstate System is a prime target for greater reliance on tolls, in part because of its high share of total highway travel. Tolls supplemented with additional fees for congestion, as used in many HOT lane and express lane projects in urban areas, would provide a means of managing demand and encouraging local traffic to remain on local routes, although expanded use of tolling for the Interstates would likely require some form of federal over- sight to avoid discriminatory charges to out-of-state users. Current federal restrictions on tolling of existing Interstate mileage are a major impediment to expanded reliance on tolls and congestion fees for the Interstate High- way System. As described earlier, average toll rates needed to rebuild and widen the Interstates would be similar to the tolls charged on existing toll roads. A potential disadvantage of tolling the Interstates is the diversion of truck traffic to highways that are less safe and not designed to handle heavy volumes of truck traffic. Thus, tolling of the Interstates might need to be accompanied by some general mileage-based fee or other form of broad user fee for trucks that would discourage route diversion. Implementing an Interstate user fee. Highway programs have long been funded by user fees that have both efficiency and equity merits. A

INVESTMENT FUNDING OPTIONS 195 mileage-based user fee for the Interstates would enhance efficiency and could replace motor fuel taxes. Revenues gained would be returned to the states for Interstate renewal and modernization on a pay-as-you-go17 basis. A promising proposal for an Interstate mileage-based user fee includes a requirement that trucks pay a mileage-based fee for use of all roads to avoid the problem of traffic diversion and to generate revenues to address major bottlenecks on all road systems affecting truck travel. Although the added cost of administration and to provide gantries for electronic fee charging to the Interstates is not trivial, this cost could be recovered in about 10 years and paid for by charging all vehicles 1 cent per mile. Furthermore, the per- mile rates necessary for passenger cars and trucks to raise an additional $20 billion annually to renew and modernize the Interstate System are within the range of equivalent per-mile tolls currently charged on Interstate toll roads. Increasing the share of the federal-aid system allocated to renewing and modernizing the Interstates. Reallocation of existing federal aid for Interstate renewal and modernization would avoid having to raise taxes or impose new fees, but from half to more than all of existing federal aid may be required for Interstate renewal and modernization, thereby shifting the burden to states for the rest of the federal-aid highways. The current federal-aid highway program, which allows states considerable discretion in how federal aid is invested, results in about 30 percent of available federal aid being spent on the Interstate System—roughly $11–$12 billion annually. Given the importance of the system for interstate travel and commerce, the federal government could require greater emphasis on Interstate rebuilding, maintenance, and expansion. Doing so would avoid the problem of raising motor fuel taxes and the cost and disruption of modifying the Interstates so as to rely on tolls or mileage-based user fees. The disadvantage of this approach is two-fold. First, the annual cost of renewing and modernizing the Interstates could require a minimum of half and a maximum of more than the entire existing federal-aid highway funding. Second, shifting such shares of existing federal aid to the Interstates would burden states with applying more state funds to sustain the rest of the federal-aid highways. Using General Fund revenues. Continuing to pay for a portion of federal highway aid through Treasury borrowing is a hidden tax on the economy and the public that could diminish future economic growth. Because of reluctance to raise federal motor fuel taxes and other fees for more than 25 years, Congress has met the demands for federal highway aid by increasingly transferring money from the General Fund to the HTF. In light of the recently reduced revenues to the federal treasury due to passage of a substantial cut in federal corporate, income, and other taxes, 17 The pay-as-you-go approach means that revenues are apportioned to the states only as fast as they come in.

196 NATIONAL COMMITMENT TO THE INTERSTATE HIGHWAY SYSTEM increasingly difficult choices are now confronted, especially concerning how to pay for the discretionary parts of the federal budget. A sound argument can be made that using General Fund revenues is an appropriate way for Congress to pay for routes in rural states that are essential to the overall transportation network and carry mostly through-state travel. A weaker argument can be made for using those revenues to pay for highways when user fees would be more efficient, and demand is adequate to provide the needed funds. Increased borrowing to pay for highways with the General Fund also risks crowding out access to capital in the rest of the economy and thereby diminishing future economic growth. Using revenues from pricing or taxing carbon emissions. Imposition of a carbon tax or pricing carbon emissions through a carbon cap-and-trade program could generate substantial new revenues for transportation, many of which would come from highway users because of the mode’s heavy reliance on fossil fuels. The most immediate effects of taxing or pricing carbon emissions would be to reduce Interstate traffic and shift some freight to less carbon-intensive modes. In the future, and as more states follow California’s lead in implementing cap-and-trade programs, a case could be made for tapping some of the revenues for highways, in general, and for the Interstate System, in particular. Investing in facilities along the Interstate to encourage electrification of intercity travel, for example, could reduce carbon emissions from Interstate users. REFERENCES Abbreviations AAA American Automobile Association ATA American Trucking Associations CBO Congressional Budget Office DOE U.S. Department of Energy FHWA Federal Highway Administration ITEP Institute on Taxation and Economic Policy TRB Transportation Research Board AAA Newsroom. 2015. Posts Tagged “Gas Tax.” https://newsroom.aaa.com/tag/gas-tax. Agrawal, A., and H. Nixon. 2018. What Do Americans Think about Federal Tax Options to Support Public Transit, Highways, and Local Streets and Roads? Results from Year Nine of a National Survey. Project 18-28. Mineta Transportation Institute, San José, Calif. https://transweb.sjsu.edu/sites/default/files/1828_Transportation-Taxes-Survey- Year-Nine_0.pdf. Agrawal, A. W., H. Nixon, and A. M. Hooper. 2016. Public Perception of Mileage-Based User Fees. NCHRP Synthesis 487. Transportation Research Board, Washington, D.C. ATA. 2018. America’s Truckers Challenge Policymakers to Support Bold Infrastructure Plan ATA Pledges Major Contribution via New Build America Fund. http://www.trucking. org/article/America%E2%80%99s-Truckers-Challenge-Policymakers-to-Support-Bold- Infrastructure-Plan.

INVESTMENT FUNDING OPTIONS 197 Austin, D. 2015. Pricing Freight Transport to Account for External Costs. Working Paper 2015-03. Congressional Budget Office, Washington, D.C. CBO. 2018. Budget and Economic Outlook: 2018 to 2028. https://www.cbo.gov/system/ files/115th-congress-2017-2018/reports/53651-outlook.pdf. DOE. 2016. Fact #915: March 7, 2016 Average Historical Annual Gasoline Pump Price, 1929–2015. https://www.energy.gov/eere/vehicles/fact-915-march-7-2016-average- historical-annual-gasoline-pump-price-1929-2015. Doll, C., L. Mejia-Dorantes, J. M. Vassallo, and K. Wachter. 2017. Economic Impact of Introducing Tolls for Heavy-Goods Vehicles: A Comparison of Spain and Germany. Transportation Research Record: Journal of the Transportation Research Board, Vol. 2609, pp. 36–45. https://doi.org/10.3141/2609-05. FHWA. 1993. Highway Statistics 1993: Vehicle-Miles of Travel, by Highway Category, Vehicle Type, and Related Data. Table VM-1. https://www.fhwa.dot.gov/ohim/hs93/Sec5.pdf. FHWA. 1997. 1997 Federal Highway Cost Allocation Study: Final Report. https://www.fhwa. dot.gov/policy/hcas/final/toc.cfm. FHWA. 2000. Addendum to the 1997 Federal Highway Cost Allocation Study Final Report. https://www.fhwa.dot.gov/policy/hcas/addendum.cfm. FHWA. 2015. Highway Statistics 2014: Annual Vehicle Distance Traveled in Miles and Re- lated Data—2014 by Highway Category and Vehicle Type. Table VM-1. https://www. fhwa.dot.gov/policyinformation/statistics/2014/vm1.cfm. FHWA. 2016a. Highway Statistics 2014: Obligation of Federal Funds by Functional Class Fiscal Year Ending September 30, 2014. Table FA-4C. https://www.fhwa.dot.gov/policy- information/statistics/2014/fa4c.cfm. FHWA. 2016b. Highway Statistics 2014: State Highway Agency Capital Outlay and Main- tenance—2014 Federal-Aid Highways—Total for All Areas. Table SF-12B. https://www. fhwa.dot.gov/policyinformation/statistics/2014/sf12b.cfm. FHWA. 2017a. Highway Statistics 2016: Status of the Federal Highway Trust Fund: Fiscal Years 1957–2016. Table FE-210. https://www.fhwa.dot.gov/policyinformation/ statistics/2016/pdf/fe210.pdf. FHWA. 2017b. Highway Statistics 2016: Annual Vehicle Distance Traveled in Miles and Re- lated Data—2016 by Highway Category and Vehicle Type. Table VM-1. https://www. fhwa.dot.gov/policyinformation/statistics/2016/vm1.cfm. FHWA. n.d. Surface Transportation Block Grant Program (STBG). https://www.fhwa.dot. gov/specialfunding/stp. Fleming, D. S., T. L. McDaniel, R. L. Grijalva, and L. A. Sánchez-Ruiz. 2012. Dispelling the Myths: Toll and Tax Collection Costs in the 21st Century. Policy Study 409. Reason Foundation, Los Angeles, Calif. https://reason.org/wp-content/uploads/files/dispelling_ toll_and_gas_tax_collection_myths.pdf. Green, M. 2018. California Aims to Get 5 Million Zero-Emission Cars on the Road. The Hill, Jan. 26. https://thehill.com/policy/energy-environment/370971-california-governor- announces-multibillion-dollar-investment-to. ITEP. 2017. How Long Has It Been Since Your State Raised Its Gas Tax?. https://itep.org/ how-long-has-it-been-since-your-state-raised-its-gas-tax-3. Kirk, R. S. 2017. Tolling U.S. Highways and Bridges. R44910. Congressional Research Service, Washington, D.C. https://www.ibtta.org/sites/default/files/documents/2017/ CRS%20Interstate%20tolls_2017-08-04.pdf. Kirk, R. S., and M. Levinson, 2016. Mileage-Based Road User Charges. R44540. Congres- sional Research Service, Washington, D.C. https://fas.org/sgp/crs/misc/R44540.pdf. Kirk, R. S., and W. J. Mallett. 2018. Funding and Financing Highways and Public Transpor- tation. R44674. Congressional Research Service, Washington, D.C. https://fas.org/sgp/ crs/misc/R44674.pdf.

198 NATIONAL COMMITMENT TO THE INTERSTATE HIGHWAY SYSTEM National Surface Transportation Infrastructure Financing Commission. 2009. Paying Our Way: A New Framework for Transportation Finance. http://www.fltod.com/research/ transportation/paying_our_way.pdf. National Surface Transportation Policy and Revenue Study Commission. 2007. Report of the National Surface Transportation Policy and Revenue Study Commission: Transportation for Tomorrow. National Surface Transportation Policy and Revenue Study Commission, Washington, D.C. Poole, Jr., R. W. 2013. Interstate 2.0: Modernizing the Interstate Highway System via Toll Finance. Reason Foundation, September 12. http://reason.org/news/show/ modernizing-the-interstate-highway. Quinton, S. 2017. Reluctant States Raise Gas Taxes to Repair Roads. Pew Charitable Trusts, July 26. http://www.pewtrusts.org/en/research-and-analysis/blogs/stateline/2017/07/26/ reluctant-states-raise-gas-taxes-to-repair-roads. Schenendorf, J., and E. Bell. 2011. Modernizing U.S. Surface Transportation System: Inaction Must Not Be an Option. In BNA Daily Report for Executives. 141 DER B-1. Bureau of National Affairs, Washington, D.C. https://www.cov.com/~/media/files/corporate/pub- lications/2011/07/modernizing-us-surface-transportation-system---inaction-must-not-be- an-option.pdf. Short, J. 2017. A Framework for Infrastructure Funding. American Transportation Research Institute, Atlanta, Ga. Small, K. A., and C. Winston. 1989. Road Work: A New Highway Pricing and Investment Policy. The Brookings Institution, Washington, D.C. Statista. 2018. Retail Price of Regular Gasoline in the United States from 1990 to 2017 (in U.S. dollars per gallon). https://www.statista.com/statistics/204740/ retail-price-of-gasoline-in-the-united-states-since-1990. Swan, P., and M. Belzer. 2010. Empirical Estimates of Toll Road Traffic Diversion and Implica- tions for Highway Infrastructure Privatization. Public Works Management and Policy, Vol. 14, No. 4, pp. 351–373. Swan, P., and M. Belzer. 2012. Tolling and Economic Efficiency: Do the Pecuniary Benefits Exceed the Safety Costs? Public Works Management and Policy, Vol. 18, No. 2, pp. 167–184. TRB. 2011. Special Report 303: Equity of Evolving Transportation Finance Mechanisms. National Research Council, Washington, D.C. U.S. Chamber of Commerce. 2018. Modernizing America’s Infrastructure Requires Ad- justing the Federal Motor Vehicle User Fee. https://www.uschamber.com/issue-brief/ modernizing-america-s-infrastructure-requires-adjusting-the-federal-motor-vehicle-user. U.S. Special Delivery. 2017. How Many Trucking Companies in the USA? https://www.us- special.com/how-many-trucking-companies-in-the-usa. Wood, H. 2011. Truck Tolling: Understanding Industry Tradeoffs When Using or Avoiding Toll Facilities. National Cooperative Freight Research Program, Web-Only Document 3. National Academies of Sciences, Engineering, and Medicine, Washington, D.C. http:// www.trb.org/Publications/Blurbs/166434.aspx. Zmud, J. 2008. The Public Supports Pricing if...A Synthesis of Public Opinion Studies on Tolling and Road Pricing. Tollways, Winter, pp. 29–39. Zmud, J., and C. Arce. 2006. Compilation of Public Opinion on Tolls and Road Pricing: A Synthesis of Highway Practice. NCHRP Synthesis 377. Transportation Research Board of the National Academies, Washington, D.C. http://onlinepubs.trb.org/onlinepubs/nchrp/ nchrp_syn_377prepublication.pdf.

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TRB Special Report 329: Renewing the National Commitment to the Interstate Highway System: A Foundation for the Future explores pending and future federal investment and policy decisions concerning the federal Interstate Highway System. Congress asked the committee to make recommendations on the “features, standards, capacity needs, application of technologies, and intergovernmental roles to upgrade the Interstate System” and to advise on any changes in law and resources required to further the recommended actions. The report of the study committee suggests a path forward to meet the growing and shifting demands of the 21st century.

The prospect of an aging and worn Interstate System that operates unreliably is concerning in the face of a vehicle fleet that continues to transform as the 21st century progresses and the vulnerabilities due to climate change place new demands on the country’s transportation infrastructure. Recent combined state and federal capital spending on the Interstates has been about $20–$25 billion per year. The estimates in this study suggest this level of spending is too low and that $45–$70 billion annually over the next 20 years will be needed to undertake the long-deferred rebuilding of pavements and bridges and to accommodate and manage growing user demand. This estimated investment is incomplete because it omits the spending that will be required to meet other challenges such as boosting the system’s resilience and expanding its geographic coverage.

The committee recommends that Congress legislate an Interstate Highway System Renewal and Modernization Program (RAMP). This program should focus on reconstructing deteriorated pavements, including their foundations, and bridge infrastructure; adding physical capacity and operations and demand management capabilities where needed; and increasing the system’s resilience. The report explores ways to pay for this program, including lifting the ban on tolling of existing general-purpose Interstate highways and increasing the federal fuel tax to a level commensurate with the federal share of the required RAMP investment.

View the videos, recorded webcast, graphics, summary booklet, press release, and highlights page at interstate.trb.org.

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