closing the gap: financing the region’s transportation needs nyu wagner - the rudin center -june...
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CLOSING THE GAP:Financing The Region’s Transportation Needs NYU Wagner - The Rudin Center -June 4, 2008
Martin Wachs, Ph.D., Director
Transportation, Space & Technology
Ideally, Financing Strategies Should be Central to Regional, State, and Federal Policy
• The way we price and charge for transportation affects demand and traffic flow (e.g. parking, tolls, taxes, fees)
• The most effective ways of managing transportation flows and environmental and energy impacts relate to pricing and charging
• Planning in general involves forecasting of demand as though flows are independent of prices and charges
• Debates about financing systems take place AFTER planning their characteristics instead of being integrated with capital planning; this leading to inadequate attention to both efficiency and equity
• The use of tolls on major roads is good policy and not merely a source of revenue
Political Reality Does Not Allow this Approach Right Now
• Motor fuel taxes are still largest source of revenue for transportation capital expenses and operations but declining each year as a proportion of the total
• Viability waning because– Opposition related to high price of fuel– Dramatic growth sought in fuel efficiency– Ultimate replacement of petroleum based fuels
for GHG policy reasons
• Inherent contradiction in the government’s reliance on motor fuel sales to finance highways in a greenhouse gas limited era
Elected Officials Responses
• Do not raise motor fuel taxes – in fact lower them!
• President Bush threatens to veto transportation bill if it raises gasoline tax by even one cent per gallon (2005)
• Secretary Peters authors “minority report” to Federal Commission (January 2008)
• Governor Schwarzenegger opposes state gasoline tax increase and favors long term bonded indebtedness – bonds approved by voters in 2007
• John McCain (April 2008) suggests suspending gasoline tax collections from Memorial Day to Labor Day; and Hillary Clinton (April 2008) joins in
• In NY City cordon tolling was defeated before it was developed in fine detail
Other Sources of Funding are Growing
• Local option transportation sales taxes – most dramatic of all alternatives, especially in CA
• Increased borrowing through bonds
• Increased use of tolls: but nationally only 6% of transportation revenue
• Congestion pricing and HOT lanes (SR95 and I-15) but only a few demonstration projects
• Public Private Partnerships: few cases; much talk
Local Option Sales Taxes
• Most popular and fastest growing
• Majority or supermajority (in CA) vote of public required
• Sunset date; reauthorization required
• Lists of projects or categories of spending
• Implementation by local governments
Percent Change in Self-Help Taxes Compared to Gas Tax
• 44 transportation finance ballot measures in U.S. in 2002; 47 in 2007 (steady pace every year)
• Most for a single county
• A few regional in nature; even fewer statewide
• 80% were sales taxes
• A few property taxes
• A few local gasoline taxes
• A few bond issues along with current taxes
Change Is Happening Quickly
• Move away from user fee philosophy
• Sales tax is broad based tax
• More regressive than alternatives
• Consistency with regional transportation plans
• Project delivery
• Local authority and responsibility
• Flexibility versus specificity
• Salience of issue of “trust”
Issues Raised by LOSTs
Growth In Borrowing For Transportation
• Like a home mortgage
• Particularly attractive in states with much “through traffic” where toll revenue is lucrative
• Must repay capital plus interest . . . roughly doubles the cost in dollars paid but they are “cheaper” dollars delivered earlier
• Access to capital markets
Potential For Borrowing Limited
• Projects having positive cash flow
• Challenges of public transit
• Costs of interest and risk
• Revenue is falling so dramatically from traditional method of taxing motor fuels . . . need for revenue has become more important in practical terms than efficiency goals of pricing
• Propulsion technology is reducing the long term viability of fuel taxes as a surrogate for tolls; alternative user fees needed if user fees are to be viable
Some Major Factors Have Changed
User-Fee Financing is Less Common but Promising
• Facility pricing in the USA vs. area pricing in Europe
• HOT lanes . . . SR 91, I-15 and growing
• Proving efficiency and effectiveness of electronic toll collection . . . also building public acceptance of tolls
• Prospects growing in many metro areas
HOT (High Occupancy / Toll) Lanes
• Concept: where excess HOV capacity exists, allow single occupancy drivers to pay tolls to use lanes– Tolls vary with demand to keep lanes free-flowing– Transit can also use
• Experience to date– I-15, SR-91, Houston, Denver, Minneapolis– All reduce delay, reduce uncertainty– Optional nature reduces political resistance –
viewed as providing additional travel choices
• Implementation challenges– Many HOV lanes at or near capacity– Little available ROW for constructing new lanes
• Implementation strategies– Up HOV limit from 2+ to 3+– Convert existing free lanes to priced lanes
Cordon Congestion Tolls• Concept: charge drivers a fee to enter congested area during peak hours
• Experience to date– London, Singapore, Stockholm– Uniformly effective. London example:
• 33% reduction in auto trips into zone• 15% VMT reduction within zone• 21% increase in travel speed within zone• 33% reduction in bus schedule delays• 19% reduction in GHGs• > €125M / year net revenues
• Implementation challenges– Not optional – increased equity concerns– Local retailer concerns– Many American Cities are polycentric – no obvious central charging zone
• Implementation strategies– Focus on a few very high traffic areas – Invest revenue in improved transit to reduce equity concerns
What Does the Future Hold?
• Few North American applications for area pricing like in London; but New York is one of them
• More applications to facilities
• Most applications will be on new capacity
• Specialized facilities: HOT lanes, bridges, bottlenecks, truck-only lanes
Equity is hotly debated
• Current system is regressive yet is assumed not to be in most debates
• Tolls are perceived to be inequitable yet prove not to be in many empirical analyses
• The demon you are familiar with is more tolerable than the unknown
• SR 91 survey results and operating experience shows that “Lexus Lane” fears were exaggerated
Experiments in Electronic Tolling
Already in Use for Truck Fees Throughout Europe; Trials in the USA
for Passenger Vehicles
• Atlanta
• Twin Cities
• State of Oregon
• Seattle
Political/Public Acceptance: The Privacy Issue
• Fear
– With all this on-board technology, is Big Brother watching?
• Fueled by press misrepresentations:
– LA Times quote: “tracking devices send a signal to a GPS satellite following the car”
Is It Possible to Envision Future Policy?
• Motor fuel tax losing its effectiveness after 90 years
• Local tax measures are interim measures and possibly longer term for public transit
• Political preference now for substitution of general taxes and borrowing
• New user fees, using distance charges and GPSS on new highway capacity & eventually to replace fuel tax
• User fees more technically feasible than at any other point in time and more equitable and efficient than general taxes; remains to be seen whether they will continue to be a dominant mode of transportation finance
Which Way Do We Go?
THANK YOU!
ITS TIME FOR YOUR QUESTIONS AND COMMENTS
BACKUP SLIDES
State Fuel Tax in 1957: 5.7
If adjusted for Inflation; End of 2007: 42.0
Actual Current Fuel Tax: 22.0
Difference 20.0
Motor Fuel Tax Lagging: State Fuel Tax Changes, 1957-2007
Average of Fifty States
Cents per gallon
Projections of Highway and Transit Account Balances Through 2012
Source: Report of the National Surface Transportation Policy and Revenue Study Commission – Transportation for Tomorrow, December 2007, Volume II, Chapter 5
2005 Revenue Used for Highways (by Collecting Agencies) in Millions and Percent
Source: Report of the National Surface Transportation Policy and Revenue Study Commission – Transportation for Tomorrow, December 2007, Volume II, Chapter 5
Highway Revenue by Level of Government
Source: Report of the National Surface Transportation Policy and Revenue Study Commission – Transportation for Tomorrow, December 2007, Volume II, Chapter 5
Taxes Supporting the Highway Trust Fund
Source: Report of the National Surface Transportation Policy and Revenue Study Commission – Transportation for Tomorrow, December 2007, Volume II, Chapter 5
Federal Gasoline Tax Rates
Source: Report of the National Surface Transportation Policy and Revenue Study Commission – Transportation for Tomorrow, December 2007, Volume II, Chapter 5
2005 Revenues Used for Transit (by Collecting Agencies) in Millions and Percent
Source: Report of the National Surface Transportation Policy and Revenue Study Commission – Transportation for Tomorrow, December 2007, Volume II, Chapter 5
Federal, State, Local Agency Transit Revenue, 1993-2005
Source: Report of the National Surface Transportation Policy and Revenue Study Commission – Transportation for Tomorrow, December 2007, Volume II, Chapter 5
Distribution of Transit Revenues, 1993-2005
Source: Report of the National Surface Transportation Policy and Revenue Study Commission – Transportation for Tomorrow, December 2007, Volume II, Chapter 5