Potholes or Tolls? Perspectives on Transportation Finance Joseph L. Schofer Professor of Civil & Environmental Engineering February, 2015
Sad State of U.S. Infrastructure 2 Joseph Schofer ‐ Northwestern University
I ‐ 5 Bridge, Skagat River, Washington Every failure is not an example… 3 Joseph Schofer ‐ Northwestern University
Transit “Backlog” U.S., poor to marginal condition: $307 billion Chicago, $20 billion Classification issues 4 Joseph Schofer ‐ Northwestern University
2013 Status of the Nation's Highways, Bridges, and Transit: Conditions & Performance Illinois All Bridges NHS Bridges Count 26,621 4,754 SD 2,275 (8.5%) 298 (6.3%) FO 1,971 (7.4%) 672 (14.1%) Both 4,246 (15.9%) 970 (20.4%) http://www.fhwa.dot.gov/bridge/nbi.cfm 5 Joseph Schofer ‐ Northwestern University http://:fhwa.dot.gov/policy/2013cpr/overviews.htm#3h
Posted Bridges Bad When It’s Your Bridge 6 Joseph Schofer ‐ Northwestern University
What’s Important Environment Outputs Outcomes Transportation Capacity, Jobs, Inputs System Performance, Investment, Flows, crashes Competitiveness 7 Joseph Schofer ‐ Northwestern University
2014 US Soybean Exports 44.5x10 6 metric tons ($15.5B) 27% PNW by rail Demands on Bridges Pavements 59% to Locks & dams Gulf/Texas Ports & harbors (Panama Canal) Railroads 51% rail 49% Barge to Texas to Gulf Panama 8 Canal http://nass.usda.gov/Charts_and_Maps/Crops_County/pdf/SB ‐ PR13 ‐ RGBChor.pdf
Problem: Not Enough Money “Roads to Ruin: Towns Rip Up the Pavement Asphalt Is Replaced By Cheaper Gravel; 'Back to Stone Age'” WSJ July 17, 2010 9 Joseph Schofer ‐ Northwestern University
Highways: Fees, Fund Flows and Politics Trust Fund Users Taxpayers Transit (15.5% General MFT) Revenue Funds Bike/Ped Livability Beautification Budget balancing Political Decision Process Highway trust fund 1956 87% from motor fuels, rest from excise taxes; Waterways, Airport & Airways Trust Funds, States, Highway too; fuel, fare tax supported Investments . 10 Joseph Schofer ‐ Northwestern University
MFT ‐ Illinois IL MFT last increased 1990 (CPI 2014 +81%) US MFT last increased 1993 (CPI 2014 64%) 11 Joseph Schofer ‐ Northwestern University
12 Joseph Schofer ‐ Northwestern University
Who pays Subsidizing the HTF for this? Logic of MFT: user pays 13 Joseph Schofer ‐ Northwestern University
What’s Behind This Shortfall? http://www.ssti.us/about ‐ ssti/ 14 Joseph Schofer ‐ Northwestern University
Trends in U.S. Passenger Car Fuel Efficiency 40.0 35.0 30.0 25.0 Miles per Gallon 20.0 15.0 10.0 5.0 0.0 1980 1985 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 (R) (R) 2011 2012 Average light duty fuel efficiency Average new passenger car fuel efficiency Café standard passenger car fuel efficiency 15 http://www.rita.dot.gov/bts/sites/rita.dot.gov.bts/files/publications/national_transportation_statistics/html/table_04_23.html
16 http://www.eia.gov/dnav/pet/pet_cons_refmg_c_nus_EPM0_mgalpd_m.htm
Cost Inflation: Another Reality CPI: Construction Cost Index $1.00 in 1990 (24 2.50 years) = 55¢ in ‘14 2.032.062.13 1.911.911.95 2.00 1.80 $1.00 in 1993 (21 1.72 1.61 years) = 61¢ in ‘14 1.52 1.281.331.361.40 1.50 1.001.031.051.081.111.141.171.201.221.19 RSMEANS 1.00 $1.00 in 1990 = 47¢ in ‘13 0.50 $1.00 in 1993 = 51¢ in ‘13 0.00 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 17 http://www.rsmeansonline.com/references/unit/refpdf/hci.pdf Joseph Schofer ‐ Northwestern University
Who is spending the money? What are their priorities? Balancing potholes and intermodal terminals Beyond Traffic ‐ USDOT 18 Joseph Schofer ‐ Northwestern University
US Highway Fund Sources and Expenditures 2010 $210 b collected; $205 b spent all levels 19 Joseph Schofer ‐ Northwestern University
Wait! Maybe the problem is that we’re not spending the money well! • Wrong projects, bad projects – Name your own! • Inefficient project delivery • Poor quality control – Fix it again • Deferred maintenance – Effects on cost, performance • Failure to protect public infrastructure • Graft, corruption • Diverting money – Bus, bike ped, environment… Joseph Schofer ‐ Northwestern University 20
OK, Raise the Darn Gas Tax! • Why do it? – Users pay • Equitable? • Why not? – Easy to collect – Public resistance – Market signal • But it was free before • Index MFT tax – Grover Norquist pledge– no new taxes… ever • But liquid fuel tax may – We don’t trust you with have limited future… our money • Who will be first to take the plunge? – Who can make the case and how? 21 Americans for Tax Reform Joseph Schofer ‐ Northwestern University
State Changes in MFT Rate (Gasoline) 18 Some states have jumped ahead • Closer to the problem, easier to make the case? 16 • Is this about devolution? Getting Feds out of • 14 the business 12 Number of States 10 8 6 4 2 0 0 ‐ 5 6 ‐ 10 11 ‐ 15 16 ‐ 20 21 ‐ 25 26 ‐ 30 31 ‐ 35 36 ‐ 40 41 ‐ 45 Years Since MFT Tax Increase http://www.fhwa.dot.gov/policyinformation/motorfuel/sep14/mmfr10.cfm 22 Joseph Schofer ‐ Northwestern University
Backing Off Devolution …Senate Environment and Public Works Committee Chairman James Inhofe (R ‐ Okla.) slammed the proposal to eliminate the gas tax, which is known as “devolution,” on Wednesday. “Interstate commerce doesn’t stop at state boundaries,” he said. “No state is an island.” Inhofe said he used to be a “father of devolution” earlier in his career in Congress, “until we realized it didn’t work.“ “One of the two things that really does work in government is this system,” he said in reference to the Highway Trust Fund and defense funding. “This is coming from a conservative.” The Hill 2/25/15 23 Joseph Schofer ‐ Northwestern University
No New Taxes: Use the Money Better Iowans are sharply divided on the Yet almost as soon as this small glimmer of gas tax increase, according to the relief has appeared, the Washington most recent Des Moines Register political class moved to signal its openness Iowa Poll. A survey conducted to raising the gas tax. Instead of looking earlier this month found 50 percent for new tax revenue, lawmakers should of respondents opposed raising the seek to spend the billions in gas tax gas tax by about 10 cents, while 48 revenues they already collect more percent were in favor and 2 percent efficiently. For example, around a third of were not sure. (Des Moines Register, 2 ‐ 24 ‐ 15) gas tax revenues collected are spent on non ‐ highway projects. ( Americans for Prosperity http://reformamerica2015.com/) The Legislature is moving toward a “If the politicians did not steal from the 10 ‐ cent increase in the state fuel tax, but foes of a tax increase — any fuel tax funded highway trust fund to pay for light rail, bike lanes, and the like, the tax increase — say state and local problem would not be as bad.” (Reader governments should instead look to comment, WSJ 2/24/15) other sources of revenue or reallocate existing revenue. (Editorial, Des Moines Register, 2 ‐ 17 ‐ 15) 24 Joseph Schofer ‐ Northwestern University
“Gas tax hike takes effect Sunday” of our state," Branstad said. "This is William Petroski, bpetrosk@dmreg.com 4:42 p.m. CST February 25, 2015 It's official: Iowa's gas tax is going up. important for economic development. This Gov. Terry Branstad signed a bill on is important for our farmers to be able to Wednesday raising the state's gasoline and get their crops to market. I know that many diesel fuel taxes by 10 cents a gallon. people have been waiting a long time for The bill passed the Iowa House and Senate this." on Tuesday after legislative leaders from The last gas tax increase was in 1989. both parties worked with the Republican Branstad pointed out the fuel tax increase governor to reach a consensus on a funding has had broad support from groups like the package to provide an additional $215 Iowa Farm Bureau, Chambers of Commerce million annually for city, county and state and other business groups, and Iowa's roads. trucking industry. He noted the bill also Branstad received Senate File 257 in his Iowa imposes restrictions on future debt and Capitol office on Wednesday morning and bonding for local government road immediately signed it. projects. That's important, he said, "This is a great example, on a difficult and explaining that he believes in a "pay ‐ as ‐ controversial issue, of the kind of bipartisan you ‐ go" method of financing road cooperation that really makes Iowa stand out construction with user fees that benefit as a state where we work together and we people who pay the extra fuel tax. 25 get things done on behalf of the citizens Joseph Schofer ‐ Northwestern University
Transponders make tolls painless… if you have a credit card … and can pay the bills And tolling decisions are steps away from political process 26 http://www.fhwa.dot.gov/policyinformation/tollpage/documents/chart.pdf Joseph Schofer ‐ Northwestern University
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