# Presentation: 917182

## Surface Transportation Funding Issues and Options

***presented by*****Gary Maring****Cambridge Systematics, Inc.**
**National Surface Transportation****Infrastructure Financing Commission**
**June 20, 2007**

**Surface Transportation Funding Issues and Options**

## Presentation Outline

**Overview of current funding all levels of government**
**Three discussion issues:**
**National Funding Gap**
**Short-Term Revenue/Financing Options (2007-2017) **
**Longer Term Transition Needed**

**Main Sources:**** **
**U.S. Chamber “Future Highway and Public Transport Finance Study” (2005)**
**TRB Policy Study “The Fuel Tax and Alternatives for Transportation Funding” (2006)**
**NCHRP “Future Finance Options for Highway and Transit” (2007)**
**                          **

## Celebrating the 50th Anniversary

***Celebrating the 50th Anniversary***

**June 29, 1956 President Eisenhower signed the Interstate Highway Act setting up ****Highway Trust Fund**** with dedicated fuel and heavy vehicle taxes; this has been the mainstay of the Federal Program **

## Federal HTF Current Revenue SourcesFuel and Vehicle Taxes

**Highway account**
**Fuel ****–**** 87 %**
**Gasoline**
**Diesel**
**Heavy vehicle fees ****– ****13%**
**Heavy Vehicle Use Tax (HVUT)**
**Sales tax on new trucks**
**Tire tax**
**Transit account**
**Fuel ****– ****100% **
**Supplemented by General Funds**

## States Also Rely on Fuel and Vehicle Taxes as Mainstay of their Highway ProgramsFiscal Years 1978-2005

**States Also Rely on ****Fuel**** and ****Vehicle**** Taxes as Mainstay of their Highway Programs****Fiscal Years 1978-2005**

**Source:  Highway Statistics, Table HF-10.**

**0**

**10**

**20**

**30**

**40**

**50**

**60**

**70**

**80**

**90**

**100**

**1978**

**1980**

**1982**

**1984**

**1986**

**1988**

**1990**

**1992**

**1994**

**1996**

**1998**

**2000**

**2002**

**2004**

**Year**

**Percent**

**MFT and Vehicle Taxes**

**General Fund**

**Special Taxes**

**Miscellaneous**

**Tolls**

**2005**

## Local Highway Funding Sources Dominated by General Sources and Property TaxesFiscal Years 1978-2003

**MFT and Vehicle Taxes**

**General Fund**

**Special Taxes**

**Miscellaneous**

**Tolls**

**Property Taxes**

**Source:  Highway Statistics, Table LGF-1.**

## Transit Revenue SourcesState/Local/Transit Agency Funding Sources 1993-2005

**Transit Revenue Sources****State/Local/Transit Agency Funding Sources 1993-2005**

**Source:  NTD Data.**

**0**

**5**

**10**

**15**

**20**

**25**

**30**

**35**

**40**

**45**

**1993**

**1995**

**1997**

**1999**

**2001**

**2003**

**Year**

**Percent**

**2005**

## Highway and Transit Revenue Sources Allocated by Level of GovernmentIn 2005 (Billions of Dollars)

|   | Highway and Transit Revenue |  |  |  |
| --- | --- | --- | --- | --- |
| Revenue Type | Federal | State | Local | Total |
| Highway | $33.1 | $66.1 | $38.5 | $137.7 |
| Transit | $6.9 | $8.2 | $24.3 | $39.4 |
| Total | $40.0 | $74.3 | $62.8 | $177 Billion |
| Percent | 23% | 42% | 35% | 100% |

## Issue #1National Funding Gap

**Issue #1****National Funding Gap**

**Year**

**Year of Expenditure Dollars (in Billions)**

**0**

**50**

**100**

**150**

**200**

**250**

**300**

**350**

**400**

**450**

**2007**

**2008**

**2009**

**2010**

**2011**

**2012**

**2013**

**2014**

**2015**

**2016**

**2017**

**Average Gap to Maintain (2010-2017) = $58 billion**

**2004 C&P Maintain Adj + O&M**

**2004 C&P Improve Adj + O&M**

**Revenues**

**Average Gap to Improve (2007-2017) = $119 billion**

## Estimated Highway and Transit Program Levels and HTF Account Balances Through 2015*

*******	****Based on 2008 Treasury revenue estimates; P****rojected spending for 2010-2015 based on current services baseline for discretionary / "other" (non-defense and non-security) outlays assumed to grow 1.15% annually after 2009 **

**Transit Program (HTF+GF)**

**Highway Account Balance**

**Transit Account Balance**

**Highway Program (HTF)**

**-30**

**-20**

**-10**

**0**

**10**

**20**

**30**

**40**

**50**

**2004**

**2005**

**2006**

**2007**

**2008**

**2009**

**2010**

**2011**

**2012**

**2013**

**2014**

**2015**

**Year**

**Dollars (in Billions)**

**-40**

## Issue #2Short-Term Funding Enhancements Needed

**Issue #2****Short-Term Funding Enhancements Needed**

_**Federal**_
**HTF revenue options**
**Other Federal revenue/investment options**
_**State/local**_
**Revenue options**
**Financing/leveraging options**

## Future Federal Revenue Options

**HTF revenue options**
**Fuel taxes**
**Increase fuel tax**
**Index fuel tax**
**Sales tax on fuel**
**Vehicle taxes**
**Index Heavy Vehicle Use Tax (HVUT)**
**Reinstitute Federal new passenger vehicle sales taxes**
**Other**
**Shift remaining exemptions to General Fund**
**Recapture interest to HTF**
**Other non-HTF Federal options**
**Tax credit bonds**
**Customs duties**
**Container fees**
**Intermodal investment tax credits**

**Source:****	****Chamber and NCHRP Studies.**

## Revenue Potential of Federal HTF Measures ($Billions)

| HTF Sources | AverageAnnual Revenue | CumulativeRevenue 2007-2017 |
| --- | --- | --- |
| Retroactive Index to 1993 (10 cents) | $25  | $202 |
| Index fuel taxforward only | $4 | $32 |
| Sales tax on fuel (3%) | $12 | $98 |
| Sales tax on new passenger vehicles (3%) | $17 | $140 |
| HVUT indexing | $3  | $21 |
| Exemptions | $1 | $12 |
| Interest | $0.5 | $5 |

## Potential of Other Federal Measures($Billions)

| Other Federal Sources | AverageAnnual Revenue | CumulativeRevenue 2007-2017 |
| --- | --- | --- |
| Tax Credit Bonds | $5  | $55 |
| 10% Customs Duties | $4 | $40 |
| Container Fees | $2 | $18 |
| Intermodal Investment Tax Credits | $1 | $13 |

## Candidate Revenue SourcesState/Local

| Specific Tool | Scope |  |  | Potential Yield | Locations Used  |
| --- | --- | --- | --- | --- | --- |
|  | Program | Project |  |  |  |
|  |  |  |  |  |  |
| Fuel Taxes |  |  |  |  |  |
| Motor fuel excise (per gallon) tax | X |   | H |  | All states, Federal |
| Indexing of the motor fuel tax  | X |   | H |  | FL, KY, ME, NE, NY, NC, PA, WV |
| Sales tax on motor fuel | X |   | H |  | CA, GA, HI, IL, IN, MI, NY |
| Other petroleum related taxes | X |   | H |  | NY, PA |
| Vehicle Fees |  |  |  |  |  |
| Registration or related fees | X |   | H |  | All states |
| Sales tax on vehicle sales | X |   | H |  | KS, NC, NE, MN, MO, OK, SD |
| Tolling, Pricing, and Other User Fees |  |  |  |  |  |
| Tolling new or existing roads and bridges |   | X | M |  | About 1⁄2 of States (e.g., TX, FL, VA) |
| HOT lanes, express toll lanes, truck toll lanes |   | X | M |  | CA, CO, GA, MN, TX |
| VMT fees | X |   | H |  | OR testing, 15 state pooled fund study |
| Transit fees (fares, park-and-ride fees, other) | X |   | H |  | All transit agencies |
| Freight/Container fees | X | X | M |  | CA |
| Local Option and Beneficiary charges |  |  |  |  |  |
| Beneficiary charges/value capture (special assessment, impact fees, and tax increment financing) |   | X | L |  | Multiple (e.g., CA, FL) |
| Permitting local option taxes for highway and transit improvements (e.g., sales tax) | X | X | M |  | 46 states have legislation |
| General Revenue Sources | X |  | H |  | Most states and localities |

**Source:  NCHRP Finance Study.**

## Revenue Potential of State/Local Measures ($Billions)

| Sources | Average Annual Revenue | Cumulative Revenue 2007-2017 |
| --- | --- | --- |
| Increase motor fuel taxes for inflation 
(5 cents) | $8  | $70  |
| Index state fuel taxes forward | $4 | $32 |
| Sales tax on motor fuel (3%) | $10 | $94 |
| Dedicate portion of state sales tax for transportation(1/2%) | $10 | $108 |
| Local option sales, value capture, misc.  | $5 | $96 |
| Additional tolling (double tolling share)  | $1 | $10 |

## Cumulative National Gap Closing PotentialAggressive Revenue Scenario (NCHRP)

**Cumulative National Gap Closing Potential****Aggressive Revenue Scenario ****(NCHRP)**

**0**

**200**

**400**

**600**

**800**

**1,000**

**1,200**

**1,400**

**HVUT****to 1997**

**HTF****Exemptions**

**HTF Interest**

**LDV Fed ****Sales Tax**

**Customs****@ 10%**

**TCB**

**ITCs**

**Container****Fees**

**Index****State MFT**

**Increase****MFT**

**Sales Tax on****Motor Fuels**

**Index****MV Fees**

**Sales Tax****on MV**

**Cumulative Funding Gap ****–**** Cost to "Improve" = $1.3 trillion**

**Cumulative Funding Gap ****–**** Cost to "Maintain" = $635 billion**

***Gap Closing Potential******x% to "Maintain"/y% to "Improve"***

**32%/****15%**

**2%/****1%**

**0.8%/****0.4%**

**12%/****6%**

**9%/****4%**

**2%/****1%**

**0.3%/****0.2%**

**3%/****1%**

**5%/****2%**

**11%/****5%**

**12%/****6%**

**5%/****3%**

**10%/****5%**

**142%/****69%**

**4%/****2%**

**General****Sales Taxes**

**Federal****MFT**

**Year of Expenditure Dollars (in Billions)**

**Tolling**

**Local****Taxes**

**Combined****Funding**

**17%/****8%**

**1%/****1%**

**15%/****7%**

**Federal**

**State**

**Local**

**Combined Funding**

## Federal Financing/Leveraging Incentives 

**Federal Financing/Leveraging Incentives**** **

**Existing****Resources **

**Funding Gap**

**Credit****Incentives**

**TIFIA Program **
**RRIF Program**

**Regulatory Incentives**

**Liberalized Tolling**
**Environmental Streamlining**

**Private Activity Bonds for Highway and Intermodal**
**Tax Credit Bonds ****–**** future?**
**Investment Tax Credits?**

**State Infrastructure Banks**
**GARVEE Bonds**

**Tax Code Incentives**

**Grant**
**Incentives**

** **

**Source:  Mercator Advisors.**

## Recent Public Private PartnershipsStates Using PPPs to Help Address Transportation Capital Needs

**Note:****	****Partial List of Financed Projects.****Source:****	****Public Works Financing.**

**Reno Rail**
**Corridor**

**SR 125**
**Toll Road**

**-**

**Hudson Bergen **
**Light Rail Line**

**Chicago Skyway**
**Asset Lease**

**Dulles **
**Greenway**

**Miami Intermodal **
**Center**

**Central Texas**
**Turnpike**

**Pocahontas**
**Parkway**

**Camden Trenton **
**Light Rail Line**

**Project Location**

**Intermodal Projects in Green**

**Highway Projects in Blue**

**Transit Projects in Yellow**

**San Joaquin Hills**
**Toll Road**

**Foothill Eastern**
**Toll Road**

**Alameda Corridor**

**-**

**Trans Texas**
**Corridor**

**Denver E-470**

**Northwest**
**Parkway **

**NM 44 (U.S. 550)**

**Southern Connector**

**Hiawatha Light Rail Line**

**Jamaica ****JFK Airtrain**

**Tacoma Narrows**
**Bridge **

**Osceola Parkway**

**Las Vegas **
**Monorail**

**I-15 Reconstruction**

**AZ-17**

**Indiana Toll Road Asset Lease**

**CREATE**

## Issue #3Motor Fuel Tax Revenues Vulnerable Longer Term

**Issue #3****Motor Fuel Tax Revenues Vulnerable Longer Term**

**Beyond 2015, likely to see some erosion of fuel tax revenues as alternative fuels and nonpetroleum-powered vehicles capture a larger share of the market**

## Transportation Research Board Policy Study 2006The Fuel Tax and Alternatives for Transportation Funding

**Fuel consumption per mile could decline 20 percent by 2025 **
**Present finance system can remain viable for at least another 15 years (although unlikely to provide enough revenue to reduce congestion)**
**Recommended longer term transition from fuel taxes to direct user charges (e.g., VMT fees)**
**Improve efficiency**
**Transition to sustainable source**
**Current tolling and pricing experimentation can help make this transition**

**Notes:**
These are questions that motivated the study and that our Executive Committee posed to the committee to guide its work.  

I should interject that unlike the previous discussion about the federal program, our report considers all sources of user fee finance at all levels of government.  

I can jump to bottom line and say that the committee’s view is that the fuel tax is viable for some time into the future.  The user fee finance based system has provided a remarkably stable share of revenues over time.  And that there are good alternatives that can supplement the fuel tax in the near term, with an open question about how large their share of revenue will be in the future.

A very important caveat, however, is that our committee did not address the question of how much money is needed now and in the future.  The committee’s conclusions are based on the ability of user fees to continue to provide a stream of revenue on a constant dollar, cent-per-mile traveled basis consistent with the past 20 or so years of history.

I’ll now turn it over to Joe to walk you through the committee’s findings and recommendations.

## On-Road Fuel Economy for New Light-Duty Vehicles1975-2006 Model Years Sales-Weighted Horsepower and MPG 

**On-Road Fuel Economy for New Light-Duty Vehicles****1975-2006 Model Years Sales-Weighted Horsepower and MPG**** **

**Source:  ****	****Environmental Protection Agency, Light Duty Automotive ****	****Technology and Fuel Economy Trends: 1975-2006, July 2006.**

**Horsepower**

**1975**

**1976**

**1977**

**1978**

**1979**

**1980**

**1982**

**1983**

**1986**

**1987**

**1988**

**1989**

**1991**

**1993**

**1994**

**1995**

**1996**

**1998**

**2000**

**2001**

**2002**

**2003**

**2005**

**2006**

**1981**

**1984**

**1985**

**1990**

**1992**

**1997**

**1999**

**2004**

**90**

**110**

**130**

**150**

**170**

**190**

**210**

**230**

**12**

**14**

**16**

**18**

**20**

**22**

**24**

**Miles per Gallon**

**60 percent more energy performance**

**60 percent more output**

**0**

**0**

## Summary of Findings from Current Revenue Studies

**Current transportation revenues insufficient to maintain or improve the nation’s surface transportation systems**
**HTF likely to be in deficit before end of SAFETEA-LU and shortfall accelerates in following years**
**Short-term funding solutions could significantly narrow the investment gap at all levels of government**
**Federal**
**HTF ****–**** Fuel and vehicle taxes, exemptions, interest**
**Other Federal ****–**** Customs duties, container fees, tax credits**
**State and local**
**Fuel and vehicle fees**
**Sales, local option, beneficiary, transit fees, freight fees, etc. **
**Tolling and pricing **
**Leveraging tools and PPPs help advance major projects **
**Recommend longer term transition away from fuel taxes as primary source (e.g. VMT fees)**

## Surface Transportation Funding Issues and Options

***presented by*****Gary Maring****Cambridge Systematics, Inc.**
**National Surface Transportation****Infrastructure Financing Commission**
**June 20, 2007**

**Surface Transportation Funding Issues and Options**