National Report on Transportation & Infrastructure
Finance at Critical Time
By Sean Slone, CSG Transportation Policy analyst
As state officials prepare to make many important decisions about the nation’s infrastructure, a new CSG national report provides useful information about transportation and infrastructure finance. Recent and upcoming events make the report a timely resource for policymakers:
Congress this week continues to hammer out the details of an economic stimulus package, which is likely to include billions of dollars for transportation projects that state leaders have identified as “shovel-ready” and that they hope will help put many Americans back to work.
A long-term funding strategy for transportation is also clearly needed. The American Society of Civil Engineers recently issued its 2009 report card on the nation’s infrastructure. It found that 26 percent of the nation’s bridges are either structurally deficient or functionally obsolete. The report estimates that $17 billion is needed annually to substantially improve current bridge conditions, yet only $10.5 billion is spent annually on construction and maintenance. Roads fared even worse in the report, receiving a D-. The ASCE reports that one-third of America’s major roads are in poor or mediocre condition and 36 percent of major urban highways are congested. Americans are spending 4.2 billion hours a year stuck in traffic at a cost to the economy of $78.2 billion. Only $70.3 billion is spent per year on highway capital improvements, well short of the $186 billion analysts say is needed.
This year Congress is expected to consider a multi-year reauthorization of transportation programs. The law that has set funding levels since 2005, known as SAFETEA-LU, is set to expire Sept. 30. Many believe SAFETEA-LU’s successor could substantially reshape the way transportation and infrastructure is funded in this country, the roles played by state and federal government and the mechanisms both use to create revenues to pay for needed improvements. State and federal fuel taxes, the traditional source of revenue for transportation, have proved inadequate to meet the needs of the nation’s infrastructure. Moreover, the federal fuel tax has not been raised since 1997 and raising state fuel taxes has proven politically difficult in recent years.
The National Surface Transportation Infrastructure Financing Commission, one of two panels created by Congress, is set to release its final report this month. Commissioners are expected to call for a 10-year transition to a system based on charging motorists for vehicle miles traveled. The commission will also recommend incentives to help states and local governments finance infrastructure investments through tolling and other user fees. Most controversially, they will call for a one-time increase in the federal gas tax to help fund infrastructure investment as the institutional and technological challenges of a VMT-based system are being resolved.
With the funding formula and the state-federal relationship in flux, states are already looking at innovative funding mechanisms to replace or supplement fuel taxes. “Transportation & Infrastructure Finance: A CSG National Report” examines in-depth the VMT concept, the proliferation of public-private partnerships in transportation, and efforts to assess vehicles for the costs they impose on society through congestion pricing. The report also looks at fuel taxes, other tax and fee mechanisms, various forms of debt financing, and state infrastructure banks.
The report draws on the work of the two federal commissions created by Congress as well as the research and assessment of numerous transportation, law and tax policy analysts, expert panels, and state and federal officials. It includes numerous state case studies from around the country as well as tables, maps, charts and graphs that assess the transportation finance landscape.