Funding & Financing

Fuel Taxes

No one likes to pay taxes. But the federal gas taxes you pay each time you fill your tank go directly to repair and modernize roads and bridges. It is a true user fee. The Highway Trust Fund, designed as a stable pot of money to fund the construction of the Interstate Highway System, was created in 1956. Since that time it has relied on revenue derived from federal gas and diesel taxes to fund roads and bridges. The gas tax was 3 cents per gallon in 1956 and gradually increased over the years to its current 18.4 cents set in 1993. For several decades the Trust Fund’s balances were growing but in recent years, spending on roads, bridges and transit has outpaced gas tax revenues. This is because the gas tax is not indexed to inflation and has not been increased since 1993. Over the same period the fuel efficiency of cars and trucks has dramatically improved and there are also more vehicles on the roads that use little or no gas at all. Consequently, the gas tax has lost over half of its purchasing power and if it had been indexed to inflation it would be 30 cents per gallon today. The result is that the Highway Trust Fund can no longer sustain current levels of funding without the infusion of additional revenue.

There have been countless reports and studies that have recommended ways to boost revenue into the Highway Trust Fund or to transition to alternate means of funding the nation’s surface transportation network. One of these was a Congressionally authorized report published in 2009 - that National Surface Transportation Infrastructure Financing Report Paying Our Way - that recommended several options for funding and financing surface transportation.

Road User Charges

Some states and communities are experimenting with 21st century user-fees to replace the gas tax. Pilot projects such as the Oregon Road Usage Charge program and the California Road Charge Pilot program – examples of mileage user fee systems – are gaining wider acceptance from the automotive and infrastructure industries as well as the public as a viable, fair alternative to the gas tax. Legislation, studies and similar projects are being considered in Colorado, Florida, Indiana, Minnesota, Nevada, Texas and Washington State. The FAST Act approved by Congress in 2015 also included $95 million in grants for states to explore this concept.

Dynamic Pricing

Dynamic pricing is a toll-based system that aims to reduce congestion in several metropolitan areas around the nation including Washington, D.C., Minneapolis, San Diego and Miami. While only viable in some areas, dynamic pricing affords motorists the choice between using existing toll-free lanes on major arteries or to pay a variable real-time or peak-demand based rate to use additional lanes paid for by the toll. The charges generally only apply to cars with fewer than three people to incentivize greater use of car pools. The Federal Highway Administration’s Office of Innovative Program Delivery has a wealth of information about road pricing and dynamic pricing.

TIFIA

The Transportation Infrastructure Finance and Innovation Act (TIFIA) program provides federal credit assistance in the form of direct loans, loan guarantees and standby lines of credit to finance transportation projects of national or regional significance in order to attract substantial non-federal public and private co-investment. Each dollar in federal funds can provide up to $10 in TIFIA credit assistance and leverage $30 in transportation investments. Over its 17 year history, the TIFIA program has leveraged more than $81 billion in investment.

National Infrastructure Bank or Financing Authority

The United States is one of the only developed countries without an independent, governmental (or semi-governmental) centralized infrastructure lending authority. A leading example – the European Investment Bank – has loaned out in excess of $100 billion annually to fund rail, road, urban transit, and waterway improvements, with a AAA credit rating and low interest rates thanks to its non-profit status.

Public-Private Partnerships

Public-Private Partnerships (P3s) are gaining popularity around the country. In order for a state to undertake a P3 it must first have authorizing legislation approved by its legislature. Currently over 30 states have some form of P3 authorizing legislation on the books. An example of a successful P3 includes the Port of Miami Tunnel that leveraged private sector investment, ownership, operations, and maintenance of public infrastructure in return for government payments over a specified period of use. P3s have the potential to grow the infrastructure project pipeline, reduce maintenance costs, and lower the burden on public sector appropriations and deficit spending. Several report and studies have been published examining P3s including one by the National League of Cities, one by the Eno Center for Transportation and one by the House Transportation and Infrastructure Committee.

Regional Infrastructure Exchanges

Regional infrastructure exchanges such as the West Coast Infrastructure Exchange and emerging programs in Washington, D.C., Colorado, Maine and Texas are non-profit institutions with mandates to pre-screen and prioritize infrastructure projects, connect projects with private capital, build standards and best practices for finance and operations and provide unbiased technical assistance to public sector decision-makers.

State and Local Revenue Options

Governors and mayors have become increasingly concerned that the level of funding they have traditionally received from Washington has been shrinking and becoming less reliable. As a result many of them have looked to other options for generating much needed revenue. Since 2013, 24 states have increased their own gas tax to fund essential transportation programs and projects. These increases have run the political spectrum from red states like Wyoming and Utah with Republican governors and legislatures, to blue states like California and Vermont with Democratic governors and legislatures. Even a state like New Jersey with a Democratic controlled legislature and a Republican governor increased its gas tax in 2016. Another option that has met with considerable success has been local ballot initiatives that seek to increase sales or property taxes with the revenue going towards specific transportation projects. The 2016 elections saw a record number of such ballot initiatives - 77 in all - of which 69 percent of them were approved by voters. The success rates for such measures has been consistently high with 68 percent approved in 2015, 69 percent in 2014 and 73 percent in 2013.