Transportation infrastructure: New report supports VMT fees and increased gas tax to maintain and expand surface transportation system
Jeff Berman, Group News Editor -- Logistics Management, 2/27/2009
WASHINGTON—The findings of a new report by a bi-partisan commission established by Congress charged with coming up with new financial payment methods to maintain and expand transportation infrastructure takes varying approaches for policy makers to consider.
The commission—entitled the National Surface Transportation Infrastructure Financing Commission—issued a report issued this week, entitled, “Steering Our Nation’s Transportation System Back Into The Black,” which begins by explaining that the current shortfall for surface transportation infrastructure spending can be attributed to various factors, including:
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how real highway spending per mile has fallen by nearly 50 percent since the federal Highway Trust Fund (HTF) was established in the 1950s;
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the federal gas—or motor vehicle fuel—which has not been raised since 1993—
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is not adjusted for inflation and has experienced a cumulative 33 percent lost in purchasing power since 1993;
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without changes to current policy, the report estimates that revenues raised by all levels of government for capital investment will total roughly one-third of the nearly $200 billion needed annually to maintain and improve the nation’s highway and transit systems; and
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long-term annual average HTF revenues are estimated to be $32 billion compared to required investments of nearly $100 billion per year, among others.
Report’s Recommendations: Rather than continuing to heavily rely on the gas tax, which the report suggests is “not sustainable in the long term and is likely to erode more quickly than previously thought due to heightened concerns over global climate change and dependency on foreign energy sources, which are creating a drive for greater fuel efficiency, alternative fuels, and new vehicle technology,” the report recommends a federal funding system based on user pay charges through a charge for each mile driven—also known as the vehicle miles traveled (VMT) fee system.
The VMT, noted the report, would be based more directly on miles driven and possibly also on time of day, type, of road and vehicle weight, and fuel economy, as opposed to indirectly on fuel consumed. And greater use of pricing mechanisms like VMT pricing systems and targeted tolling could “spur more efficient use of our highway network, and, by shifting demand to less congested periods of the day or to other modes, may…enable more efficient investment, thus reducing the additional capacity that needs to be built.” VMT usage would be tracked through technology standards and require original equipment vehicle manufacturers to install standardized technology, the report noted.
“The direction you are going to see [going forward] is an emphasis on consumption-based pricing and the VMT is a form of that, as is tolling,” said Michael A. Regan, CEO of transportation rate analysts TranzAct Technologies. “You are philosophically going to see a push towards a system that says the more you use the system the more you are going to pay to be in that system, and you cannot pay for it with the gas tax or fund a Highway Bill with it.”
Regan added that a big question will be what consumption-based pricing method is most sellable to the American public. He explained that as the next Highway Bill gets drafted there will be a push towards tolling existing interstate highways that are currently free that are going to be tolled.
“You are going to be paying more for each toll and be paying a lot more tolls,” Regan quipped.
The report also recommended transitioning to a new, more direct, mileage-based user charge system as soon as possible, and deploying a comprehensive system by 2020. And when that system is in place, current fuel and other vehicle-related charges used as the primary funding mechanism for funding the surface transportation system could be eliminated.
Another proposal included raising the federal motor fuel tax by ten cents and the federal diesel gasoline tax by 15 cents, coupled with commensurate increases in all special fuel taxes and then indexing those rates to inflation.
The current motor fuel tax is 18.4 cents per gallon for gasoline and 24.4 cents per gallon for diesel. At the National Shippers Strategic Transportation Councils (NASSTRAC) Annual Conference in 2008, U.S. Chamber of Commerce President and CEO quipped that the U.S. needs “to quit fooling itself” when it comes to the motor fuels tax. And with the tax not having been raised since 1993, he said it is likely infrastructure and related funding issues will continue.
Even through the VMT is positioned as a key component of turning around transportation infrastructure funding, not everyone is buying into it.
“The federal fuel tax has worked well for more than 50 years with the lowest collection and evasion costs,” says ATA President Bill Graves, in a statement. “There is no reason to transition to a new funding source within the 10-year timeframe suggested by the Commission, and certainly not to an alternative with as many problems as a VMT tax.”
This is the first major Congressional-backed report issued on transportation infrastructure since the January 2008 report from the National Surface Transportation Policy and Revenue Study Commission was published. That report examined ways in which global and domestic freight movements need to be examined and evaluated to remedy a looming infrastructure crisis.
Among its findings were that the U.S. should be spending at least $225 billion per year for the next years on its surface transportation system from all levels of government compared to the less than 40 percent currently invested; the federal government needs to be a full partner with state and local governments and the private sector in providing the additional investment needed; and raising the gas tax from five-to-eight cents per year to 25-to-40 cents per gallon over the next five years, which would eventually be followed by a VMT tax until at least 2025, implementing a federal freight fee, and having a portion of Customs fees dedicated to the HTF.
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