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Vol. 13, No. 5 - September/October 2002

Financing Future Transportation Needs
Part II: The Next Six Years
In the last issue, we noted a growing sentiment in Congress and the transportation community to significantly increase federal funding for surface transportation. Simply maintaining the highway system at acceptable levels could run as high as $56 billion per year, compared to the current investment of $32 billion annually, according to Senate Environment and Public Works Committee Chairman Jim Jeffords (I-VT). A similar conclusion has been reached by the U.S. Department of Transportation, whose most recent Conditions and Performance Report estimates that federal highway capital expenditures nationwide would need more than double from current levels to meet system preservation and expansion needs.

Where is this kind of money going to come from? The Highway Trust Fund currently can sustain only an annual rate of expenditures of $30 billion, rising to $35 billion by the end of the next reauthorization cycle (FY 2009). Various revenue enhancements such as eliminating the ethanol tax exemption and transferring the 2.5 cent/gallon ethanol tax to the trust fund, could add another $5 billion per year, for a total revenue stream of $35 billion per year ($40 billion in FY2009), according to Congressional Budget Office testimony before the House Subcommittee on Highways and Transit (Hearing on “Long-term Outlook on Highway Trust Fund: Are Fuel Taxes a Viable Measure,” July 16, 2002). But that would still leave a huge funding gap.

The most straightforward way to fill that gap would be to raise the federal gasoline tax (currently at 18.4 cents/gallon). Each additional penny would generate about $1.5 billion per year. But raising the gas tax - or even indexing it for inflation - is anathema in this, an election year, and any such move has been emphatically ruled out by the Administration. However, this has not discouraged the American Road and Transportation Builders Association from making a tax increase - along with better cash management of Highway Trust Fund revenues - a central feature of its reauthorization proposal.

Financing Future Transportation Needs
Part III: Long Term Alternatives - New Funding Concepts

Long-term growth of trust fund revenues may be seriously impaired by the prospect of more fuel efficient cars and increased market penetration by hybrids and fuel cell-powered vehicles that do not use petroleum-based fuels. Every one-mile-per-gallon increase in fuel efficiency is estimated to result in a $3.5 billion loss of income to the trust fund. To keep pace with the future highway and transit needs, entirely new funding mechanisms may need to be devised to supplement or replace the gasoline tax in the very long term. Below, we offer some tentative thoughts on what these alternative funding concepts might involve.

Toll Truckways
Toward a Model 21st Century Freight Highway System
High capacity tractor-trailers, the so called LCVs (longer combination vehicles), are able to carry several times the payload of ordinary trucks, and thus offer significant productivity gains and large savings in shipping costs. Trucking interests have long urged liberalizing the current federal standards that prohibit such trucks in most states under a 1991 federal “freeze” limiting truck weight to 80,000 lbs. Safety advocates and state transportation departments, on the other hand, oppose any such relaxation on the grounds that allowing bigger rigs in mixed traffic on todays’ highways would pose increased risks of accidents and lead to accelerated pavement damage. A new study by the Reason Foundation offers a potential solution: construct separate toll truckways in selected interstate highway corridors to accommodate LCVs and offer the option of safer and faster travel to ordinary trucks. The study suggests that truckers would be more than willing to pay truckway tolls because separate lanes would save them time and money. The study’s authors may be right: the American Trucking Association has been among those who have endorsed the toll truckways concept. While many obstacles to building truckways remain, the idea is sound and deserves serious administration and congressional scrutiny.

The Route to Reauthorization
Brad Mallory, Secretary of the Pennsylvania Department of Transportation, is a thoughtful and respected voice in the transportation community. He also serves as President of the American Association of State Highway and Transportation Officials (AASHTO), the influential national organization of the state transportation departments. That is why, when he speaks, the Administration and the Congress listen. Secretary Mallory has kindly agreed to share with us his views on the upcoming surface transportation reauthorization. The text below is an abbreviated version of his remarks before the Road Gang, a group of Washington transportation “insiders.”

Automobile Fuel Efficiency: A Modest Proposal
Commentary by James A. Dunn, Jr.
Automobile fuel efficiency policy has been stuck in political and ideological gridlock for decades. How can we break out of this impasse? Since the car companies are the key bottleneck, and since they are in business to make money, let's pay them to make their vehicles more fuel efficient. Pick a year far enough in the future to allow them to re-engineer their fleet. Set a goal of significant but attainable improvement in fuel economy. A National Academy of Sciences report last year said that a substantial improvement in fuel economy, particularly for light trucks and SUVs was possible with existing, off-the-shelf technology. Offer a one-time, sales-weighted lump sum payment to each and every manufacturer that meets the goal. Set intermediate goals and offer bonuses for early achievement of the goals. Once all of the new car fleet has been redesigned to meet the new higher standard, the current system of penalty fines for non-compliance with CAFE standards would kick in again to prevent backsliding

News From Abroad
London’s Congestion Charging System
For the past thirty years Singapore and three Norwegian cities have had the unique distinction of being the only cities in the world that charge motorists for entering or driving within the city center. The city of London will soon join this exclusive club. London’s proposed congestion charging scheme has cleared its last legal challenge and, barring unforeseen circumstances, will come into force next February. London motorists will have to pay £5 ($7) per day for the privilege of driving within an 8-square-mile central area. Those who fail to do so will face an automatic £80 fine. The following article offers a preview of the scheme.

China’s Rush to Motorize
With incomes rising, a growing number of China's 1.3 billion people are shedding their bicycles and getting behind the wheel. New-vehicle sales in China grew at double-digit rates for much of the past decade, and topped 2.3 million last year. And the boom is just beginning. Analysts predict vehicle sales will reach 3.7 million by 2006, with passenger-car sales exceeding 1.2 million units. Car ownership is moving within the reach of China’s growing middle class, and the country is expected to emerge as the world's largest car market in the next two decades. China’s highway authorities are scrambling to keep pace with the escalating vehicle fleet. For now, however, much of China's highway network is either overcrowded, underdeveloped or both.


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