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Vol. 15, No. 4; June 2004

How Should We Finance Future Highway Needs?

The transportation community is virtually unanimous in claiming that the revenue stream from motor fuel taxes at current rates is not adequate to support the cost of maintaining and improving the country's transportation infrastructure. But this consensus does not extend to agreeing on a unique solution to the funding dilemma. Rather, a variety of financing alternatives has been proposed, all of which will compete for the attention of congressional lawmakers. For it is Congress, aided by a National Commission to Study Future Revenue Sources (authorized in Sec. 1121 of HR 3550, the House reauthorization bill), that will eventually have to decide whether and how to alter the current system of surface transportation financing.

This Brief attempts to summarize and comment on some of the views currently circulating within the transportation community. Our summary draws on several sources. They include the discussions held at the "Transportation Finance Summit," sponsored by the International Bridge Tunnel and Turnpike Association (IBTTA); an informal exchange of views on the "Future of the Highway Trust Fund" between a small group of transportation professionals and several senior U.S. DOT officials held under the auspices of the Highway Users Alliance in late March; an ongoing email-based dialogue among a group of finance-oriented analysts, initiated by the Federal Highway Administration; and personal communications with individual members of the Transportation Research Board's "Committee on the Long Term Viability of Fuel Taxes."

Maryland's Express Toll Lanes: A Giant Step Forward

Four years ago, we speculated in these pages that making motorists pay for the use of roads that offer a superior level of service may become common practice in the 21 st century. One possible scenario we envisioned was an eventual emergence of a dual network of highways offering differential levels of service. The "old" system, built in the 20 th century would remain free but become increasingly congested and unreliable. Newly built roads and dedicated lanes on existing roads in heavily traveled corridors would offer a faster and more reliable, congestion-free travel alternative–for a fee. Electronic toll collection technology would facilitate this trend by doing away with cash transactions and the need to stop at toll booths. ( "Paying a Premium for a Premium Level of Service," Innovation Briefs, Vol.11 No. 3, May/June 2000). We further speculated that, as existing urban roads become ever more congested and as highway travel becomes increasingly slower and less reliable, a demand for a higher level of highway service will emerge – and that there will be plenty of people and businesses willing to pay for it.

What was sheer speculation on our part four years ago has moved closer to reality with the May 4 th announcement by Maryland's Transportation Secretary, Robert Flanagan, of a plan to create a statewide network of express toll lanes that would offer travelers the option of congestion-free travel. Together with similar toll lanes proposed in the neighboring state of Virginia, they would form an areawide network of express toll lanes that would give motorists and bus riders an escape from gridlocked highways throughout the National Capital region.

We commend Maryland's Transportation Secretary Flanagan and State Highway Administrator Neil J. Pedersen, as well as Virginia's Transportation Secretary Whittington W. Clement and Commissioner Philip Shucet for their leadership, political courage and initiative concerning express toll lanes. Thanks to them, the concept of traffic relief through voluntary market-based toll systems has taken a giant step forward. There are still many obstacles to be overcome but we feel confident that, thanks to the Maryland and Virginia initiatives, our speculation about a 21 st century system of congestion-free premium toll lanes now has a far better chance of becoming a reality.


Rating and Evaluating "New Starts"

"Transit use is important in a number of our nation's major urban centers. However, many cities have built or are building systems that are overpriced or underutilized..." So stated Chairman Ernest J. Istook (R-OK) in his opening statement at the April 28 hearing of the House Transportation Appropriations Subcommittee on "Rating and Evaluating New Fixed Guideway Systems." Rep. Istook went on to say, "We need to better emphasize cost-effectiveness and congestion relief as measures of a candidate project's worthiness to receive federal funds. Currently FTA is tracking over 150 projects in planning studies and preliminary stages for new projects or system expansions. These projects could seek over sixty billion in federal New Starts funding over the next several years...We all know that sixty billion dollars simply will not be available, so we had better get started in winnowing the field of candidates..." The chairman's opening statement summarized succinctly the challenge facing the Federal Transit Administration in the years ahead: How to become more adept at weeding out projects that do not relieve the most congestion, move the most people or are the most cost-effective. 

In the last issue of Innovation Briefs we suggested that the proposed congressional reauthorization, with 38 authorized projects in the funding pipeline and 143 authorized alternatives analysis studies has placed congressional appropriators in a difficult position since only a small fraction of the authorized projects can be expected to receive funding. We expressed the hope that Chairman Istook's transportation appropriations subcommittee might take a careful look at the New Starts program and instruct the Federal Transit Administration to take a more disciplined approach to managing the limited New Starts dollars. We hope that the Committee's report will spell out in explicit terms the reforms it expects the agency to make in its rating and evaluation process, and recommend appropriate congressional action to give FTA the necessary authority to prevent marginally effective rail proposals from entering the New Starts pipeline.


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