Commission recommends ‘fundamental shift’ in US transportation financing

The Federally-mandated US Surface Transportation Infrastructure Financing Commission has recommended the government “fundamentally shift” the way it finances transportation infrastructure by moving from the vehicle fuel tax to charges based on vehicle miles traveled (VMTs) – an option opposed by President Barack Obama.

After nearly two years of deliberation, the commission concluded in its final report to Congress that US transportation infrastructure has suffered from insufficient financing and under pricing relative to the strain it experiences from users. The US will have a federal highway and transit gap of $400 billion in the next six years that will grow to $2.3 trillion through 2035 at current funding levels.

The commission recommends the US government shift its federal surface transportation funding source from the 76-year old vehicle fuel tax to “user pay” charges based on VMTs by 2020.

“The VMT user charge rated high compared to all the other things we looked at in terms of its strong link between who pays and who benefits,” said Bryan Grote, a Principal at consulting firm Mercator Advisors and a member of the commission. The commission examined 40 funding mechanisms for the federal highway trust fund, he added.

As an interim measure, the commission recommended vehicle fuel taxes be raised 10 cents per gallon for gas and 15 cents per gallon for diesel to bring them up to the level they would be had they been indexed for inflation in 1993 – the last time Congress raised them. 

Other commission recommendations included re-authorisation and expansion of a credit assistance program for surface transportation projects known as TIFIA (Transportation Infrastructure Financing and Innovation Act) from current levels of $122 million per year to $1 billion per year. The commission also believes TIFIA loan assistance should be limited to new development projects and the percentage of its eligible use toward a project’s capital costs be raised to 50 percent from the current cap of 33 percent.

The government should also help support state and local efforts in developing public-private partnerships (PPPs) and similar arrangements, the commission said.

“Generally these PPPs are at the instigation of state and local governments and they should bear the responsibility for exploring them. But it would be a good idea [for the federal government] to put out best practices-type information that states and localities could use,” Grote said.  

McKenna, Long and Aldridge, a Washington DC-based law firm, is currently working to secure federal support for an organization called Partnerships USA, which would provide this sort of advice to states and localities.

Other recommendations in the report included increased funding for state-level infrastructure banks, a requirement that states reinvest money from asset monetisations into surface transportation spending and an expansion of states’ and localities’ ability to toll new and, in some cases, existing highway capacity.

Congress will take the recommendations into consideration when debating the reauthorisation of the surface transportation bill known as SAFETEA-LU (“Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users”), which is scheduled to expire with the end of the government's current fiscal year on 30 September 2009.

The debate is likely to be intense.

“The short answer is that there are no easy choices politically . . . none of this is easy and it gets back to our fundamental premise that we are not coming close to paying for the current system that we have,” Grote said.