New formula for highways

With federal dollars uncertain, who will step in?

Despite widespread concern about deficits, President Obama’s 2014 federal budget proposal doesn’t shy away from addressing the need to reinvest in our transportation infrastructure. It calls for an immediate $40 billion to repair highways, bridges and other transportation assets, and another $10 billion for programs involving “high-value infrastructure projects.”

The President’s budget proposal also resurrects the idea of a national infrastructure bank and calls for creation of new federal bonds as ways to sidestep the short-term highway bill funding process and establish more stable sources of capital for long-term transportation planning. And it also opens the door to more private investment in the nation’s transportation infrastructure.

But of course, this is all just part of a proposal, a proposal that marks only the beginning of the fierce partisan wrangling that characterizes our federal legislative process these days. And so we continue to wait to see how the federal government will find and spend the many billions of dollars needed to make crucial repairs and investments in our highways.

Lost in all the talk about federal transportation funding is the fact that it only accounts for a relatively small portion of spending on roads and transit. According to the nonprofit American Assn. of State Highway and Transportation Officials (AASHTO), federal road and transit dollars provide about 20% of the money spent nationwide on the surface transportation infrastructure.

States are the source for nearly half of all that investment, and local counties and municipalities provide the other 30% by AASHTO’s reckoning. Currently, the main source for that money comes from state motor vehicle fuel taxes, with vehicle sales taxes, registration fees, truck-weight fees and tolls among the other contributors. Bonds of various types also figure into state and local funding mechanisms for road maintenance and construction.

Given the immediate need to address long-deferred maintenance and growing traffic congestion, states are understandably concerned about the uncertainty surrounding federal contributions. It’s not surprising, then, that a number of states have decided they can’t wait on Congress to get its act together.

Virginia and Maryland, for example, have imposed a sales tax at the wholesale level for gasoline with revenues to be dedicated to transportation projects. Other states like Massachusetts, Missouri, New Hampshire, Arkansas, and Michigan are looking to back transportation bonds with sales tax increases of one type or another. Ohio is using tolls to back its state transportation bonds. And the three West Coast states are looking at a joint infrastructure financing “exchange.”

As Ken Orski, an industry observer who publishes the Innovation News Briefs email newsletter, recently pointed out, major transportation projects like replacement of the New York Tappan Zee Bridge and the eastern span of the San Francisco Bay Bridge are being largely financed by long-term bonds rather than those uncertain federal funds. In fact, Orski says, there are no highway transportation “megaprojects” in the planning stages that would primarily depend on Federal dollars.

By simple default, we may have stumbled on the future of highway funding: States will raise the money needed to keep their roads and bridges in good shape, and some mix of public and private bonds or other financing will generate capital for the big, long-term building projects.

Hide comments


  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.