October 11, 2015

Transportation Finance

As a person who has been involved in providing advocacy and advisory services as a volunteer for over two decades, I find that public and political decision making relative to transportation shows our elected officials and the public in their least flattering light.

Clearly, we have a crisis in terms of traffic congestion, overburdened existing transportation infrastructure, too many bridges that are structurally deficient and functionally obsolete, and too many preventable safety-related problems.  In the July 28, 2008, USA Today, a federal transportation official was quoted as saying that we need an additional $225 billion in transportation spending to address this crisis.  Moreover, in the July 29 New York Times, an articled reported that the Federal Highway Trust Fund, the main source of federal dollars for road and bridge projects is in such dire financial straits that money may need to be borrowed from a federal mass transit fund.

Decades ago, our country made the decision to finance transportation construction, maintenance, and repair, and public transportation asset acquisition primarily through taxes and fees levied on purchases of gasoline and other fossil fuels.  Today, that decision is painful and being stress-tested to the limit because of the $4 a gallon price for gasoline.

Elected officials are reacting to this crisis by proposing temporary gasoline tax holidays, rollbacks of gasoline tax increases, and even reductions of current gasoline tax levels.  At the same time, they and the public are resistant to implementing or increasing tolls or congestion pricing that could potentially provide a supplemental source of financing.  There is also a lot of resistance to privatizing transportation assets in many states and regions, although some states, such as Indiana and Illinois, have jointly outsourced the tollway that operates at the border of both states.

This collective denial and refusal to face up to this crisis has serious consequences, particularly in an environment in which delay is causing significant increases in the price tags of any transportation project governments may wish to undertake.  The same forces that are causing a rapid increase in gasoline prices are operating to increase the prices of the basis commodities used in construction: steel, plastics, nickel, zinc, copper, aluminum, and cement.  As the clock ticks, inflation ravages the purchasing power of tax dollars at a level unseen since the 1970’s.  Unlike the 1970’s, when we basically had a self-inflicted set of problems that drove inflation, this inflationary spiral is driven by global forces that are largely outside our control, such as demand in China, India, and the Middle East for the same construction materials.

The only thing that appears to motivate elected officials who do not want to collect gasoline taxes, do not want to institute or raise tolls, and do not want to privatize assets is that they are hoping against all odds that this crisis will go away on its own.  Unfortunately, it won’t.  This crisis is not like fine wine.  It will not get better with age.

We need elected officials who have the moral courage to describe in specific detail what it will take for our transportation crisis to be addressed, and to propose unpopular, but necessary, steps to deal with it.

I understand that there is a lack of trust in many departments of transportation in terms of their cost estimates and their competence in carrying out big projects.  But even if they had exaggerated the problem by doubling cost estimates, and even if they were exceptionally competent, we would still have a major crisis.

I believe there are some creative ideas for reducing the scope of the problem.  Private sector money could be used for assets such as bicycle paths, rail station parking areas, or even airport improvements.  Traffic information systems could be provided far more cost-effectively by the private sector than by the cumbersome processes used in government procurement, and they would be far more responsive to the needs of both individual and business travelers, as well as logistics and delivery firms that depend on correct, real-time information.  I also believe that demand reduction is a viable strategy today, a far less expensive and faster one than adding capacity.

But none of these ideas will see the light of day until elected and appointed government officials face honestly up to the problem, and have an intelligent dialogue with the public.  While there will also be those members of the public who do not want to face reality, the majority of Americans will support prudent investments in our critical infrastructure.