New funding sources key for transport infrastructure
When travel on American roads returns to pre-pandemic numbers, fuel tax coffers will be replenished and transportation leaders will again be able to forecast budgets with some accuracy. However a rebound in traffic won’t be enough to power long-term stability in transportation revenues. For example, the Pennsylvania Department of Transportation reported a $8.1 billion funding shortfall last year. The pandemic didn’t cause the shortfall; modern mechanics did.
The long-term problem with fuel taxes, which is traditionally the largest single revenue source for DOTs, is that most vehicles increasingly use less fuel. Fuel-efficient cars and the adoption of electric vehicles will mean fuel taxes contribute less to the maintenance of transit infrastructure. New funding mechanisms must be explored.
States are developing a variety of solutions such as bond issuance, road user fees and tax increases to stabilize transportation funding and address critical infrastructure needs because delaying maintenance for roads, highways and bridges may not be an option. The American Society of Civil Engineers last ranked US infrastructure a grade of D+. President-elect Joe Biden is expected to support critical infrastructure projects, but new federal funding won’t leave states off the hook.
States could raise bonds, as Oklahoma’s DOT did in 2020 when it borrowed $200 million to keep highway projects on schedule, or enter public-private partnerships to pay for specific projects, which has become common.
Perhaps the quickest fix is raising taxes, as New Jersey did last year by 9.3 cents per gallon. It happened automatically because a 2016 state law mandates it rise if revenues fall short of the state Highway Fuels Revenue Target. Since the law was enacted, the Garden State’s fuel tax has risen 250%.
Meanwhile the federal gas tax rate isn’t indexed to inflation and hasn’t changed since 1993.
Tolls are another well-established solution, mostly associated with stationary toll gates on major highways. In September, rates on three New Jersey toll roads were raised to help meet shortfalls.
An alternative or complementary system called road user charging is based on mileage. In 2020, Utah launched a RUC system for alternative fuel vehicles. When owners register their gas hybrid, plug-in hybrid or electric vehicle, they either pay a flat fee or join the RUC system.
Utah awarded its RUC contract to emovis, which is a subsidiary of Abertis. Pilots of the emovis system have been deployed in Oregon and Washington states, as well as research pilots in Europe.
Users register their vehicle with the system. The vehicle’s milage is captured via a GPS-equipped vehicle plug-in with 4G Internet connection. Payment options, miles driven and routes are available via a mobile phone app.
Because the system covers travel on all roads, it can provide targeted pricing. For example, commercial trucks could be incentivized to travel a given route. Cities seeking to limit congestion during weekdays could charge varying amounts based on the district, day of the week or time of day.
Data collected could also provide transportation planners valuable insights, as electrified transportation, remote work, environmental regulations and other factors may alter mobility demands. Being able to adapt quickly is a key requirement for new funding solutions.