We Need an Ambitious Transpo Bill. So How Are We Going to Pay for It?

Unknown.pngDOT Secretary Ray LaHood testifying in the Senate yesterday.

Yesterday, the Senate Committee on Commerce, Science and Transportation held a hearing about the future of national surface transportation. This much isn’t in doubt: Current policies need a major overhaul. What to change and, especially, how to pay for it are very much in question.

Several panelists spoke about the need to reform the nation’s transportation priorities and set firm goals, like reducing car dependence and traffic deaths. Shifting away from policies that emphasize highway capacity and reward gas consumption didn’t sit that well with senators from states like South Dakota and Texas, but there was a broad sense that the next surface transportation bill must reverse years of underinvestment in the nation’s infrastructure. Nevertheless, Secretary of Transportation Ray LaHood reiterated the Obama administration’s opposition to a
promising funding solution — raising the gas tax — and obeyed the directive from up top to never again mention a tax on vehicle miles (VMT).

At around the same time, a very different story was unfolding in the House, where James Oberstar (D-MN), chairman of the Transportation and Infrastructure Committee, pushed for his preferred funding solution, a VMT tax. Asserting that the technology to implement this solution is already available, he asked his committee to rapidly advance the timetable: "Why do we need a pilot program? Why don’t we just phase it in?" Since Oberstar has taken a leading role in shaping the next transportation bill, this may mean that a VMT tax will be included in the first draft.

Back at the Senate hearing, several panelists called attention to the impending insolvency of the Highway Trust Fund, which uses money raised by the gas tax to pay for transit and roads projects. Steve Heminger, director of the San Francisco Bay Area Metropolitan Transportation Commission, estimated that the U.S. needs to invest at least $225 billion annually in its transportation infrastructure. We’re only spending about 40 percent of that today, and the downward trend in driving means the fund is drying up. Few options will suffice to raise the needed revenue, he said, other than increasing the gas tax or imposing a VMT fee.

LaHood skirted the funding issue and focused on rethinking existing
transportation priorities. "Our initial focus will be on expanding the
transportation choices available to American families," he said. LaHood
repeatedly described his intention to help communities become more transit-friendly, walkable
and bikeable. He cited the administration’s desire to get Americans out of their cars, but never made the link that higher gas prices create powerful incentives to reduce car dependence. His prepared testimony instead asked for "innovative" ideas from Congress to address
the transportation funding dilemma, leaving aside any specifics.

  • Mr. Doughnut

    It maybe political reality, but this is still doughnut based policy making. In doughnut land they figure out what matters most and then cut it out of the center. To get people out of cars requires two things: a price signal and alternative ways of getting around. A VMT or higher gas tax or carbon tax helps do both. It makes motorists pay more of the cost of their driving (thereby encouraging smarter land use and reduced driving,) and helps fund alternatives and existing infrastructure. Like Oberstar says, a VMT tax would make a lot of sense. Well gosh darn it, the USDOT better not talk about it then. Thank God for the US senate where a couple of senators from South Dakota can stop just about anything.

  • Moser

    I’m tired of the canard that the “downward trend in driving” has broken the Highway Trust Fund. The fact is that Congress increased spending in 1998 and 2005 without adding any major new revenues to transportation, and that the buying power of the U.S. gas tax has been eroding since it was last increased during Bill Clinton’s first term. It’s a long-term failure to face facts, not some sudden new trend.

  • “the next surface transportation bill must reverse years of underinvestment in the nation’s infrastructure.”

    Haven’t we actually overinvested in freeways and underinvested in transit, pedestrians, and bicycles? Maybe we need a shift of spending rather than an increase in spending.

    A carbon tax or cap and trade can discourage driving and use the money to develop alternative energy.

    A gas tas or VMT tax will discourage driving, but the political reality is that much of the additional money it raises will go into building freeways, which will encourage driving.

    Remember that, when he was trying to get the stimulus bill passed, even Obama was repeating the mantra “roads and bridges.” If they try to pass an increased gas or VMT tax, it will be based on the same mantra.

    Of course, we are just talking about transportation infrastructure here – not about other needed infrastructure such as a smart grid.

  • Chris in Sacramento

    If our movement’s “problem” is an Administration focused on “rethinking existing transportation priorities [and]… expanding the transportation choices available to American families” tussling with congressional leadership hell-bent on instituting a VMT tax, I can live with that!

  • Larry Littlefield

    “Haven’t we actually overinvested in freeways and underinvested in transit, pedestrians, and bicycles? Maybe we need a shift of spending rather than an increase in spending…Remember that, when he was trying to get the stimulus bill passed, even Obama was repeating the mantra “roads and bridges.”

    I agree with you, but in that case perhaps it’s time to look outside the box. Perhaps the best that the federal government can do is nothing, with its transportation spending eroding with gas tax revenues.

    At the federal level, there will tremendous pressure, given the fix Americans have gotten themselves into, to subsidize those locked into using more public and personal resources to get by. Mortgage relief for McMansions. Bailouts for auto companies. Oil anyway we can get it.

    The push for transit and non-motorized trips, is coming from individual areas that have them, or are seeking them. It is non-federal.

    You may recall that NYC recovered from its long decline in the Reagan era. It wasn’t due to help from the Reagan Administration — just a malign neglect. The federal government stopped subsidizing new water and sewer systems for new suburbs, and that made what the cities already had more valuable.

    Me, I’m hoping for national health care financing. It would free up money for NYC to set its own course, and take away federal money that can be used to do more damage.

  • “The push for transit and non-motorized trips, is coming from individual areas that have them, or are seeking them. It is non-federal.”

    Larry, we will see. There is a strong push by Transportation For America and its coalition of activist groups to shift federal transit spending from roads to transit. Given the current emphasis on global warming among the Democratic majority, I think it is possible that, after this year’s TEA reauthorization, there will be a federal push for non-automotive modes.

  • LJR

    Chris, how low do you want to set the bar? No sticks and a couple small carrots is not going to change much. So, you achieve wonders and double bike mode share, that’ll be something like 2%. Yeah, better than nothing, but outside of a handful of center cities, you’re not going to see many cyclists. Driving is so massively subsidized by both the private and public sector via free parking, absence of cost accounting for crashes, air pollution, traffic congestion etc that there has got to be some form of pricing. Obama has his limits, and it really shows when it comes to transportation.

  • Ian Turner

    So, what exactly is the policy justification for taxing VMT instead of gas?

  • Kaja Geis

    A VMT tax will also report every mile traveled by every citizen in a car to the government.

    Some things are more important than transit policy; basic goddamned liberty is among them.

  • Chris in Sacramento

    LJR, go for it. Having been through several of these reauthorizations, I note only that the terms of debate seem to have shifted in our favor. Yes, Obama will only go as far as we make (or permit) him. By all means, l’audace, l’audace, l’audace!

    >LJR

    Chris, how low do you want to set the bar?

  • Chris in Sacramento

    It boils down to the need to fund transportation infrastructure construction, rehab and maintenance. Cars are increasingly fuel efficient; With luck, most will run on no or little gasoline in a decade or two, making the present per-gallon gas tax increasingly ineffective at generating revenue. How, then, to pay for roads, transit, etc? Thus, consideration of a user fee based on VMT. Typically, the VMT fee/tax is contemplated as a supplement to, not a replacement for, the current excise tax.

    >Ian Turner

    So, what exactly is the policy justification for taxing VMT instead of gas?

  • gecko

    We should be retrofitting our transportation environment by eliminating supersized and overpowered vehicles just like we are starting to retofit our built environment (at least here in New York).

  • gecko

    Properly retrofitting and greening the transportation evironment would amplify stimulus actions by reducing transportation costs, providing green jobs, improved mobility and safety.

  • Larry Littlefield

    “There is a strong push by Transportation For America and its coalition of activist groups to shift federal transit spending from roads to transit.”

    I’ll be happy if you are right. And surprised.

    For one thing there isn’t enough money to maintain the roads and bridges we have, let alone pay for new ones (something that I agree should be stopped). For another, like the Republicans the Democrats don’t actually believe what they say they believe, they believe what they are paid to believe.

    A little story. Back in the early 1990s, I was assigned to work with the City Planning Commission on parts of the charter mandated (but never repeated) Planning and Zoning report. The Commission was stuffed with Dinkins appointees with Great Society backgrounds and ideas, but the city was broke. So the answer they wanted to give to everything was federal money. Poverty? Federal money. Infrastructure? Federal money. Education? Federal money. Housing? Federal money.

    Finally I couldn’t stand it anymore. Does the Commission believe, I asked, that New York City given its needs and its federal tax payments, the NYC was getting a fair share of the federal money that was already being spent? NO! they all agreed. Then what made them think that having the federal government spend more non-entitlement money (ie. discretionary and politically controlled) would direct more money to the city? Because, they said, it was the additional money that WASN’T being spent that would have been spent in NYC.

    Then we had a Democratic congress and President (Clinton). NY paid more and got screwed. Then we had a whole new type of federal spending (Homeland Security) based on a devastating attack on NYC. NYC got screwed.

    NY has lots of rich and well connected people who want to run the world. And they are happy to sell out the interests of the little people, in how much in taxes they pay and what they get in return, in exchange for the advancement of their personal power, a deal others are often willing to take.

    Ask the leadership of our state.

  • Ian Turner

    Chris,

    Respectfully, the existence fuel-efficient vehicles are not a justification for a VMT tax; you can get the same effect by increasing the gas excise tax, or by automatically adjusting that to the average vehicle efficiency. The issue of vehicles that don’t use gas freeriding on those that do is simply not a problem that we have today. If we do get to a point where fuel-free vehicles constitute more than, say, 5% of the vehicles on the road (as opposed to the current ~0.001% we have today), that would be an appropriate time to revisit this issue.

    Cheers,

    –Ian

  • Chris in Sacramento

    Ian,

    As you and others note, there are solid arguments against a VMT-based scheme.

    Gas tax increases poll poorly, and politicians are thus very reluctant to increase them. Hasn’t happened here in CA since the early 90’s. They won’t even index it to inflation. I’m with you at a policy level; for the next decade or two, it’s probably the best way to go.

    Chris

  • Ian Turner

    Hi Chris, is there any evidence that a VMT tax is more politically palatable than an increased gas tax? Mr. LaHood’s muzzling would seem to indicate otherwise.

  • Jim Mearkle

    The best way to fund the next “TEA” is to improve the efficiency of the federal aid process. Strip out all the “administrivia” and the perverse incentives.

    For example, the county public works department I work for is replacing a mid-sized bridge. We had low bid to design the bridge under $50,000, and an estimated construction cost of $500,000. Then we got it on the federal aid list, and these costs became $500,000 and $1,000,000. The added hoops to jump through when federal aid is involved inflate the costs in a way I think is as bad as the Defense Department’s $2000 hammers.

    Since federal aid pays for 80% of the project, it makes sense for the county to apply for federal aid. This is a perverse incentive. We are rewarded for pursuing a funding source that inflates the overall project cost, because it reduces our cost.

    So, to pay for transportation, we need to out as many as the additional hoops to jump through as we can, while still maintaining accountability. That’s the administrivia part.

    To remove the perverse incentives, perhaps some sort of means test is needed to see if an agency really needs federal aid for a project. For a small town with a $1/2M annual budget, federal aid for a $1/2M bridge makes sense. In our case, it did not.

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