Think Roads Pay for Themselves? Think Again

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Image: Subsidyscope

The myth that U.S. roads “pay for themselves” thanks to user fees is a subject that’s likely familiar to many Streetsblog readers — but just how much of the nation’s highway funding is provided by charging drivers?

The answer may surprise even active critics of the current asphalt-centric transportation system. Between 1982 and 2007, the amount of federal highway revenue derived from non-users of the highway system has doubled, according to a study released today by Subsidyscope.

Analyzing Federal Highway Administration data dating back to 1957, the dawn of the Interstate system, Subsidyscope researchers found that non-users of the highway system contributed $70 billion for nationwide road construction and maintenance in 2007. In 1982, by contrast, highway contributions from non-users totaled just $35 billion (in 2007 dollars).

Today’s study also found that the share of road funding generated by user fees fell to 51 percent in 2007, down from 61 percent just a decade earlier. (The accounting used by Subsidyscope, a joint project of the Pew Charitable Trusts and the Sunlight Foundation, accounted for the use of about one-sixth of federal gas tax revenue to pay for transit.)

What has caused the government’s increasingly rapid dependence on non-road user fees — which more often than not take the form of direct transfers from the Treasury — to pay for roads?

Subsidyscope points out that the federal gas tax has stayed stagnant since 1993, rapidly losing value as inflation climbs, but the growing popularity of bond issuances as a way to pay for new roads is also a factor. According to Subsidyscope’s research, the value of new bonds issued to pay for highways reached $24.7 billion in 2007, up from just $6 billion in new bonds issued in 1982 (converted to 2007 dollars).

Bond offerings, which often represent states and localities playing a greater role in transportation planning, do not guarantee that users will be paying for new highway construction — rather, bonds depend on market conditions to allow a successful leveraging of debt, and the recent economic downturn has forced many governments to limit their bonding plans.

  • Rob

    “Bond offerings, which often represent states and localities playing a greater role in transportation planning, do not guarantee that users will be paying for new highway construction — rather, bonds depend on market conditions to allow a successful leveraging of debt, and the recent economic downturn has forced many governments to limit their bonding plans.”

    Not sure I understand this last paragraph. If a state issues a revenue-bond for a toll road, then the tolls are supposed to pay interest and principal on those bonds. So how would non-users being paying for the bonds?

    Can someone please explain? Thanks.

  • Ian Turner

    Bonds should be entered as non-users, because they will be paid by future taxpayers, who are decidedly not users of today’s roads.

  • Ian Turner

    Rob, the point is that if tolls don’t bring in as much as expected, then the governments must pay the bonds out of general revenues, i.e. from non-users.

  • Ian beat me to it. Also, it’s worth noting that toll increases localities may need to make higher debt service payments on bonds in the out-years often require political support to pass – which isn’t guaranteed.

  • Rob’s point does need to be clarified. Bonds financed through tolls on specific roads are probably the fairest and most practical way to charge users of specific roads. Indeed, that system is much fairer in a lot of ways than a broad stroke gas tax.

  • Elena —

    I believe the Subsidyscope study encompasses all U.S. roads — federal, state and local. (You appear to characterize it as federal only, in para #2.)

    I couldn’t follow your prose in your comment (#4). Could you restate?

    I followed the link to what appears to be a 1-2 page summary. Is there a detailed, underlying study?

    Thanks.

  • Galls

    No one is even mentioning a tax on every gallon of gasoline goes to the interstates, but not even half of all gallons of gasoline are used on the actual interstates.

    So interstates in reality pay for less than 1/4th of their costs.

  • Tom

    Charles: the original numbers come from DOT, so no, there’s no larger report that can be pointed to. This is just some crunching of relatively obscure numbers that are already collected by the feds. Interesting, though!

  • This trend has likely accelerated in the last year or so, at least at the federal level. Since the gas-tax fed Highway Trust Fund went into the red in late 2008 Congress has made up the difference with general funds, paid for mainly with income taxes.

  • PCC

    Some states front their local match of federal funds by issuing bonds backed not by road revenues, but by other taxes. Here in Illinois, liquor taxes have helped fund the two most recent rounds of state infrastructure bonds.

  • Please note, all, that this appears to refer to federal highways, which have always been LESS subsidized than state and municipal roadways. For an example of the far higher subsidies for state and local roads, see this study from Texas DOT:

    http://www.txdot.gov/KeepTexasMovingNewsletter/11202006.html#Cost

  • John M

    ‘User funds v. non-user funds’ is not the same as ‘user v. non-user’ We all know it is the (unfortunate) case that many/most of our income and property taxpayers are motorists. They pay taxes to funds not derived from road use, but they are not universally non-users.

    I’m saying this not to argue against the article, but rather for the article. Our arguments against the transportation status quo need to be rock solid. While turning ‘non-user funds’ into ‘funding by non-users’ sounds stronger, it unfortunately doesn’t stand up.

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