Is it time for a much different approach to infrastructure funding?
June 7, 2010
June 7, 2010
Over the past decade I’ve chaired or otherwise participated in a number of panels dealing with the considerable and growing gap between what we should be spending on infrastructure every year and what actually is being spent. If I’ve learned anything it’s that our problems are in no way unique; legislators and transportation stakeholders south of the border are just as pressed to find an effective way to deal with this issue as are their counterparts in Europe and Australia. I’ve also learned that continuing with the same old strategies is going to deliver nothing but the same old problems. We need to consider new approaches, no matter how far they may depart from our current practices.
Over the past year, US legislators and stakeholders have engaged in a debate that may revolutionize their greatly troubled approach to infrastructure spending. The debate is worth following; it’s directly relevant and there is much to learn.
US legislators have had to face the fact that their approach to raising infrastructure funding through fuel taxes is outdated. Current stimulus spending may temporarily mask the depth of the problem but this approach to raising funding has for years been falling short of meeting obligations for highway projects. By last year it was estimated that infrastructure investments from all levels of US government are contributing only about one third of the $190 billion that’s needed every year just to keep up with highway maintenance plus some gradual improvements to stay in line with the increases in trade, population growth and geographic movements of people that is normal over the course of years. It has been reported that from 1980 to 2006 the total number of miles travelled by car and trucks doubled yet highway lane capacity increased by just 4.4%. If you adjust for inflation, real highway spending in the US is down an incredible 50% since the heydays of the Highway Trust Fund of the late 1950s.
The problem is a flawed approach to generating revenues for infrastructure spending. The tax is tacked on the price of each gallon of gasoline or diesel yet purchases of fuel are actually dropping as Americans drive more fuel efficient vehicles. For example, Americans drove 108 billion fewer miles in 2008 than they did in 2007. Recessions, of course, further drive down mileage. And with US president Barack Obama pushing for a 40% improvement in gas mileage for cars and light truck fleets by 2020, the continuing demise of the current infrastructure revenue collection strategy seems inevitable.
So the US Congress chartered a special commission to look into the infrastructure funding gap and the commission came back with an interesting recommendation: Phase out the collection of fuel taxes and move towards a direct user-fee system where vehicle owners are charged based on the miles they drive. This way, the cars and trucks that use the nation’s roadways the most, and thus cause the most wear and tear on roadway surfaces, end up paying the most.
How would the government know who is using the highways the most? Well, this is the electronic age so you know there would have to be a technological solution. The commission believes that tracking technology and wireless communication could be used on a grand scale to calculate each vehicle’s travel miles and initiate the billing. The technology to send the data would have to built into all new vehicles over time.
One more thing I learned from the infrastructure panels I chaired or participated in was that if there is an interesting new idea, it’s likely already being tried somewhere. And so it is with user fees based on vehicle miles traveled. Several European countries are either already using them – Germany, Switzerland, Austria — or planning to in the near future –the Netherlands, Denmark.
Germany’s experience has shown supply chain management improvements such as a clear incentive to consolidate shipments and cut down on out-of-route miles; move a portion of traffic to rail and purchase trucks with cleaner burning engines (the government gives a discount for doing so).
No doubt there are negatives to this approach (errors in tracking spring to mind plus the obvious invasion of privacy through tracking vehicle destinations) but overall I think this approach is worth consideration. What do you think?
With more than 25 years of experience reporting on transportation issues, Lou is one of the more recognizable personalities in the industry. An award-winning writer well known for his insightful writing and meticulous market analysis, he is a leading authority on industry trends and statistics. All posts by Lou Smyrlis