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User fees may take a bigger toll

By Adam Ledlow TORONTO, Ont. - Two recent studies from unrelated groups in Canada and the US have each called for an increase in federal fuel taxes within weeks of each other. An Ontario-based allianc...

By Adam Ledlow TORONTO, Ont. –Two recent studies from unrelated groups in Canada and the US have each called for an increase in federal fuel taxes within weeks of each other. An Ontario-based alliance composed of management and labour groups in the construction industry has released a study urging a range of new municipal taxes -including road tolls and fuel taxes -in order to fund road and public transit systems, reduce traffic congestion and cut greenhouse gas emissions. The study, commissioned by the Residential and Civil Construction Alliance of Ontario (RCCAO) and authored by Trent University economics professor Harry Kitchen, was released Jan. 21.

The study says local governments in the Greater Toronto Area including Hamilton (GTAH) should be allowed to adopt these new taxes to ensure the well-being of the region’s infrastructure.

The groups says municipalities current revenue sources -most notably property taxes and user fees -are no longer sufficient to fund the massive operating and capital requirements of public transit and roads.

“Much of this infrastructure was built years ago and is nearing the end of its life span. Billions of dollars, perhaps tens of billions, will be required to ensure that the GTAH has the public transit and transportation systems critical to remaining competitive,” Kitchen said at a news conference at Queen’s Park.

“Not only would it be politically difficult to raise property taxes to levels that would generate the needed revenue, but property taxes also do nothing to change people’s behaviour when it comes to road and transit use,” RCCAO reps said in a release. “Specific transportation charges, on the other hand, can be designed to provide an incentive for people to make efficient decisions about how they use the services, where they should live, and where they should work.”

According to the study, the best instrument for reducing gridlock in the GTAH would be the implementation of area-wide road tolls. It has been estimated that a toll of seven cents per kilometre on the 400-series highways in the GTAH would produce $700 million in revenue annually.

Road tolls have been successful in a number of cities (Singapore, Stockholm, and London, UK) in reducing congestion and travel times, lowering emissions, and increasing transit use, according to RCCAO officials. Although the study cautions that there will be resistance to road tolls, it suggests public support will be higher if the revenues are earmarked for transportation and public transit purposes.

The study suggests that tolls could be designed so that they are higher for vehicles that cause relatively more road damage, travel longer distances, travel in peak-demand hours, and/or produce higher emissions, meaning long-haul truck drivers would likely experience the highest tolls.

The study recommends that road tolls be applied on a regional basis on the major 400-series highways, the Queen Elizabeth Way, the Don Valley Parkway, the Gardiner Expressway, the Red Hill Creek and Lincoln Alexander Parkways.

Other major arterial highways could also be included if they were deemed appropriate.

As for a GTAH-wide fuel tax, suggested to be set by a governing body and piggybacked onto the provincial fuel tax, the study indicates that this would be a relatively inexpensive and simple plan to administer. It has been estimated that a charge of six cents per litre would generate new revenue of between $300 million and $420 million per year.

“A municipal fuel tax is a blunter instrument than road tolls for controlling individual behaviour but it is almost certain to have an impact as commuters are likely to drive less if gas prices rise,” Kitchen noted.

Currently in a few jurisdictions in Canada, fuel tax revenues are shared between the province and the city or region. The Greater Vancouver Transit Authority (TransLink) receives 12 cents per litre from B. C., and 2.5 cents per litre is remitted to the transit system in the Victoria region.

Calgary and Edmonton receive provincial grants for transportation infrastructure that are estimated at five cents per litre. Agence Metropolitaine de Transport, which provides transit services to Montreal and surrounding municipalities, receives 1.5 cents per litre.

Other initiatives suggested by the study include non-residential parking space taxes and motor vehicle registration fees.

The study comes on the heels of a report by the National Surface Transportation Policy and Revenue Study Commission in the US, released in December, which calls for the increase of fuel taxes by as much as 40 cents per gallon to pay for infrastructure improvements. The report says that an annual investment of $225 billion is necessary over the next 50 years to update the current system to a state of good repair. Less than 40% of this total is currently being spent, according to the commission.

The report has drawn both praise and criticism from the American trucking community. The American Trucking Associations has commended the efforts of the commission “for its hard work and dedication to analyzing the future infrastructure needs of the nation.”

“As the Commission report makes clear, trucking is, and will remain, the dominant mode of freight transportation,” the ATA said.

ATA officials say fixing infrastructure problems in the US is “a significant financial undertaking” and noted the “current revenue streams are failing to keep pace with infrastructure needs.”

The ATA said the report acknowledged the need for a new and improved investment strategy which “not only supports the health of the highways, but the health of our future economy. One that includes a combination of steps designed to ease congestion, alleviate bottlenecks and repair aging infrastructure.”

ATA said it was particularly pleased that the commission recognizes the need to address freight movement; the important role that goods movement plays in the overall health of the US economy; the need to reform the program to ensure a more performance-based system; and the need to maintain a user-fee based system.

The American Automobile Association (AAA) is also applauding the commission’s “positive contribution,” saying the group is “making a strong recommendation for change.”

“We have been saying for some time now that America needs a new vision for how the nation’s transportation system is planned, funded and implemented,” AAA representatives said. The AAA said that based on its research, it found that the motoring public may be willing to pay more in taxes “provided they trust that the money is invested responsibly in programs and projects that will provide enhanced safety, improved mobility and system reliability.”

The Owner-Operator Independent Drivers Association (OOIDA) however, disagreed with the commission’s call to increase fuel taxes, saying instead that there needs to be a restructuring of the way money from the Highway Trust Fund is used.

“They need to show us the money,” says Todd Spencer, executive vice-president of OOIDA. “Where it’s going, how it is being used, what are our true national needs, how the system is going to be cleaned up top to bottom, and then we’ll talk about paying more. Truckers pay enormous sums into the Highway Trust Fund, contributing as much as 36% of it, and deserve better than just ‘a new beginning’ – which really just means paying even more money.”

The association admits that runaway earmarks are part of the nation’s problem, but reform efforts should also focus on where other highway tax dollars are spent, adding that many federal agencies and programs are funded by those tax dollars.

“Some of those agencies and programs should be streamlined or done away with, and others should be funded by other means,” said Spencer. “Simply put, highway tax dollars should be spent on highways.”

OOIDA officials say they also appreciate the Commission’s recommendations on limiting tolling and reigning in highway privatization.

ased tolling and privatization will no doubt have a crip-pling effect on the trucking industry and on the nation’s economy,” adds Spencer.

He noted that truckers pay significant amounts in highway user taxes in the form of registration fees, state fuel taxes, tolls, highway usage fees, and excise taxes specific to trucking equipment.

Three members of the 12-member commission sided with OOIDA’s stance on the tax increases, rejecting the idea outright. One of those members, Transportation Secretary Mary Peters, has said that increasing federal gas taxes “is not leadership – it is ludicrous.”

“According to recent surveys, the public overwhelmingly opposes the idea of raising (federal gas taxes). They have no confidence that their gas taxes – which go into the Highway Trust Fund – will be spent either wisely or well,” Peters was quoted as saying at a Portland seminar in October.

“Washington’s misplaced priorities have caused Americans to lose trust in the trust fund. They are tired of paying for excellent bridges to nowhere and horrible commutes to everywhere else. And I do not blame them one bit.”

Peters has said the better way to move forward is offering incentives to states willing to pursue more efficient approaches to relieving congestion and investing federal funds more effectively.

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