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Highway funding nebulous

Finding a reliable funding stream for transportation infrastructure in Pennsylvania is crucial because the current system that relies on gas taxes and tolls isn’t producing the necessary revenue.

Finding a reliable funding stream for transportation infrastructure in Pennsylvania is crucial because the current system that relies on gas taxes and tolls isn’t producing the necessary revenue.

More efficient cars and motorists driving fewer miles have meant state and federal governments are collecting less money to maintain infrastructure. Gas taxes collected in Pennsylvania have declined 5.4 percent in the past two fiscal years, from $2.1 billion in 2006-07, according to PennDOT.

However, the state and federal governments are no closer to finding alternatives. Public and business backlash at solutions requiring drivers to pay more is a central problem. Politicians also have dragged their feet on the issue because it’s a no-win in a recession, business leaders and analysts said.

Congress hasn’t approved a transportation funding bill and likely won’t take up debate until after the Labor Day recess, U.S. Transportation Secretary Ray LaHood said in a meeting with midstate business leaders last month.

The federal transportation funding law expires Sept. 30. Pennsylvania receives about $1.4 billion a year from the federal government for roads and bridges, said Rich Kirkpatrick, a PennDOT spokesman. State gas taxes provide an additional $2 billion for transportation, he said.

The legislature and governor continue to hash out a budget, which already is two months late, delaying discussions transportation funding reform. Federal economic-stimulus money is helping to put construction companies and road crews to work, but the American Recovery and Reinvestment Act will stop financing road projects after next year.

“All this uncertainty leads construction companies to hunker down,” said Robert Latham, executive vice president of the Associated Pennsylvania Constructors, a Harrisburg-based trade group representing heavy-infrastructure construction companies.

Construction firms have said they’re concerned, too. Large-scale infrastructure building — not just repaving operations — is needed to sustain job levels, add new workers and fix the state’s transportation system, they said.

The gas tax was fine when people were driving more with less-efficient cars, academics said. But the trend to fuel efficiency and non-gasoline powered vehicles will deplete gas taxes. The tax also wasn’t designed to keep up with a changing economy.

“The problem with the federal and many state fuel taxes is that they were never indexed for inflation,” said Peter Swan, a professor of logistics and operations management at Penn State Harrisburg.

There are several funding streams that could be tapped to replace the gas tax. They include mileage-based user charges, tolls, privatization and raising the gas tax, Swan said. Each has its pros and cons, but the largest resistance comes from the public’s distaste for paying more, he said.

“The real problem is that the voting public does not understand economics and they want everything for free,” he said.

Pennsylvania tried to augment the gas tax. Gov. Ed Rendell wanted to lease the Pennsylvania Turnpike, but that faced heavy opposition from trucking companies, legislators and the Turnpike Commission. The governor and legislature then turned to tolling plans.

Although neither plan has come to fruition, Kirkpatrick pointed to them as leadership from the governor on transportation funding.

The Susquehanna Valley Center for Public Policy, a moderate-conservative think tank based in Derry Township, Dauphin County, was against the turnpike-lease plan, said Charles Greenawalt, a senior fellow with the center. Greenawalt is also a professor at Millersville University in Lancaster County and worked on transportation policy for the gubernatorial campaign of Bill Scranton in 1986.

If private companies want to come to the state, build a road and operate it, that’s fine, he said.

“But to just give away the crown jewel of our transportation system would be disastrous,” he said.

The private entity wants to buy that system to make money, he said. There’s only two ways to do that: cut maintenance or raise tolls, he said.

Such plans are vulnerable to economic swings, such as the global recession over the past year and a half, Greenawalt said. That could have spoiled Pennsylvania’s plans to lease the turnpike if the private entity was hurt significantly by the recession and unable to meet its investment obligations, he said.

Then there’s tolling initiatives. Pennsylvania passed Act 44 in 2008, which called for the tolling of I-80. The Turnpike Commission would operate the tolls and begin making payments to the state to support transportation.

However, that idea ran into a major snag when the U.S. Department of Transportation found problems with the state’s proposal. The main concern was the use of toll money to fund transportation infrastructure other than I-80.

A 2006 study from the Transportation Research Board, an arm of the National Academies, recommended both tolling and mileage-based alternatives to gas taxes.

Greenawalt favors gateway tolling on Pennsylvania’s major arteries. Gateway tolling collects money from truckers and travelers who will pass through the state. Those motorists spend minimal money in the state but wear on the roads just the same, he said.

The Turnpike Commission and PennDOT are reviewing the I-80 application and its issues to determine the best course of action, Kirkpatrick said. He did not have a timeline for resolution of the issue and PennDOT is not looking at other alternatives, he said.

“There currently isn’t a political will to take the steps that are probably most necessary,” said Chris Peters, vice president of operations at trucking firm Carlisle Carrier Corp. “This is not a glamorous political issue. This is a day-to-day, on-the-ground issue. And it’s not going to help a politician in their career.”

Hampden Township, Cumberland County-based Carlisle Carrier, like many trucking firms, has a direct interest in transportation funding. Trucking companies need good roads to do business, but fuel taxes and tolls hit them in the wallet. Those costs are passed on to customers, Peters said.

“From our side, it feels like we’re being asked to fund more than our share,” he said.

Without I-80 tolls, Act 44 is in serious trouble, and additional Turnpike Commission payments will be cut in half after 2010, said Carl DeFebo, a spokesman for the Turnpike Commission. The commission has contributed $1.8 billion and will pay $675 million this fiscal year.

The legislature will be confronted with a $473 million transportation budget shortfall next year, or about $60 billion through the 47-year life of Act 44, DeFebo said. That leaves Pennsylvania back in the same position it was before: without a larger plan to fund transportation.

If that continues, infrastructure will decline more rapidly, making the job of fixing it more difficult, Swan said.

To prevent that, political and private-sector leaders need to do a cost-benefit analysis to find the best mix of funding options that are fair, Greenawalt said.

“There’s always a tension. It’s the private sector that has the tools and techniques to gain the greatest return on investment,” he said. “But it’s the public sector that must provide the supervision to make sure this gets done right.”

Highway-funding alternatives 101

Ideas for additional revenue to pay for maintenance, repair and replacement of Pennsylvania and U.S. transportation infrastructure have existed for decades, according to academics and analysts.

However, the issue is more urgent today with reduced gasoline usage, which puts transportation funding in jeopardy because of its reliance on the gasoline tax.

Here’s a look at four main ideas for raising additional revenue for roads:

Funding avenue: Increase gas tax, index it to inflation

Pros: Inflation-linked gas tax better reflects real cost of road maintenance; all drivers pay the tax

Cons: Fuel-efficient cars and trucks use less gasoline; motorists driving less; future automobiles may not use gasoline; does not account for heavy-vehicle road damage

Funding avenue: Mileage-based road-use charges (scanner systems similar to E-ZPass)

Pros: Fair accounting of each auto’s road usage; can account for weight and fuel efficiency of a vehicle; Oregon has experimented with mileage-based taxes and found the idea sound; similar system used for trucking

Cons: Big Brother aspect of tracking a motorist’s every movement alarms civil libertarians; needs guarantees of privacy protection; costs of installing tracking technology

Funding avenue: More toll roads, increased tolls

Pros: By tolling more highways, such as Interstate 80 in Pa., states can capture revenue from pass-through traffic; most often used in conjunction with gas taxes

Cons: Requires strict guidelines for direction of revenue; trucking firms see tolls as double taxes; pushes traffic to side roads, increasing accidents, municipal road repairs; cost unfairly put on back of toll-road users

Funding avenue: Highway leases, road privatization

Pros: Takes politicians out of business loop, resulting in faster decisions; real cost to operate roads; government receives large lump sum, can control contracts

Cons: Tolls could increase sharply, even with leases; privatization would sell public asset, unavailable to state as collateral later; oversight process can be vague

Fuel taxes into Pennsylvania Motor License Fund

Fuel taxes that help finance Pennsylvania’s repair and maintenance of its highway infrastructure have been declining since the 2006-07 fiscal year, according to PennDOT.

The decline has left a gap in funding for road projects, a scenario that many states are dealing with, academics said.

Here’s a look at the history of Pennsylvania’s fuel tax receipts:

Fiscal year: 2005-06
Fuel tax receipts: $2.07 billion
Percent change: 10 percent

Fiscal year: 2006-07
Fuel tax receipts: $2.14 billion
Percent change: 3 percent

Fiscal year: 2007-08
Fuel tax receipts: $2.09 billion
Percent change: – 2.2 percent

Fiscal year: 2008-09
Fuel tax receipts: $2.02 billion
Percent change: – 3.3 percent

 

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