Transcript NSTIFC Final Report Briefing BG-AASHTO (10-22

NATIONAL SURFACE TRANSPORTATION
INFRASTRUCTURE FINANCING COMMISSION
PAYING OUR WAY:
A NEW FRAMEWORK FOR
TRANSPORTATION FINANCE
Final Report Briefing
Presented by:
Bryan Grote, Commissioner
Principal, Mercator Advisors, LLC
October 25, 2009
AASHTO Annual Meeting
About the Commission
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Created in SAFETEA-LU (sec. 11142) to:
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15 Commissioners
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Assess highway and transit investment needs
Examine federal HTF revenues, status, and projections
Consider alternative funding options and finance techniques
Report back to Congress with findings and recommendations
Diverse backgrounds, appointed by Congress or Secretary of
Transportation
Open and transparent process
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23 months of literature reviews, expert presentations, public comments,
and commission debates  final report
National Surface Transportation Infrastructure Financing Commission
Commission Focus & Principles
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Three interrelated questions:
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How much revenue is needed?
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How should it be raised?
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How should it be spent? (generally outside scope)
Six guiding principles:
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Enhance mobility of all system users
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Generate sufficient funding on a sustainable basis
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Cause users to pay full cost of system use to greatest extent possible
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Encourage efficient investment
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Incorporate equity considerations
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Support broader public policy goals (i.e., energy and environment)
National Surface Transportation Infrastructure Financing Commission
Starting (Obvious?) Observations
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Demands outpacing investment
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System maintenance competing
with capacity expansion
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Fuel taxes not sufficient (at
current rates)
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Need more revenue…and
collected in ways more directly
related to system costs
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Need more investment…and
more intelligent investment
National Surface Transportation Infrastructure Financing Commission
Findings – The Highway/Transit Funding Gap
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Nationally:
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Meeting only 1/3 of roughly $200 billion
required each year to maintain and improve
the system
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Meeting only 1/5 when externalities such as
congestion, environmental, and safety
impacts are considered
Federal level (assuming current share of
national needs):
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HTF receipts projected to average $32 billion
per year over next 25 years (2008 dollars)
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To maintain system, projected to need
additional $46 billion+ each year
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To improve system, projected to need
additional $64 billion+ each year
National Surface Transportation Infrastructure Financing Commission
Federal Funding Gap (current law)
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National Surface Transportation Infrastructure Financing Commission
Fuel Tax Projections over Long Term
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Fuel tax
sustainability
eroding
quickly –
unlikely to
follow smooth
path, with
technology
advances and
heightened
focus on
global climate
change.
National Surface Transportation Infrastructure Financing Commission
Commission Recommendations Overview
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No “silver bullet” solution
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Current indirect user fees provide only weak price signals for system use
Financing approaches can help, but no substitute for required revenue
Long term, mileage-based user fee (VMT) system best choice
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Sends clear signals about full costs of system use
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Spurs more efficient use and investment
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More consistent with broader federal policies
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More sustainable as a funding source
Near term, need to bridge the gap with current sources
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All options face political and practical challenges
Can’t just wait – new funding and spending reform must go hand-in-hand
National Surface Transportation Infrastructure Financing Commission
Framework for Funding Options Assessment
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Established 14 evaluation criteria:
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Revenue stream considerations
Implementation and administration
Economic efficiency and impact
Equity considerations
Evaluated 40+ funding options:
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Existing sources
New vehicle-related taxes and fees
New fuel-related taxes
Broad-based taxes
Freight-related sources
Tolling and pricing mechanisms
National Surface Transportation Infrastructure Financing Commission
Summary of Funding Options Assessment
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Options
evaluated
based
primarily on
relevance to
direct federal
funding or
federal
facilitation of
state and
local
mechanisms
National Surface Transportation Infrastructure Financing Commission
Comment on Freight-Related Options
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Truck-related fees (incl. diesel tax) contribute more than onethird of HTF revenues
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Short term, increasing these charges is best option:
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Modest relationship to road use and impacts
Avoids distortions for particular user classes
Favorable from administrative cost standpoint
Downside – some charges have considerable revenue variability
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Long term, move to VMT fee structure preferred
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There are opportunities for targeted fees (e.g., customs
duties, container charges) for dedicated investment
categories
National Surface Transportation Infrastructure Financing Commission
Commission Recommendations:
Transition to Mileage-Based User Fee
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Begin transition to VMT as soon as possible
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Set federal fee at level sufficient to fund federal share of
national needs
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Approximately 2¢ per mile for autos under current policies and estimates
Additional charges at state/local level
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Including for congestion, emissions, special tolled facilities, etc.
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Reduce/eliminate HTF reliance on fuel and vehicle-based
taxes (carbon charges may still be required)
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Ancillary benefits – ITS (traveler info) and VII (safety
applications)
National Surface Transportation Infrastructure Financing Commission
Transition to VMT (cont’d)
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Significant but resolvable issues:
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System reliability / security / enforceability / fairness
Privacy protection
Implementation and administration costs
Technologies and standards, equipping vehicles
Next steps:
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R&D programs (technologies and standards)
Pilot programs and state-level VMT initiatives
Extensive public outreach to address concerns and problems,
explain possible solutions
Independent advisory committee or policy oversight body to
coordinate efforts
National Surface Transportation Infrastructure Financing Commission
Commission Recommendations:
Immediate Action – Existing Sources
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Protect and preserve Highway Trust Fund
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Increase existing HTF revenue sources:
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Modest fuel tax increases (10¢ gas, 13¢ +2¢ diesel)
Increase (double) Heavy Vehicle Use Tax (HVUT)
Index motor fuels tax, HVUT, and truck tire tax to inflation
Together these short-term measures will:
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Generate $20B annually, recapture lost purchasing power since 1993
Close 30-40% of combined federal funding gap (current policies)
Enable continuation of current program spending levels
The proposed gas tax increase will cost the typical household only
$9 per month ($5 per vehicle, ½¢ per mile).
National Surface Transportation Infrastructure Financing Commission
Commission Recommendations:
Facilitate Non-Federal Investment
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Tolling Initiatives
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Financing Incentives
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Allow tolling for new Interstate capacity, existing Interstates in major metro
areas for congestion relief
Expand Interstate System Reconstruction and Rehab Pilot Program
Residual revenues for surface transportation
Tolling standardization and pricing information for travelers
Enhance federal credit (TIFIA) and re-capitalize State Infrastructure Banks
Financial incentives for user-backed projects ($700M per year)
Expand private activity bond program, consider additional targeted tax
subsidies (tax credit bonds)
Private Sector Financial Participation (PPPs)
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Facilitate private participation in project development, financing, and O&M
Ensure controls to protect the public interest, support state oversight
National Surface Transportation Infrastructure Financing Commission
Commentary on the NIB Concept
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Confusion about the fundamental policy objectives:
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Key questions yet to be answered clearly:
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Is overall objective to improve resource allocation or provide financing?
What investments are being targeted for federal assistance?
How will projects be selected (at the federal level)?
Do they require funding (grants) or financing (loans)?
Is such assistance not available from existing public or private sources?
What revenue source(s) will be used to fund this assistance?
How will this be more effective than existing programs?
Recommendations (if this is pursued):
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What problem(s) will it solve?
What is the appropriate federal role?
Focus on nationally significant projects
Provide cost-effective financing with direct federal credit, building on TIFIA
No substitute for new revenue!
National Surface Transportation Infrastructure Financing Commission
Other Recommendations
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Research, Development and Demonstration Initiatives
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VMT next steps
System cost impacts of certain users/vehicles
PPP guidelines for transparency and accountability
Technical assistance to states
Funding Allocation (“Bucket 3” Issues)
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Safety as high priority
Performance-based funding allocation
Comprehensive and cohesive surface transportation system
Transparent process for, and explicit limits on, earmarking
Contracting to achieve life cycle costing and optimal asset management
National Surface Transportation Infrastructure Financing Commission
Concluding Thoughts
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“Looking to the future, the Commission supports transitioning
to a funding approach based more directly on use of the
transportation system – ideally a mileage-based user fee –
as the right foundation.”
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Who pays now?
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Average user pays 3¢ per mile in motor fuel taxes (compared to direct
cost of 10¢ to 29¢ per mile on congested highways).
Who pays in the future?
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We still pay…
Question is how much, when, and what do we get in terms of greater
congestion, reduced personal mobility, lower economic growth, worse
environment, and reduced safety.
National Surface Transportation Infrastructure Financing Commission
For More Information
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http://financecommission.dot.gov
National Surface Transportation Infrastructure Financing Commission
19-March-09