Transcript ARE THE FULL COSTS OF ROADS PAID FOR BY ROAD USERS? A Paper for THE AMERICAN DREAM COALITION Funded by DONORS CAPITAL PROGRAM By THOMAS A.

ARE THE FULL COSTS OF ROADS
PAID FOR BY ROAD USERS?
A Paper for
THE AMERICAN DREAM COALITION
Funded by
DONORS CAPITAL PROGRAM
By
THOMAS A. RUBIN, CPA, CMA,
CMC, CIA, CGFM, CFM
Yes.
Questions?
Do Road Users Paid the Full Cost?
• In recent years, much discussion
• Several papers/organizations say “no:”
– Sierra Club America’s Auto’s on Welfare – Seven
studies estimating annual road subsidies from
$378-2,157 billion (1992-1996)
– Subsidyscope, Analysis Finds Shifting Trends in
Highway Funding: User Fees Make Up Decreasing
Share (Nov ‘09) – for 2007, user revenues only
51% of total highway revenues
Do Road Users Paid the Full Cost? II
• Cambridge Systems, Inc. for TxDOT, The
Highway Construction Equity Gap (2/08) – For
seven TxDOT roadway improvement projects,
the life-cycle ratio of road user revenue to
costs ranged from 13% to 91%, with a
weighted average of 34%.
What’s Different With This Paper?
• Sierra Club:
– Papers cited by Sierra Club include “soft costs,”
such as global warning, pollution, U.S.
Department of Defense, etc.
– This paper is “hard costs” only – the construction,
maintenance, and operation of roads, plus
associated activities such as law enforcement and
emergency response, motor vehicle registration,
compared to road user payments to governmental
bodies.
– Later papers in this series will address “soft costs.”
What’s Different With This Paper?
• Subsidyscope:
– Only looked at revenues, did not consider costs.
– Only considered road user charges utilized for roads.
– We have included as road use-generated revenues many
factors that Subsidyscope did not.
• Subsidyscope paper does fine job of showing how
road user charges, as they calculate them, have
dropped from 60-70+% in 1950’s through 1970’s
(high of 72.69% in 1963) to 50.81% in 2007.
• Regardless of how you calculate, road user fees
have not kept up with inflation and mpg increases.
What’s Different With This Paper?
• TxDOT:
– Very misunderstood and improperly cited paper.
– There are cross-subsidies identified in this paper,
but they are from the entire Texas road system to
specific road projects, not from “general” taxes to
the specific road projects.
– This paper is making the case that more dedicated
funding is needed for Texas roads – and that the
diversion of road user fees for other purposes is
substantial.
What’s Different With This Paper?
• TxDOT (concluded):
– Texas has 20¢/gallon motor fuel excise charge.
– 5¢/gallon (25%) is dedicated to K-12 education.
– .6¢ (3%) of what’s left goes for collection costs.
– Of the 20¢/gallon that each motorist pays to the State,
only 14.4¢ (72%) winds up going for road purposes.
– The Texas cents-per-gallon rate was last increased in
1991 – but, since then, all road construction costs have
increased almost every year and vehicle mpg has
increased substantially – and cost increases will
continue.
What Else Is Different
With This Paper?
This Paper Was Done
By An Accountant.
Process
• First, we’ll work through the road expenditures.
• Second, we’ll collect road user revenues.
• Data sources:
– Chief source is: Federal Highway Administration,
Highway Statistics 2007.
– Population and Taxable Sales: Census Bureau
– General Sales Tax Rates: Federation of Tax
Administrators
– Motor Fuel Sales Tax Rates: American Petroleum
Institute
Costs
• There are two ways to disaggregate the cost:
– Government level: federal state, local
– Function
• Both are in web version, we’ll use “function” here:
– Capital outlays (new construction and capital renewal
and replacement, not split out)
– Maintenance and service
– Administration, planning, and research
– Law enforcement and safety
– Debt service
Road User Revenues
• Two-factor test; it is road user revenue if:
1. If the driver wants to drive his/her vehicle
on the roads, (s)he must pay the charge,
and
2. The payment of the charge is only made
by those who are using the roads or
clearly intending to use the roads.
• If it meets both criteria, it is counted; if it
doesn’t it isn’t.
Included Road User Revenues
• Federal Highway Trust Fund
• State User Fees – cents/gallon fuel charges,
vehicle registration fees, tolls
• Local Government User Fees – motor vehicle
and fuel charges, tolls
• Original Issue Toll-Backed Bonds
• Vehicle/Parts Sales Tax Receipts
• Motor Vehicle Fuel Sales Tax Receipts
• Highway Trust Fund Interest
• All “net” of collection costs
Why Include All of These?
• Many obviously direct road user charges are, by
statute, diverted to non-road purposes.
• Many taxes are obviously directly related to road
use – see two-factor test.
• Many allegations that roads are subsidized by
“general fund revenues:”
– No doubt that many general fund taxes go for roads.
– In order to test validity of “subsidy hypothesis,” we must
know not only the amount of general fund revenues that
go for road purposes, but also the amount of funding for
general fund that comes from direct road use charges.
Federal Highway Trust Fund
•
•
•
•
•
•
•
$.184/gallon for gasoline
$.284/gallon for diesel
Other rates for other types of fuel
Excise charge on heavy truck tires
12% “sales tax” on heavy trucks
Annual fee for heavy trucks based on weight
Values shown include $.0286/gallon dedicated
to transit, other “flexible funds” (CMAQ, STP)
used for non-road purposes, exclude
$.001/gallon for LUST
State User Fees
• Includes:
– Cents/gallon charges
– Motor vehicle registration & drivers licenses
– State agency toll receipts
– In some states, overweight violation fines
• Excludes:
– Speeding and other types of traffic violation
penalties
– Sales taxes
Local Government User Fees
• Includes:
– Cents/gallon charges
– Motor vehicle registration fees
– Local agency toll receipts
• Excludes:
– Speeding and other types of traffic violation
penalties
– Sales taxes
– Curb parking ticket revenue/fines
Original Issue Toll Backed Bonds
• This is something that virtually every other
paper counts as “taxpayer subsidy.”
• However, toll road/bridge/HOT lane bonds
that are backed by toll revenues are paid out
of user charges – tolls – for road use – and
satisfy our two-factor test.
• Note that “general obligation” and revenue
bonds backed by non-toll revenues are not
included here.
• Refunding bonds not included, only first issue.
Vehicle/Parts Sales Tax Receipts
• This is another source that other papers do
not count.
• Again, this satisfies the two-factor test –
people who buy cars do so to use them on
roads and, if you buy a car, you must pay sales
tax.
• In 2007, only five states (Alaska, Delaware,
Montana, New Hampshire, Oregon) did not
have general sales tax.
Motor Vehicle Fuel Sales Tax Receipts
• Again, not counted in other papers.
• Again, passes two-factor test with flying
colors.
• In 2007, only six states (California, Florida,
Georgia, Illinois, Indiana, Michigan, and New
York) had motor fuel sales taxes, but many of
these states were among the largest for motor
fuel sales.
General Notes on Sales Taxes
• With the exception of New York Sales motor
fuel sales taxes, only state-wide taxes are
included.
• Many states allow local sales taxes, which can
be extensive – in Los Angeles County, the
nation’s largest local county, there were two
half-cent sales taxes primarily for transit that,
in 2007, generated over $1 billion – and
approximately one-third of sales are vehicles,
parts, and motor vehicle fuel.
Highway Trust Fund Interest
• The funds sitting in the Highway Trust Fund waiting
to be allocated and called down do not accrue
interest for the Highway Trust Fund.
• Having these funds sitting idle means that the
Treasury don’t have to issue that amount of debt to
finance the nation debt.
• In 2007, the average balance was >$15 billion and
the average one-year Treasury rate for FY07 was
4.87% – so the taxpayers saved $746 million in
interest expense.
• Another “no-one-but-us-counts-it” item.
Significant Variance by State
• Road User Revenues Exceed Road
Expenditures:
– 23 States “in the black”
– Tennessee had revenues of 193.7% of
expenditures
– California had $9.6 billion “surplus”
• Road Expenditures Exceed Road User
Revenues:
– 27 States and District of Columbia “in the red”
– Alaska had revenues of 26.2% of expenditures
– Missouri had $2.2 billion “deficit”
“Sierra Club” Subsidies
• These will be subject of future papers in this series
• Quick-and-dirty responses here
• Eleven factors – wording in titles of following slides
are those of Sierra Club
• Note that their seven reports are all fourteen to
eighteen years old
• The highest estimate of road subsidies – $2,127
billion in 1994 – was >30% of GDP in that year
1. Police, Fire, Ambulance; road
construction & maintenance; other
local government – paid for with taxes
• See preceding – government collections from road
users exceeds government expenditures on roads.
• This paper does include all factors listed above;
however, based on comparative review of
emergency response costs, it is likely that these are
not consistently reported from state-to-state.
• Traffic fine revenues and insurance recoveries not
included as road user revenues in FHWA stat’s.
2. Property taxes lost from land
cleared for freeways
• Property tax valuation added due to mobility
created by the American system of mobility has
created many times the accessed valuation lost to
land used for roads; a large portion of high-value
American land would be worth a small fraction of
current value without road mobility.
• Many roads, primarily those in cities and smaller
urban areas, existed before the advent of the
automobile.
3. Parking – free or cheaper parking is
paid for with other taxes, or more
expensive goods or services
• Much truth in this – but there is such a huge
overlap between the beneficiaries of the subsidies
and those that are paying for the subsidies, does it
really matter all that much?
• Even those who do not park, or even drive, benefit
substantially; for example, someone who walks or
cycles to a supermarket gets the benefit of far larger
section of goods, fresher produce, and lower prices
than if they were limited to no-drive food markets.
4. Air, water, land pollution – adds to
medical expenses, loss of species and
cleanup costs.
• The American road system is definitely a major
source of pollution; however, there have been huge
improvements over the past half century and there
will continue to be huge improvements for many
years to come, even without any new technologies
or laws, as older vehicles are retired.
• Let’s look at how childhood asthma prevalence, and
how the EPA data for its “Big Six” atmospheric
pollutants has changed, 1980-2008.
Air Quality
• There is no question that, in the U.S., childhood
asthma, a serious and incurable condition, is
increasing at a dramatic rate – and there is
widespread agreement that air pollution is a major
cause.
• However, for the “Big Six” air quality measures from
EPA, they have been constantly going down – which
makes explaining how air pollution is the dominant
factor in asthma causation somewhat difficult.
• Also, there were very significant air quality
improvements prior to the EPA 1980 cutoff.
Other Environmental Factors
• Prior to advent of the automobile, the predominant
“power plants” for good deliveries, and much
passenger transportation, in urban areas were
horse, mule, and oxen.
• The “pollution” from these “power plants” was a
very serious direct threat to public health, not to
mention a major municipal expense for carrying it
away and for disposal – and much of this was for
carcasses, left f.o.b. street – where they fell.
• The change to motorized travel was a huge public
health improvement compared to what went before
5. Noise, vibration damage to
structures – adds to medical expenses
and repair costs
• A valid point – but not necessarily a huge one.
• Consider the noise and vibration from other modes
of transportation – such as rail, and streetcars.
• Electric rail also has another interesting effect, stray
electric current. Prior to the early 1920’s, improper
grounding of electric trains led to major failures of
underground metal – like water pipes and
foundations. Even today, problems occur – check
with Houston Metro and Sound Transit (Seattle)
6. Global warming – adds to
medical expenses, loss of species
and other costs
• At the risk of being labeled a “global warning
denier” (as in, “Holocaust denier”), as the
complexity of the topic, I’m just going to ask, how
much credit do you give to global warming/climate
change warnings – and then leave the details on
this one for another day.
7. Petroleum supply line policing,
security, petroleum production
subsidies – increases taxes for defense
• The higher estimates for this line item allocate 50%
of the costs of the Department of Defense and
national security as road subsidies.
• These were done by what are generally known in
the forecasting profession as “Delphi forecasting” –
or what is sometimes popularly known as a WAG or
a SWAG.
• As far as Middle East oil, some recognition might be
given to the long-term U.S. support of Israel.
8. Trade deficit, infrastructure deficit –
increases costs of goods
• This refers to cost of imported oil.
• Very true.
• Now, try to image the U.S., or the world, economy –
without roads.
• The best alternative energy available is nuclear –
we’re about built-out for hydro power (in fact, many
“Greens” are pushing to remove dams), wind and
solar are unreliable – which means fossil fuel backup plants – and none of these or others is really
able to make a major addition to U.S. power supply.
What About Passenger Rail?
• There have been many proposals for greater use of
passenger rail for both intercity and local passenger
transport, particularly electric-powered rail – and
the European Union (EU) is often given as an
example of what we could do.
• Unfortunately, it is extremely difficult to operate
both passenger and freight rail on the same system
– and the U.S. has gone for freight rail.
U.S. vs. EU Mode Shares
Road*
Passenger-Miles
United States
88.0%
European Union
86.0%
* Includes auto and bus
Ton-Miles
United States
28%
European Union
75%
Does this look like a good-trade off to you?
Rail
.6%
7.6%
38%
14%
9. Sprawl, loss of transportation
options – increases personal and
corporate transportation costs
• The underlying assumptions include:
– Transit capital costs are lower than road capital costs
– Transit is less expensive to operate than driving
– More compact development is attractive to large
segments of the population and leads to lower travel
– Transit can be an effective substitute for road travel for
large numbers of people
• Many of these are questionable.
• Needs more detail that we can get into today.
10. Uncompensated auto accidents –
increases personal costs
• This is a real problem – which might be best
addressed by “real” no-fault insurance, where each
driver is responsible for his/her own losses,
regardless of fault, through insurance or not.
• Significantly improving driver training, including
making insurance companies responsible for issuing
drivers licenses, would also be worth looking at.
11. Congestion – increases
personal costs and losses
• Congestion slows down auto travel (and road transit
modes), but average home-to-work travel time,
2005-2007, for all U.S. urbanized areas with
populations over 500,000:
– Auto (includes carpool):
– Transit:
25.2 minutes
48.1 minutes
• Transit trips tend to be shorter distances.
• The people use commute via transit are largely:
– Those without other options (age, auto availability, etc.)
– Those who have the best transit options
SUMMARY
• Road user-generated revenues include revenues
generated by road users for use of roads besides
that actually dedicated for road use – including
some revenues that are dedicated for non-road
uses.
• Road user-generated revenues exceeded “hard
cost” expenditures on roads for 2007.
• Papers on “soft costs” coming next.
Transparency
in Transit
Workshop
Questions
• Do understand the phases
in transportation planning?
• When do you believe the
major decisions are really
made?
• Where do you get your
information regarding
transportation decisions?
• Who do you trust for
information?
• Do you contact people
about transportation issues
that concern you?
• Do you comment on
environmental clearance
documents?
• Do you belong to a
transportation/public
decisions interest group?
• Do you attend meetings of
decision-making bodies?
• Do you write/blog/e-mail
about transportation
issues?
• Do you vote?