OUTLOOK: Post-FAST ACT, Focus Moves to Sustainable Road Revenue
December 24, 2015 10:42 AM
The gasoline tax and other dedicated taxes and fees provide about 70% of the funding in the new five-year, $305 billion FAST Act, but that level of support will drop to about 50% when the measure expires in October 2020, said Peter Nonis, senior manager for federal relations at the American Society of Civil Engineers. The current $15 billion per-year revenue gap in the HTF could have been covered by a 10 cent per gallon hike in the federal gasoline tax, but the $24 billion annual gap expected by fiscal 2020 would require a 20 cent per gallon increase in the 18.4 cent per gallon tax, Nonis said. "This means that any attempt to fill the budget hole through an increase in the gas tax will require a bigger increase than has ever been needed," he said. "Beyond filling the budget hole, increased investment is needed to modernize our surface transportation network."
Virginia is determining whether to go ahead in 2016 with a proposal to levy tolls on existing lanes of Interstate 95 to fund transportation projects, said Doug Koelemay, director of Virginia's Office of Public-Private Partnerships. The state holds one of three conditionally approved slots in a federal interstate toll pilot program and could lose that opportunity at the end of the year under the FAST Act, the new five-year federal highway funding plan signed into law by President Obama in early December. "We're doing our due diligence, and we plan to aggressively pursue it," he said. "We don't want to lose our slots, and it's a use-it-or-lose-it situation with the new law."
Congress needs to get to work early in the new year on a supplemental revenue source for the Highway Trust Fund when the FAST Act expires in October 2020, according to James Burnley, who served as President Reagan's transportation secretary from 1987 to 1989 and currently co-chairs the transportation law practice at Venable LLP in Washington. "The FAST Act gives them five years to get it right," Burnley said. "There are a lot of serious issues that need to be discussed, and Congress doesn't make big decisions quickly, especially big tax decisions. The time to focus on it is now." States are experimenting with a variety of revenue sources, including Oregon's vehicle-miles-traveled program. "The states are stepping into the gap," Burnley said. "That's what is supposed to happen in a federal system."
Congress did the right thing in the FAST Act by extending the Federal Highway Administration's pilot program of tolls on existing interstate highways, even though none of the three states in the 17-year-old program have opted to levy the road fee, said Pat Jones, executive director of the International Bridge, Tunnel and Turnpike Association. "Providing this type of flexibility to three states is an important and modest step to enable states to meet the growing funding needs of the aging interstate system," Jones said. "Even the best-built roads can wear out after 50 years, and sometimes you have to rebuild them from the ground up."
The modest increase in funding in the FAST Act won't begin to solve Missouri's transportation revenue woes, said Stephen Miller, chairman of the Missouri Highway and Transportation Commission. "The FAST Act is a start to addressing our funding need, and we need to start somewhere," he said. "However, we cannot rely on the federal government to address our most pressing needs. These can only be tackled with new funding at the state level." The state needs another $160 million per year over the next 10 years to maintain its existing highway system and begin replacing more than aging 600 bridges, Miller said.
A modified tolling mechanism that accounts for interstate highway maintenance costs could be part of the federal funding mix, said Ananth Prasad, transportation practice leader at infrastructure solutions firm HNTB and a former Florida transportation secretary. Tolls would be levied on all interstates, with a reduction in the federal gasoline tax to compensate for the road upkeep fee. "That would take a big burden off the federal gas tax," he said. "The states could then use their federal funding for other eligible roads in their systems."
The Alliance for Toll-Free Interstates will oppose any effort to impose tolls on existing interstate lanes in 2016, said communications director Stephanie Kane. The Interstate System Reconstruction and Rehabilitation Pilot Program has been available for 17 years but so far none of the three eligible states have opted to levy a toll on existing lanes. "We can fund highway and transit projects, without resorting to imposing tolls on existing interstates," Kane said. "The ISRRPP is an outdated pilot program that should ultimately be repealed in its entirety."
The Illinois Department of Transportation will decide in 2016 on a proposal to add new tolled express lanes in each direction on 25 miles of Interstate 55 in Chicago. IDOT is currently studying cost estimates and financial options for the project. The number of free lanes would not be reduced. If the state decides to go ahead with the project, it would then determine if the project should be financed as a public-private partnership. "We can't go on moving traffic in the same way we have in the past," said IDOT Secretary Randy Blankenhorn. "This approach works in more than 50 cities now."
