Report: Surface Infrastructure Group Prefers Tolling to Gas Tax Financing

An interim report issued by the National Surface Transportation Infrastructure Finance Commission calls for exploration of more direct user charges, like tolling, to fund the nation's surface transportation system instead of continuing to rely on the federal gas tax.

"While more funding is needed at all levels of government - regardless of the source - funding more of the system costs through direct user charges, rather than indirect fees such as the fuel tax or general revenues, can encourage more efficient use of system capacity," said the report published late Friday.

The report cited tolling, variable-price tolling, and fees charged for miles traveled as examples of mechanisms for generating funds that are more directly linked to actual use of the system.

"The feasibility and potential of these and other alternative approaches must be seriously examined, recognizing that some approaches may be problematic in certain circumstances - such as tolls in less densely populated areas," the report said.

The commission - created by Congress in 2005 to write a report recommending future funding options for the nation's surface transportation - will explore these ideas, as well as an increase private financing in its final report, which is likely to be published as soon as November and no later than April 2009. In order to help in its work, the commission requested input from transportation finance specialists and related sectors.

"We sincerely invite stakeholder feedback on all aspects of our approach in order to help us develop constructive and specific recommendations that will support our nation's future transportation needs," the report said.

Currently, federal highway and transit construction funds come from the federal gas tax. The revenues are collected into a pool, known as the highway trust fund, and distributed to states annually based on a formula. States sometimes use the revenue to repay tax-exempt bonds issued to finance projects.

But "the fuel tax, which has been the key federal funding source for our system, is no longer sufficient at current rates" and increasing the tax, which is "always politically unpopular - would be even more so now, given the recent sharp increase in the price of fuel," the report said.

The 18.4-cent-per-gallon gas tax gas tax was last raised in 1993. The report cites a recent Transportation Research Board study that puts the gap between annual revenues and investment needs at $105 billion in 2007 and $134 billion in 2017.

The finance panel's preliminary observations appear to be at odds with a report recently unveiled by another congressionally mandated panel, the National Surface Transportation Policy and Revenue Study Commission. That report recommended raising the current 18.4 cent per gallon gas tax by as much as eight cents a year over five years and indexing the tax for inflation after the fifth year. The report proposes that the nation switch to a pricing system based on vehicle miles traveled, instead of the gas tax, after 2025.

In total, the policy commission report called for all levels of government to provide at least $225 billion over 50 years for transportation infrastructure. The federal government is expected to cover about 40% of the $225 billion. States and local governments are expected to raise their gas or other taxes or fees in or help pay for the remaining 60%.

Other recommendations include a federal ticket tax on transit trips and intercity rail passenger trips to augment federal gas tax funding and a fee on freight shipments for freight infrastructure investment.

Transportation Secretary Mary Peters, chairman of the policy commission, did not support the recommendations made in the report. Peters, who objects to an increase in the gas tax, believes that greater use of tolling and private sector investment through P3 deals are the most effective way to mitigate traffic congestion.

She is scheduled to appear before the Senate Environment and Public Works Committee tomorrow to discuss her position. At a hearing last week, leaders of the Senate panel also voiced concerns about the commission's gas tax boost. q

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