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Sunday, May 24, 2015

Road Funds - Is there a perfect solution? Part 1

Construction of bridges and roadways, maintenance of bridges and roadways: paying for our transportation infrastructure is not cheap.

Transportation infrastructure is deteriorating nationwide. States are finding it difficult to maintain their roads and bridges and to fund new construction projects. One of the primary sources of funding for infrastructure is a gas tax. This source, however, is drying up.

A one-two punch has hit the gas tax. One, cars are being driven fewer miles. Oregon, for example hit peak driving in 2004. Each year since then has seen fewer miles on the state's roads. Millennials just don't drive as much as previous generations. They are digital natives and are happy to work at the corner coffee shop rather than an office 20 miles from their home. The second punch is that vehicles are becoming more fuel efficient. Hybrid and plug-in vehicles are steadily increasing the MPG rating of new cars.

Even with the reduction in miles driven, many of the road maintenance costs continue. So how should we fund our roads?

There are always behavioral elements associated with a taxes and fees that must be considered. In a simple model, governments tax the things they want to discourage and have incentives for the things they'd like to see proliferate. For our road funding thought experiment, I propose that any potential solution would be measured with the following criteria:

Road fund taxes/fees should:
1) Have some correlation to road wear
2) Not be excessively regressive
3) Provide adequate funds for transportation maintenance needs
4) Be simple to pay
5) Allow for collection without invasion of personal privacy
6) Allow for out-of-state travel without paying in-state road fees
7) Tax drivers from out-of-state when they are using Oregon roads

Constructing a solution to meet all of these goals will not simple. What do you think of these are the success criteria? People often disagree about things because they have different goals. If we have agreement on the goals, we're more likely to have agreement on the solution(s).

You might have noticed that there is no item in the above list for air pollution or CO2. These are important, but this is an issue for road funding. If the externalities of fossil fuel use is to be addressed (and I think they should), that would be independent from road funds. So something such as a carbon tax is outside of the scope of the road funding discussion.

In the next few posts let's look at a few proposed solutions and see how they rate against these criteria.

Potential Funding Method
Part 2 Raising the gas tax
Part 3 Increasing property taxes
Part 4 Increasing vehicle registration
Part 5 Tire tax
Part 6a GPS OReGO
Part 6b No GPS OReGO

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