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How States and Territories Fund Transportation: A New Report

A new report released by the National Governors Association Center for Best Practices details the states and territories funding for transportation entitled “How States and Territories Fund Transportation: An Overview of Traditional and Nontraditional Strategies. 

Transportation funding is not easy to understand due to the conglomeration of sources used.  This report makes a great effort to put all the states and territories in the same format for ease of understanding and comparison.  Two general areas are explored:  Traditional funding and non-traditional funding.  A short summary is provided below 

Traditional funding

  •  Fuel taxes
     All states have some kind of motor fuel tax and generated $36 billion in 2008
  • Sales taxes on Fuel and other fuel industry taxes
     Nine states add a sales tax on gasoline purchases or a tax on fuel distributors
  •  Vehicle registration fees
     All states collect some form of vehicle registration fee which generated almost $20 billion in 2008 (Two states do not explicitly fund transportation with these fees)
  •  Traditional bond proceeds
     Nearly all states have bonding authority and in 2007 the bonds were valued at $19.8 billion.
  •  Tolls
     150 toll roads, bridges and tunnels are operated in 27 states. Forty
    Of these toll facilities are administered by state operating authorities.  In 2006, state-administered toll facility revenue accounted for about 5 percent of total state transportation funning or $7.6 billion
  •  General funds
    Thirty-two states have general fund revenues that collectively account for approximately 6 percent of total state highway funding. In 2007, state general fund proceeds directed to transportation projects amounted to just over $8 billion
  •  Other fees, taxes etc
    Twenty states use one or more other sources of funding, including inspection fees; driver license fees; advertising; a rental car tax; state lottery/gaming funds; oil company taxes; vehicle excise taxes; vehicle weight fees; investment income; and other licenses, permits, and fees revenue.

Nontraditional and Innovative Funding and Financing

  • GARVEE Bonds
    Grant Anticipation Revenue Vehicles were created in 1995 and permit states to leverage their federal-aid highway aid highway funds to support bonds. As of 2008, 30 states and territories authorized GARVEEs, with 32 issuances worth $9.3 billion.  This accounts for approximately 40 percent of state bonds for transportation purposes.
  • Private Activity Bonds
    Another form for tax exempt debt financing authorized for highways for the first time in 2005. As of December 2008, eight PABs worth over $4.9 billion had been issued in six states.
  • ARRA Bonds
    The American Recovery and Reinvestment Act of 2009(ARRA) provided for two new transportation bonds, Build America Bonds (BABs) and Recovery Zone Bonds. In the first several months of availability, public issuers sold nearly $8 billion in BABs, including a successful $1.375 billion issue by the New Jersey Turnpike Authority.
  • Federal Credit Assistance
    Through the Transportation Infrastructure Finance and Innovation Act (TIFIA) loan program, the federal government provides states direct loans, loan guarantees, and lines of credit for major transportation infrastructure projects. Traditional financing would have been federal grants. As of April 2009, 17 projects in 12 states and territories have used TIFIA financing with a value of $6 billion.
  • State Infrastructure Banks
    State Infrastructure Banks (SIBs) are revolving loan funds to finance highway and transit projects. SIBs are in place in 35 states, although more than 95 percent of the funding is concentrated in eight states, and one state accounts for more than half.  Today SIB’s have provided more than $6.2 billion for 693 transportation projects. 
  • Congestion and Cordon Pricing
    Congestion pricing is designed to shift demand to less congested areas or time periods by charging motorists for road use, or varying charges, during times of peak demand. Cordon pricing similarly charges users for entry into a congested area, such as a city center, during some portion of the day. A few states have congestions pricing (in particular on high occupancy toll (HOT) lanes.
  • Public-Private Partnerships
    Public-private partnerships establish a contractual agreement between a public agency and a private sector entity to collaborate on a transportation project. Twenty-six states have some sort of PPP enabling legislation, and 24 states have used some form of public-private partnership for surface transportation, including roads, freight facilities, and transit, for a total of 71 projects.
  • Vehicle Miles Traveled Fees
    Vehicle miles traveled (VMT) fees charge drivers directly for each mile traveled.  This charge is being considered as a replacement or in addition to the traditional motor fuel tax. Oregon had a demonstration project on VMT fees and other states are beginning to examine using VMT fees.
  • Other Sources (Impact Fees, Traffic Camera Fees, Container Fees, Emissions Fees)
    Other types of new or innovative vehicle or user fees are also employed by states as well as internationally to generate revenue. Twenty-three states and a number of European countries are using impact fees to help fund new infrastructure and transportation projects. Meanwhile, 23 states and many European countries are using traffic cameras to generate revenue for surface transportation. Several European and Asian countries rely on vehicle emissions fees, which are currently not in use in the United States.

The report has extensive discussion of each of the elements of transportation funding and includes examples of innovative projects in the international arena.  There are numerous tables which compare all the states and territories on each of the funding mechanisms. 

At the end of report is an appendix with state by state (and territory) statistics including road lane mileage, airline passenger passengers, port traffic and transit ridership.   Also included in the tables are statistics for each of the traditional and non-traditional funding sources.

I highly recommend the report as a good new resource on transportation funding information.

Shirley Ybarra is Senior Transportation Policy Analyst


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