Goals for Federal Transportation Reauthorization

Now that House Transportation Committee Chairman James Oberstar has released his draft plan for the next surface transportation authorization act, the time is ripe for conversation about what should, and should not, be in this next transportation bill. Bob, Len and Shirley have offered some preliminary reactions to Oberstar’s proposals here, here and here. But I want to lay out a rough cut at 10 things the Reason team believes would deliver the best bill for taxpayers and the nation’s infrastructure.

1. Redefining the federal role in transportation: Oberstar has embraced the idea that much more of transportation spending and policy needs to be provided by the federal government. But this is the wrong path. Now that the feds are no longer building the Interstate system, there is no longer a need for the federal government to be the central player in transportation. This is the era of completing and improving transportation networks in states and major metropolitan areas. The federal transportation program should be more focused and aimed at a smaller set of goals, projects and issues that are clearly national in scope or impact, such as maintaining the Interstate system, Interstate upgrades, important trade corridors, safety and research. State and local governments need to turn away from depending on federal transportation funds and instead team up with the private sector. Most surface transportation needs are local or regional, state and local governments need to take responsibility for creating and maintaining their own transportation networks.

2. Climate change and greenhouse gases: Transportation is a significant source of greenhouse gases. As Bob Poole recently wrote, “all of transportation (including trucking, airlines, barges, etc.) contributes 27.9 percent of U.S. greenhouse gas emissions, according to the Environmental Protection Agency. Personal vehicles (cars and light trucks) are 61 percent of that; hence, personal vehicles are the source of 17 percent of GHGs, not one-third, as you will often hear.” It is crucial that all discussion of reducing greenhouse gas emissions from transportation reflect the real potential for reductions, not unrealistic hopes, and fully delve into the tradeoffs and consequences of each measure. Just as important, any taxes or fees levied against greenhouse gas emissions needs to be transparent, not buried in some other bundle of charges. Reducing vehicle miles traveled (VMT) should not be a primary focus of these policies. Proposals should focus instead on emission reductions, which may lead to VMT reduction, but don’t directly restrict mobility.

3. Performance-based funding decisions. Federal transportation funding decisions must be made more on performance criteria rather than pure politics or nose counts. Chairman Oberstar’s proposal includes considerable proposals to make funding grants more performance based. And the Bipartisan Policy Center’s new report Performance Driven: A New Vision for U.S. Transportation Policy breaks some new ground by laying out in detail the mechanisms of a performance-based approach and proposing actual measures. Step one is really just getting into the authorization bill requirements that funding be performance-based. Step two will be to figure out through the regulatory process how that will actually work, what the measures will be, and how to apply them.

4. Enable Public-Private Partnerships: As Bob points out his post, Chairman Oberstar has proposed a suite of new restrictions and regulation of public-private partnerships (PPPs) in transportation. This is precisely the wrong direction to go, because they work. Now more than ever, state and local governments need to partner with the private sector for capital to build new transportation infrastructure and expertise to operate it. Nearly ever state is facing a budget deficit. They need access to private money for infrastructure. Certainly the federal government needs to have clear policies governing and understanding of any PPPs on Interstates and other key federal highways, and needs to preserve interstate competition. But for the most part PPPs are state and local policy decisions. The fact that the federal government provides some transportation funding should not be a lever for them to regulate what institutional arrangements state and local governments can use to build and manage the infrastructure. The highway bill should protect and retain SEP 15 (the part of current law that allows PPPs) and other innovative finance programs that allow federal funding to blend with state, local and private funds to complete projects.

5. Retain a focus on urban congestion. Interstates are a key part of the road network in virtually all congested major metropolitan areas. The folly of allowing congestion to strangle the economic life from our cities is increasingly apparent. Federal transportation priorities should include working with state and local governments to solve congestion.

6. Advance tolling and road pricing. First, as the report of the National Surface Transportation Infrastructure Finance Commission (NSTIFC ), of which I was a member, points out the way to fund transportation in the future is with mileage-based user fees—road pricing. This authorization bill needs to take the first steps towards that goal identified by the NSTIFC, steps that will lay crucial ground work for a future transition, including devising means to ensure user’s privacy is thoroughly protected. A VMT tax should replace the gas tax, not be implemented in addition to the existing fuel taxes. It is also important to note that a vehicle miles traveled tax will not solve the long-standing failure of governments to select and prioritize projects on the basis of costs-benefit analysis. Mileage-based user fees should result in money being spent where customer demand is the highest and the most transportation improvement can be delivered. It is not acceptable merely as a means to increase funding. In the interim, federal policy should strongly encourage the use of road pricing and tolling by state and local governments, including new pilot projects on network road pricing. That would include encouraging and incentivizing states to develop pricing pilot programs, perhaps using a model similar to the Urban Partnership Program.

7. The gas tax. Gas tax increases and more general fund spending on transportation are not needed and don’t make sense. I have laid out elsewhere the case against a gas tax increase, the bottom line being that the federal government has not done a good job with current funds, and is not demonstrably striving to get the most bang for each buck we already pay. Public officials have not produced results (improving mobility in a cost effective fashion) and thus do not have the confidence and trust of taxpayers necessary before asking for more gas tax funds. Moreover, the gas tax is an unsustainable source of funding—through a great many current policies, and with many more to come, the government is actively trying to discourage the use of gas and diesel. You can’t fund the system by taxing something you want people to consume less of.

8. Goods movement. Federal transportation policy has focused on earmarks, funding state programs, and micromanaging metro area transportation policy, while failing to focus on the national goods movement network. Federal policy should base funding on a performance-based analysis of projects and clearly identify the share of goods movement infrastructure projects that accrues to interstate trade. State and local governments that reap the lion’s share of the economic development benefits of ports and similar facilities should also bear the brunt of the burden for funding them. Again, wise use of public-private partnerships will help allow the private sector to make more of these investments. The authorization should also include pilot projects for truck-only toll lanes with LCVs.

9. Eliminate earmarking. Earmarking is bad financial management and is not a transparent or accountable means to accomplish policy goals, so there should be no earmarks.

10. Innovative finance tools. Previous TEA laws have included a variety of innovative finance tools, including private activity bonds and the Transportation Infrastructure Finance and Innovation Act (TIFIA), as well as others. This authorization should retain and expand upon those tools. Again, the NSTIFC made a series of excellent recommendations in this regard, including expanding the PAB and TIFIA programs. Any National Infrastructure Bank type of instrument should not be a mechanism for using general funds to increase transportation spending. Instead it should extend the TIFIA type of approach to leveraging existing funds and helping to cover the “gaps” that sometimes prevent projects from being financed.