New Jersey Senate Appropriations Committee Testimony

Testimony

New Jersey Senate Appropriations Committee Testimony

Testimony from hearing details New Jersey's exorbitant spending on roadways and provides suggestions on stretching resources further

Members of the New Jersey Senate Budget and Appropriations Committee, my name is Baruch Feigenbaum; I am the Assistant Director of Transportation Policy at Reason Foundation, a non-profit think tank that has been advising policymakers on transportation policy for 40 years. I have a Master’s Degree in Transportation Planning with a focus in Engineering from the Georgia Institute of Technology and serve on two National Academy of Sciences Transportation Research Board committees.

Reason Foundation’s Annual Highway Report generated some controversy in New Jersey this year. I want to take a few minutes to describe our report and explain what it does and does not measure. Reason’s report is not a review of the state DOT. It is a view of how each state manages its roads. A report from Rutgers, recently commissioned by New Jersey’s Dept of Transportation, found that New Jersey’s costs to maintain its roadways are significantly lower than the numbers included in our report. However, the Rutgers report uses a different methodology. To help clear up confusion, I want to detail the differences in the two reports.

First, the Rutgers report examines costs reported by NJDOT for New Jersey Department of Transportation roads only. Our report uses data reported by the state of New Jersey to the Federal Highway Administration. While the Rutgers study measured NJDOT roads only, our report measures all state-controlled roadway systems. In New Jersey, in addition to roads controlled by the New Jersey Department of Transportation, this includes the Turnpike system, the Atlantic City Expressway, the Delaware River- Bridges, roads in state parks, roads in Universities and roads in prison complexes.

Second, the Rutgers report measures Administration, Capital Construction and Maintenance disbursements. In addition to these three, we measure Law Enforcement, Interest Payments and Bond Retirement. We believe these additional categories give a much fuller description of spending.

The Rutgers report measures costs in lane-miles while our report uses centerline miles. In response to a criticism by former Commissioner Fox that New Jersey roads are unusually wide so using centerline miles is not fair, we recalculated New Jersey’s costs using lane-miles. New Jersey moved from 50th in costs to 49th, but it moved further behind its peer states of Massachusetts, Connecticut, Rhode Island and Maryland.

Most significantly our report measures debt by including both the principal loan amount and the interest payments. The Rutgers report measures the interest payments only; it does not measure the principal loan amount. For example, using New Jersey’s approach,when buying a house, the borrower would be responsible for the interest payments only and not the principal loan amount. Using our approach the borrower would have to pay back both the interest and the principal. Paying back the interest only is a good way to make the state look more efficient, but it would cause the state to default and is not proper accounting. I am not aware of any other state that measures interest this way. I would note that the American Association of State Highway and Transportation Officials (AASHTO), the trade group for state DOTs, has long admonished New Jersey for accumulating far too much debt.

For the last few years, New Jersey officials have argued that their costs cannot be compared to Texas or North Carolina, states with lower densities and larger populations. We agree. While there are commonalities between all states, we have never argued that New Jersey should have the lowest costs of any states. What we have argued is that New Jersey should aim to reduce its costs to the nationwide average. At a minimum,the state should match costs in its peer states—states with similar densities, weather and business practices. Yet New Jersey cannot even do that. The state spends 3-5 times what its peer states (Connecticut, Maryland, Massachusetts, Rhode Island) spend to build and maintain state roads.

One reason our report is generating controversy is because it comes at a time when the New Jersey Legislature and Governor Christie are examining ways to increase transportation funding. New Jersey’s gas tax ranks towards the bottom and is lower than all of the surrounding states. Therefore, raising the gas tax could be appropriate if New Jersey DOT was maximizing resources and running an efficient organization. Sadly, the data suggest otherwise. Using a scale where 1st is the best and 50th is the worst, New Jersey ranks 48th overall, spending more than per mile than every other state on state-controlled highways. The state ranks near the bottom nationally in numerous categories, 46th in urban Interstate pavement condition, 41st in urban freeway traffic congestion, and 36th in the percentage of deficient bridges. The one piece of good news is that the state’s fatality rate is among the lowest in the country, ranking 5th.

Therefore, New Jersey needs to make several changes before it increases its gas tax:

1)    Enter into Design-Build and Public-Private Partnerships: NJDOT should pass enabling legislation allowing use of design-build contracts and public private partnerships. Design-build contracts combine two of the elements of building a road together to speed construction and reduce costs. Public-private partnerships are partnerships between the government and private sector in which the skills and assets of each sector (public and private) are shared in delivering a service or facility for the use of the general public. Both methods can be utilized to build roads more cost-effectively. Today, more than 40 states use design-build contracts and more than 30 use public-private partnerships.

2)    Prioritize State of Good Repair: New Jersey’s roadways are in poor condition. The state should prioritize improving the condition of its roadways before spending money on new construction, either roadway or transit. New ribbon cuttings are sexy but maintaining a high quality road network is the bread and butter of 21st century Departments of Transportation.

3)    Right-size Staffing: As the fifth smallest state by land area, New Jersey has one of the smaller state highway systems. Yet a joint American Association of State Highway and Transportation Officials and National Conference of State Legislatures report shows that the DOT by itself (not counting the Turnpike or other road agencies) employs 3,443 workers. This is an excess number of employees for the size of New Jersey’s system. Most 21st century DOTs need fewer employees, but those that they do employ have a higher skillset and are more engaged in project management.

4)    Employ a Merit-Based Project Selection Process: Many states, including North Carolina and Virginia, use technical criteria such as population growth, congestion, and road safety, to focus transportation spending on the most critical parts of the system. States that do not have such systems, such as New Jersey, tend to build unnecessary white elephant projects, both highways and transit. These technical criteria force the DOT to make tough decisions between necessary and nice-to-have projects. Criteria can be customized by state. This merit-based process has proven the best way to eliminate political influence in the transportation project selection process.

5)    Reduce Diversions: New Jersey has, in the past, diverted money from the transportation fund to general budget expenses. The transportation fund is a dedicated source of transportation revenue funded by gas tax revenue. It should NEVER be used to fund general obligations. Further, New Jersey spends approximately half of the transportation fund on New Jersey Transit. We believe that to ensure the gas tax remains its user-pays/user-benefits principle, all gas tax money should be spent on roadways, and no money should be spent on rail transit. However, given realities, it would be a major improvement if New Jersey spends at least 75% of gas tax revenue on roadways. Finally, New Jersey uses gas tax revenue to fund the State Police. The State Police is a critical agency. However, funding it out of the gas tax as opposed to the general fund or special account takes crucial money away from roadway needs.

The taxpayers of New Jersey expect a quality road network and an accountable DOT. New Jersey leadership has significant progress to make on both fronts. While New Jersey may have a need for additional funds, we cannot support a tax increase until New Jersey makes significant reforms. Increasing funding without making long-term reforms will result in continued ineffective spending, and will necessitate additional tax increases in the near future, perpetuating the problem. The taxpayers of New Jersey deserve better.

I am happy to answer any and all questions.

Baruch Feigenbaum is Assistant Director of Transportation Policy at Reason Foundation a non-profit think tank advancing free minds and free markets. Feigenbaum has a diverse background researching and implementing transportation issues including revenue and finance, public-private partnerships, highways, transit, high-speed rail, ports, intelligent transportation systems, land use, and local policymaking.