/ Financial / DOT Chiefs Explore Options, Limits on States’ Efforts to Increase Project Funding

DOT Chiefs Explore Options, Limits on States’ Efforts to Increase Project Funding

Parul Dubey on January 17, 2018 - in Financial, News

Generating new investment in transportation infrastructure at the state level requires building public trust and increasingly adopting “creative” or new approaches, CEOs of state departments of transportation said Jan. 9 during the Transportation Research Board’s annual meeting in Washington, D.C.

They made the remarks during a TRB panel titled “State DOTs Generating and Leveraging Dollars to Underpin Investment,” which was moderated by John Schroer, Tennessee DOT commissioner and current president of the American Association of State Highway and Transportation Officials.

“We’ve got to talk about funding,” Schroer said. He noted that during the past federal fiscal year the dedicated revenue stream for the Highway Trust Fund actually declined, and that stakeholders may face that again in the future because of rising fuel efficiency levels of newer cars.

“Those are issues we’re going to have to face every day,” Schroer added, as he invited state CEOs to weigh in on what they face in funding their transportation programs.

Missouri DOT Director Patrick McKenna said while promoting greater investment in transportation in that state he realized that the public has a long memory, as he often encountered residents citing an investment program from the early 1990s that McKenna said was over-committed and under-funded. He indicated that residents felt misled by its unkept promises.

“Although that plan was disbanded in Missouri in 1998, I can tell you that the public view of that was still alive and well when I got to [the Missouri DOT] two years ago. Overcoming that boundary and gaining the public trust, I think, is one of the most critical things we all face when we bring measures to a population that feels overtaxed and overburdened already. ”

McKenna said he realized the public knows very little about how transportation is paid for, so his agency developed a residents’ guide to transportation funding in Missouri that tells people how much they pay for it a month and where those funds are invested. As a result, “what we found is that people are surprised at how little they pay for transportation,” he said.

Jennifer Cohan, Delaware’s transportation secretary, said her state is looking at creative approaches to funding transportation that go beyond the traditional fuel tax. Delaware is among states researching the feasibility of assessing fees for vehicle miles traveled, while also leveraging project financing options such as federal infrastructure loans along with additional federal funding through USDOT grants.

“The traditional funding sources, they’re there. But we’re in a situation now where we really need to be creative,” she said.

Texas DOT Executive Director James Bass, formerly the department’s finance director, said that state avoided raising motor fuel taxes despite expanding the overall program, by leveraging borrowing strategies.

Texas has not raised its 20-cent-a-gallon fuel tax since 1991. Bass said that in the early 2000s the legislature began to fund transportation program increases from other revenues including bond debt, while the state also began implementing public-private partnerships that included toll roads.

And starting in 2006, Bass said, the state was able to award $56 billion in project contracts over 10 years. However, “one thing about borrowing money is [that] there’s a limit,” Bass said.

By 2010, he said, the state needed to spend about $5 billion annually to service the transportation debt and maintain the state program at current levels. So lawmakers tapped part of the state’s reserve funds for transportation to bolster project spending, and shifted revenue to transportation from receipts from oil and gas industries. And, later, voters approved a ballot measure to shift a portion of state sales taxes to transportation.

But Mike Patterson, the Oklahoma DOT secretary, said Texas’ multi-pronged approach to funding has made it difficult for neighboring Oklahoma to have much success addressing its funding needs with a more restricted set of revenue options.

He said each state has a different mix of revenues that make per-gallon fuel tax comparisons incomplete – an issue that will only become more challenging as more states find ways to generate revenue from alternative fuel vehicles.

For instance, as Oklahoma legislators consider raising motor fuel taxes funds for transportation investments, “they certainly don’t want to go past the state of Texas. They don’t want to go higher than Texas. But fuel taxes don’t tell the whole story.” Patterson said that in Oklahoma transportation is partly funded by a portion of income tax as well by fuel taxes.

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