With
the collapse of the funding formula embedded in last
year's transportation funding package, the infamous HB
3202, the General Assembly has undergone a
legislative meltdown of sub-prime proportions. The Old Dominion may enjoy the
reputation as the Best State for Business and one of
the three Best Run States in America, but you
wouldn't know it from the spasmodic, floundering
efforts to fashion a system for funding Virginia's
transportation needs in the 21st century.
Responding
to a public backlash, the General Assembly repealed
outright one revenue-enhancement measure that it
enacted last year: the notorious Abuser Fees. Meanwhile, the Supreme
Court has struck down the creation of unelected and
unaccountable regional transportation authorities
with the power to tax, and an economic downturn has
cut into the General Fund surplus that legislators
had expected to devote to transportation. About all
that's left from last year's financing package is a
provision to borrow a sum that will pay for a tiny
fraction of the state's anticipated needs.
While
the legislative edifice fashioned by Republican
lawmakers has buckled under its own weight, credit
the GOP leadership at least with trying to do
something different. If you placed their Democratic
colleagues under an MRI scanner and
told them to focus their thoughts on transportation
solutions, you wouldn't see a single neuron light
up. The Dems offer the same-old, same-old: Increase
the gas tax to build more stuff.
Despite a surge in
energy prices that is precipitating a global
economic realignment, Donkey Clan senators evidently see
no reason to re-evaluate the tax-and-build
transportation policy that arose in Virginia during
decades of cheap energy. When it comes to traffic
congestion, they appear to be of the opinion that
there's nothing wrong with Virginia's transportation
system that jacking up taxes and giving
politicians more money to play with won't cure. As
far as climate change and energy conservation is
concerned... Quick, call the doctor -- brain
functions are flat-lining.
If
there's one thing everyone agrees upon, it's the
necessity of doing something. There is a cost
to doing nothing: It's called traffic congestion. A
growing population and growing economy require
investment in transportation infrastructure. If we
fail to build new roads, bridges and rails, we will
pay indirectly through strangled economic
opportunities.
Delay
is deadly also.
With inflation in the construction sector outpacing
that of the general economy, the expense of doing
anything only gets worse the longer we wait.
The
breakdown in governance is not over the question if
Virginia needs to raise more money, but how
to raise it.
While most elected officials are content to do
things the same way as always -- just more of it -- Virginia can no
longer afford Business As Usual. Over and
above the obvious waste of building roads to places
only politicians and developers want to build them,
a decade of rising energy prices have altered the
economics of transportation so that the old
energy-intensive patterns of travel no longer make sense.
If
the slogan of the old
Byrd Machine was "pay as you go," the
mantra for the 21st century should be "user pays."
The unifying principle is very simple: There needs
to be a direct connection between the demands
citizens place upon the transportation system and
what they pay.
If,
despite the abundant financing options available, money
can't be found for a desired improvement,
that's a pretty good sign that the project is
economically unjustified and should not be
built.
A
user-pays system, as I will outline in some detail,
would meet several key criteria. It would be:
Fair.
There would be a logical and transparent
nexus between those who pay for transportation
improvements and those who use them, or benefit from
them. When adding a lane of Interstate in Richmond
or Hampton Roads, there is no justification for
asking people who walk or bicycle to work in
Arlington to help them pay for it. The people who
drive on that Interstate should pay for it. There is
no justification to ask people who ride the bus,
telecommute,
carpool, or don’t work at all to subsidize
those who drive 20,000 miles, 25,000 miles or more
per year in long-distance commutes. There is no justification for taxing the
general public to fund transportation improvements
that enrich politically connected speculators whose
property gains value from those investments.
Demand-side
responsive. Any system for funding
transportation improvements should reduce demand for
automobile travel, not subsidize it, by giving people
incentives to change their behavior: to walk, to
bicycle, to telecommute, to carpool, to buy a home
closer to where they work, or to adopt a one-car
lifestyle. By encouraging people to drive
less, a user-pays system would reduce the demand for new
transportation infrastructure, which in turn, would
reduce pressure for more spending.
Long-term and
sustainable. Building
transportation infrastructure is expensive, and so
are delays. The
Commonwealth needs sources of revenue that are
sustainable over the long term, not subject to
fluctuations of the business cycle or the whims of
political expediency.
Secure
from budgetary raids. Many members of the public do
not trust politicians, bureaucrats and lobbyists to
spend transportation dollars wisely. Citizens fear
that the political class will raid transportation
funds to pay for other needs or will use them to pay
for politically inspired projects that
disproportionately benefit rent-seekers – the
plugged-in developers, property owners and other
special interests who know
how to work the system. A carefully constructed
user-pays system would ensure citizens and taxpayers
that the people benefiting from the expenditure of
big-dollar projects are the ones paying for
them.
Transparent.
It is interesting to hear Republican legislators tie
themselves into knots to avoid a user-pays system.
It wouldn't be "fair" to impose added
taxes by increasing the gas tax or charging tolls,
they say: Such levies would hurt people who can ill
afford to absorb the extra costs. And what is the
"fair" Republican solution? Divvy up the costs between
so many different sources -- abuser fees, lodging taxes, real estate transfer taxes, car
registrations, General Fund revenues, car insurance
premiums, whatever -- that people have the illusion of getting
something for nothing. People would pay just as much -- they just
wouldn't know it.
Sleights of hand will not do. Raising taxes through opaque
mechanisms does no one any favors. By obscuring the
cost of automobiles as a mode of transportation, the
GOP approach prolongs economically self-defeating behavior, preventing people from making the tough
lifestyle decisions that rising gasoline prices and other costs will force
them to make eventually. Misplaced sympathy
only delays the inevitable day of reckoning.
Fortunately, there
are
numerous sources of funds to pay for new roads,
highways, bridges, bus stations, rail lines and
other improvements. The trick is to structure
transportation financing in such a way as to gain
buy-in from the public. A user-pays system built
around the following propositions meets the criteria
of being just, transparent and less subject to
manipulation by favor seekers.
Dedicate the gas
tax to maintenance. At present, the gas tax of 17.5
cents per gallon of gasoline goes largely to
maintenance, with an ever-shrinking share being
applied to construction. In 15 years,
Sen. Majority Leader Richard Saslaw said recently, a
17.5-cent-per- gallon gasoline tax will be totally
consumed by maintenance costs. (Given the rate of
inflation in the construction sector, that forecast may be
conservative.)
Lawmakers
should strike a bargain with
taxpayers: The state will set the gasoline tax at
whatever rate it takes to fully fund road and
highway maintenance, and no more. If maintenance costs are less
than 17.5 cents per gallon, as they would be for at
least a few years, the General Assembly
will cut the tax. (A tax cut! Whoopee!) If maintenance costs
rise,
the legislature will raise the tax. An annual
re-setting of the gasoline tax will pressure
lawmakers and the Virginia Department of
Transportation to develop cost-efficient
approaches to maintenance, such as implementation of
asset-management systems that invest more in
maintenance up
front to yield greater savings down the
road. An annual re-setting also would make clear to
the public that there are costs associated with
building new lane-miles of highway and accepting new
subdivision streets into the system.
Most importantly, taxpayers
would see a direct
connection between how much they drive and how much
they pay in gasoline taxes. It would be difficult for anyone to
argue that they should be exempt from paying their
fair share of what it costs to maintain the roads
they drive on every day.
Prepare for the
day when the gas tax doesn’t work anymore. A
recent General Assembly study
committee concluded:
Based on current gas prices, current consumer
demand, and Congress’ recently enacted CAFE
standards, the current methods of transportation
funding in the Commonwealth will not keep pace with
new energy technologies being used for motor
vehicles (e.g., hybrid vehicles; increased use of
alternative fuel) and the Commonwealth will see a
decrease in motor vehicle fuels tax revenues.
The logical
replacement of the gasoline tax is a
levy based upon Vehicle Miles Traveled, which taxes
vehicles on the basis of how many miles they travel,
possibly adjusted for the weight (heavier cars cause
more wear and tear on roads) and how much they
pollute. Several
states are studying a VMT tax, trying to figure out
how to administer it efficiently and fairly, and how
to resolve potential privacy issues associated with
monitoring where and how far cars drive. Virginia
needs to begin working through these thorny issues now,
not when a financial crisis is upon us.
Use tolls to build new
facilities.
Private investors have tens of billions of dollars
they are willing to commit to transportation infrastructure projects.
Such investment is
ideal for bridges and limited-access highways where
tolls can be collected to repay the construction
bonds. The Commonwealth should
continue its policy of encouraging private entities
to submit proposals for toll-based projects.
Politically, citizens are accepting of toll-funded
projects that create
transportation options that didn’t exist before.
(They bitterly resent tolls on facilities that used to be free
or in instances like the Dulles Toll Road
where the bonds have been paid off and the tolls
reinstated.) The logic is
simple: If you don’t want to pay the toll, you can
take the route you used to take before the toll road
was built. You are no worse off. Furthermore, while
no one likes paying tolls, most people accept the
logic that it's not reasonable to ask someone
else to pay for a project built for your benefit but you
are unwilling to pay for yourself.
Charge
Impact fees on residential and commercial
development. Here’s the premise: Growth should pay
for itself. Municipal governments should collect
impact fees not only from developers whose land is
being rezoned, but from by-right development and
commercial development, all of which generates
traffic and strains the capacity of secondary
roads.
The tricky part is devising a
methodology for determining how to set the impact
fees. A two-tier structure like that proposed in the
Watkins bill (one uniform fee for Northern Virginia
localities, a lower fee for the Rest of
Virginia) ignores the fact that traffic
conditions vary from location to location, as do construction
costs and the expense of acquiring right of way. Another
complication is the task of calculating appropriate
contributions from impact fees to cover the capital
cost of building schools and public safety
buildings. The General Assembly has agreed to study
impact fees in depth in the year ahead. It is
crucial to address the methodology for setting the
fees.
While
details remain to ironed out, the idea is a
winner from a political perspective. Impact fees don't
get recycled through Richmond where rent seekers and
politicians can get their hands on them. They go directly to the municipalities impacted
by growth, and the funds are used to improve the roads and highways directly
affected, at the point
of impact. Moreover, most citizens accept the impact
fees because they know they're getting something tangible
-- roads and school buildings they might otherwise
have to wait for years to see -- for
their money.
CDAs and TIFs. In some
instances, impact fees may not cover the cost of
more ambitious transportation improvements.
Another option is to set up Community Development
Authorities to issue bonds and pay back the bonds
through Tax Increment Financing, a surcharge on the
normal tax rate. CDAs are voluntary. Property owners
don’t agree to create them unless the increase in
property value made possible by the transportation
improvement yields more than the cost of higher
taxes – in other words, unless property owners have
more to gain than lose in the transaction.
Sometimes CDAs
are structured so that the debt obligation is passed
onto homeowners. History has shown that homeowners
rarely complain. No one is compelled to buy a
house in a CDA district. No one is forced to
purchase a dwelling unless they believe the
trade-offs (better infrastructure for a temporary
tax surcharge) are worthwhile.
Congestion
tolls. Politically, congestion tolls are
the hardest sell of any of the proposals outlined
here. In effect, lawmakers would be asking citizens
to pay for access to roads they once enjoyed for
free. Few citizens are impressed by the economist's
logic that congestion tolls are the most efficient
way to allocate scarce highway capacity. Nor are
they likely to be mollified that congestion tolls priced
to maximize free-flow traffic conditions through the
corridor (or within the tolling district) actually
increase the carrying capacity of existing roads
because free-flowing lanes move more cars than
congested lanes.
One way to
persuade citizens that they aren't getting ripped
off may be to enact legislation allowing for the creation of
“congestion corridor authorities” or “congestion
district authorities." The legislation would
require that revenues raised from congestion tolls would be
reinvested to increase transportation capacity --
new lanes of road, ramp meters, traffic light
synchronization, incident response management, park
'n' ride lots, bus stations, whatever -- within
the same district.
Economic development and public
safety. On occasion, it may be justified to
spend General Funds on transportation
improvements: when public safety (hurricane
evacuation) or economic development (SW Virginia
coalfields) is at stake. In these rare instances,
transportation projects should compete with other
priorities such as education, health care,
corrections, etc.
Constitutional
amendment. To build citizen trust, lawmakers
need to give ironclad assurances that funds
raised for highway maintenance or
congestion-corridor improvements will not be
diverted for politicians’ other pet projects.
Unfortunately, the General Assembly’s track record
is not encouraging. As part of any larger
transportation-financing reform,
the General Assembly needs to set the machinery in
motion to enact a constitutional amendment to
protect transportation dollars.
Building
a transportation system for the 21st century does
not end with figuring out how to pay for it. Indeed,
devising a workable financing system is only the
first step. The General Assembly must enact
other reforms to ensure that dollars are spent as
efficiently as possible and that projects are
prioritized on a non-political basis. Furthermore,
it is essential to tie transportation planning with
land use planning and to assign responsibility for
both planning and spending to the appropriate levels
of government.
But a rational financing
scheme for transportation funding can help drive
other reforms forward. Once people accept the idea
that roads aren’t something that “someone
else” pays for, they will begin thinking very differently
about what kind of transportation system they can
afford.
--
March 24, 2008
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