States must explore all revenue options to overcome federal transportation funding slump - Metropolitan Planning Council

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States must explore all revenue options to overcome federal transportation funding slump

Source: Transportation for America

A number of states have adopted innovative new revenue streams to pay for transportation infrastructure.

Federal support for transportation infrastructure will likely continue to face cuts and budgetary shortfalls. What does that mean for Illinoisans? The answer depends, in part, on how state leaders respond—a topic the two front-runner candidates for governor will address at the Metropolitan Planning Council’s Annual Luncheon on Aug. 28

The federal Highway Trust Fund, supported by the gas tax, has long supplied the lion’s share of funding for local and state transportation infrastructure projects. But the gas tax has not been increased since 1993; inflation, exacerbated by Americans driving less and choosing more fuel-efficient vehicles, has eroded this critically important revenue source. Last-minute quick fixes by Congress have allowed the fund to hobble along, but make no mistake: The end is in sight, perhaps as early as May 2015. At stake in metropolitan Chicago are regionally significant investments such as the Elgin-O’Hare Bypass, West Loop Transportation Center and gold standard Bus Rapid Transit on Ashland Avenue. 

While D.C. remains hindered by uncertainty, a handful of states and a number of cities are developing new ways to select, fund and build economically important transportation and infrastructure projects. 

Ballot measures have long played an important role in securing funds for local infrastructure investment, because such projects typically are financed with general obligation bonds that require popular approval. Many cities, particularly in the western states, are jumping on this trend: Los Angeles, Phoenix and Salt Lake City have voted to tax themselves, effectively dedicating substantial local money to regionally and nationally significant transportation investments. 

Successful campaigns, such as Measure R in Los Angeles and FasTracks in Denver, have directly appealed to personal benefits. For instance, maps showed voters where capital improvements would occur, allowing people to understand how their daily commutes would improve. Print, radio and TV ads targeted specific demographics of commuters (drivers, transit riders, seniors) and pointed out benefits. Advocates even estimated a dollar value of the tax per person per year, allowing voters to judge if the tax was worth it to them. 

More and more, voters are opting for investment: According to the Center for Transportation Excellence, 73 percent of intra-metropolitan transportation measures passed in 2013, as did 79 percent in 2012. While state-level ballot measures on infrastructure investments are far less common, in 2013 eight states voted to raise fuel taxes. This includes both conservative states like Wyoming and Democratic-controlled legislatures like Maryland’s. Illinois is not on that list—its tax has remained at 19 cents per gallon since 1990. 

A number of cities are leveraging the market in creative ways to finance infrastructure, such as fronting the cost of, say, a new transit line by “capturing” the increased value in land nearby that will result. This approach clearly matches the benefit of the infrastructure investment with its cost. Techniques also include impact fees, through which land developers are assessed a charge to help support associated investments in local roads, sidewalks and the like. Leasing or selling air rights is another practice that has been used to finance development around transit stations for decades, famously around Grand Central Station in New York, and more recently in Boston and Arlington, Va

Certain transportation projects are appropriate as public-private partnerships (PPPs). These are often complex agreements that allow the public sector to engage with private enterprises to take an active role in one or more aspects of the lifecycle of an infrastructure asset. Since no standards exist for contracts and pricing, risk sharing and returns, a mix of public, private and civic groups are and will continue to shape models for this new path forward for infrastructure. The West Coast Infrastructure Exchange is an emerging example. The WCX is a collaborative effort between California, Oregon, Washington and British Columbia to create a pipeline of viable projects and to develop standards for important factors, such as transparency, contracts, labor and risk allocation. 

Regardless of the funding arrangement, clearly projects are getting more complex. There is no universal best mix of funds; it depends on the specific place and time, and the particulars of each project matter very much. As federal funding continues to wane, smart state and city leaders will earnestly explore all revenue options—and they will put their hard-earned dollars to their best use, by selecting projects that measurably reduce congestion, curb air pollution, connect people to vital destinations and spark economic development. 

Robert Puentes is a senior fellow with the Brookings Institution’s Metropolitan Policy Program where he also directs the program's Metropolitan Infrastructure Initiative. The Initiative was established to address the pressing transportation and infrastructure challenges facing cities and suburbs in the United States and abroad.


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