Through its wide-ranging investigative and deliberative process, the Commission makes the following critical findings:
• There is no easy "silver bullet" solution to the problem of insufficient funding. As an important corollary, not all approaches work equally well throughout a geo- graphically and economically diverse country. The Commission assembled a broad and balanced menu of options for Congress to consider, with an assessment of the pros and cons of each approach.
• The current federal surface transportation funding structure that relies primarily on taxes imposed on petroleum-derived vehicle fuels is not sustainable in the long term and is likely to erode more quickly than previously thought. This is due in large measure to heightened concerns regarding global climate change and dependence on foreign energy sources, which are creating a drive for greater fuel efficiency, alternative fuels, and new vehicle technology.
• The current indirect user fee system based on taxes paid for fuel consumed provides users with only weak price signals to use the transportation system in the most efficient ways. This results from three primary factors: system users are typically unaware of how much they pay in fuel taxes (as distinct from the price of gasoline), such that daily swings in price mask the tax component and blunt its effect on demand; fuel taxes and other direct and indirect user fees currently account for less than 60 percent of total system revenue (federal, state, and local), so that users do not bear anywhere near the full costs of their travel; and fuel taxes have no direct link to specific parts of the system being used or to times of the day and thus cannot be used to affect these kinds of traveler choices.
• A federal funding system based on more direct forms of "user pay" charges, in the form of a charge for each mile driven (commonly referred to as a vehicle miles traveled or VMT fee system), has emerged as the consensus choice for the future. The Commission cast a wide net, reviewed many funding alternatives, and concluded that indeed the most viable approach to efficiently fund federal investment in surface transportation in the medium to long run will be a user charge system based more directly on miles driven (and potentially on factors such as time of day, type of road, and vehicle weight and fuel economy) rather than indirectly on fuel consumed. At the same time, this choice for the federal system provides a foundation for state and local governments that choose to use it to develop their own mileage-based systems that piggyback on the federal system in order to raise their share of needed revenues in ways that spur more efficient use of the system. The Commission believes that such a system can and should be designed in ways that protect users' privacy and civil liberties, that
incorporate any necessary cross-subsidies (for instance, to benefit the national network or to meet social equity objectives), that do not interfere with interstate commerce, and that support goals for carbon reduction. Moreover, greater use of pricing mechanisms, including both targeted tolling and broad- based VMT pricing systems, may spur more efficient use of our highway network and, by shifting demand to less congested periods of the day or to other modes, may in turn enable more efficient investment, thus reducing the additional capacity that needs to be built. | INFRASTRUCTURE STIMULUS WILL NOT SOLVE THE PROBLEM |
An economic stimulus spending package that includes investments in surface transportation, while helpful, will not solve the immediate or the longer-term problems of funding system needs. The current investment shortfall is just too great. The Highway Trust Fund will continue to need significant augmentation beyond whatever an immediate short-term stimulus plan can provide. For instance, a stimulus package that includes nearly $40 billion for highway and transit infrastructure, while important in addressing the short-term economic crisis, will pay for only about three months of the identified annual national funding gap to maintain and improve the system—a gap that repeats itself and compounds year after year. |
EXHIBIT ES-4: REVENUE OPTION EVALUATION SUMMARY* | |||
Strong | Moderate | Weak | Not Applicable/ |
Federal Options | |||
• Vehicle miles traveled fee •Automobile tire tax • Motor fuel tax • Carbon tax/cap and trade •Customs duties •Truck/trailer sales tax •Vehicle registration fee • Heavy Vehicle Use Tax • Container fee •Tariff on imported oil • Sales tax on motor fuels •Truck tire tax | • Freight waybill tax • Vehicle sales tax • Harbor maintenance tax • General fund transfer | • Freight ton-mile tax • Driver's license surcharge • Bicycle tire tax • Dedicated income tax •Auto-related sales tax • Freight ton-based tax • General sales tax | • Vehicle inspection and •Vehicle personal property tax •Windfall profits tax • Petroleum franchise tax • Minerals severance tax • Federal tax on local transit fares • Federal tax on local parking fees |
State and Local Options Benefiting from Federal Action | |||
• Facility level tolling | • Proceeds of asset sales, | • Cordon area pricing • Passenger facility charges | • Development and impact fees •Tourism-related taxes •Tobacco, alcohol, and gambling taxes |
*For revenue options that are dependent upon utilization of a targeted investment fund as a basic premise for feasibility, such a fund is assumed for evaluation purposes (e.g., for all freight-related funding mechanisms and more specifically those more narrowly targeted to intermodal port and harbor-related investment).
** State and local options in this category may have applicability but there is no relevant federal action or role.
• As a nation, we cannot afford to wait for a new revenue system to be put in place to start addressing the fundamental investment challenge. And, in the short term, effective and feasible options are limited. Given the significant current funding shortfall, the Commission concluded that the best near-term options for federal in- vestment are increases to current federal fuel taxes and other existing HTF revenue sources. After reviewing a wide array of options and suggesting several viable candidate approaches (see Exhibit ES-4), the Commission concluded that increasing and indexing existing mechanisms satisfies the key evaluation criteria most effectively—primarily in raising significant sums with relatively low implementation costs or other hurdles. That is not to say that other options are not possible should Congress choose to pursue other avenues as well, but increases in existing HTF revenues present the best option in the near term, the Commission believes.
• Federal actions can help expand the options available to states and localities to fund their shares of investment. While many state and local funding options are not reliant on the federal government for implementation, several key federal actions could help facilitate and encourage the greater application of some—specifically, user-backed funding approaches such as tolling and pricing—to help meet a portion of state and local government investment needs, including their required matching of federal support.
• Finally and importantly, financing approaches—as distinct from revenue- raising mechanisms—are not a substitute for solving the underlying problem of insufficient funding. Properly structured financing techniques and government financial programs, including those focused on facilitating partnerships with the private sector, can play an important supplementary role. Their success, however, will depend on their ability to leverage new revenue streams to repay upfront capital investments. Even with this, financing approaches will have limited positive impact if not coupled with substantial net new resources.
The Commission realizes that the transition from the current funding and finance model to a new model cannot be made overnight and that the immediate needs are simply too critical to wait until such a system is put in place. The Commission therefore makes the following recommendations for a multi-pronged approach to meet both short-term and longer-term challenges. More detailed recommendations are provided in Chapter 8.