Ontario and US transportation leaders share a common set of problems

Ontario’s Transportation community is in good company.

A 2010.03.06 newsletter from Ken Orski re Transportation Funding in the US is an excellent crystal ball and near-future predictor for Transportation Funding in Ontario (www.innobriefs.com (Vol.21, No 4) “The Clouded Future of the Surface Transportation Program”). Here are its critical messages for Ontario:

This is the third time in less than three years that Congress used the general fund to bail out the Highway Trust Fund, growing from $8B to $19B over three tranches. This is a measure of the steadily declining efficacy of the fuel tax. We enjoy the same trend.

“House approval of the Jobs Bill … on March 4 … has put an end to the series of temporary month-to-month extensions and placed the federal surface transportation program on a solid financial footing for the rest of the year. The bill, which extends the federal transportation program through December 31, 2010, transfers $19.5 billion from the General Fund into the Highway Trust Fund and restores an earlier $8.7 billion rescission of contract authority. These resources, when added to the expected revenue stream from the gas tax, should allow the Trust Fund to support highway and transit programs at the levels authorized for Fiscal Year 2009 through the end of 2010 and into 2011.”

Using money from the General Fund is a holding pattern, because for various reasons they cannot take the necessary measures re funding reform. Note the taboo against mention of a critical market-rectifying tool – paying by road use rather than by a fuel consumption tax. We enjoy this same taboo. We also need “breathing room”, have “murky prospects” and “fail to shed light”.

“Passage … extend[s] the existing law for 18 months (through March 2011). It also provides Congress and the White House with some welcome breathing room in which to come up with a longer-term solution. However, the prospects for a multi-year bill remain murky. Several meetings in the past two weeks have focused on the outlook for transportation legislation but failed to shed any new light on how to pay for a long-term bill…”

US Congress cannot raise fuel taxes. Neither can we.

“Running through all of the discussions was a common refrain: how to pay for the needed improvements to the nation’s transportation system. To close the funding gap between the projected revenue to the Highway Trust Fund (HTF) ($235 billion from 2010 to 2015) and the program needs … would require an extra $215 billion over the life of the next authorization (or an extra $265 billion if the proposed rail program is included). Where is the money to come from? No one has yet produced an answer. “We cannot afford to continue funding our highways and transit out of the General Fund,” Sen. Conrad said, urging Sec. LaHood to devise other funding alternatives. But the latest round of meetings broke no new ground.

The most obvious option --- an increase in the gas tax--- seems to have been taken off the table. The Administration’s unwillingness to consider this option was forcefully reaffirmed by Secretary LaHood at the AASHTO Briefing. “It’s easy for people who are not elected to talk about raising the gas tax,” the Secretary observed. “They don’t have to face the voters.” He left no doubt that the Administration remains unalterably and unequivocally opposed to this option—at least as long as the country finds itself in an economic recession. Nor is there political will in Congress to enact a tax increase in an election year.”

In the US, as in Ontario, how roads are funded becomes less and less transparent. This prevents taxpayer from having any idea of the true cost of the use of a private vehicle.

“How about supplementing the HTF revenue with General Fund appropriations? This option, it was pointed out on more than one occasion in the recent meetings, is not exactly without precedent. It was pursued de facto to keep the Trust Fund solvent during the past year (with two transfers amounting to $15 billion) and it will be used again in implementing program funding under the latest extension ($19.5 billion). Overall, the federal surface transportation program has benefited from almost $60 billion in General Fund transfers over the past two years.

Objections to using General Funds are based on three grounds: that their use undermines the user-pays principle; that it means a potential loss of contract authority, i.e. the ability to enter into multi-year funding commitments in advance of appropriations; and that it opens the surface transportation program to competition for funds from other government programs.”

Hiding the cost of mobility erodes the user-pays principle. This will serve to make eventual funding reform (e.g., road-pricing) ever harder, until we reach a state of emergency.

“While the user-pays principle is not without merit, it has been already substantially weakened in recent years as the Highway Trust Fund assumed additional funding responsibilities for mass transit and other non-highway modes (walkways, bike paths, scenic trails) and, most recently, promoting the “livability” agenda. Today, as much as 25 percent of the Highway Trust Fund revenue is spent on non-highway programs. One way to partially restore solvency to the Highway Trust Fund, some participants at the recent meetings suggested, would be to limit the use of HTF funds to highway expenditures and transfer all of its non-highway obligations to the General Fund. It is estimated that this would free up approximately $10 billion/year for highway expenditures.

At the state and local level much of the revenue for routine highway operations already comes from sources other than user fees. It includes developer impact fees, tax districts, local government bonding, and state and local sales taxes. Thus, another funding approach would be to follow the local example and reserve HTF tax revenues for the maintenance of the National Highway system in a state of good repair while shifting the expense of funding new capacity to the General Fund. The Administration seems to have embraced this philosophy by proposing to fund the $4 billion National Infrastructure Innovation and Finance Fund (NIIFF)— designed to fund major capital transportation projects— with General Fund contributions.”

The US lacks decisive leadership in Transportation Funding. So does Ontario.

“The need for the Administration to become more engaged in advancing the transportation agenda was mentioned repeatedly at the recent meetings. “We need President Obama’s leadership to move things forward,” urged Sen. Voinovich at the Bipartisan Policy Center meeting. Implied in his statement was a widely shared perception that the White House has been largely absent from the debate about the future of the program.”

The unrelenting (and I say fruitless) struggle between highway vs transit continues (note the car-wars swipe):

“The Administration has yet to articulate a clear vision of where the federal program should be going. Its “livability” agenda – described by some critics as “a rhetorical abstraction” and alleged by the AASHTO community to be a code word for downplaying highway investment in favor of public transit – is no substitute for a coherent long-term strategy that clearly defines the federal role, establishes criteria and performance standards for federal investment and provides a financial plan.”

Leadership remains non-committal for both of us:

“Pressed to provide some indication as to when the Department may be expected to unveil its blueprint for a multi-year transportation bill, Secretary LaHood told reporters at the AASHTO meeting that a set of “principles” will be released within the next 90 days. Will the principles include a funding proposal, the Secretary was asked. He would not say. But the Secretary's earlier testimony before the Senate Budget Committee made it clear that the Administration does not expect to release its full authorization proposal before the end of the fiscal year.”

Our two publics are insufficiently engaged:

“Another recurrent theme at the recent meetings has been the need to seek public support and raise public awareness about the necessity for larger investment in transportation But … warnings about “crumbling infrastructure” do not resonate with the general public. People do not seem to share a sense of an impending infrastructure crisis, nor are they alarmed about the deteriorating state of the transportation system. Collapsing bridges are happily few and far between, and the focused attention that state and local highway agencies devote to system preservation and maintaining their assets in a state of good repair tends to keep signs of aging infrastructure largely hidden from view. The effects of disinvestment are not readily apparent and warnings about an “infrastructure deficit” fall on deaf ears.”

People complain about congestion, but do not see is as solvable. It is seen to be like the weather – either unaddressable, or “the worst happens elsewhere”.

“To be sure, another current deficiency of the transportation system— traffic congestion— is highly visible and public dissatisfaction with it is well documented. But the driving public has grown skeptical that more money or program reform will bring effective congestion relief. Perhaps they have come to accept the truth of the oft-repeated refrain that “you cannot build your way out of traffic congestion.” What is more, traffic congestion leaves vast [rural] stretches … unaffected and unconcerned. Mitigating traffic congestion may be of great importance to many individual urban communities, but it is not perceived as warranting federal intervention.”

Without a major change, we will both continue to drift.

“According to most economists, the projected budget deficit in the out years will not return to what is considered as “sustainable” levels any time in the foreseeable future. This has led one respected political analyst, NY Times' David Sanger, to predict that there will be virtually no room for major new domestic initiatives in the next ten years. Instead, as Emil Frankel [Director of Transportation Policy, Bipartisan Policy Center] speculated, we may continue to drift along, relying on General Fund appropriations to prop up the program until such time as the effects of the accumulated disinvestment become visible enough to create conditions of a genuine emergency. At that point, aroused public opinion will oblige the Congress and the President to act forcefully and decisively, setting the stage for a major multi-year program of infrastructure renewal akin in scope and ambition to the Interstate Highway Program.”

Frankel is right. Things have to become “visible enough to create conditions of a genuine emergency”. And that is a shame. Unfortunately, “infrastructure renewal” in the absence of user-pay reform from fuel-tax to road-use-tax will be a no-show. Every government program demands more funds. Every tax-payer demands to pay fewer taxes. This is not rocket science.

Regarding the Innobriefs newsletter:

“Please feel free to forward or reprint this item with appropriate citation. All correspondence, including requests to subscribe and unsubscribe, should be addressed to: C. Kenneth Orski, Editor/Publisher; email: korski@verizon.net; tel: 301.299.1996; fax: 301.299.4425. Please make sure that your email account is set up to accept incoming mail from korski@verizon.net”