John Locke Update / Research Brief

A Fork in the Road for Transportation Funding

posted on in Fiscal Insight, Spending & Taxes, Transportation
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Governments cannot realistically take enough money from citizens to pay for all the repairs and construction people say we need.

The American Society of Civil Engineers estimated an unmet need of $1.1 trillion over ten years. Federal gas taxes bring in $35 billion per year. Meeting the difference would require a gas tax four times higher than today, assuming people did not change buy more fuel-efficient vehicles or drive less.

Closer to home, North Carolina spends $600 million less than what is needed for roads and bridges each year. Filling that gap would require a 30 percent increase in revenue, not counting money desired for new construction, new and expanded roads, new rail links, expansion and modernization of port facilities in Morehead City and Wilmington, inland ports, airport expansion, and transit.

The State Transportation Improvement Program identified $28 billion in projects by 2027 but just $9 billion in funds, which also covers salaries and benefits for N.C. Department of Transportation’s (DoT) 12,000 employees plus other operating and maintenance expenses. The state could take out $270 million a year in new debt each year according to the State Treasurer’s 2017 Debt Affordability Study, which would bring the total available to perhaps $12 billion, still less than half of the stated need.

Courts added $596 million to the financial need by protecting property rights of 4,530 families. North Carolina’s Map Act allowed the Department of Transportation to “establish official maps of future road corridors in order to freeze development within the maps, reducing property values, and thereby reducing the amount of just compensation…paid to property owners.” The Supreme Court ruled that DoT could not delay payments until construction but owed for the value of the property when a map was published, some as far back as 1992. The Department of Transportation is, according to my colleague Jon Guze, “dragging its heels” on compensation to people whose property had already been affected.

There is also the simple truth that “the more roads we build, the more we need to one day fix.” Road maintenance is a liability. Roads are costs that make possible value-creating transactions unless there is a way to capture come of the value they make possible. We cannot, as a state or a nation, pay for more of the same with more of the same.

Finding better ways to use existing resources and private investment and user fees, such as tolls, a vehicle-miles-traveled tax, or congestion pricing should be considered. Other ways to monetize the value created through the physical connections provided by our transportation infrastructure should also be on the table. None of these on its own or in combination will raise enough money for our entire wish list, but they could help in other ways, such as reassessing where to build homes and businesses, what to build, and how to build.

Relaxed zoning and land-use regulations could allow for incremental development in existing areas without the create ersatz downtowns out of whole cloth. They could also improve return on investment for transit, as a World Bank report noted in its case study of Washington, DC.

More than finding new ways to pay more to build more, we need to reconsider the purpose of our transportation system, which will likely mean a different idea of what counts as a need.

Our wealth is not measured in the number of roads we have,” writes Strong Towns Founder and President Charles Marohn, “but in how we use them.” One of the core principles of his group is that “A transportation system is a means of creating prosperity in a community.”

To get the most from the money and data available for transportation, we have to acknowledge the limits of how much money can be available and adjust our desires to what is possible with those funds with a focus on how that creates prosperity. Placing more of the burden for transportation maintenance on the direct beneficiaries of a certain road or transportation node—drivers, riders, and property owners provides a clear signal of the value of a project and the possible return on investment.

Finally, we have to scale back what counts as essential needs worthy of a shared contribution from the state and what should be left to users of the infrastructure.

Joe Coletti is Director of Oversight Staff for the NC House Majority. Joe is a former Senior Fellow at Locke. Here, he examined fiscal and tax policy. He previously headed the North Carolina Government Efficiency and Reform initiative… ...

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