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2005 Forum
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2005 Oberstar Forum — Summary
Looking past the gas tax: 4th Oberstar Forum examines transportation finance alternatives
Regional and national transportation officials, policymakers, and professionals joined U.S. Rep. James L. Oberstar on April 17–18, 2005, to discuss the future of transportation financing, including the gas tax and possible alternatives. This was the fourth meeting of the transportation policy and technology forum named in honor of Oberstar and hosted by the Center for Transportation Studies at the University of Minnesota.
Pete Ruane (center), participating in the Forum's facilitated conversation, says political will has been lacking among leaders with regard to transportation funding.
Oberstar headlined the two-day event, which featured USDOT acting assistant secretary for transportation policy Tyler Duvall, Surface Transportation Policy Project president Anne Canby, American Association of State Highway and Transportation Officials engineering and technical services director Tony Kane, American Public Transportation Association president Bill Millar, and Oregon DOT innovative partnerships and alternative funding manager James Whitty. Many other state and national leaders also attended. CTS director Robert Johns served as master of ceremonies.
“We have different pricing mechanisms for different sources of energy for transportation,” Oberstar said, unveiling his vision for a national commission to examine all Highway Trust Fund financing options by 2009. “We’ve got to bring those all together in some unified system that brings us sustainability, certainty of revenue, and fairness and equity.”
The portion of the event for invited leaders included a series of presentations and panel discussions following an introductory briefing on transportation financing from Parsons Brinckerhoff vice president Steve Lockwood. He acknowledged that while we cannot invent and implement an entirely new transportation funding system in the next 20 years, we can focus on fixing the existing system.
In addition, University of Minnesota researchers presented findings from their transportation financing-related studies. Barry Ryan from the applied economics department discussed current transportation finance mechanisms and challenges for Minnesota. He offered “some grist for the mill” in a three-part presentation that described taxpayer impacts, the motor-fuel excise tax and tax effort, and predictions on how well road taxes will maintain their purchasing power. The policy challenge, he explained, is to fashion a road tax system that is appropriate for the level of user benefits. Civil engineering assistant professor David Levinson described his research about the future of transportation networks and their financing. “We’re in a mature stage with surfaced roads and need different strategies to deal with this mature mode,” Levinson explained. One suggested strategy is to differentiate levels of service on the road network and consider building high-occupancy toll (HOT) lanes and HOT networks that ensure people willing to pay for those options that they can get from point to point within a given period time.
Mindful of the pending major highway and transit funding legislation in Congress, forum invitees dissected transportation finance policy during a facilitated conversation. Dialogue centered around three points: the impacts of more funding sources used to finance transportation, how to address the issues those additional sources raise, and their short- and long-term implications for public policy and programs.
During the discussion, T. Peter Ruane, president and CEO of the American Road & Transportation Builders Association, pointed out that in the 2002 elections only 50 percent of local referenda, such as bonding bills, user fees, or sales taxes, passed. In the 2004 elections, 80 percent passed. “We need to take advantage of that. Clearly, the public is way ahead of most politicians. People are willing to pay… but the missing ingredient is political will.”
Rick Krueger, executive director of the Minnesota Transportation Alliance, agreed. “Transportation hasn’t had enough state leadership for a long time. We are jeopardizing our long-term economic development because of a lack of investment in the transportation infrastructure," he said. "If we can’t get leaders to lead on this issue, we need to engage the public and get them to say it’s a priority issue they are willing to vote on.”
Marcia Marcoux, member of the Rochester city council and the National League of Cities Transportation Policy Committee, pointed out that taxpayers often have a hard time understanding what their taxes actually pay for. “People sometimes feel they shouldn’t have to pay a street assessment because they already pay taxes, and they think the money is there,” she said. “Somehow we have to change that attitude and better explain how things are funded.” Tony Kane, director of engineering services for the American Association for State Highway and Transportation Officials (AASHTO) agreed, and noted that the fuel tax, while it is a signal to motorists that they have to pay something [for roads/transportation], it is not a very strong signal. “State and federal gas taxes amount to about two cents per vehicle miles of travel,” Kane said. “We need stronger signals, whether they’re in the form of new user fees, tolls, or HOT lane pricing, so that motorists understand that transportation is not free.”
“The transportation issue must be positioned to the public,” added Jay Cowles, chair of a group of business executives known as the Itasca Project involved in shaping public policy in key areas such as transportation. “This is one of the great black boxes of public policy. It's worse than health care and education. We need to find ways to speak more meaningfully to the public about what they already know, but put it in a context where they trust the public policy process.”
Panelists (from left) Robert Johns, James Oberstar, Tyler Duvall, Anne Canby, Tony Kane, and Bill Millar discuss short-term directions for funding transportation.
Next, Innovation Briefs editor/publisher C. Kenneth Orski presented his observations of the themes that emerged from the preceding presentations and discussions. He noted that one of the long-term challenges for public policy will be to facilitate transition to a market-based or priced system while maintaining a basic level of service on the existing federal aid highway network. “We can see dimly the model of this scenario in Texas where they decided to change from supporting new infrastructure with gas taxes to using tolls and bonding almost exclusively. Whether this Texas scenario will be adopted more widely in other states remains to be seen,” Orski concluded. “But the fact that at least one state is ready to go ahead with this approach means it is no longer fiction; it is a reality.”
During the public portion of the form, a panel of transportation leaders discussed short-term directions in transportation finance from a variety of perspectives. Tyler Duvall highlighted the Bush administration’s proposal for financing surface transportation programs at an increased level of $284 billion through 2009. “We’ve also laid the ground work in the policy arena for some fairly significant changes in terms of how we finance and manage our transportation systems in the future,” he continued. “We propose to mainstream the value pricing pilot program, of which Minnesota is one of most active states, and think it’s time the entire country experimented with these new developments taking place in terms of road pricing.”
Next, Anne Canby weighed in on the issue of tolls. “We must be mindful that we’re talking about how we use a public right-of-way,” she said. “At the moment, the public might not accept tolling options because the price of gas already is increasing the cost of driving. The double whammy of a toll might be a hard concept to sell.”
But Tony Kane believes the biggest challenge to the fuel tax is the lack of political will to raise it. “It has been 20 years since the gas tax was raised in Minnesota,” he said. “I think the public is willing to pay a higher price for better service on their transportation systems.”
Finally, Bill Millar contemplated a shift from an indirect source of funding, like general taxes or gas taxes. “We need to talk about the entire system, all its components, and all that can be contributed to the system to make sure there’s a way to fund each and every one of those components,” he said.
The next panel moved beyond short-term issues and addressed future visions for transportation finance. James Whitty described Oregon’s year-long, road user-fee pilot program scheduled to roll out in late 2005. This legislatively mandated program is tasked to develop a revenue collection design for Oregon roads and highways that would replace the current system. The objective is to make the mileage, or vehicle-miles traveled (VMT), fee technologically, administratively, and financially practical. Using in-vehicle Global Positioning System (GPS) receivers linked to computers at select fueling stations, drivers will be assessed a per-mile charge based on the number of miles driven within the state—or zone. This system also provides the ability to have rush hour pricing with virtually no added cost. “The intent is to replace the gas tax,” Whitty explained, describing how a mileage fee is added and the gas tax is deducted when drivers purchase gas. “We don’t think this is the only solution or best solution. It’s simply an option we want to prove can work.”
Max Donath, director of the University’s Intelligent Transportation Systems (ITS) Institute explained that the Oregon program is a very simple system. “Simple is what we should all be working towards,” he said. “However, there are technologies available that facilitate even more differentiation than Oregon’s zone system such that we can distinguish individual roads and allow each jurisdiction to recoup the cost of travel on its roads.” These technologies include differential global positioning systems (DGPS) and digital maps, which conceivably could offer high enough accuracy to track vehicles as they move back and forth between a HOT lane and a normal lane—and apply road use pricing accordingly.
Panelists (from left) James Whitty, Max Donath, and Lee Munnich provide a glimpse into the future of transportation finance.
Lee Munnich, director of the Humphrey School’s State and Local Policy Program, added that studies during the mid-1990s concluded that technology was available to enable road pricing but using it lacked political and institutional support. “We’re beginning to see that we can’t make the necessary changes without political leaders and champions,” he said. “Not just because they do the legislation, but if they can’t understand and explain something to their constituents, then there’s no way change will happen.”
Following the panel discussions, Oberstar addressed the pros and cons of various alternative financing mechanisms, emphasizing his belief that the gas tax still is a fair method of financing highway development. “All the users pay,” he explained. “Although the system is not perfect, the amount of tax each user pays is generally equivalent to miles driven and use made of the system.” “I am reluctant to see heavy reliance on new tolls,” Oberstar continued. “For one thing, tolls have an element of inequity. Drivers paying tolls are also paying a gas tax for each mile driven on a toll road, so these drivers are, in a sense, paying twice. As part of the bipartisan compromise on the [pending reauthorization] bill, H.R.3 contains provisions authorizing a limited number of new tolling projects so that we can further evaluate the desirability of tolling. I caution, however, that if we are to expand the use of tolling, even through pilot programs, we must take steps to ensure that equity is adequately addressed.”
To close the event, Oberstar reiterated his hope that the forum continues to be “a place where ideas can clash” in a thoughtful and constructive way. “We’re looking for short-term answers to our transportation problems,” he concluded, “and long-term solutions to maintaining our sustainability, our competitiveness in the domestic and international marketplace, and our quality of life in today’s society and for those who follow us.”
More information about the James L. Oberstar Forum for Transportation Policy and Technology is available on the Oberstar Forum homepage. A detailed report summarizing this year’s forum is available here (472 KB PDF).