New Debate about Vehicle Miles Travelled Fee

Recent weeks have seen renewed debate about how to pay for transportation investment. The National Financing Commission released a report recommending an increase in the gas tax and a transition in the next decade to a system based on vehicle miles travelled (VMT). Around the same time, Transportation Secretary LaHood commented that he was willing to consider a VMT charge as a revenue mechanism – a comment that the Obama administration quickly smacked down and backed away from. This was a surprising move that does little to advance a reasonable discussion of how to actually pay for transportation investment.

The basic issues, as we have partly laid out in previous posts, are these:

1. There is a popular myth that the public fully pays for transportation infrastructure via the gas tax. This is false. As the Finance Commission reports, people pay nowhere near the full direct and indirect costs of transportation.


2. Transportation infrastructure is not only deteriorating, it is not being used efficiently. Charging people more of the actual cost of their use can preclude the need for more investment. Either people pay upfront with higher fees, or they pay later through higher general or indirect taxes, and it is cheaper to pay upfront.


3. If we do not raise enough revenue through user fees like a VMT charge, we face the issue of whether to spend money from the general fund. This would be a foolish approach because it severs the connection between payment and use.


4. The gas tax is unsustainable. As the primary revenue source, in the short term it needs to be increased if we want to invest adequately in transportation. In the medium term (5-20 years), it needs to be phased out because changing technologies will limit the revenue it raises.

So we arrive at discussion of the VMT charge. The administration’s dismissal of a VMT charge flies in the face of broad consensus in the transportation sector. Without proposing an alternative revenue source, it seems that the administration either does not believe that more money should be invested in transportation, or that more investment should be paid for from the general fund. The first possibility is contradicted by the administration’s own emphasis in the stimulus bill of the public value of investing in transportation. The second possibility is simply poor policy.

At a time when the country needs to focus on efficient spending, a policy that funds transportation from the general fund is the most costly and least efficient approach. It voids the principle of “user pay” and ensures that transportation infrastructure will be used in the most inefficient way (i.e. continued traffic congestion).

It is not that a VMT charge is the only viable user fee available, but it is a logical and reasonable one. To dismiss it off the cuff without a discussion of the alternatives is to preempt a thoughtful debate of best practices. For those reasons, we have certainly not heard the last of a VMT charge.

How to Improve the Stimulus Bill

There has been much discomfort in the transportation community about the amount of funding for transportation infrastructure in the stimulus, or economic recovery, bill reported out of the House Appropriations Committee a week ago Of course, we do not yet know what the final bill will contain for transportation or even the degree to which the House language is reflective of what the new President and his Administration desire, but this first significant legislative action on economic stimulus is an opportunity to remind ourselves of our goals and purposes.

I am not an economist, but it seems to me that the purpose of a stimulus bill is to stimulate the economy and, more specifically, to stimulate job creation. That is why there has been a focus on "shovel-ready" projects and why the House bill contained "use it or lose it" language. Nonetheless, as the Congressional Budget Office noted, there is some delay (often, fairly significant delays) before transportation authorizations are turned into outlays, that is, before they become money actually spent and invested in the economy. Indeed, even though every recent surface transportation authorization bill has been primarily justified on the basis of job creation, no one really knows how many jobs are created by transportation bills or how quickly. My limited exposure to this issue during my service at the U.S. Department of Transportation left me skeptical that there was very much authenticity in, or analytical rigor to, the estimates of "X number of jobs are created for $1 billion of spending" in this sector.

Nonetheless, while we may not know for certain how many jobs are created, or how quickly, by surface transportation spending, clearly these investments make fiscal sense in the current economic environment. With that in mind, let's continue to remember that job creation is the purpose of the transportation spending in this stimulus bill. The transportation sections of a stimulus bill are not designed to correct the serious shortfalls that we have had in infrastructure investment in this country for many years or to correct the fact that much of the surface transportation money that has been authorized by Congress in recent bills has not always been spent wisely.

Our goals should remain constant: however much money for transportation is contained in the final stimulus or economic recovery bill, those funds should be spent on "good" projects. That means projects that are likely to bring the greatest economic returns in the shortest time. Most often, these will be projects designed to restore transportation facilities and networks to states of good repair and to enhance the operational efficiency and productivity of existing systems.

Moreover, the principles of transparency, tracking, and accountability that are in the House stimulus bill should be retained in the final legislative language.

This discussion reminds us that we need significant long-term change in federal surface transportation programs. That is unlikely to happen in a stimulus bill, but we should be certain that the stimulus bill does not set this effort back. There was -- and, I suppose, there remains -- a risk that the attention on the total level of transportation funding in a stimulus bill would divert us from this purpose and would "swallow-up" the debate over national transportation goals and over the need to establish performance-driven and accountable surface transportation policies.

We need to articulate these national transportation goals, to redefine the federal role in transportation, to assure funding mechanisms that advance performance and accountability, to "get the prices right" in transportation (as the Eddington Report advocated for the U.K)., and to reform fundamentally federal surface transportation programs. These challenges will only be met in the surface transportation authorization bill yet before us, and these challenges will remain, no matter the level of transportation funding in the final stimulus bill.

-Emil Frankel

Congressman LaHood and the Department of Transportation

During his career in the U.S. House of Representatives Congressman LaHood had a reputation for approaching public problems with an open and pragmatic mind.  I am confident that this attitude will translate into a willingness to consider significant reform in the transportation sector during his leadership of U.S. Department of Transportation.  Many necessary changes can only come through legislative action, but DOT can undertake administrative and regulatory changes to promote greater linkages between transportation policy, economic growth and competitiveness, energy security, and climate change. Addressing these issues, which are deeply interwoven with transportation policy areas, is essential in developing a forward-looking federal vision – and DOT can play an important role in this task.

There are a number of steps DOT can begin today to reform the system. Perhaps the most dramatic might be a reorganization of DOT’s structure along functional, rather than modal, lines. The leading example of such a departmental restructuring comes from the United Kingdom. The goal is to better align priorities, objectives, and process while reducing inefficiency and providing incentives for success. A restructuring would help clarify and consolidate the grant-making agencies within the DOT (like merging the highway and transit agencies into one) and the more regulatory-oriented agencies that deal with goals like safety. Within the limits of existing statute, the new Secretary might consider a reorganization of DOT around national goals and purposes, such as transportation in metropolitan regions, major trade and goods movement corridors, and intercity passenger connectivity.  In addition, the new Secretary might undertake – again, within existing law – a consolidation of the Department’s regulatory activities that deal with goals like safety.

DOT can lead in other areas as well. In focusing on energy security and environmental goals, Cong. LaHood, as Secretary, should begin the process of further increases in CAFE standards for all classes of vehicles and should direct DOT’s operating agencies to develop guidance to state, local, and metropolitan agencies that will encourage genuine strategic transportation planning and linkages between transportation, economic growth, energy, and climate change at those levels. To improve operations DOT can take action to enhance the role and capacity of the Bureau of Transportation Statistics to collect data critical to insuring performance and accountability; without better data it is hard to develop accountability much less set goals. DOT can also move to put a greater emphasis on operating improvements and restoration of existing assets and, to the extent possible under existing law, using DOT programs and authority to allow state and local governments to utilize pricing in the management of systems. 

Even if all of these goals cannot be fully accomplished in the next few years, a DOT focused on opportunistically moving the ball forward when possible will help to ensure that critical long-term concerns are advanced.

Obama's Department of Transportation (Possibly)

As President-Elect Obama names the key personnel in his new administration, one department he has yet to address is Transportation. The Washington Post recently profiled some of the people who may be up for the top job - including Jane Garvey, a member of the National Transportation Policy Project - and it is certainly a talented group. Regardless of who is appointed, however, they may face both the necessity and the opportunity to dramatically restructure how the Department is organized. The current DOT structure is divided by modes (e.g. highway, transit, aviation), when it really should be built around goals.

What does that mean exactly, and how would it change things? The leading example of such a departmental restructuring comes from the United Kingdom. Following the release of the Eddington Report, which we have mentioned in previous blogs, the UK set out to restructure its Department for Transport in a way that aligned with the report’s recommendations. For instance, the report presented five governance principles, two key ones we will mention here being:

• 1.       The geographic scope of decision making should allow a whole journey approach – reflecting the economic and geographic reality of travel.
  
• 2.       To ensure decision makers consider all modes and policy options, they need power or influence over all modes and policy options.
  

To incorporate these principles the UK switched from a modal structure, like the US currently has, to one centered on goals and places.

The key impact of this kind of restructuring is that it better aligns priorities, objectives, and process; it reduces inefficiency and sets up incentives for success. A restructuring would help clarify and consolidate the grant-making agencies within the DOT (like merging the highway and transit agencies into one) and the more regulatory-oriented agencies that deal with goals like safety.  If America is to renew its transportation system so that it can meet environmental, energy, and economic goals, the DOT should be organized around ends not means. The current divisions along modal lines foster destructive competition about how much money each mode gets instead of a focus on what those modes are trying to achieve in cooperation. The transportation system is just that, a system composed of many parts that should be working in coordination, and it’s time that the DOT’s organization properly recognized that fact.

-Daniel Lewis

 

 

What Are The Candidates Saying About Transportation?

Not much, is the correct answer. (You can bet that they're not whispering about transportation in that photo). At the Democratic convention last week, and at the Republican convention this week, the topic of transportation policy and infrastructure has been absent. Now, maybe some have been talking about it, perhaps minor speakers at non prime-time hours, but of the major voices? Very few. There has been a great amount of focus on clean, renewable energy, and that ties in with transportation in a serious way – but it is separate from the policy and infrastructure issue of roads, rails, and transit.

For example, at the Democratic convention, both Bill and Hillary Clinton mentioned energy, but not transportation. Same story with Joe Biden and John Kerry. Michelle Obama spoke of neither. Transportation made one brief appearance in Barack Obama’s speech when he called for government to “invest in new schools and new roads.”

From major Republicans in Minneapolis there has also been no talk of transportation. President Bush, Rudy Giuliani and Sarah Palin all mentioned energy but not transportation, and Fred Thompson and Joe Lieberman mentioned neither. Perhaps John McCain will throw in a one-line reference like Obama.

Two of the only events we know about that focused on transportation were roundtable discussions held by the Rockefeller foundation at each convention. In fact, National Transportation Policy Project Members participated in Denver and Minneapolis, Jane Garvey and Senator Slade Gorton respectively. Other big names attended, like Pennsylvania Governor Ed Rendell, but so far as we know the forums were not televised.

It is tempting to write that transportation has been conspicuously absent from these conventions, but that’s not exactly fair to the phrase. Transportation would had to have been a common topic beforehand for it to go conspicuously absent; but no politician, going back as far as the early presidential primaries, has made it a key campaign focus.

In many ways this is shocking. For most Americans, transportation - alongside public schools and taxes -is their most frequent interaction with government. Driving their car, taking a bus, these activities are on infrastructure paid for by government. And everyone knows how poor that infrastructure is these days. Congested commutes, potholed roads, infrequent trains, these are problems that when fixed earn deep gratitude from the public. This is not to mention high gas prices, the Minnesota bridge collapse, and recently renewed discussion about the Bridge to Nowhere earmark. Why aren’t politicians talking transportation?

Perhaps most people don’t consider the situation as troubling as I do. That goes against my personal experience, and the experience of almost everyone I’ve talked to regarding the subject, but it’s possible. The more likely cause might be that people have become accustomed to mediocre infrastructure, and just enough is being done to stifle complete road rage. Politicians can get by spreading out projects here and there rather than tackling the larger and tougher choices about how to fund, prioritize and invest in transportation. Given all the talk about leadership at the conventions you would think there is plenty to go around, but transportation is one area that is still crying out for it.

-Daniel Lewis