Subsidies are a way of life, but invisible, like the air we breathe
Do Roads Pay for Themselves? Not at all
We append this 2008 article on a Texas State government website, undated, earlier noted at the Sightline website in July.
By the Texas Department of Transportation.1. What is a traveler paying for when he or she pays state gas tax at the pump?
Texas state motor fuel tax is collected from all over the state and goes into a single pool of revenue—about one quarter of which goes to fund education, and about three-quarters of which goes to the state’s highway fund, where it is spent on transportation uses and some non-transportation functions of government. The state receives federal funds as the state’s share of the federal fuel tax; about 70 cents of every gas tax dollar Texans send to Washington comes back for road use. Historically the fuel tax paid in any locality of the state is unrelated to the road projects in that locality; every fuel taxpayer in the state paid something for any given road. 2. When is a given road actually “paid for?”
Just like your car, it never is. You may have paid the note, but maintenance and fuel costs go on as long as you own the vehicle. Once a road is built, maintenance and rehabilitation costs last its entire life, generally about 40 years. The decision to build a road is a permanent commitment to the traveling public, including reconstruction when necessary, meaning no road is ever truly “paid for.”
TxDOT developed the Asset Value Index to compare the full 40-year life-cycle costs to the revenues attributable to a given road corridor or section. The shorthand version calculates how much gasoline is consumed on a roadway and how much gas tax revenue that generates. The Asset Value Index is the ratio of the total expected revenues divided by the total expected costs. If the ratio is 0.60, the road will produce revenues to meet 60% of its costs; it would be “paid for” only if the ratio were 1.00, when the revenues met 100% of costs.
A “tax gap” analysis shows how much the state fuel tax would have to be on a corridor for revenues to match costs. This methodology revealed that no road pays for itself in gas taxes and fees.
For example, in Houston, 15 miles of SH 99 will cost $1 billion to build and maintain over its lifetime, while only generating $162 million in gas taxes. That gives a tax gap ratio of .16, which means that the real gas tax rate people would need to pay on this segment of road to completely pay for it would be $2.22 per gallon. Or revenues from other parts of the state must be used to build and maintain this corridor.
This is just one example, but there is not one road in Texas that pays for itself based on the tax system of today. Some roads pay for about half their true cost, but most roads we have analyzed pay for considerably less. Across the state, as revealed by the tax gap analysis, overall revenues are not sufficient to meet the state’s transportation needs.
Blogger Jeff Youngstrom: According to the Federal Highway Administration, funding for local roads and streets in Texas is 88% from "motor-vehicle and motor-carrier taxes"; less than 3% comes from fuel taxes. For Texas highways, only 22% of funding comes from fuel taxes, another 14% from those motor-vehicle taxes, and the rest comes from a variety of sources, but mostly federal funds. If Texans want to pay for roads with gas taxes, they've got a lot of shifting to do.
JJS: Roads cost money that road users should pay; the people who use the roads most should pay the most. However, as TxDOT noted, roads have “capital costs”, those of construction, and ongoing costs, those of maintenance. To cover capital costs, a jurisdiction needs to pay the builder a lump sum. But to cover ongoing costs, government should make road users -- drivers -- pay a-la-carte, since that gives incentives not to over-consume, but rather to drive only as much as makes sense.
Other ongoing costs include police patrols, collision response, insurance, pollution, delays from congestion, etc. Fuel taxes and perhaps emission fees and traffic charges could cover these costs of using the road.
As for covering the capital cost with a lump sum payment, note that roads also draw up land values of nearby sites. The locality could recover those higher values that its roads generate by shifting the property tax off buildings, onto land. Then use some of the land-tax revenue to pay off the bonds sold to build the roads.
Once the bonds are all paid off, what to do with site “rents” still pouring in to the public treasury? For starters, one could cut out other taxes. After that, what a nice problem to have!
Jeffery J. Smith runs the Forum on Geonomics.
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