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INDUSTRY OPINION >>

It's always 'us' that pays for infrastructure projects, it's just a case of how?

For the past several months, it seems that all we have heard is about how to pay for transportation infrastructure and very little about what it ought to be. I’m willing to play along with the game of ‘who pays’ and ‘how’, recognizing that the ‘who’ is always ‘us’. After all, there are no free roads and even repatriated foreign balances originally came from ‘us’.

There are three broad categories for funding: direct user payments, indirect user payments and general government revenue. Let’s take a look at all three and see if we can learn something to guide our thinking.

The traditional gas tax is a more indirect form of payment, with both state and federal levies added to the per gallon price and paid at the pump. It is a proxy for usage, hitting less fuel-efficient vehicles harder and exempting plug-in electrics entirely. It is less visible and most people, when asked, think they pay much more in fuel taxes than they actually do pay.

Direct user payments already exist on toll roads, bridges and transit systems. Users simply pay for the use of the service, either at point of sale or with an account. The industry is now considering how to extend this to road user charging, or having drivers pay per mile driven.

The final idea would be to use federal dollars from the general fund to pay for infrastructure. The last several surface transportation bills depended in part on general fund transfers due to declining revenues from the motor fuel tax.

Proposals from the Trump administration for an expansion of public-private partnerships (PPP) fuelled by tax reductions bridge the first and third idea. They would be dependent on a user pay revenue stream, but would also benefit from federal tax support.

Why have I started this column with a tutorial on transportation funding? I believe that there is a relationship between how we pay for things and how we value them and that this relationship is critical to keeping our transportation infrastructure vital and up to date. But before I draw that connection closer, let me mention one important trend. That is that increasingly, transportation technology is being provided by private sector firms and not the government. Traffic conditions, navigation guidance, route planning, all the way to automated cars, are purchased directly by consumers. While so much of government-provided infrastructure and data are critical to these services, the role of government is increasingly obscured.

If we are to maintain the critical public sector infrastructure that underlies the entire system, then we will need public dollars to support it and we need the public to understand and see the connection between their dollars and the transportation system.

The critical solution is that the user pays and the user knows that he/she is paying. Tolling, transit, road user charging and PPPs are all a necessary part of the solution.

 

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