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Settling the Bill: Putting Transportation Costs in Perspective

Funding Future Mobility: Exit 5

August 16, 2012

This is the fifth stop in our transportation infrastructure thought leadership series. In “Settling the Bill,” we explore how the public views transportation as a basic entitlement and begin to set the stage to shift that view to more practical funding solutions.

Ed Regan funding future mobility paper1

“Five Networks”
In Exit 4, we discussed some interesting questions that came up during a recent International Bridge, Tunnel and Turnpike Association conference, including why the public acknowledges the need for infrastructure investment but doesn’t want to pay for it. Perhaps the best explanation for this paradox can be found in comments by one of the conference speakers: Doug Foy, president of Serrafix Corporation in Boston. He spoke about “the five networks” we all depend on:

  • Electricity —We willingly spend perhaps $100 to $150 per month ($1,500 per year) for power
  • Water —Those with public water supplies spend $50 to $100 per month ($1,000 per year) for this essential resource
  • Communications —We probably spend about $200 per month (more than $2,000 per year) on land lines, cell phones and Internet access
  • Television —Many spend perhaps $50 to $150 or more per month ($1,000 per year) to watch almost unlimited offerings
  • Transportation—How much do we spend for access to transportation networks?

For each of the first four items, we willingly—okay, sometimes begrudgingly—pay monthly fees for access to these essential “network” services. In some cases, we don’t have much choice and keep paying even when rates are increased. We accept that electricity and water are important, and know that they are not free.

But transportation is somehow different. As discussed in Exit 2 of this series, most of us don’t even realize how little we pay for access to transportation networks: generally about $18 per month per vehicle, less than $220 per year, per car—hardly noticeable to most people. The problem is, while many don’t know how much they pay for transportation, transport taxes are mentally lumped in with all other taxes by the public, who now seems to think that all taxes of any kind are too high.

How We Pay
But it’s not just how little we pay, it’s also how we pay it. Most transportation revenue is still raised through the gas tax, which is automatically included in the price we pay at the pump. At today’s prices, gas taxes represent only 10 to 15 percent of the cost of fuel, but the collection process is really quite invisible to most drivers. These “invisible” taxes, coupled with the absurdly low amounts we pay in the United States, create the commonly held belief that roads are free and always should be.

According to the general public, we are entitled to free roads. So it stands to reason that if we believe we are entitled to good roads, and they are supposed to be free, then of course we support increased transportation investment without having to pay for it!

Funny though, none of us think electricity or water should be free. We expect to pay for phone and Internet service. Today, almost everyone pays for cable or satellite TV even though there were days where rooftop antennas allowed this to be considered “free.” But transportation? No. Apparently, we‘re entitled to that and it should always be free …

It’s Time
If we are ever going to increase investment in transportation infrastructure, we will need to increase funding. However, it will continue to be difficult to do that as long as most U.S. drivers think that good roads are a free entitlement. Therefore, an argument can be made that we should begin to increase the use of more direct road user charges as we look for new, sustainable sources of revenue for transportation—just like the user charges we are all willing to pay for other essential network services.

The remaining installments of the “Funding Future Mobility” series will look at just that: the increased future use of direct user fees for transportation. First, we need to see an increase in the use of a new generation of all-electronic tolling. Eventually, we will need to replace our per-gallon (invisible) taxation method with a more sustainable (and visible) per-mile charge.

Ed Regan is a CDM Smith senior vice president based in Columbia, South Carolina, USA, and a preeminent thought leader on transportation finance and planning. Nearly 4 decades of dedication to the toll industry have fed his passion to advocate sustainable solutions for funding transportation infrastructure today and in the future.