Transportation as Utility

Transportation Policy Consultant, Former Deputy Administrator of the Research and Innovative Technology Administration at the U.S. Department of Transportation, Eno Board of Advisors

While the Federal Highway Administration (FHWA) does not define the nation’s transportation system as a utility (see Title 23, Code of Federal Regulations, Part 645 (23 CFR 645)), it seems clear by the nature and purpose of the system that it does in fact meet the common definition of a utility, i.e.: “Something useful to or designed for use by the public” (Webster’s New World Dictionary).

In fact, some, including this author, would argue that the transportation system is the most important utility, since it supports the supply of all the necessities to the human population including; food, shelter, clothing, water, sewer, electricity, education, recreation, health care, law and order, entertainment, etc. When it is not functioning properly, which unfortunately tends to be more the rule these days than the exception, these essential needs are delayed and sometimes not available.

Case in point, the just released Texas A&M Transportation Institute’s “2012 Annual Urban Mobility Report,” which that notes that congestion on the nation’s roadways continues to:

§  Increase the hours of wasted time sitting in traffic;

§  Increase environmental damage because of unnecessary idling in traffic; and,

§  Cause users of the system to set aside more time for travel in order to be on time to their desired destination.

And all of this in spite of the fact that the Baby Boomer generation and those in the age group 16 to 35 need or want to forego the use of cars and rely more on alternative modes of transportation, and the nation continues to experience a the decline in vehicle miles traveled and changes in preference by.

Add to the evidence the myriad reports from the American Society of Civil Engineers, Building America’s Future and others on the state of disrepair and the backlog of needed improvements to the nation’s transportation system, and it’s increasingly clear that the nation’s transportation system is indeed a vital utility that is losing its utility.

There are at least three factors at the heart of this matter. They include:

  1. A steady growth in the overall population;
  2. Increased demand for transportation facilities because of growth in economic activity; and,
  3. The continued under investment and the lack of commitment to long-term solutions by policy makers at all levels.

At a recent Eno Foundation/Bipartisan Policy Center (BPC) conference on the outlook for transportation policy following the 2012 election, Doug Foy, founder and CEO of Serrafix and former president of the Conservation Law Foundation, urged that: “People need to start thinking of paying for the transportation network like they would pay for a utility.”

Foy said he spent upwards of $2,000 last year for each of the three other major utility networks: cable/internet, phone, and gas/electric. Water and sewer service cost more than $1,000.

Do you know what he spent last year to keep the transportation network healthy? Not counting whatever he spent at the transit fare box, Foy said he spent $160 in gas taxes.

For my part, I found that last year I paid approximately $1,900 for water and sewerage service, $3,600 for cable/internet/phone service, $2,400 for electric service, and $184 in federal and state gas taxes to travel 9,000 miles in a car that averages 17 miles per gallon.

What a bargain – 2.1 cents a mile!

Obviously, though, one gets what one pays for, and that’s why the Texas A&M Transportation Institute ranks the Washington, D.C. Metropolitan Area number one in congestion.

In the face of this situation, however, resistance to doing what is clearly needed appears to be extreme. For example, Virginia Governor Robert F. McDonnell, who ran for his post in 2009 as a champion for transportation, has attempted repeatedly to fulfill his campaign promises by sleight of hand.

At the outset of his administration the governor proposed to solve the Commonwealth’s transportation challenge by selling the state-owned liquor stores for approximately $500 million and foregoing the annual income of nearly $300 million that helps fund education, health care and public safety. Most recently, the governor proposed doing away with the state’s gas tax in exchange for raising the state’s sales tax by .8 cents – which by the way is not levied on gasoline sales – imposing a registration fee on hybrid and alternative fuel-powered automobiles, and banking on a not-yet-realized income stream from a proposed tax on the sale of goods and services via the internet. The net of this proposal is estimated at $3.1 billion over the next five years – barely half of what experts project is needed to maintain, not to mention improve, the Commonwealth’s transportation system over the same time period. Plus, the governor’s proposal shifts the burden for paying for transportation away from the users and beneficiaries of the system in a more dramatic and damaging way than even the dwindling value of the stagnant gas tax has.

In his presentation at the Eno/BPI session, Foy urged: [that] “people need to start thinking of paying for the transportation network like they would pay for a utility.”

Indeed, Doug Foy is not alone in his perspective.

Former West Virginia Secretary of Transportation and former Deputy Administrator of the U.S. Department of Transportation’s Research and Special Programs Administration, Samuel G. Bonasso, recently observed:

“Transportation, particularly highways, are fundamental to the economic well-being of modern society and should be under the guidance of a special public transportation utility body capable of guiding its funding, operation and upkeep. With oversight from the state public utility board, this body should be empowered to generate new sources of revenue associated with the operation of highway system as they are needed. Such a transportation utility board should be established with all the usual powers of a port authority, i.e., bonding power, eminent domain, etc.

“Transportation is a utility, essential for our access to basic necessities, i.e., food, shelter, public safety and security, education, and recreation. It should be treated like sewage, water, electricity, waste disposal, natural gas, telephone, etc. The user of the system should be paying for the use of the system at an appropriate rate that reflects the cost of constructing, operating and replacing it.”

Several communities around the nation have taken the notion of transportation as a utility to the extent they have experimented with and/or adopted “Transportation Utility Fees” (TUF).

As explained in the State Science and Technology Institute’s (SSTI) Survey of State and Local Transportation Revenue Sources, January 2013, TUFs are:

“Similar to a utility’s rates, TUFs are based on the premise that transportation improvements should be financed primarily through user fees. TUFs more directly tie the costs of a project to the users of the facilities than general property taxes do. The fees are assessed on properties based on the estimated amount of trips that the property generates, providing a direct connection between the costs of transportation facilities and their demand. Unlike a property tax, which is only loosely related to the costs a particular property imposes on the transportation system through congestion and pavement damage, TUFs are assessed based on characteristics of the property that are closely related to transportation demand. They therefore have the potential to better spread the costs associated with transportation improvements and operations and maintenance among the users of the system.”

Similarly, writing in the Journal of Transport and Land Use, Jason Junge and David Levinson argue that the reasoning behind TUFs is that the transportation system functions as a public utility comparable to municipal water and sewer systems.

“Those utilities are funded by charging users based on how much they use the systems, and transportation funding can be approached in a similar way. Properties that cause more traffic by the nature of their use are responsible for a greater portion of the wear and tear on transportation infrastructure, and might reasonably be expected to make larger contributions toward maintenance expenses.”

Junge and Levinson further suggest that:

“In many instances, the establishment of a transportation utility fee is motivated by a revenue shortfall and a backlog of road maintenance projects. Because they are not taxes, fees may be adopted without a public referendum in many cases, though this depends on the city and state in question. The visible connection between the fee and its purpose can also make it more acceptable to the public and easier to levy than a new tax.”

Bonasso, in his recent comments suggested that,

“We don’t have a tax problem we have a spending problem. People don’t trust their representatives to actually spend their money on the roads wisely. The user fee principle says that the user is always willing to pay for the use of the specific benefit.”

Based on the experience of multiple communities around the nation that have held successful referenda on various transit projects where there has been a clear line drawn between the requested revenue and the benefits to be derived, it would appear that the perspectives of Foy, Junge, Levinson, and Bonasso have much merit, and could be a source from which governors like Virginia’s Bob McDonnell, and national leaders like the President and the Chairman of the House Transportation and Infrastructure Committee could draw some insight.

Instead of opposing increases in the gas tax, or offering less useful, but less objectionable tax measures as the cure to woeful levels of transportation investment and funding, give consideration to a utility fee, a vehicle miles traveled fee in the form of perhaps a tire-tax, or other similar funding mechanisms that provides accountability and a direct link between the service requested and the benefit provided. That would reflect the true value of a utility.

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of The Eno Center for Transportation.

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