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CHAPTER 1
Our Troubled Highway System
We sit in daily traffic congestion, frustrated at seemingly endless delays. We watch or read stories of major bridges collapsing. Many highways are rough and potholed, making for unpleasant drives and increased vehicle repairs. In the world's wealthiest country, why do these problems exist? And what can be done to fix them?
We Americans tend to take our road and highway system for granted. We rely on it more than any other mode for personal transportation; 89 percent of all passenger miles of surface travel in 2009, including passenger cars and buses, took place on paved roadways. The Census Bureau's American Community Survey found that 88.6 percent of our commuting trips are made on streets and highways (85.8 percent by car, 2.8 percent by bus). And to a far greater extent than most of us realize, we also rely on highways for the goods that fill our stores. Some 80 percent of all freight, by value, moves on trucks (for which highways provide the infrastructure).
Yet more and more Americans are becoming aware that our highways are beset with serious problems. Anyone who commutes by car in a large metro area confronts chronic traffic congestion on a daily basis. The most recent analysis by the Texas A&M Transportation Institute (TTI) finds that congestion continues to extract a high cost from commuters in America's major urban areas in particular. Conservatively valuing the amount of wasted time and fuel of motorists stuck in congestion, TTI put the annual direct cost of congestion in the New York metro area at $14.7 billion, with Los Angeles close behind at $13.3 billion per year. Over all 471 US urban areas, the estimated direct cost was found to be $160 billion per year. And that figure does not include estimates of the lost productivity in urban areas suffering from congestion. Some studies put that indirect cost equal to or greater than the direct cost of wasted time and fuel, so that the total economic cost of congestion likely exceeds $300 billion per year.
A second major problem is the extent of disrepair of US highways and bridges. While the common political trope that US highways and bridges are "crumbling" is an exaggeration, disrepair is a serious problem. Nationwide, the average condition of highway pavement and bridges has improved modestly over the past two decades, but there is still a huge backlog of bridges — 21 percent — that are either structurally deficient or functionally obsolete for current and projected traffic. And while most Interstate highways are in "good" condition, according to the Federal Highway Administration (FHWA), only 61 percent of other rural highways are rated "good," and only 40 percent of urban-area arterials and boulevards are in good condition. The extent of disrepair varies enormously from state to state, which suggests that some states have done far better than others at allocating resources to proper ongoing maintenance and repair.
One contributing factor to both poor highway performance (congestion) and the extent of disrepair is a growing funding shortfall. Highways and bridges are funded largely by federal and state user taxes on gasoline and diesel fuel, while local streets and roads are funded by local taxes, especially property taxes. For most of the 20th century, this system of dedicated revenues from highway users functioned pretty well, ensuring that funding grew generally in step with the growth in highway travel. But that system no longer keeps pace with highway needs. The latest federal assessment of highway capital investment found that federal and state governments spent a total of $105.2 billion (including federal stimulus funds) in the most recent year measured. That should be more than enough to keep pavement and bridge conditions and traffic congestion from getting any worse, since the Federal Highway Administration's model estimates that only $89.9 billion per year would be sufficient to maintain status-quo conditions. But if we want to improve highway conditions and performance (i.e., achieve lower congestion and better pavements), the same model estimates that it would take $142.5 billion per year to implement all highway improvement projects whose benefits are greater than their costs.
What has happened to the 20th-century fuel-tax funding system? It is breaking down for four principal reasons. First, federal policy imposes ever stricter fuel economy mandates for new vehicles. By 2025, the average new passenger vehicle must achieve 54.5 miles per gallon, about double the fuel efficiency of cars produced in the first decade of this century. Enabling vehicles to go twice as far on a gallon of gas will benefit the environment by reducing tailpipe emissions, but it will be devastating for highway funding. That's because the tax is levied on gallons consumed, not on miles driven. Other things being equal, in the years after 2025, new personal vehicles will generate only half as much fuel tax revenue as typical vehicles do today for the same number of miles driven.
A second problem is that fuel tax rates are not indexed to inflation, except for state gas taxes in a handful of states. But most of what fuel-tax revenues are spent on — adding lanes, rebuilding worn-out highways and bridges, or performing maintenance — goes up in cost year by year, and construction costs often go up faster than do consumer prices. Thus, the real, inflation-adjusted value of fuel tax proceeds declines year by year. The most recent increase in the federal gas tax (to 18.4 cents per gallon) took effect in 1993. To have the same buying power in 2017, that rate would have to be 31.5 cents per gallon.
The third problem is that it has become difficult, politically, for elected officials to increase the rates at which gasoline and diesel fuel are taxed. Even though these are called user taxes, they are no longer spent exclusively to benefit highway users — and are increasingly seen simply as "taxes." Thus, any increase is considered as a "tax increase" and therefore as politically radioactive. This problem is greater at the federal level, where there seems to have been a considerable loss of trust in the 20th-century model that was used to build the Interstate highway system: uniform federal user taxes on gasoline and diesel, dedicated to the federal Highway Trust Fund and redistributed to states by formula. While the federal fuel tax rates have not been increased since 1993, 38 of the 50 states have enacted one or more fuel tax rate increases during that same time.
The fourth reason is the small but growing market share for vehicles that are powered by something other than gasoline or diesel. All these alternative fuel vehicles make the same use of our highways and streets as those powered by gasoline and diesel, but under current laws in nearly all states they pay nothing for the upkeep and modernization of those roads. The most successful alternative is the hybrid vehicle (like the Toyota Prius), which uses an electric motor supplemented by a traditional internal combustion engine. Future alternatives include all-electric vehicles (such as the growing line of Tesla vehicles), natural gas vehicles, and possibly hydrogen fuel-cell vehicles.
For all of these reasons, there is a growing consensus among transportation researchers, as well as a number of state transportation departments, that America must begin a transition from charging for road use per gallon of fuel to charging, in some manner yet to be determined, per mile driven. A growing number of states have pilot programs under way to test various methods and technologies, but we are a long way from arriving at a consensus on how and when to make such a transition.
Another problem with today's highway system is an apparent decline in the productivity of highway investments. A number of academic studies have attempted to measure the return on highway investment, much as businesses do in analyzing proposed capital investments to see if they are likely to bring in more in revenues than what they cost. Since highways are not businesses and, except for toll roads, do not directly generate revenues for the road provider, these academic studies instead estimate the benefit to the economy from better highways. These studies generally report high returns on the highway investments of the 1950s and 1960s, when major new toll roads (e.g., the Ohio Turnpike, Florida's Turnpike, etc.) and the Interstate highway system were being built; lower returns in the 1970s and 1980s; and still lower returns in the 1990s and 2000s.
Of course, such studies can only analyze the highway investments that were actually made in each time period. During the same decades in which the academic studies found lower rates of return, urban freeways reached new highs each year in congestion cost — yet very little capital investment was made in those expressways to better balance supply (capacity) with demand. In addition, the way state legislators and state departments of transportation (DOTs) divide up each year's available highway money puts a premium not on funding the highest-return projects first, but rather on spreading the money around to every member's district. A single megaproject that would yield major benefits in reduced congestion could easily consume most of the state's highway capital budget for several years — but that spending and the associated construction jobs would all be in just one member's district, something that is hardly politically feasible. So the conclusion of the academic studies reflects poorly on the highway capital investments that are actually being made. But that does not demonstrate that we have run out of productive investment opportunities in the highway system, as the FHWA's modeling indicates.
Another serious problem is that what used to be purely highway user monies have increasingly been diverted to nonhighway uses, at both state and federal levels of government. At the federal level, the dedicated tax on gasoline and diesel was enacted in 1956 along with creation of the federal Highway Trust Fund. This mirrored the practice in numerous states, since they began collecting fuel taxes in 1919, of dedicating highway user tax revenues to highway uses. Once the majority of the Interstate system was built, Congress began thinking up other things that Highway Trust Fund monies could be spent on. Initially, this "diversion" was minor, but in 1982 the Reagan administration supported a major change: the creation of a transit account within the Highway Trust Fund. Initially, the transit account was to receive one cent out of the five-cent increase in the federal fuel tax rate. But over time, Congress regularly expanded nonhighway uses until by 2010 fully 23 percent of Highway Trust Fund monies could go for nonhighway purposes: urban transit, bike paths, sidewalks, recreational trails, historical preservation, and even transportation museums.
There are organized interest groups favoring each and every one of those uses. And opinion poll results show that many people favor more spending on those uses, especially when not asked about how they should be paid for. But it is not at all clear that a typical voter concerned about traffic congestion and potholes understands that the more uses that are authorized for Trust Fund monies, the less money remains available for the highways and bridges that he or she depends on. On the contrary, it is quite plausible that the gradual conversion of the Highway Trust Fund into an all-purpose transportation public works program has contributed to the voting public's distrust of the program and resulting opposition to increasing federal fuel tax rates. Such a voter can assess a proposed federal fuel tax increase as follows: "If I urge my Congress member to support that increase, and it passes, the only thing I can be sure of is that my cost of driving will go up. I have little or no confidence that the increase will lead to any meaningful improvement in the transportation systems that I use and depend on."
An Appreciation of the 20th-Century Model
Despite the litany of problems besetting the US highway system today, we should not lose sight of the tremendous accomplishments of the 20th-century highway model.
Paved highways were unknown in the 19th century, prior to the development of motor vehicles. Early in the 20th century, a "good roads movement" emerged to advocate the creation of paved highways around the country, similar to the paved streets that were becoming common in cities. Two early proponents for paved highways were bicyclists and farmers. Bicyclists wanted smooth, durable pavements outside the cities, whilefarmers sought paved "farm-to-market" roads. They were subsequently joined by various components of the auto industry: vehicle makers, tire makers, and fuel providers.
From the outset, funding was the biggest obstacle to achieving paved highways. Several early multistate highway efforts were coordinated by coalitions of private groups: the east-west Lincoln Highway and the north-south Dixie Highway are the best-known examples. These projects ignored the large history of 19th-century (pre-auto) toll roads (discussed in chapter 3). Instead, their funding model unrealistically relied on land donations for right-of-way and fund-raising for paving. The limitations of that model soon led to its displacement. The idea of taxing motor fuel and using the proceeds exclusively for highways was first implemented in Oregon in 1919. This funding method was seen by many advocates as second-best to tolling, but the administrative and collection costs of tolling were seen as too high to be viable, and the toll revenues, in those early days of motor vehicles, were expected to be too low to finance paved highways. The fuel tax / highway fund model caught on rapidly, and by 1930 all 48 states had such mechanisms in place.
Between 1919 and America's entrance into World War II in 1941, miles of paved highway grew substantially. States laid out and built extensive networks of intercity and farm-to-market roads, on a pay-as-you-go basis (highway construction and maintenance were paid for on a cash basis out of annual fuel tax revenues). Congress created the Bureau of Public Roads in 1918. That agency, the predecessor of today's Federal Highway Administration, made modest grants to states to help pay for a system of paved US highways, consistently numbered from US 1 on the East Coast to US 101 on the West Coast, complemented by such important east-west highways as the iconic US (Route) 66. When the US Office of Public Road Inquiries, a predecessor of the Bureau of Public Roads, made its first census of rural roads in 1904, out of 2.2 million miles, only 257,000 (11.7 percent) were paved in some manner. By 1921, total rural mileage had increased to 2.9 million, but still only a modest 367,000 miles (12.6 percent) were paved. Ten years, later the miles of paved roads had more than doubled to 830,000, and by the eve of World War II in 1941, the total had reached 1.38 million miles paved out of a total of just over 3 million miles, which meant that 45 percent of all rural roads were paved by then.
While the new paved highways were state-owned and state-maintained, their routes were laid out in cooperation with the Bureau of Public Roads to facilitate interstate commerce. In 1932, Congress authorized a one-cent-per-gallon federal gasoline tax as a budget deficit-reduction measure. There was no connection between that tax on motor fuel and the modest federal highway assistance grants, which came out of the general fund. That federal gas tax was increased to 1.5 cents per gallon in 1940 and to two cents per gallon in 1951, but there was still no linkage to federal highway spending.
In the years shortly before and the decade after World War II, the next major development was the superhighway, of which the Pennsylvania Turnpike was the first. In contrast to existing state and US highways, the superhighway was limited-access: a vehicle could enter or exit only at designated on-ramps and off-ramps, typically spaced many miles apart. There were two or more lanes in each direction, to make it easier for faster vehicles to pass slower ones. There was separation between the lanes going one direction from those going in the other direction, for increased safety. There were no traffic lights, and the roads were designed for faster travel than on existing highways; they had broader curves, shallower grades, and complete separation from other roads or railroads.
The cost of building a superhighway was significantly more than that of building ordinary highways, but the service a superhighway could offer was clearly superior. So Pennsylvania reintroduced tolling as the funding source, offering motorists much better service in exchange for a toll payment. Instead of using each year's toll revenue to build a few dozen more miles, the Pennsylvania Turnpike Commission issued revenue bonds based on projected toll revenue. This is how electric utilities and railroads pay for major capital projects. Doing this is called financing a project, as opposed to funding it out of each year's revenues, as is done by state transportation agencies using fuel tax monies.
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Excerpted from "Rethinking America's Highways"
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