June 1, 2010

A Changing Climate for Users Fees

By Therese Dunphy

Since the creation of the Eisenhower highway system, gas taxes — also known as user fees — have been among the most significant and successful funding mechanisms for the nation’s transportation system. For years, many have believed that an increase in gas taxes is part of the solution to budget shortfalls that have left the nation’s infrastructure overburdened and underfunded. The idea of a gas tax increase has never moved beyond discussion, however, because the potential reaction of constituents sends many legislators cowering in fear.

But while Congress has been unwilling to impose higher user fees to improve infrastructure, some appear willing to do so as part of climate change legislation. Through the American Power Act, Senators John Kerry and Joe Lieberman propose, among other items, the sale of a carbon allowance fee to oil companies.

What’s the cost of this allowance fee? One industry estimate pegs the cost at about 13 cents per gallon at the pump. Unlike traditional gas taxes, however, this fee would not be dedicated to transportation funding. And that has folks fighting mad.

On May 19, four transportation leaders — including John Horsley, executive director of the American Association of State Highway and Transportation Officials; William Millar, president of the American Public Transportation Association; Stephen E. Sandherr, CEO of the Associated General Contractors of America; and Pete Ruane, president/CEO of the American Road and Transportation Builders Association — held a press conference to urge the bill’s sponsors to reconsider how it would direct revenues from transportation-based motor fuel fees.

According to their comments, 77 percent of the anticipated $19.5 billion in revenue would be diverted from surface transportation investment in its first year, with that percentage increasing as carbon allowance fees increase. A maximum of $6.25 billion would go to transportation infrastructure investments, with a cap of $2.5 billion per year being contributed to the federal Highway Trust Fund. The remaining funds would be used to give rebates to customers, reduce the federal debt, produce subsidies for the energy production industry, and provide incentives for nuclear power.

The American Power Act contains laudable goals, including reducing reliance on foreign oil and increasing the use of clean energy. But while its intent may have merit, its flaws are significant. The bill ignores environmental impact of congested roads and undermines the ability of transportation coalitions to achieve the meaningful increase needed to maintain, let alone improve, the nation’s transportation system. While the various association leaders stopped short of saying that the American Power Act would make it impossible to pass multi-year transportation reauthorization, it would certainly indicate a rocky road ahead.

For more than 50 years, gas and fuel taxes have paid for transportation investment. Given the current infrastructure needs, now is not the time to reduce that funding mechanism. If the American Power Act collects fees on fuels, 100 percent of those fees should go toward transportation.

As Sandherr said, “The last thing we can afford is to take the trust out of the Highway Trust Fund.”

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