Advancing a Multimodal Transportation System by Eliminating Funding Restrictions

By Kevin DeGood & Andrew Schwartz | Wednesday, January 28, 2015

One of the most pervasive, durable, and detrimental myths in transportation policy is that highways pay for themselves, while public transportation does not. In reality, both modes require significant public subsidies, as user fees—such as fuel taxes and farebox revenues—cover only a portion of total costs. States and the federal government supplement these user fees with property taxes, bonding, and general revenues. On average, these nonuser fee revenues represent 26 percent of total annual highway expenditures.

Moreover, treating all highways equally obscures the fact that per-mile construction and maintenance costs, driving levels, and motor fuel tax revenues vary substantially depending on the location, size, and population around a particular road. While the overwhelming majority of driving occurs within metropolitan areas, many large urban highways and arterial roads cost substantially more money to maintain than they generate in fuel taxes. This is also true of many rural and exurban arterial roads. This means that states must cross subsidize thousands of miles of roads that generate insufficient gas tax revenues each year.

Research by the Center for American Progress shows that nearly 4 in 10 miles of interstate highway and other principal arterial roadways fail to generate enough in user fees to cover their long-term maintenance costs. For the purposes of this analysis, maintenance costs include one reconstruction and multiple resurfacings over the course of three decades while excluding the costs of land acquisition, engineering, construction, and inflation.

When the analysis is conducted assuming 1 percent annual inflation, the share of interstate and other principal arterial roadways that fail to cover their costs rises by more than 22,000 miles, or 9 percent. In all likelihood, actual construction inflation will be much higher than 1 percent per year over the next 30 years. Furthermore, if land acquisition and construction expenses were amortized over the same period, an even higher share of roadways would fail to cover their costs.

This research also strongly suggests that an even higher share of minor arterial roadways, collectors, and other local roads fail to cover their long-term costs. A disproportionately large percentage of driving occurs on interstates and principal arterials—which make up the National Highway System, or NHS—relative to the rest of the roadway network. Data from the U.S. Department of Transportation’s Federal Highway Administration shows that the NHS accounts for only 5.5 percent of all roadway miles yet carries 55 percent of all vehicle miles traveled, or VMT, each year. As a result, the remaining 94 percent of the system generates much less user fee revenue on a per-mile basis, since it carries less than half of all driving.

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