A blurred view of a highway

Re-imagining How to Fund Transportation in the U.S.

Re-imagining How to Fund Transportation in the U.S.

March 11, 2021
A blurred view of a highway

In the current transportation policy and programming environment, a looming transportation crisis is facing the U.S. The existing model, which relies primarily on the Liquid Fuels (or “Gas”) Tax, is not sustainable. As vehicle fleets transition to higher efficiency and alternative fuels, revenue from this antiquated tax will continue to decline and, perhaps, cease to exist. The Gas Tax has not been raised in a generation (more than 27 years), and it is not indexed to inflation. Over this time, inflationary costs have eroded as much as 70% of the real value of the taxes collected. Finding a solution to this pressing issue is no longer a luxury; it is a requirement. As a nation, and as transportation professionals, we must find a path forward that provides equitable, sustainable, and environmentally conscious options to fund our transportation infrastructure.

Infrastructure Backlog and New Investments

Across America, debates continue about how to spend our transportation dollars. Parallel to this problem is a second concurrent issue universally agreed upon by transportation agencies – we must find a way to fix what we have. A 2019 report from the Volcker Alliance estimated that the cost of deferred maintenance for the U.S.’s infrastructure tops $1 trillion. Infrastructure has been neglected for too long, and the bill is coming due. Despite the massive funding needed just for routine operations and management, it is also increasingly clear that long-term sustainability will require investing in new transportation facilities. There is an abundance of transportation needs in urban and rural communities, with no shortage of good ideas for areas to invest or build.

Our industry now faces this question: How will transportation agencies re-invent their business model? We need to re-imagine and evaluate all ideas for a nationwide solution.

“Transportation in the U.S. is facing two converging issues – infrastructure that requires significant investment and a funding model that needs to be reinvented for the first time in over 100 years.”

Increasing Impact of EVs

Reduced buying power of the Gas Tax is now further accelerated by the proliferation of electric vehicles (EVs). Alternative fuel vehicles such as EVs account for less than 1% of the total amount of passenger vehicles currently registered in the U.S. The figure may be surprising to the casual observer, given that EVs such as Tesla generate attention-grabbing headlines and are increasingly common on highways. The U.S.’s vehicle fleet is still overwhelmingly powered by traditional gasoline. However, a clear pattern is emerging that points to the future of transportation and mobility that must be planned for:

  • During the COVID-19 pandemic, new vehicle sales are increasing
  • New and more affordable EV models are hitting the market and growing in popularity
  • Median battery ranges are increasing, providing motorists with greater comfort, security, and more miles in-between charging
  • Charging times are decreasing due to advancements in technology.

Because of these evolving market conditions, EV sales are expected to rise sharply. Evadoption.com, which tracks and forecasts EV sales in the U.S., predicts that 10% of all new vehicle sales in 2026 will be EV. While the U.S. is clearly in the early-adopter phase of the EV market, acceptance is coming sooner rather than later. President Biden’s administration committed to replacing the entire federal vehicle fleet with EVs and expects many states to follow this lead. President Biden also wants to build 500,000 EV charging stations, a multiple of 20 times more than what currently exists.

RUC as a Viable Solution

Concepts for charging users of a transportation facility date as far back to the 7th century B.C. for travelers using the highway from Susa to Babylon. Economists and planners have been trying to figure out ways to effectively price a roadway to combat congestion since the 1950s. Linking road pricing to congestion has morphed into what we see today as tolling, managed lanes, and congestion pricing. These applications typically tend to be tied to a specific roadway, facility, urban area, or region. Our current transportation funding issue needs a wider-scale national solution that works for all types of roadways, facilities, and regions. We need a solution like Road Usage Charge (RUC).

The Mileage-Based User Fee Alliance (MBUFA) defines the RUC concept as “a user charge based on miles driven in a specific vehicle as opposed to the current excise tax on fuel consumed. At its simplest, the fee would be cents per mile. More sophisticated systems could assess different mileage fees based on factors like location, congestion, emissions, and type of vehicle.” I agree with this definition because it is simple, yet broad enough to encompass most scenarios.

To date, RUC has been studied and piloted at the state and regional levels including multi-state organizations such as the Eastern Transportation Coalition and RUC West. These projects have demonstrated varying levels of success. In some cases, they have left the researchers with more questions than answers. This is expected given the infinite number of scenarios that may occur for any given vehicle trip. The Surface Transportation System Funding Alternative (STSFA) funded projects yielded critical insights into the feasibility of RUC, but what is missing is the implementation structure for a national system. In fact, this ability to accurately capture and collect payment and disburse revenue to federal, state, and local governments will require a good foundation. The actual devices and tools are of secondary concern to the policies and procedures that must be developed and debated before any national RUC pilot can provide value.

The Next Steps

RUC is one of the viable long-term solutions to the transportation funding issue that should be evaluated further. Still, it will need to overcome technical, social, and policy-related challenges to be successful. To progress national RUC implementation as a funding solution, the logical starting point is to create proper policy and procedures to support the capture and payment.

The challenge of developing a fair and equitable method for collecting transportation funding in a country with 285 million vehicles can seem like a monumental undertaking. After all, the transportation industry hasn’t solved this issue in over 100 years. The decisions we make today and the direction we will embark on tomorrow could have lasting effects on the transportation system for generations to come. Fortunately, the transportation industry has a good starting point by leveraging the lessons from the tolling sector, which has dealt with these same issues of economics and reciprocity. It will be a challenge, yet, our industry has dealt with complex matters before – and we are ready to do so again.

For more information, watch our free, on demand INSIGHTS webcast entitled, Re-imagining How to Fund Transportation in the U.S.” 

Keith Mullins

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