Tag: "state government"

How Gas-related Taxes have Created Unfunded Liabilities in Construction

As any responsible steward of income can probably state that any reduction in income must be met with a reduction in spending and likewise any increase in spending must be validated by an increase in available income, lest the reality of debt or re-appropriation of disposable funds becomes your only choice. The gas tax debacle that looms over our heads is an example of how this simple yet universal lesson in finance is often lost upon the government.

Due to its lack of popularity among both citizens and politicians alike, the federal gas tax which was progressively rising throughout the 20th century finally hit a wall in 1993 at $0.18, from which it hasn’t moved since. Curiously, the 1993 increase in the gas tax was not even fully utilized to improve the highway systems as 2.5 cents per gallon were dedicated towards paying down federal debt…  As we’ll see later, states were not behind this trend of cross-funding. When coupled with inflation, this stagnation of the federal-gas tax and a simultaneous reduction in the amount of gas spent per mile — with the introduction of more fuel efficient cars — has effectively minimized revenues upon which the government was dependent to fully fund the Highway Trust Fund. However this simple lack of resources is not the only reason Congress is supporting bailing out the fund.

Spending priorities are determined more by politicians appeasing special interests than local needs or consumer choices. And the federal regulatory burden delays projects and smothers state and private-sector innovation.

― Emily J. Goff, a policy analyst at the Heritage Foundation

While the simple reality that solutions offered by the federal government will rarely not have an adverse effect on some Americans, what Goff describes is only the tip of the iceberg:

The beneficiaries of these local activities take from, but do not contribute to, the Highway Trust Fund. Better for New York and New Jersey to fund their subways, Oregon its bike paths and Maryland its trails.

What is the validity behind these assertions? Here are some numbers and figures for your consideration:

  • New Jersey is currently allocating 95% ($516 million) of its gas tax revenue towards paying off the $1 billion it has in interest on debt
  • New York currently uses 70% ($1.4 billion) of this revenue to pay off debt on past construction projects
  • Oregon will have to spend over 35% of its gas tax revenue ($200 million) per year to fulfill interest payments on bonds purchased
  • The state of Washington allocates 11.18 cents of tax revenue per gallon towards paying down its own debt payments
  • There are even states like Texas, where 25% of the total state tax funds go towards funding completely unrelated endeavors, such as education

Given the magnitude of the fund’s present day debt, it becomes clear that these are not simply isolated incidents and hence, this not necessarily a problem that is unique to the federal government. The gas tax represents a failure of policymakers, not only the simple failure of neglecting to index taxes to inflation but the failure to create a non-regressive tax while exercising responsible stewardship over its revenues.

-Santiago Bello is a research associate at the National Center for Policy Analysis

Developing a State Free Market Transportation Policy

In my last post we examined how to create a local free-market transportation policy. This posting will examine how to create a similar policy on the state level where Republicans will control 32 governorships in 2015, almost 2/3 of the U.S. total. Most states lack a comprehensive transportation vision. Many depend on Washington D.C. for more than 50% of their funds. Yet with federal budget challenges, most policy makers expect federal funding to decrease. As a result, states need to create a transportation vision and ensure that they have the budget to implement such a vision.

States should focus on funding statewide assets. What is a statewide asset? Generally, it is a transportation asset that serves intrastate movement. Most national systems which transport people throughout the country transport people throughout the state and qualify as state assets. These systems include Interstate highways and other major roads that are part of the National Highway System, class one railroads and certain aviation routes. Railroads typically are self-funded so states can merely need to coordinate freight needs with the railroads. Intrastate passenger rail services should also receive some state-level funding assuming the corridors are commercially viable. Statewide and regional transit systems also merit some funding, although the majority of funding should come from the regional, county or city level. While it may be popular to fund non-motorized transport, bicycling and walking are primarily local activities that should be funded at the regional, county or local level.

How should states fund such a system? Similar to at the federal level, the most economically efficient method is a user-pay/user-benefit system. For highways this means transitioning from a partial user-pay/user-benefit gas tax system (some of the money gets diverted to other uses) to a complete user-pay/user-benefit mileage based user fee system (MBUF). An MBUF is the best option because it could be set up to include no revenue diversions. Further, it allows states to vary rates based on type of road and level of congestion to provide a more advanced system. Oregon allows its drivers to choose from one of three models. The most advanced option monitors driving habits and charges rates based on the type of road and the time of day. But for those wary of government intrusion Oregon also offers the option of an annual fee with neither destination nor time-of-day monitoring for motorist travel. Oregon also refunds gas tax revenue so motorists are not paying twice.


Developing a Local Free Market Transportation Policy

In my previous blog post we examined how to create a national free-market transportation policy. This posting will examine how to create a similar policy on the local level. Unlike the federal and state levels, the make-up of local government varies by location. While major cities, close-in suburbs, and some small towns tend to be under Democratic rule, other suburbs, exurbs and the remainder of small towns tend to be under Republican rule. While Republicans are most likely to adopt free market reforms, moderate Democrats can be convinced to adopt such reforms as well.

Municipalities should focus on funding local assets. A local asset is any transportation infrastructure that serves residents of a city or region. For highways, cities should focus on funding minor arterials and local streets. Regional governments may still fund some freeway and major arterials if these systems move people throughout the region. For passenger railroads and airports, governments may provide some funding if the assets serve a major regional purpose, but such systems are better funded at the national and state level. While freight rail is better funded at the national or state level, regional coordination is important. Local governments are the best units to fund transit systems, although governments should insist on a farebox recovery rate of 50% and a professionally-operated system. Local governments are the best unit to fund bicycling and walking. However, governments should spend transportation resources on bicycling and walking used for transportation purposes not recreational purposes. Recreational uses should be funded by the park/general budget.

How should such a system be funded? We detailed the user-pay/user-benefit argument for highways, aviation and freight rail in the national post and the principle of mileage based user fees (MBUF) in the local post. Transit is best funded by a combination of farebox revenue, value capture and sponsorships. These funding mechanisms typically struggle to provide half of the funds for transit, often because service is priced too low. A better option is charging the full market rate for transit service and offering vouchers for low-income riders. Well-operated transit systems should be able to receive a minimum of 50% of operating expenses from tickets, value-capture and sponsorships. Bicycling and walking are the most challenging modes to fund. Ideally, a city will enact some form of small charge for bicyclists such as a tire fee. While such a sum raises only a small amount of funds it retains the user-pay/user-benefit principal. Using general funds on non-motorized transport may be necessary and is acceptable as long as significant numbers of commuters bike or walk.


Western Water Market Needed

Outdated laws and lack of a water market in western United States, continues to cause problems and increases the chance for dire consequences.

Droughts continue to cause more damage to farmers and the regional economy. As the population rapidly increases in these already dry western states, the water laws must be reformed, at least for now, to allow for:

  • Short-term leases of water.
  • Basic market institutions.
  • Risk-migration tools such as dry-year options.
  • Basic controls such as regulating how much water can be pumped.

Opening up water markets will improve the efficiency of water supply and demand and provide water at the most appropriate price to everyone. Such a system will be better prepared for droughts and other consequences to the increasing water shortage in the west.

The Gas Tax

The American Petroleum Institute’s Gasoline Tax interactive map allows users to check out each state and the United States average state excise tax, other state taxes/fees, total state taxes/fees and total state and federal taxes.

Some of the states with the highest federal and state gasoline tax include:

  • New York — 68.90 cents
  • California — 68.18 cents
  • Connecticut — 67.70 cents
  • Hawaii — 66.85 cents

Some of the states with the lowest federal and state gasoline tax include:

  • New Jersey — 32.90 cents
  • South Carolina — 35.15 cents
  • Oklahoma — 35.40 cents
  • Virginia — 35.68 cents
  • Missouri — 35.70 cents

The federal government adds 18.40 cents per gallon in each state. That federal tax is higher than the total state taxes for the states of New Jersey, South Carolina, Virginia, Oklahoma and Missouri.

High gasoline taxes from the states and federal government have a huge impact on gas prices at the pump. This is a heavy burden that the consumers are having to bear the brunt. The federal government and many states feel that the increased revenue from the gas tax is beneficial and that it will encourage less gasoline consumption and more alternative fuels/transportation. However, these excessive and usually unnecessary taxes directly hurt American consumers and damage the United States economy. This tax should be a really low flat tax across the nation creating a fairer and less burdensome tax, while still generating revenue for the states and/or federal government.

EPA NY Bridge Loan Rejection Leads to Setback

The Environmental Protection Agency rejected most of a $511 million loan that had been requested by Governor Andrew Cuomo to finance the construction of the new Tappan Zee Bridge. The original purpose of the loan was for “enhancing the environment.” However, it became clear that the entire amount of the loan would be used for construction of the bridge. The EPA’s rejection of the loan is a major setback for the governor.

The rejection was a reminder of how difficult big infrastructure projects — and the challenges of financing them — are for governors.

So far, the state has obtained $1.6 billion in federal transportation loans, the state asked for an additional $511 million from the EPA through the Clean Water Act.

President Obama used the bridge last May as a backdrop when he urged Republicans in Congress to support his $302 billion, four-year transportation-infrastructure program.

Water Policing vs. Water Pricing in California

California is in significant drought, with a water crisis that has caused acres of crops to die or go unplanted, as water reservoirs continue to be depleted. According to one NASA water scientist, “If this drought continues, we’re going to be in a terrible situation within the next 12-24 months.”

The water crisis has caused municipalities to take action, sending “water police” out to monitor water usage and charging violators for excessive watering and other violations. Neighbors have begun to report one another to city authorities for using their sprinklers too often.

Water usage in California is suffering from the “tragedy of the commons.” In fact, water use in the state has increased by 1 percent this year, despite the worsening drought.

Why are Californians unwilling to curb their water use?

  • The authors explain that the state has incredibly low water prices: it costs less than 0.7 cents per gallon in San Diego and Los Angeles.
  • McKenzie himself writes that he pays just 0.2 cents per gallon for water in Irvine, California, meaning that he can purchase over 2,000 gallons of water for the same price as a single gallon of gas.

McKenzie and Shelton write that because water is so cheap, few Californians see it as a precious resource. They encourage raising the price of water in the state:

  • According to economists, raising the price of water by 10 percent will lead to a drop in consumption of 2 percent to 4 percent.
  • In order to reduce consumption in California by 20 percent, rates will have to rise by 50 percent.
  • By raising the price, consumers will give greater thought to their water usage and find ways to be more efficient.

To prevent the price hike from hurting the poor, a progressive pricing structure (in which the price of water rises as use increases) should kick in after a consumer has reached a minimal level of water usage.

NCPA Senior Fellow Richard McKenzie and Kathryn Shelton of the America’s Future Foundation

Water Desalination Efforts Can Really Benefit Texas

Water issues are becoming a growing problem for many places around the United States, especially in Texas. Droughts and a population boom are continuing to put more pressure on the state’s water supply. On top of that, the process of fracking (very popular in Texas) uses lots of water that is turned into waste water. The process of desalination can turn waste water, brackish water and even sea water into water that can be used as drinking water, irrigation and other uses.

An article by William McKenzie of the George Bush Institute in the Dallas Morning News highlights the desalination efforts in Texas, with a focus on the Kay Bailey Hutchinson Plant in El Paso.

He includes some recommendations for Texas:

  • The Texas Water Development Board can hire more geologists to research brackish water.
  • Communities can work on efforts to recycle brackish water.
  • Private/Public desalination plant partnerships, like in California, can provide enough water to millions of residents.

The Importance of Reducing Congestion by Spotlighting One Intersection

Creating a redundant transportation system is crucial to reducing congestion and improving mobility. One of the most important projects in the Atlanta metro area is the reconstruction of the I-285/SR 400 intersection, identified for years as one of the top transportation projects in Georgia. I-285 and SR 400 are the two freeways which provide access to the Perimeter business area, home to the largest concentration of jobs in the Southeast U.S.

The Georgia Department of Transportation (GDOT) has wanted to fix this interchange for years but has lacked the resources. The interchange and collector distributor ramps on SR 400 (totaling a combined $700+ million dollars) were on the 1% transportation special purpose local option sales tax list in 2012. While the interchange had near unanimous support, other projects on the list were controversial causing the tax to fail. However, GDOT still needed to fix the interchange and because of worsening congestion in metro Atlanta it decided to add collector-distributor lanes in addition to the SR 400 ramps. This brought the total cost to $950 billion.

To fund the project the state is going to sell $130 million in bonds, use $81.5 million in gas tax revenue and use a design-build-finance approach with builder contributions to supplement other sources.

But not everybody is happy. Atlanta Urbanist has created a list of bogus reasons to oppose the project.

First, the article claims that the interchange is something Atlanta does not need because new lanes lead to induced demand. But the interchange reconstruction project is not building new lanes; it is rebuilding a functionally obsolete interchange. Second, induced demand is only created when new non-priced lanes are added to growing areas. GDOT has an official policy, adopted in 2007, of adding only priced lanes to Atlanta freeways. The agency is planning on adding priced lanes to both corridors but the variable pricing will prevent induced demand.

Second, the article claims that Georgia has a pedestrian death rate 25% above the national average. This high rate is a problem but we have no idea what is causing the rate without researching the cause. Atlanta Urbanist wants to spend the $950 million on pedestrian improvements. The problem with this logic is that GDOT is using federal gas tax money collected from drivers and intended to be used on highways. Since this money comes from drivers it is only fair it is used on highways. Also, this federal funding is supposed to be used for interstate purposes. There are a large number of vehicles on I-285 and SR 400 from other states such as Florida and North Carolina. I doubt many folks in the metro Atlanta area walked here from another state.

Third, metro Atlanta has a growing senior population and we need ways to better serve them including transit. I agree that Atlanta’s transit service is insufficient. But with most rail lines costing in excess of $2 billion, this is not enough funding to pay for a full line. The interchange rebuild that allows the addition of variably priced lanes will also provide a free virtual guideway for buses and vanpools. In fact, thanks to using managed lanes as a guideway, Atlanta could build and operate a comprehensive bus system for less than a third of the cost of building a comprehensive light rail system. Further, new technology such as the development of automated vehicles may allow seniors to drive longer. While such vehicles are not yet available, they will be in the future.

The I-285-SR 400 interchange project is the biggest bottleneck in the metro Atlanta area. Regardless of what anyone claims, rebuilding the interchange will do more to improve mobility than any other transportation project in Georgia.

Replace EPA Tyranny with a Democratic 50 State Council

A new study by Jay Lehr of the Heartland Institute explains a five year plan that replaces the Environmental Protection Agency (EPA) with a 50 state “Committee of the Whole” group of environmental agencies. The plan effectively replaces the EPA, a federal entity that has been known to over exert its power and abuse power.

  • Net reduction in federal environmental spending of $6.2 billion a year.
  • 15,000 EPA employees to 300 “Committee of the Whole” staff of six representatives from each state.
  • $20 million to each state ($1 billion).
  • Continued research and development at a national level ($1 billion).

Are you in favor of the EPA, or this new plan?