National Academies Press: OpenBook
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Suggested Citation:"Front Matter." National Academies of Sciences, Engineering, and Medicine. 2006. Future Financing Options to Meet Highway and Transit Needs. Washington, DC: The National Academies Press. doi: 10.17226/23200.
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Suggested Citation:"Front Matter." National Academies of Sciences, Engineering, and Medicine. 2006. Future Financing Options to Meet Highway and Transit Needs. Washington, DC: The National Academies Press. doi: 10.17226/23200.
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Suggested Citation:"Front Matter." National Academies of Sciences, Engineering, and Medicine. 2006. Future Financing Options to Meet Highway and Transit Needs. Washington, DC: The National Academies Press. doi: 10.17226/23200.
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Suggested Citation:"Front Matter." National Academies of Sciences, Engineering, and Medicine. 2006. Future Financing Options to Meet Highway and Transit Needs. Washington, DC: The National Academies Press. doi: 10.17226/23200.
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Suggested Citation:"Front Matter." National Academies of Sciences, Engineering, and Medicine. 2006. Future Financing Options to Meet Highway and Transit Needs. Washington, DC: The National Academies Press. doi: 10.17226/23200.
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Suggested Citation:"Front Matter." National Academies of Sciences, Engineering, and Medicine. 2006. Future Financing Options to Meet Highway and Transit Needs. Washington, DC: The National Academies Press. doi: 10.17226/23200.
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Suggested Citation:"Front Matter." National Academies of Sciences, Engineering, and Medicine. 2006. Future Financing Options to Meet Highway and Transit Needs. Washington, DC: The National Academies Press. doi: 10.17226/23200.
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Below is the uncorrected machine-read text of this chapter, intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text of each book. Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.

ACKNOWLEDGMENT This work was sponsored by the American Association of State Highway and Transportation Officials (AASHTO), in cooperation with the Federal Highway Administration, and was conducted in the National Cooperative Highway Research Program (NCHRP), which is administered by the Transportation Research Board (TRB) of the National Academies. COPYRIGHT PERMISSION Authors herein are responsible for the authenticity of their materials and for obtaining written permissions from publishers or persons who own the copyright to any previously published or copyrighted material used herein. Cooperative Research Programs (CRP) grants permission to reproduce material in this publication for classroom and not-for-profit purposes. Permission is given with the understanding that none of the material will be used to imply TRB, AASHTO, FAA, FHWA, FMCSA, FTA, Transit Development Corporation, or AOC endorsement of a particular product, method, or practice. It is expected that those reproducing the material in this document for educational and not-for-profit uses will give appropriate acknowledgment of the source of any reprinted or reproduced material. For other uses of the material, request permission from CRP. DISCLAIMER The opinion and conclusions expressed or implied in the report are those of the research agency. They are not necessarily those of the TRB, the National Research Council, AASHTO, or the U.S. Government. This report has not been edited by TRB.

FOREWORD By Andrew C. Lemer Staff Officer Transportation Research Board This report assesses the viability of a range of conventional and innovative options for financing investments and operations of highway and transit systems. Such options can help reduce the gap between the funds being generated by currently used financing methods and government agencies’ estimated needs for funds. The report will be useful to senior federal, state, and local government officials and other policy makers. The challenges government officials and other policy makers face in their efforts to secure sustainable resources and means for financing the nation’s transportation system are immense. Demand is expanding, and its patterns are shifting—exceeding the existing system’s capacity. Increasing congestion in urbanized areas lengthens commuting times, obstructs deliveries, and imposes costs on workers and businesses. Our desires to enhance our economic competitiveness, personal mobility, and environmental quality require that we improve the system’s efficiency. Current options (for example, user fees, tolls, bonding, and use of general revenue) are unlikely to meet well-documented future resource needs; the Federal Highway Trust Fund is not able to keep pace with even the currently authorized highway and transit programs. To assist agencies in meeting these challenges, the National Cooperative Highway Research Program (NCHRP) is conducting several research studies on topics requested by the American Association of State Highway and Transportation Officials (AASHTO). This report is the final product of NCHRP Project 20-24(49), “Future Financing Options to Meet Highway and Transit Needs,” one of these studies. The NCHRP 20-24 project series was initiated in 1988 to address problems experienced by top management of state departments of transportation (DOTs). As of April 2006, more than 54 specific projects have been undertaken addressing topics in finance, human resources, organization structure, strategic planning, leadership, business practices, and other areas of direct concern to high-level DOT executives. The objective of NCHRP Project 20-24(49) was to present options for all levels of government to reduce the highway and transit funding deficits on a sustainable basis. A research team led by Cambridge Systematics performed the study in three phases. Phase 1 entailed a review of estimates of investment needs and available revenues available at all levels of government, using information available from the U.S. Department of Transportation (U.S. DOT), AASHTO, and other sources, to identify the likely shortfall over the coming decade. In the second phase, the researchers examined the advantages and limitations of a wide range of conventional and innovative revenue and financing options—such as fuel taxes, tolls, motor- vehicle fees, transit fares, local option taxes, and impact and development fees—considering their ability to maintain purchasing power over time, ease of acceptance and deployment, collection efficiency, and other factors influencing their attractiveness to state and local agencies. In the final phase, the team explored how funding options might be used in combination to reduce the resource shortfall identified in Phase 1, considering costs, risks, and impediments to implementation.

The results presented in this report include an assessment of options for raising revenue; approaches to using innovative financing methods and public-private partnerships for applying these revenue-raising options; and strategies that federal, state, and local government agencies might pursue to reduce the estimated gap between available funds and needs. The researchers reviewed others’ estimates of the magnitude of that gap at local, state, and federal levels for the coming decade, 2007–2017. They used these estimates to assess how significant a contribution various revenue and financing options might be able to make toward closing the gap. The report concludes with a discussion of implementation strategies for highway and transit funding initiatives, presenting several case studies of successful initiatives.

NCHRP 20-24(49) – Future Financing Options to Meet Highway and Transit Needs Author Acknowledgments The research reported herein was performed under NCHRP Project 20-24(49) by Cambridge Systematics in cooperation with Mercator Advisors LLC, Alan E. Pisarski, and Martin Wachs. Mr. Gary Maring of Cambridge Systematics was the Project Director and Principal Investigator. The other authors of this report are Iris Ortiz, Arlee Reno, and Lance Grenzeback of Cambridge Systematics; Bryan Grote, James Taylor, and David Seltzer of Mercator Advisors; and consultants Alan Pisarski and Martin Wachs. Abstract This report presents options for all levels of government to close the nation’s highway and transit investment deficits on a sustainable basis. The study estimated the needs and revenues available at all levels of government from 2007 to 2017; examined existing and emerging revenue options; and demonstrated potential portfolios of funding options to close the revenue gap. The report also discusses necessary implementation steps to help secure the needed additional transportation investment.

NCHRP 20-24(49) – Future Financing Options to Meet Highway and Transit Needs Table of Contents Executive Summary .............................................................................................................. ES-1 Overall Study Conclusions........................................................................................... ES-1 1.0 Introduction................................................................................................................... 1-1 2.0 Highway and Transit Investment Needs, Revenues, and Shortfalls ................. 2-1 2.1 Highway and Transit System Investment Requirements................................ 2-1 2.2 Highway and Transit System Current and Projected Revenue...................... 2-6 2.3 The Shortfall........................................................................................................... 2-15 3.0 Improved and New Revenue Options ..................................................................... 3-1 3.1 Review of Specific Candidate Revenue Sources.............................................. 3-1 3.2 Conclusion ............................................................................................................ 3-23 4.0 The Role of Innovative Finance and Public-Private Partnerships ...................... 4-1 4.1 Leverage Existing Resources ............................................................................... 4-2 4.2 Create Revenue-Generating Assets .................................................................... 4-8 4.3 Use Public-Private Partnerships to Enhance Project Delivery and Asset Management........................................................................................ 4-13 4.4 Summary and Key Policy Issues......................................................................... 4-16 5.0 Prospective New and Enhanced Funding Options ................................................ 5-1 5.1 Criteria for Evaluating Revenue Sources........................................................... 5-1 5.2 Evaluating Promising Sources Against Criteria ............................................... 5-4 5.3 Summary Review of the Promising Revenue and Financing Options .......... 5-13 5.4 Conclusions............................................................................................................ 5-16 6.0 Gap Closing Strategies and Estimates...................................................................... 6-1 6.1 Federal Revenue Options..................................................................................... 6-1 6.2 State Government Revenue Strategies ............................................................... 6-7 6.3 Local Government Revenue Strategies .............................................................. 6-10 6.4 State Highway and Transit Revenue Level of Effort........................................ 6-10 6.5 Summary of Gap Closing Potential of Various Revenue Strategies .............. 6-10 6.6 Packages of Actions to Close the Gap ................................................................ 6-15 6.7 Illustrative Scenario for Ensuring HTF Solvency during SAFETEA-LU and Addressing Needs during the Next Authorization Cycle............................... 6-19 6.8 Conclusions............................................................................................................ 6-21

NCHRP 20-24(49) – Future Financing Options to Meet Highway and Transit Needs Table of Contents (continued) 7.0 Implementation Plan and Strategies ........................................................................ 7-1 7.1 Implementation Plan for Highway and Transit Funding Initiatives............. 7-1 7.2 Case Studies of Successful Initiatives................................................................. 7-10 7.3 Revenue Transition ............................................................................................... 7-22 7.4 Conclusions............................................................................................................ 7-23 Appendix A Needs and Revenue Forecast Assumptions .............................................................. A-1 Appendix B Highway and Transit Local Option Taxes for Transportation................................ B-1 Appendix C Fuel Tax Vulnerability to Price Changes and Alternative Fuels............................. C-1 Appendix D State and Local Highway Funding Analysis ............................................................. D-1 Appendix E Transit Funding Analysis ............................................................................................. E-1 Appendix F Assumptions for Selected Short-Term Revenue Enhancement Projections.......... F-1 Appendix G State Level of Effort Analysis....................................................................................... G-1

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TRB’s National Cooperative Highway Research Program (NCHRP) Web-Only Document 102: Future Financing Options to Meet Highway and Transit Needs explores the viability of a range of conventional and innovative options for financing investments and operations of highway and transit systems.

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