Executive Briefings

Governors' Summit Looks at Innovative Ways to Pay for Overhaul of Crumbling U.S. Infrastructure

It should come as no surprise to anyone who uses the nation's highways and transit systems that they are in dire need of overhaul. But who will pay for it? A recent summit of state governors called for new ideas on funding the necessary improvements. Currently, the money comes from a mixture of sources, including fuel taxes, vehicle user fees, transit fares, impact fees, bonds, property taxes, sales taxes and general funds. But the total amount spent on highways and transit still "falls dramatically short of the amount needed to maintain the current status, let alone improve the status of the nation's transportation infrastructure," according to a statement by the National Governors Association Center for Best Practices. The group's summit, held in Washington, D.C. in conjunction with the U.S. Transportation Department, brought together state and federal leaders to talk about innovative funding strategies.

They examined a number of ideas, especially new financing tools available to states, such as tolls on highways and bridges built with federal aid. A combination of expanded tolls and the use of high-occupancy toll lanes would raise revenues while reducing congestion, participants said. Congestion pricing is another idea that has recently been gaining traction. Proponents argue that it helps to ration limited road space during peak traffic periods while generating funds for transit improvements and road maintenance. Yet another proposed fee, the vehicle miles traveled (VMT) tax, could prompt drivers to cut down on unnecessary trips, with demand further reduced through mileage-based insurance policies. Opponents argue that the VMT tax raises privacy concerns, in light of the tracking and reporting technology to which it would give rise. Recent innovations in project finance have given states more leeway in funding new construction through big capital projects that might exceed available tax revenue, although the current nationwide credit crunch might make that avenue less attractive. Finally, there is the option of public-private partnerships, which give states access to fresh capital and allow them to share responsibilities and risk. Together the partners could deliver projects in less time and at reduced cost, summit participants said.

Visit www.nga.org/center

It should come as no surprise to anyone who uses the nation's highways and transit systems that they are in dire need of overhaul. But who will pay for it? A recent summit of state governors called for new ideas on funding the necessary improvements. Currently, the money comes from a mixture of sources, including fuel taxes, vehicle user fees, transit fares, impact fees, bonds, property taxes, sales taxes and general funds. But the total amount spent on highways and transit still "falls dramatically short of the amount needed to maintain the current status, let alone improve the status of the nation's transportation infrastructure," according to a statement by the National Governors Association Center for Best Practices. The group's summit, held in Washington, D.C. in conjunction with the U.S. Transportation Department, brought together state and federal leaders to talk about innovative funding strategies.

They examined a number of ideas, especially new financing tools available to states, such as tolls on highways and bridges built with federal aid. A combination of expanded tolls and the use of high-occupancy toll lanes would raise revenues while reducing congestion, participants said. Congestion pricing is another idea that has recently been gaining traction. Proponents argue that it helps to ration limited road space during peak traffic periods while generating funds for transit improvements and road maintenance. Yet another proposed fee, the vehicle miles traveled (VMT) tax, could prompt drivers to cut down on unnecessary trips, with demand further reduced through mileage-based insurance policies. Opponents argue that the VMT tax raises privacy concerns, in light of the tracking and reporting technology to which it would give rise. Recent innovations in project finance have given states more leeway in funding new construction through big capital projects that might exceed available tax revenue, although the current nationwide credit crunch might make that avenue less attractive. Finally, there is the option of public-private partnerships, which give states access to fresh capital and allow them to share responsibilities and risk. Together the partners could deliver projects in less time and at reduced cost, summit participants said.

Visit www.nga.org/center