We are going to be hearing increasingly this year about the Highway Funding Crisis. Much of that discussion will be directed toward exploiting the political leverage that our car addiction gives to the Highway Lobby.
But there is the other side of the Highway Funding Crisis, which is freight transport. Our freight transport system has been as deliberately addicted to road funding as our passenger transport system, and in the process is quite heavily addicted to diesel fuel.
Now, the Sunday Train has frequently tackled this issue from the side of the physical unsustainability of our dependence on petroleum based fuels for a majority of our transport. However, its also the case that the system of public finance upon which we built our road transport system is becoming more and more financially unsustainable.
And so, this week, Sunday Train starts a series on the Freight Transport dimension of our Highway Funding Crisis. This is not a free-standing piece, but is the first half of a piece presented in two parts.
1. America's Underfunded Road Infrastructure
In 2013, the American Society of Civil Engineers (ASCE) issued their “Infrastructure Report Card”.[1] In that report, America's roads were given a grade of “D”:
The infrastructure is in poor to fair condition and mostly below standard, with many elements approaching the end of their service life. A large portion of the system exhibits significant deterioration. Condition and capacity are of significant concern with strong risk of failure.
According to the ASCE, it would cost $101 billion to maintain the nation's highways in their current state. And the state of the nation's highways at present is not what it should be, with 42% of the nation's major urban highways congested. In addition, 32% of America's major roads are not in a state of good repair, in either poor or mediocre condition, with 54% of highway vehicle miles on pavements that do not provide good ride quality.
The Federal Highway Administration estimates that $170 billion in new investment per year would be required to substantially improve conditions, with $85 billion required to improve existing highways so that 74% of vehicle highway miles are on pavement in a state of good repair. In other words, a total of $186 billion annually is required to bring our existing highway network to a state of good repair, with an addition $85 billion required per year to address bottlenecks in the nation's highway network as we presently use it.
When we look to the funding provided, Federal, State and Local governments are only spending $91 billion annually on highway investment. And a part of this is for the construction of new road projects, which will increase the maintenance burden in the future.
Looking more broadly than highways alone, road spending on both highways and local roadways totaled $192.7 billion in 2008. With a funding shortfall in 2008 estimated at 13% of that total, total funding requirements were about $220b, with 43% met by user fees and 45% as subsidies funded by other taxes. State governments are the most important source of funding, meeting 44% of the need, followed by local governments meeting 24% of the need, and finally the Federal government meeting 19% of the need. [2]
The more local the level of government, the more heavily it relies on tax subsidies. In 2008, less than three tenths of Federal government funding were subsidies funded from other tax revenues. About four tenths of state government funding were subsidies, and a dominant nine tenths of local government funding were subsidies. [2] Therefore, if shortfalls in Federal funding spill over to shortfalls in state funding, which force local governments to spend more, this also results in an increase in the share of road costs covered by subsidy.
Meanwhile, the largest individual source of highway funds, the Federal Highway Trust fund, is funded by gasoline and diesel taxed that has been set at the same nominal amount since 1993, 18.4 cents for gasoline and 24.4 cents for diesel. According to Kevin DeGood at the Center for American Progress: [3]
- In inflation-adjusted terms, the gas tax is worth only 11.5 cents today.
- In 1993, the gas tax represented 18 percent of the cost of an average gallon of gasoline. Today, it represents only 5 percent.
- If gas and diesel taxes had been indexed to keep pace with inflation, today they would be 29 cents and 38 cents per gallon, respectively.
- The corporate average fuel-economy standards will rise to 54.5 miles per gallon for cars and light-duty trucks by model year 2025. This will approximately double the efficiency of vehicles compared to current levels and dramatically reduce the amount of tax revenue flowing to the HTF, crippling federal surface transportation programs.
The Federal Highway Trust Fund would be facing a shortfall over the long term simply due to the fact that it is not corrected for inflation, while the cost of maintaining each mile of the highway system increases annually. However, the damage done to the road network is based on miles driven and vehicle weight, not on the amount of energy required to drive those miles and move that weight.
As we pursue greater fuel efficiency to reduce the pollution and greenhouse gas impact of each mile driven, we further reduce the payment made by cars and trucks for each vehicle mile and ton-mile of use of the road.
At the time of writing, the Highway Trust Fund is projected to exhaust all but emergency reserves within the calendar year, if nothing is done to provide new revenues. However, even if a short-term fix is provided, the long term problem remains that we are not keeping up with the maintenance costs of our road network, even as we continue to add to that network, and over the medium to long term, an increasing reliance on electric cars will undermine that part of our highway funding which is derived from vehicle fuel taxes.
This is challenge is both substantial and complex challenge, and it calls for policy responses on multiple dimensions of the problem at once.
We can respond to this shortfall on the funding supply side, by looking for ways to increase the revenue devoted to road maintenance. We can also respond on the demand side, by looking for ways to reduce the need for maintenance generated by road users. The challenge is substantial enough to justify pursuing both approaches. The focus here is on the demand side, to develop demand-side policies can offer a useful complement to efforts to make progress on the supply side.
Passengers carried on light vehicles and buses, and freight carried by heavy trucks quite distinctive types of transportation tasks. They both contribute substantial shares to the unfunded demand for road maintenance, and it is worthwhile to consider demand reduction policies for both types of road users. The focus here is on demand side policies to reduce the wear and tear generated by heavy trucks, to develop demand-side policies for freight carries by heavy trucks that can complement demand-side policies for passenger traffic carried by light vehicles and buses.
2. The Role of Freight Shipments by Truck In Our Highway Funding Crisis.
Any comprehensive demand-side policy for the road-funding shortfall must consider truck freight, since a substantial share of road costs can be attributed to truck freight. Starting with the 1997 Federal Highway Cost Allocation Study [4], both Federal and state studies of the allocation of costs between light and heavy vehicles commonly find that heavy vehicles are responsible for 30% to 40% of total highway expenditures.[5] Much of the focus of these studies are on whether the distribution of revenue and costs are equitable, but given spending that is falling short of need, perfect equity means that all users bear equal responsibility for the shortfall.
It is also important to distinguish between between maintaining the system that we have and bringing it up to a state of good repair, and expanding the system that we have. Maintaining the system we have and bringing it up to a state of good repair reduces our unfunded future road liability. Expanding the system, by contrast, increases our unfunded future road liability.
Trucks play an especially prominent role when we consider focus on the cost of maintaining our current system and bringing our current system up to a state of good repair. For example, in the 1997 FHA Highway Allocation Study, it was estimated that 44% due to semi-trailer and multi-trailer trucks, 16% due to heavy unit trucks, and 40% of the cost for system preservation due to passenger vehicles and light trucks. So a policy of reducing the shortfall by reducing the damage done to our roads gains the most leverage from diverting some share of freight carried by multiple unit trucks from road to some other means of travel. [4]
Wear and tear from heavy trucks is concentrated on those roads that are most directly exposed to the funding difficulties faced by the Federal Highway Trust Fund. The highest volumes of truck traffic occurs on National Highway System (NHS) roads. Federal Highway Administration (FHA) day indicates that 22% of NHS roads carry high volume truck traffic, more than 10,000 trucks daily, and a further 13% carry moderate volume truck traffic, between 5,000 and 10,000 trucks daily. By contrast, fewer than 1% of the miles of non-NHS roads carried moderate or high volumes of truck traffic. Among NHS roads, high volume truck traffic is further concentrated on the Interstate System, with 77% of urban Interstate System miles and 64% of rural Interstate System miles experiencing high volume truck traffic. [6]
If there are ways to ship freight with substantially lower maintenance costs per ton-mile, it is possible to reduce the unfunded road maintenance burden by shifting road freight shipments to that alternative. In this policy, there is substantial leverage available in focusing on “long haul” shipments over 250 miles. After all, shifting a single shipment of 500 miles has the same benefit as shifting ten 50 mile shipments, while shifting a single shipment of 2,500 miles has the same benefit as shifting fifty 50 miles shipments.
There are substantial opportunities for shifting long-haul truck freight, since while trucking dominates short haul freight traffic, it also carries a substantial share of all long-haul freight traffic in the country. When national freight traffic is broken down by distance, truck carries a majority of ton-miles for shipments shipments between 250 and 750 miles, and for shipments over 2,000 miles, and over 30% of the ton-miles for shipments between 750 and 2,000 miles. And trucking dominates freight of certain types of goods at all distances, so that for either mixed freight or machinery, a majority ton-miles are carried by truck.
The primary alternative means of carrying long-haul freight are air, water, and rail. Shifting substantial truck freight to air is moving in the wrong direction, since the infrastructure, energy, and environmental costs per ton-mile of air freight are higher than truck freight. Shifting truck freight to water freight is a useful alternative where it is feasible, since well-regulated water born freight offers the lowest infrastructure, energy and environmental costs per ton-mile. However, many truck freight routes lack a viable water born alternative, and many freight customers demand a higher speed than water born freight can deliver. This leaves rail freight as the primary alternative to long haul truck freight that offers lower maintenance, energy, and environmental costs per ton-mile of freight moved.
... To Be Continued ...
Sources
[1] American Society of Civil Engineers. “Report Card for America's Infrastructure”. March, 2013: http://www.infrastructurereportcard.org/a/browser-options/downloads/2013-Report-Card.pdf
[2] Victoria Transport Policy Institute. “5.6: Roadway Facility Costs.” In Transportation Cost and Benefit Analysis II – Roadway Costs. 28 August, 2013. pp. 5.6-6. http://www.vtpi.org/tca/tca0506.pdf
[3] Kevin DeGood. “Understanding the Highway Trust Fund and the Perils of Inaction”. Center for American Progress, February 20, 2014: http://www.americanprogress.org/wp-content/uploads/2014/02/HTF_factsheet2.pdf
[4] Federal Highway Administration. “1997 Federal Highway Cost Allocation Study –
Summary Report: V – Highway Cost Responsibility.” 1997: https://www.fhwa.dot.gov/policy/hcas/final/five.htm
[5] Oregon Department of Administrative Services, Office of Economic Analysis. “Highway Cost Allocation Study 2013-2015 Biennium.” January 2013: http://www.oregon.gov/DAS/OEA/docs/highwaycost/2013report.pdf
[6] Federal Highway Administration, U.S. Dept. of Transportation. “FHWA Freight Management and Operations – Chapter 5: Capacity and Performance Analysis.” August 10, 2011: http://faf.ornl.gov/fafweb/Data/Freight_Traffic_Analysis/chap5.htm#table54
Conclusions and Considerations
I always say that the conclusion of the piece is just the start of the discussion ... and how much more true that is if the piece has not yet reached its conclusion!
As always, any topic in sustainable transport is on-topic in the Sunday Train. So feel free to talk about CO2 emissions reduction, energy independence, suburban retrofit and reversing the cancer of sprawl over our diverse ecosystems, or the latest iPhone or Android app to map you bike ride. Whatever.
And on this particular topic, what are your thoughts on how to address the problem that the road network that our freight transport is so heavily dependent upon is both ecologically and financially unsustainable?
The Sunday Train doesn't really leave the station until you jump in and join the conversation so ... All Aboard!