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Business Observer Thursday, Jul. 23, 2009 10 years ago

The Cost to Drive

It seems there just is not enough money for roads in Florida. Government policies to promote less driving reduce gas tax revenues to pay for roadwork, and new federal legislation could also make it more difficult to create public private partnerships and build needed toll roads.
by: Jay Brady Government Editor

It seems there just is not enough money for roads in Florida. Government policies to promote less driving reduce gas tax revenues to pay for roadwork, and new federal legislation could also make it more difficult to create public private partnerships and build needed toll roads.

There's a simple solution to this traffic problem. We'll have business build the roads and government build the cars. — Will Rogers

While the feds look to make everything from health care to auto-manufacturing government-run, Florida is looking at privatizing a major government operation: toll roads. All of which makes Will Rogers as prescient as ever.

With flat or declining gas tax revenues and the need to keep the budget in balance, privately-owned and operated roads could become far more common for Gulf Coast drivers, along with new ways to nick drivers for more taxes.

Bob Hartnett, president and CEO of Orlando-based TEAMFL, a consortium of transportation and expressway authorities, says 91% of all road mileage built in the country since the completion of the interstate system in 1993 was for toll roads -- about a $10 billion investment.

Odds are good for that trend to continue, and even accelerate. Consider that the federal gas tax was last increased in 1982 and has not kept up with inflation much less road construction costs. Since 1990, 174 miles of new toll roads and bridges have been added to the Florida landscape.

Along the Gulf Coast, toll roads pass through parts of Pasco, Pinellas, Hillsborough, Lee and Collier counties. (See table page 17.) Across the state, 750 miles of toll facilities serve 75% of the population in the 23 counties with at least one toll road. The U.S. has more than 5,200 miles of toll roads, bridges and tunnels in 33 states.

Gas tax revenues are declining only in part due to the slow economy. Because fuel taxes are based on gallons consumed, and not dollars spent, better fuel mileage means less gas used and therefore smaller balances in state and federal transportation trust funds. “The gas tax is inadequate,” says U.S. DOT Secretary Ray LaHood, speaking in Sarasota recently.

This also means less revenue for counties with their own gas taxes. The locals have also been getting less trickling down so some have resorted to inflating impact fees and adopting other taxes. Now, they're shifting revenues around to offset plummeting property taxes.

Adding to the drop off, the state trust fund became victim to a $120 million “sweep” this spring to shore up a $6 billion state budget gap to help balance the budget. Had some legislators had their way it might have been $400 million.

But the reduced raid may still cost the state future federal highway stimulus funds, according to Michael Guy, executive director of STARTUPS, a Sarasota-Manatee transportation advocacy group.

As the feds continue to demonstrate, they are unable to get their financial house in order. Congress recently transferred $8 billion to the Federal Highway Trust Fund as a short term fix, but there may be delays in reimbursements to the states. Established in 1956, 60% of the fund comes from gas taxes, 30% from diesel fuel taxes, and the rest from non-fuel sources.

Over the past half century, gross domestic product grew steadily in tandem with the rising road travel. But national, state and, in some cases, local policies are aimed at reducing everyone's travel — what transportation planners refer to as “vehicle miles traveled” — or VMT.

It's also part of the president's and Gov. Charlie Crist's plans to reduce greenhouse gas emissions 80% by 2050. Passenger vehicles contribute about 20% of U.S. carbon emissions.

And now, with new advances in technology, a growing cadre in the community of transportation gurus and politicians are looking hard at charging drivers for each mile traveled — the Mother of all User Fees.

OBD2 gizmo
Robert Poole, director of transportation policy for the Reason Foundation, a California think tank, has been working on high occupancy toll (“HOT”) lanes for Lee County, and studies advances in transportation planning.

“Most of the serious people in the community say we're going to have to replace the gas tax,” he says.

That won't be easy, but it could happen. The technology hurdles will be challenging, but political obstacles may prove more daunting with constituents fretting about “big brother” watching their every move.

TEAMFL's Hartnett, a former legislator, shares the “big brother” concern telling the mostly middle-aged audience at a recent Floridians for Better Transportation conference in St. Pete Beach: “I don't think you'll see a (vehicle) mileage-counter system approved in my lifetime or anyone's lifetime in this room.”

But the very same week, a University of Minnesota engineering team's solution was trumpeted by Poole, a self-professed “skeptic of any near-term implementation of this concept.” The proposal calls for electronic gadgetry that plugs directly into a vehicle's data bus — the On-Board Data link 2 (OBD2) that has been standard on all vehicles sold in the U.S. since 1996.

This is the gizmo mechanics plug into to run diagnostics on engines and other vehicle systems. About 90% of vehicles on the road have the device.

The key to the system that sets it apart from GPS satellite system proposals panned for working poorly around mountains and tall buildings, is that the OBD2 would identify the nearest cell phone tower the same way cell phones do. By using cell phone-based text messaging, the system uploads accumulated VMT and payment-due data periodically.

Poole says the Minnesota concept “would make it possible for per-mile charges to be applied by state and county governments.” He also notes that transponders, like Florida's SunPass, would still be needed for toll roads. The system could be programmed to credit tolls or fuel taxes paid against the VMT charge.

Another authority is Peter Samuel, editor of Toll Roads News, who is frequently critical of transportation proposals that are not thought through. But Samuel thinks the Minnesota proposal has merit and, Poole says, “considerable credibility.”

'Big trouble'
The concept is one of 40 revenue options evaluated, and one of a number supported by the National Surface Transportation Financing Commission. Their report was completed last February.

Kathy Ruffalo, a member of the Commission and panelist at the transportation conference, says the Federal Highway Trust Fund is insolvent and facing a $40 billion shortfall. “We're in big trouble,” she says, adding, “We don't have a financing problem in this country, we have a funding problem.”

Others expect that the funding will have to shift to states and local governments. Former U.S. DOT Secretary Mary Peters has been quoted saying, “States will not be able to count on Federal money to keep up with highway construction needs. States must find other ways to finance new roads and maintain the ones they have.”

The elephant in the room is the pending reauthorization of the federal surface transportation bill, potentially a $500 billion piece of legislation that the House is advancing, but on which the Senate is lagging. With the current bill expiring Sept. 30, the administration wants an 18-month delay and $20 billion to keep its programs solvent.

Senate leadership supports the extension, but the House Transportation and Infrastructure Committee wants to finish committee work before October in hopes of the full House taking action before the end of the year. Rep. Vern
Buchanan, R-Longboat Key, sits on the committee and hosted Secretary LaHood this past week. Speaking about the bill, LaHood says, “The whole notion here is to get people out of their automobile.”

Two key pieces of the bill have Florida DOT Secretary Stephanie Kopelousos concerned about the lack of flexibility for states. Already upset with state only getting back about 86 cents on the dollar, Kopelousos is frustrated with the bill's authors' intent, and takes them to task by saying that, to them, “Capacity is a cuss word.”

One section of the bill governs public-private partnership contracts using federal aid funds. The other would create an “Office of Public Benefit” to decide the tolling of a federal highway.

Plus, an additional approval would be required for any part of a program that requires tolling authority by the feds or uses the public-private partnerships. According to one critique, the fear is that the added bureaucracy “would severely limit the attractiveness of (public-private partnerships) to both state and the private sector.”

Kopelousos worries that if LaHood has to approve everything, “We'll be here for years. We'll never get a project done.” Asked by the Business Review about Kopelousos' concerns, LaHood says, “I think that what she should really do is talk to people on the (Transportation and Infrasructure) Committee.”

Most states require more road maintenance than new capacity. The sunshine state still needs new roads, and its highways are in better shape. In fact, a 2006 study claims 97% of Florida's interstate system is rated good — not surprising for a young, warm weather state.

To increase funding for new capacity, FDOT went to an extensive effort to execute a long term lease of Alligator Alley. The 78-mile Interstate 75 facility running from Collier to Broward counties, is already run and maintained by a number of private contractors to the agency. But the bidding process ended up without any bidders.

The hope was to gain a large upfront payment while also improving efficiencies by having one contractor handle the whole operation, including toll facilities and maintenance.

Although it's not clear what all the reasons were, bidders had to be turned off by opposition from Sen. Dave Aronberg, D-Greenacres, whose district includes areas crossed by Alligator Alley. Other reasons offered include too many companies on the bidders' short list, and a citizens group in Collier bent on opposing privatization at any price despite legislated performance standards and other safeguards.

Kevin Thibault, assistant secretary for engineering and operations at FDOT, says a lot of people speculate that weak credit markets were also to blame. Thibault says FDOT is not sure if they will rebid the project, but are considering raising tolls to support a bond issue. Oddly, the fear of higher tolls following privatization may be the real reason for local opposition.

In the meantime, public-private partnership projects are moving forward with a $1.1 billion port tunnel project in Miami, the Interstate 595 express lanes, which are a variable toll project in Broward costing $1.2 billion, and a new, $2 billion outer beltway toll road around Jacksonville. Hillsborough's $500 million Interstate 4 LeRoy Selmon Expressway connector, scheduled for completion in 2014, is set to be let this fall.

Still in the background, but advancing are vehicle mileage charges. Oregon already has a pilot project underway where drivers' mileage is uploaded at gas stations.

Critics argue that these fees discourage economic growth while restricting freedom. National transportation consultant Alan Pisarski characterizes it as “taxing travel based on where, when and what you are doing.” In the same breath he refers to an overthrown communist leader, when he says, “It sounds like something from the Nicolae Ceausescu school of planning.”

If mileage charges don't pan out, and gas tax revenues continue their predictable decline, public and private toll roads will become an even greater share of new capacity — if the feds don't muck it up.

There may be no perfect solution, but there is good news for Florida's 2.5 million daily toll customers: no more stopping when toll roads become cashless systems, so toll booths will only be found in a museum.

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