Thursday, July 10, 2008

Texas DOT: roads don't pay for themselves

The Texas Department of Transportation knows that no road pays for itself through tolls or gas taxes.

That is no surprise, really -- traditionally road taxes are collected in one area of a state and spent in another. For example, gas taxes collected in Wausau are going to be thrown away on expanding North-South I-94 where expansion won't help traffic times.

What is very nice about TDOT's methodology is that it recognizes the cost of a highway over its lifetime -- including the cost of maintenance. From TDOT web site:

When is a given road actually “paid for?”

Just like your car, it never is. You may have paid the note, but maintenance and fuel costs go on as long as you own the vehicle. Once a road is built, maintenance and rehabilitation costs last its entire life, generally about 40 years.

The decision to build a road is a permanent commitment to the traveling public. Not only will a road be built, but it must also be routinely maintained and reconstructed when necessary, meaning no road is ever truly “paid for.”

Until recently, when TxDOT built or expanded a road, no methodology existed to determine the extent to which this work would be paid off through revenues.

The Asset Value Index, was developed to compare the full 40-year life-cycle costs to the revenues attributable to a given road corridor or section. The shorthand version calculates how much gasoline is consumed on a roadway and how much gas tax revenue that generates.

The Asset Value Index is the ratio of the total expected revenues divided by the total expected costs. If the ratio is 0.60, the road will produce revenues to meet 60 percent of its costs; it would be “paid for” only if the ratio were 1.00, when the revenues met 100 percent of costs. Another way of describing this is to do a “tax gap” analysis, which shows how much the state fuel tax would have to be on that given corridor for the ratio for revenues to match costs.

Applying this methodology, revealed that no road pays for itself in gas taxes and fees. For example, in Houston, the 15 miles of SH 99 from I-10 to US 290 will cost $1 billion to build and maintain over its lifetime, while only generating $162 million in gas taxes. That gives a tax gap ratio of .16, which means that the real gas tax rate people would need to pay on this segment of road to completely pay for it would be $2.22 per gallon. This is just one example, but there is not one road in Texas that pays for itself based on the tax system of today. Some roads pay for about half their true cost, but most roads we have analyzed pay for considerably less. To conclude, in the SH 99 example, since the traffic volume for that road doesn't generate enough fuel tax revenue to pay for it, revenues from other parts of the state must be used to build and maintain this corridor segment. The same is true across the state, meaning that, as revealed by the tax gap analysis, overall revenues are not sufficient to meet the state’s transportation needs.

This is miles ahead of our own Wisconsin Department of Transportation, which cites the $1.69 billion construction cost of rebuilding expanding that very same North-South I-94 as if that is the only cost associated with the project.

The Texas method is obviously more honest and transparent. We await WisDOT's adoption of it. And await and await and await....

1 comment:

Anonymous said...

How about they use electronic tolls on the new capacity? Or another thought. Put any new capacity underground, and rebuild the freeway above ground to it's existing width? I confess I am a road fan, and would probably be welcome in Story Hill when Hell freezes over, but I have picked up a few ideas on rebuilding southeast Wiconsin's Freeway system with added capacity, with minimal destruction of existing homes and businesses.