AEM PRESENTS REVENUE-NEUTRAL SOLUTION TO REBUILDING AMERICA’S INTERSTATES

Multi-year Highway Bill can be Fully-Funded without Raising the Gas Tax

The Association of Equipment Manufacturers (AEM) today released a revenue-neutral solution to rebuild and modernize America’s interstates without raising the gas tax. The proposal, advanced by AEM in an ongoing effort to reinvigorate the stalled debate on infrastructure investment financing, was developed by Jack Schenendorf, former vice chairman of the National Surface Transportation Policy and Revenue Study Commission, of Counsel, Covington & Burling LLP, and Elizabeth Bell, Associate, Covington & Burling LLP.

As the deadline looms to reauthorize U.S. surface transportation policy by September 30, Schenendorf unveiled two alternative solutions to supplement current federal transportation revenues in a policy paper published by The Bureau of National Affairs.  Recognizing that the current highway trust fund is an inadequate source of federal funding to rebuild and modernize the nation’s deteriorating roads, bridges and highways, Schenendorf’s solutions will create an alternative funding source for America’s aging and congested interstate highways that are a growing barrier to U.S. economic growth.

“Our manufacturers and farmers are at a competitive disadvantage with other countries because of aging infrastructure that has suffered decades of neglect. We risk losing manufacturing and agriculture jobs to overseas markets if Congress further reduces highway spending, as has been proposed in the House. With no political will by policy makers to increase the gas tax, we must look for other practical solutions that ensure the nation’s transportation needs are satisfied,” said Dennis Slater, President of the Association of Equipment Manufacturers.

“Both Congress and the President have recognized the severity of our infrastructure problem and the need to fix it. But neither has been able to come up with a funding solution to pay for the increased investments. This proposal will provide the critically needed funding to modernize our surface transportation system, and allows Congress to increase transportation investment without raising motor fuel or diesel fuel taxes and with no increase to the debt or the deficit,” asserted Schenendorf.

The revenue-neutral transportation funding proposal offers two alternative solutions: a Federal Interstate User Fee (FIUF) and a Federal Motor Carrier User Fee (FMCUF).

How it works:

Federal Interstate User Fee. 

  • All vehicles using the Interstate Highway System would pay a user fee.  The fee would be collected through an “EZ Pass”-like system, which would be entirely electronic.  There would be no tollbooths.
    • All of the revenues generated by the fee would be deposited in a special account in the Highway Trust Fund.  The revenues would be used exclusively to restore the Interstate Highway System to a state of good repair and to expand and modernize it to meet the challenges of the 21st century.
    • The fee structure would be set annually, by an independent group of experts, at the level necessary to reimburse the states in accordance with policies established by Congress for the federal share of these improvements.  No higher, no lower.  The fees would not be designed to control the level of traffic or to “price out” drivers from using the Interstate.
    • This user fee would restore the Interstate Highway System to being the crown jewel of the U.S. surface transportation network and the envy of the world.

Federal Motor Carrier User Fee. 

  • This fee would be imposed on commercial trucks’ usage of all roads and would be collected through GPS-like systems currently being used by many trucking companies.
    • Importantly, trucks would not be double-charged for miles traveled on the Interstate; rather, those miles would be recorded through the Federal Interstate User Fee program.
    • All of the revenues generated by this fee would be deposited in a special account in the Highway Trust Fund and would be used exclusively for freight-related improvements.
    • The same independent entity discussed above would set the fee structure at the level necessary to reimburse the states in accordance with policies established by Congress for the Federal share of these freight improvements.  No higher, no lower.
    • This user fee would play a critical role in improving the movement of freight, thereby helping to make U.S. businesses more competitive in today’s global marketplace.

To read the full text of Schenendorf’s paper and to learn more about this innovative funding solution, please click here.

Executive Summary

MODERNIZING THE U.S. SURFACE TRANSPORTATION SYSTEM

Inaction Must Not Be An Option

The problem

Study after study, report after report, and Commission after Commission have documented something that almost every American knows—our highways and bridges are aging and becoming more and more congested with every passing day.

·            Over the last 30 years, vehicle miles traveled doubled, but the total number of highway lanes grew only 4.4 percent.

·            The Federal Highway Administration reports that over half of the vehicle miles traveled on the federal highway system occur on roads that are in less than good condition.

·            In urban areas alone, congestion resulted in 4.8 billion hours of traveler delays and consumption of an additional 3.9 billion gallons of fuel in 2009.

We should not be surprised to find ourselves sitting in traffic on roads not as safe or well-maintained as they should be. We have been underinvesting in transportation for decades.

Both Congress and the President recognize the severity of the problem and want to fix it. Unfortunately, they have not been able to come up with a way to pay for the increased investment that is needed.            Over the next few years, it looks as though funding will actually go down, or at best hold steady, making the problem even worse than it is today. If nothing changes, revenues generated by current law will only provide enough resources to cover less than half of what is needed to merely maintain our highways through 2035.

We must not let this happen. We must start modernizing our surface transportation network now.

A Way Forward

One way to move forward would be to employ two targeted user fees to supplement, not replace, existing Federal transportation revenue sources. Congress could establish a Federal Interstate User Fee to modernize the Interstate Highway System and a Federal Motor Carrier User Fee to improve freight facilities that benefit the freight industry. Here’s how they would work:

1.            Federal Interstate User Fee.

· All vehicles using the Interstate Highway System would pay a user fee. The fee would be collected through an “EZ Pass”-like system, which would be entirely electronic. There would be no tollbooths.

· All of the revenues generated by the fee would be deposited in a special account in the Highway Trust Fund. The revenues would be used exclusively to restore the Interstate Highway System to a state of good repair and to expand and modernize it to meet the challenges of the 21st century.

· The fee structure would be set annually, by an independent group of experts, at the level necessary to reimburse the states in accordance with policies established by Congress for the federal share of these improvements. No higher, no lower. The fees would not be designed to control the level of traffic or to “price out” drivers from using the Interstate.

· This user fee would restore the Interstate Highway System to being the crown jewel of the U.S. surface transportation network and the envy of the world.

2.            Federal Motor Carrier User Fee.

· This fee would be imposed on commercial trucks’ usage of all roads and would be collected through GPS-like systems currently being used by many trucking companies.

· Importantly, trucks would not be double-charged for miles traveled on the Interstate; rather, those miles would be recorded through the Federal Interstate User Fee program.

MODERNIZING THE U.S. SURFACE TRANSPORTATION SYSTEM

· All of the revenues generated by this fee would be deposited in a special account in the Highway Trust Fund and would be used exclusively for freight-related improvements.

· The same independent entity discussed above would set the fee structure at the level necessary to reimburse the states in accordance with policies established by Congress for the Federal share of these freight improvements. No higher, no lower.

· This user fee would play a critical role in improving the movement of freight, thereby helping to make U.S. businesses more competitive in today’s global marketplace.

Base Program

Federal-aid eligible highways—including the Interstate System—constitute about 985,000 miles of road out of a U.S. total of 4 million miles. This 25% of our roads carries 85% of all vehicle miles traveled. Existing HTF revenues would no longer have to be used on Interstate projects since the new Federal Interstate User Fee would fund all Interstate projects. Similarly, freight projects funded by the Federal Motor Carrier User Fee would no longer have to be funded from existing HTF revenues.

Together, these two programs would take pressure off of the HTF and allow its existing revenues to be used to upgrade the remaining Federal-aid highways, including the major non-Interstate highways on the National Highway System. To help in meeting these needs, Congress should, if possible, index the existing motor fuel taxes for inflation.

Advantages

No Tax Increase. The FIUF and the FMCUF are user fees. They would allow Congress to increase transportation investment without raising motor fuel or diesel fuel taxes.

Fair To Users. By dedicating all of the revenues generated by the user fees to benefit the users preserving and modernizing the Interstate System or financing freight-related projects, these mechanisms would establish a strong link between the user and purpose for which the fees are used. Moreover, the fees would be set at the minimum level necessary to pay for the improvements. No debt service payments. No diversion. No demand management fees to “price out” drivers from using the Interstate. And since the FIUF and FMCUF revenues would be supporting a pay-as-you-go system, users would only pay for work and improvements as they are completed.

National Policy. The Interstate Highway System is a national system governed by national policies and standards. A FIUF is consistent with that by establishing a national user fee mechanism for the entire Interstate. This will help to ensure that the system does not become balkanized by disparate state and local pricing policies.

No Increase In The Deficit Or Debt. Revenues generated by the user fees would pay the full cost of the increased federal investment. Therefore, increased investment would not increase the federal deficit or the federal debt. In fact, over the long term it would help reduce the deficit and debt by promoting greater economic growth.

Modernizes Federal Financing Mechanisms. The FIUF and the FMCUF would be a much-needed step towards post- gas tax revenue strategies.

Improves The Entire Federal-Aid Highway Network. The revenue generated by the FIUF would pay for preservation and modernization of the Interstate Highway System. The FMCUF-generated revenue would be used to pay for major freight improvements. This would free up existing HTF resources to pay for improvements to the non-Interstate portion of the National Highway System and the remaining Federal-aid highways. The entire national network would benefit.

Improves Competitiveness and Creates Jobs. Modernizing our national transportation network will make U.S. businesses more competitive. Over the long term, this will strengthen the U.S. economy and lead to greater private sector job growth. Another benefit would accrue in the short-term—greater economic activity and considerable job growth in the construction and construction-related industries.

To see entire report click here

http://www.aem.org/PDF/2011-07-27_SchenendorfModernizingSystem.pdf

 

Editors note: When is a good time? It wasn’t a good time 2 years ago when the bill expired and hasn’t been every time the extension expired. Never is a good time and yet if our representatives in Washington were seriously interested in strengthening the economy, reducing unemployment and getting our country going again they would have passed the original proposal two years ago and we would be doing a lot better on all levels. Can one bill have that much of an impact on our economy? It sure can…

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