Conditions and Performance
Chapter Listing
Conditions and
Performance Home Page
Introduction
Impact of Highway and
Bridge Investment on Conditions and Performance
Transit Investment
Impacts
Methods for Increasing Future Investment for Transportation Projects
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Methods for Increasing Future Investment for
Transportation Projects
Chapter 6 describes the broad revenue categories that have traditionally provided most funding
for highways. Buried within these numbers are a variety of new financing mechanisms that have come
on line in recent years. These innovative finance strategies leverage existing Federal, State, and
local transportation funds, and draw on the resources of the private sector as well. Innovative finance is
a broadly defined term that refers to methods of financing transportation infrastructure other
than relying on conventional highway user fees and taxes.
The TEA-21 provides new grants, management flexibility, and project financing opportunities
to State DOTs and other project sponsors. Major finance provisions include:
- TIFIA: The Transportation Infrastructure Finance and Innovation Act of 1998
(TIFIA) established a new Federal credit program under which the Department of
Transportation (DOT) may provide $10.6 billion via three forms of credit assistance -- secured (direct)
loans, loan guarantees and standby lines of credit -- for surface transportation projects of national
or regional significance. The program's fundamental goal is to leverage Federal funds
by attracting substantial private and other non-Federal co-investment in critical improvements
to the Nation's surface transportation system.
- SIBs: A State Infrastructure Bank (SIB)
pilot program was established under the
1995 National Highway System Designation Act (Section 350) and expanded upon in the
1997 DOT Appropriations Act. Designed to complement traditional transportation
funding programs, SIBs can give States significantly increased flexibility in project financing.
Much like a private bank, a SIB uses seed capitalization funds to get started and offers customers
a range of loans and credit enhancement products. The SIBs can be used to finance
eligible surface transportation projects, including both highway construction and transit
capital projects. As of September 30, 1999, $516.5 million in Federal funds had been deposited
into the highway and transit accounts of the 39 approved State banks. The TEA-21 authorized
only four states to use TEA-21 funds to capitalize the SIBs.
- GARVEE: Grant Anticipation Revenue Vehicle, or GARVEE Bond, refers to any
financing instrument for which principal and/or interest is repaid with future Federal-aid highway
funds. In essence, the debt is issued in anticipation of the receipt of Federal apportionments
in subsequent years.
The following are innovative finance concepts and strategies that can be used to increase the state
and local transportation revenue streams. It is important to note that controversy surrounds each.
For example, questions have been raised about whether some of the strategies listed below are equitable.
- Congestion pricing ("peak hour tolls"): Motorists pay a fee to use congested roadways
during peak hour traffic. The fee assessed is reflective of the amount of delay and congestion
present on the roadway. The user pays a higher fee during peak hour traffic, when delay is
heaviest, and a lower or no fee during less congested non-peak hour traffic. The fee is based
on estimated costs and other externalities (e.g., air pollution).
Q Have any of these innovative funding
strategies been implemented? |
A Yes. The following is a sample of some of
the innovative financing measures that have been implemented.
Federal Government Sponsored
- TIFIA: An example of TIFIA funding project is
the Miami Intermodal Center, estimated at
$1.349 billion. Two Federal TIFIA direct loans will be
provided: one in the amount of $269 million, secured by
State fuel tax revenues, and the other, for the Rental
Car Facility (RCF), in the amount of $167 million, secured by rental car fees.
- SIBs: As of September 30, 1999, $516.5 million
in Federal funds had been deposited into the
highway and transit accounts of the 39 approved
State banks. Although States are limited in
expanding Federal capitalization of their SIBs (with the
exception of the four TEA-21 pilot States), some
States are enhancing capitalization with
non-Federal revenue sources.
- GARVEEs: Three States -- New Mexico, Ohio,
and Massachusetts -- have already taken advantage
of the GARVEE bond issue, by issuing debt backed
by pledges of Federal aid. On the transit side, the
New Jersey Transit Corporation issued $151.5 million
in debt backed solely by a pledge of future
Federal Transit Administration (FTA) funding. The
debt, which was sold in March 1999, and insured by AMBAC Corporation, will be used to purchase
500 new buses for the mass transit agency.
State Sponsored
- A HOT lane was opened on State Route 91
in Orange County, California. A private company
built the lanes and will operate and maintain the
facility. After 35 years the lanes revert back to
California. Other operational HOT lane projects include the
I-15 HOV lanes in San Diego, CA, and the I-10
(Katy) HOV lane in Houston, TX.-
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- Value pricing: In contrast to congestion pricing, motorists pay a fee to use
"uncongested" roadways, such as existing high-occupancy vehicle (HOV) lanes. A recent concept referred
to as High-Occupancy Toll (HOT) Lanes allows lower occupancy vehicles or solo drivers to
pay a fee to use HOV lanes during peak hour traffic. The HOT toll is based on traffic volume
and time of day and is set to maintain free flow in the express lane. Motorists have a "choice,"
that is if they are in a hurry, they may elect to pay in order to have less delay and improved
level-of-service compared to the free general purpose travel lanes.
- VMT fee: A fee based on the number of miles a vehicle travels. Unlike fuel taxes, VMT
fees measure overall road use. Some say VMT fees are superior to fuel taxes because of the
wide differences in the fuel-efficiency of vehicles. A potential problem is the discouragement
of owning fuel-efficient cars.
- Emission fees: A fee based on the
air pollution produced by a vehicle.
- Parking charges: A fee collected
to offset the costs of providing parking and externalities related
to automobile driving. Currently, many employers offer free parking
to employees.
- Pay-at-the-pump insurance: Instead of paying set premiums directly to
an insurance agent for vehicle liability coverage, a motorist pays a
surcharge per gallon of gasoline purchased. This insurance program would
not necessarily generate revenue, but it would change insurance
payment from a lump sum to an out-of-pocket cost. Lump sum payments lead to
the perception that driving an automobile is cheaper than it really is
because there is not a frequent reminder of the actual associated cost. A
driver would achieve lower insurance rates if he/she drives less or uses a
fuel-efficient vehicle.
- Development Impact Fees: States
are using Development Impact Fees (DIFs) to finance
transportation projects. The DIFs are assessed on new development, and are
normally used to improve an area's infra-structure, such as schools, sewers
or roads. Georgia law allows local governments to establish DIFs. In
the case of the Foothill/Easterns Toll Road in Orange County,
California, DIFs have raised $178 million.
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