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FHWA Home / Policy & Governmental Affairs / Conditions and Performance Report

Conditions and Performance Report

Conditions and Performance Report
Chapter 9—Impacts of Investment

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

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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.-

  • 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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Page last modified on November 7, 2014
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