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Publication Number:  FHWA-HRT-05-006    Date:  July/August 2005
Publication Number: FHWA-HRT-05-006
Issue No: Vol. 69 No. 1
Date: July/August 2005


Guest Editorial

Financing the Increasing Cost of Highways

Frederick G. 'Bud' Wright"We need more money for highways." This comment goes back to the earliest days of the Federal-Aid Highway Program. Each era has found solutions to funding shortages in keeping with the social, economic, and political times. In the 1950s, in step with those times, Congress rejected toll and bond financing and created the Highway Trust Fund to ensure that highway user tax revenues would be dedicated to the Eisenhower Interstate System and other highway projects. This mechanism served the Nation well for five decades.

The social, economic, and political spirit of the 21st century has raised questions about whether the Nation can rely on traditional highway user taxes alone to sustain the highway infrastructure, which is being squeezed to the limit. All levels of government—Federal, State, and local—are feeling budget pressures. Moreover, with the growing interest in fuel-efficient vehicles, such as gas-electric hybrids, traditional highway user revenues may not continue to increase as they have in the past. It is safe to assume, however, that highway needs will grow.

The Federal Highway Administration (FHWA) has joined with a number of State and local transportation agencies to explore alternative financing mechanisms, including tolling and public-private partnerships. These ideas were promoted for many years, but they have gained momentum since the mid-1990s with the spread of automated toll collection equipment. New tolling innovations have opened up possibilities that were not even imagined in 1956 when Congress created the Highway Trust Fund. From the high-occupancy toll (HOT) lanes on State Route 91 in California to the proposal to add HOT lanes on the Capital Beltway in the District of Columbia's metropolitan area, innovative financing concepts are being implemented from coast to coast.

This issue of PUBLIC ROADS launches a series of articles on highway financing issues and options. "Direct User Charges," the first article, explores the effects of direct user charges on the roles, relationships, and organization of network service providers, including State departments of transportation, toll authorities, and private-sector organizations. The intent of the series is to raise awareness of the choices that are available and to share some ideas that currently are being explored.

Motorists accept the notion that the gas taxes they pay are used to improve transportation. Therefore, perhaps the most surprising aspect of recent developments is the public's possible acceptance of tolls, especially when collected electronically instead of at stop-and-pay tollbooths, to provide needed service. This acceptance is enabling State and local governments to explore toll options to finance the local and interregional needs through fees that are tied more directly to specific projects or that make use of premium services, such as HOT lanes.

Another encouraging development is the growth of public-private partnerships. In some cases, the private sector contributes part of the cost for new facilities through bonds or other financing mechanisms. In other cases, private companies help reduce overall costs and enable projects to start much sooner than would have been possible using highway user taxes. FHWA is actively supporting States that want to experiment with public-private partnerships and other innovative project delivery mechanisms.

Fuel taxes have served the Nation well for many years. Federal, State, and local governments have invested billions of highway user dollars in a highway network that is essential to U.S. economic well-being, vital for national defense, and integral to the American way of life. Although the financing challenge is certainly not new, the stakes are as high as ever as the transportation community searches for innovative solutions to serve the 21st century. As complex and controversial as it might be, a new course for financing highway infrastructure will have to be charted in the very near future. Stay tuned to future issues of PUBLIC ROADS for new strategies and ideas regarding financing highway projects.

Frederick G. "Bud" Wright

Executive Director

Federal Highway Administration




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