Thursday, January 15, 2015

Let's Debate: Should we really raise the Federal Gas Tax?


By: Nicholas Ventrone, Community Engagement Director
riversidetransit@gmail.com



With fuel and oil prices finally down, commuters, travelers, and businesses have been finally catching a fiscal break at the gas pump with more of their hard-earned cash going into the bank instead of the tank. Overall, that's a good thing as that leads to lower prices for you and I all throughout the marketplace, increased profits and jobs for businesses, and increased spending power of the wage dollar.

While the length of this gas price break is speculative, here's what's not speculation: Those involved in the foreign oil business need to realize that the days of the OPEC monopoly are coming to an end soon thanks to new innovations. When exactly? I don't know. But it's coming.

Even though it may get exported, domestic oil competition is growing from the Dakota's which increases current supplies. Proper oversight will ensure that the oil boom won't become a pollutant. Also, zero-emission and all-electric cars may one day become the norm with clean solar renewable energy as a major source to power motor vehicle engines. With the growing sales of individual solar panels and these new innovations, get ready for some changes and freedom from expensive gas prices soon.

Debating an increase in the Federal Gas Tax

With these changes, politicians in Washington are debating once again to increase federal gas taxes which currently stands at 18.4 cents per gallon. The tax is not indexed to inflation and has not been raised since 1993. Because cars are becoming more and more fuel-efficient, cleaner and less polluting in recent years, the future of the tax which feeds into Highway Trust Fund kitty is certainly threatened. Therefore, these valid facts may appear to justify that a tax hike is necessary, at least for the short term.

A few months ago, 60 Minutes featured a story showing that road and bridge infrastructure throughout the country is "falling apart". According to the report, the federal government identified 70,000 bridges that have been deemed structurally deficient. Our fuel taxes have historically funded the maintenance of the roads and bridges in the nation, but the fund is on its way to running out of cash.

In the eyes of many which includes many outlets in the news media, the only option left is to raise the tax. But is it the right thing to do?

Not really.

Before anybody starts sending me dissenting comments, I'm going to give you some points and some facts that were not even mentioned in several news media outlets. First, let me point out that I'm not against indexing flat tax rates such as fuel taxes with inflation in general as that's the fair thing to do. Plus, we must purpose money we pay into the federal system to transportation.

But I also want better accountability of the spending of such huge sums of money that's supposed to be going to our transportation infrastructure that motorists, private HOV's, and transit fleets rely on. With that, we must allocate resources to infrastructure, but I'm not going to back such a wholesale hike on the fuel tax until the federal rules mandate better policing of the spending. That's also because the current fuel tax receipts are still receiving massive sums of cash despite the appearance that the Highway Trust Fund is broke.

State & Local Annual Fuel Tax Receipts Nationwide

According to the U.S. Census Bureau, state and local governments nationwide collected $42.5 billion in motor vehicle fuel taxes in in 2012, a record. In 1992, the governments collected $23.6 billion in fuel taxes, worth about $39.8 billion in 2014. So even with inflation, state and local fuel tax receipts were at record levels.

California took in approximately $7.2 billion of the pot according to the Legislative Analyst’s Office.

At the federal level, fuel tax receipts for 2013 clocked in at just under $30 billion according to the Federal Highway Administration, another record with inflation. In '94, the feds collected about $13.9 billion.

Southern California's GDP was about 6% of the nation's GDP of $15.6 trillion at the publishing of a 2013 LA Chamber of Commerce report or just under $1 trillion. If you do the math, SoCal should be getting back roughly $1.8 billion in transportation funding per year from the feds alone. Factor in state and local tax receipts for transportation and we should have a sufficient cash flow to fund infrastructure and transit operations. With that type of infusion, our entire Future Vision of Mass Transit for both LA and the Inland Empire could be built out within a few years time with no debt and the 91 Express Lanes toll payment bonds and loans for both counties would be fully paid off too.

That cash is supposed to be going toward surface transportation and urban mass transit infrastructure as it did back in the 90's and early 2000's when Metrolink was fist born, LA Metro returned to rail transit, and Orange County built its massive freeway and carpool lane master plan. Since then, the Inland Empire has grown, more HOV's are clogging into the built carpool lanes, but the infrastructure and transit options have lagged behind. That's because a significant portion of the tax is not fairly being returned to the local taxpaying jurisdictions, is being overspent, displaced to pet projects, or not even making it to the roads and rails at all.

A few examples of crazy spending:

Park & Ride Proposed: The 157-space Temecula Parkway facility planned on this lot is priced at $2.364 million.
Temecula Parkway Park & Ride per-space cost: 
Last year, RCTC allocated $1.3 million in federal Congestion Mitigation and Air Quality funds to an HOV Park & Ride infrastructure project in Temecula. The total project price tag is $2.364 million. The problem is the lot is proposed to comprise of only 157 parking spaces. Let's suppose we subtract out an over-generous amount $1,000,000 for land acquisition, planning and engineering; that still adds up to a whopping per-space cost of $8,688 for a construction bill of $1.3 million.

I believe that once again, trivial policies on the federal funds and current state labor laws which panders to public labor unions have forced the price tag up well beyond the market rates. The project also includes 10 bike lockers and a passenger loading zone but according to the Traffic Engineering Handbook, surface parking lot projects average around $1500-3500 per space to build and $10,000-20,000 per space for a parking structure.

Don't get me wrong. Temecula needs this HOV infrastructure to facilitate the vast number of commuter carpools, but why isn't the lot's per-space price tag adding up?

Bloated Operations Costs for U.S. Rail Service:
Rail advocates, get ready for this one. The Train Riders Association of California reported that a study recently published by Britain's Office of Rail Regulation exposed that U.S. rail operating costs are unbelievably bloated as much as 6.5 times as European rail systems. That includes statewide rail corridors in California. You read that right--costs as much as 650% higher.

In Europe, railroads show an average operating cost range from $15 to $35 per train mile which includes track access charges. To compare, the 2012 cost-per-train mile for the Amtrak San Joaquins, Capitol Corridor, and Surfliners ranged from $65 to $85 per mile. Amtrak as a whole is about $100 per train mile. Up north, Caltrain and ACE are over $100. Metrolink is about $70 per train mile, but to be fair, it operates right-of-ways which allows the railroad to levy track access fees on other operators.

TRAC went on pointed that more efficient, frequent and corridor-based rail service can increase productivity--MetrolinkMax anyone?--and identified management incompetence and careerism is the root source of the problem. Why can't simple reforms be made so that intercity rail transit can operate at a profit which would incentivize private investments, improved services, better competition, and lower fares?

CA High Speed Rail:
Let's not forget our own California high speed rail project of which the initial funding bonds approved by voters in 2008 were supposed to provide seed money to the state to speed up the travel trip times to get up and down the state between the urban cores to the point where intrastate rail travel would turn a profit. Thus, the seed money should have incentivized the private sector to invest in it, finish the master plan with proper state oversight and expand it to other urban areas. Most of us want a functioning and efficient high speed means to get around the state and trains have long provided that. It can and should turn a profit. But pandering, trivial politics and rules have obstructed this infrastructure project and rallied the opposition.

To add the icing on the cake, despite all of this cash flowing into Washington, the federal debt continues to balloon, surpassing $18 trillion.

Funding: What's preventing fuel taxes from funding robust Inland HOV transit infrastructure that would allow for "One Sweet Ride"-like Rapid express buses to serve major Inland Empire corridors?
Let's Debate: How are we going to pay for transit infrastructure?

As I've pointed already, I'm not against indexing flat tax rates to inflation and I know that the dollar's value has dropped significantly since 1993. And I'm aware that the kitty is threatened due to technological advancements in fuel efficiency. Plus, we must obligate federal tax funds to our transportation infrastructure which leads to streamlined mobility, rideshare incentives, and more productive and faster transit operations. But both the state and federal government have demonstrated that we must have better oversight of how our infrastructure money is spent.

I've mentioned as a solution in the past that on top of the Highway Trust Fund/Mass Transit Account spending reforms, economists need to be recruited to find out how much money motorists will infuse into the market economy if they didn't have to pay outrageous prices at the gas pump. That additional tax revenue would be purposed exclusively to surface transportation infrastructure purposes. Plus, as the 91 Express Lanes and I-15 Express Lanes demonstrate, allowing non-carpools into open HOV lanes for a toll can supply additional local funding to pay for road and bridge maintenance and express BRT along the corridor.

As it debates raising the federal gas tax, Washington has an obligation to the taxpaying public to include policies in legislation that prevents our transportation money that comes in from all levels of government from being squandered, displaced elsewhere or overspent well above the market rates. We need to deal with this situation and fast.

Do you have any fresh ideas? Let's debate.

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