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Wednesday
Aug262009

The Cost of Development, Highway Edition Update

Back in April I wrote a post discussing funding for the Minnesota Department of Transportation (Mn/DOT) and how, by my estimation, to sustain the current state highway network in my district (District 3) we needed a gas tax increase of between $0.85 and $1.00. My intention was not to advocate for an increased gas tax - far from it. I was attempting to point out how our current approach to highway building is inefficient, wasteful and financially ruinous.

Mn/DOT has now released their 20-year transportation plan and, no surprise, it reveals that Minnesota has $65 billion in transportation needs over the next 20 years but only $15 billion to pay for them. That leaves the state $50 billion short. Considering our biannual capital bonding bills have been less than a billion dollars a year, $50 billion is an insanely large amount of money.

It took the Star Tribune until the fifth paragraph of their brief on the report to start discussing an increase in the gas tax. The Tribune reports that a one cent increase will yield an additional $30 million per year. They fail to mention that the figure assumes no alteration in driving habits, which may be true with modest increases but not with the size needed to make up this gap. Let's do some math, without any inflationary adjustments.

$50,000,000,000 shortfall / 20 years = $2,500,000,000 per year

$2,500,000,000 per year / $30,000,000 per year per cent increase = $0.83 increase

So without adjusting for inflation (which would make this number more difficult) and assuming everyone continues to drive as much as they do now even with a large increase in the gas tax - or more if cars become more fuel efficient - we would need an immediate $0.83 increase in the STATE gas tax in order to meet Mn/DOT's shortfall.

Keep in mind, our current state gas tax after the most recent hard-fought increase is 25.5 cents per gallon. It needs to be $1.10 per gallon or likely higher, just for the state needs. Add to that the fact that the Federal Highway Trust Fund recently needed an infusion of yet billions more in borrowed money to keep it solvent, and it is clear that our highway building days are over.

Or is it?

Read the executive summary of Mn/DOT's report. Start with their vision, on page 3. There Mn/DOT states they will:

  • Promote a safe, reliable and modern transportation system
  • Improve access and enhance the movement of people and freight
  • Promote a culture of innovation in the organization
  • Become the state transportation leader and employer of choice for Minnesota's diverse population
  • Build public trust in the department

These are Mn/DOT's priorities, no doubt. They represent a large bureaucracy that has its finger - no its entire being - on the pulse of the political structure at every level. You should notice one odd thing about Mn/DOT's vision; there is no part of Mn/DOT that is attentive to the cost structure, fiscal responsibility or long-term financial planning of running a large utility. Safety. Reliability. Capacity. Public trust (and political preference).

On page 8 they begin their guiding principles, number seven of eight which deals with the issue of cost.

7. Seek cost-effective and context-appropriate solutions: Given limited financial resources, it is essential that cost-effective and context-appropriate solutions are implemented so that resources can be stretched to provide benefits to the greatest number of users.

Let me translate engineering speak. Cost-effective does not mean what you may think; making wise use of the dollars you have at your disposal. Cost-effective means building to last so you have to rebuild less often. Ironically, it is this approach that has gotten us into this mess.

Building to last means, in the near-term, overbuilding. As I mentioned a few weeks ago when discussing a local road project here in my hometown, Mn/DOT does not factor in induced demand. Overbuild anticipating growth. Induce the growth you are projecting. Now you look brilliant and underfunded.

Cost-effective in the real world means designing the best possible system with the budget you have. Mn/DOT - and departments of transportation in general nationwide - have never operated in this way. The approach is always demand-driven. And since the free-flowing highway capacity is a public good and DOT's are powerless to address land use issues, the demand is unlimited. This has ballooned the system in a way that is beyond our ability to maintain.

Tom Sorel, Transportation Commissioner, added this for the newspaper, adding to my assertion that Mn/DOT believes that the problem is a lack of revenue,

He [Sorel] also said Minnesota is looking into studying a system under which drivers would pay a fee per mile driven rather than through the gas tax. Such a system was tested in Oregon a few years back, and the University of Iowa is organizing a federally sponsored study in five cities around the country.

There is one glimmer of hope in this entire thing (well two, if you count us going bankrupt as a catalyst for getting us to rethink our approach) and that is a proposed "future study" listed briefly at the very end of the report.

Complete Streets Feasibility Study

Complete streets are defined as roadways designed and operated to enable safe, attractive and comfortable access and travel for all users: pedestrians, bicyclists, motorists and public transport users of all ages and abilities. Mn/DOT and its partners are assessing the benefits, cost and feasibility of establishing a complete streets policy in Minnesota.

Engineers have gotten us into this mess. While we need their help getting us out, they need to be given new priorities that challenge them to build the most productive transportation system possible with the dollars available to them. I believe it can be done. And if we shifted our priorities in that way, we would quit putting together such ridiculous reports detailing things we will never do and instead focus on getting the highest return on each investment, financial and social.

Now, transpose this financial shortfall with Mn/DOT (a very efficient and well-run DOT) over every city, township, county and state transportation department and you will begin to understand that this is a national problem of monumental proportions that cannot be fixed except through an entirely new way of thinking.

 

Note

If you wonder why the complete street concept is a glimmer of hope, read the following posts from this blog for more background: 

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