The most interesting tax issue on the Harrisonville ballot is a local gas tax. Local gas taxes are a little-used option for funding roads for municipalities. Harrisonville would be the eighth city in Missouri to enact such a tax for its roads, according to Show-Me Institute research. Not surprisingly, many of these municipalities are located along major highways where people frequently stop for gas. In the same way that Prussia was called “an army with a country,” Foristell and Matthews could be considered truck stops with their own cities.

Local gas taxes require a 60 percent threshold for voter approval. The funds raised by the tax can only be spent on roads within the city. Obviously, getting 60 percent of the vote for any new tax is difficult, and that is likely one reason local gas taxes are so rare. Foristell, for example, needed multiple attempts before voters approved its gas tax.

Funding roads with user taxes like a gas tax is good public policy, and this includes local roads. It is smart policy to connect the cost of driving with the act of driving as much as possible. When you pay for roads with unrelated taxes, such as a property tax, a general transportation sales tax, or a targeted transportation development district (TDD) sales tax (which sounds like a transportation tax but is often just a form of corporate welfare), you subsidize increased driving by lowering the relative cost of driving.

As electric vehicles become more common, adjustments to the gas tax system will have to be made. But in the short term, more cities should consider adopting very low gas taxes in order to fund local roads. This table has more information on the local gas taxes implemented by Missouri cities:

While not every municipality can raise hundreds of thousands of dollars a year, it is worth considering in any municipality with a gas station. Similarly, the state should consider lowering the threshold for voter approval of local gas taxes to the standard 50 percent plus one.

The other two taxes and bonds being considered are much less beneficial. Harrisonville already has a local sales tax rate of 2.375%, and it is asking voters to raise it another 0.25%. However, the ballot wording is very confusing. The ballot says, “Shall the city of Harrisonville, Missouri impose a city sales tax of one and one quarter of a percent?” That would seemingly indicate a tax increase of 1.25%. However, the city website says it is only a 0.25% increase, leading to a total tax of 1.25%. But that conflicts with the other city website (link above), which lists the city sales tax at 2.375%. It may be that the city general sales tax is being increased, but then the city is clearly misleading voters as to the current sales tax rate by saying it is just 1% when it is 2.375%.

This sales tax rate increase is particularly high considering that Harrisonville also levies a moderately high property tax rate. Other cities with extremely high sales taxes tend to have very low property tax rates, such as Ashland. Whether they want the tax increase or not, Harrisonville residents should know they are living in a city with very high total municipal taxes. In particular, Harrisonville should remove some of its 1% TDD sales taxes, which would make its local sales tax almost 5%, if voters approve the tax increase.

Finally, voters are being asked to approve a bond issue for the Harrisonville municipal water and sewer system. This blog post is long enough, but suffice it to say residents of Harrisonville would be better served by privatizing their municipal utilities instead of continuing to go further into debt for them.

The post Harrisonville Goes for a Local Gas Tax appeared first on Show-Me Institute.

For example, large trucks cause between 15 to 49 times more damage to Missouri’s roads than cars do. Yet, the largest source of state road maintenance revenue comes from the motor fuel tax, which is levied at the same rate for both large trucks and other vehicles.

This report looks at various ways in which the financing of road maintenance could be reformed so that the amounts that truck-owners and car-owners pay are better aligned with the amount of damage their vehicles do to the roads. In addition to fuel taxes, tolling and other road usage charges are discussed.

Click here to read the full report.

The post Who Pays for Road Maintenance appeared first on Show-Me Institute.

Every toll road I drove on was tolled 100 percent electronically—there was no option to pay with cash. My rental car was equipped with a transponder that registered with overhead sensors when driving through a checkpoint. Cars that didn’t have a transponder would have their license plate photographed and a bill sent to them in the mail. Drivers without transponders paid higher rates to reflect the higher administrative costs of physically mailing bills rather than deducting money from an online account.

Toll rates vary by vehicle type and number of axles. The more axles on your vehicle, the higher the toll. Rates also vary by the location of the road. The higher the cost of maintaining the road, the more drivers pay for its use. And while I did not use it on my trip, the Florida Turnpike’s website has an online map that lets drivers calculate the cost of tolls on their trip based on the exact route they plan to take.

Florida’s all-electronic toll roads are the future of tolling. Drivers don’t need to stop and start at every checkpoint, nor do they need to constantly remember to carry cash. Missouri has heavily traveled highways that need rebuilding (page 18), and tolling is a responsible way to raise the money needed to get them back in good shape. It wouldn’t be easy to establish toll roads in Missouri. There are a number of legal hurdles that would make implementing tolling in Missouri a challenge, and voters have been reluctant to accept their use.

But if Missourians knew how easy it is to drive on modern toll roads, they might be willing to give tolling a shot.

The post Missouri Can Take a Lesson From Florida’s Toll Roads appeared first on Show-Me Institute.

When troubled or sickly aristocratic English youth needed a place to recuperate in private away from their cruel stepparents, they would go to Secret Gardens, where magic and mystery would solve all of their problems. We don’t need mysterious places to address our transportation needs in Missouri, and most of our “Secret Gardens” are actually illegal meth labs. But, amazing as it may seem, there really is a local transportation funding option that is unknown to most municipal officials in Missouri. Local gas taxes are a little-used yet very efficient method of funding important local transportation priorities for cities like Lake Ozark as it considers ways to improve Bagnell Dam Boulevard and Valley Road.

I know what you’re thinking. If there is tax that most politicians don’t know about, why would you tell them? Our gas taxes are low in Missouri, and Missouri voters clearly like them that way, as attempts to raise our second-lowest-in-the-nation rate have consistently failed at the polls.

That low tax rate has benefits and costs. If you stop at a gas station near the state border, you can’t help but notice the large percentage of license plates from border states gassing up over here in Missouri. Those drivers do much of their driving in other states but choose to give us their tax dollars for Missouri roads.

But the low gas tax has costs, too. Missouri’s roads and bridges could certainly be in better shape. A 2019 report from the Federal Highway Administration ranked our roads as 8th worst in the nation. We don’t want to commit the logical fallacy of drawing causation from correlation, but there might be a connection between those 2nd-lowest taxes and those 8th-worst roads. Even for roads in good condition, increases in population, tourism, and more can burden a system.

The fact is, we need to invest more in our road and bridge system in Missouri, and our local roads are no exception. Local roads are maintained by cities and counties, not the state, and are funded by a mixture of the state gas tax, local property taxes, and sales taxes. Unfortunately, local sales taxes are the mechanism most frequently expanded to fund local roads, and they are the worst option of the three. Funding roads by sales taxes subsidizes the act of driving by charging shoppers in a manner unconnected to driving. Walkers, bikers, or carpoolers will pay just as much as solo drivers for road improvements. People who can drive on roads without directly paying for their upkeep will drive more than they otherwise would, with the resulting extra traffic, pollution, and other road issues.

Ideally, the cost of driving should be connected as closely as possible to the act of driving. Lake Ozark city leaders are currently considering a sales tax-based transportation development district (TDD) to fund improvements to Bagnell Dam Boulevard and Valley Road, both key roads for the region. A better option for funding local roads like these would be a local gas tax. A local gas tax fixes the discrepancies that sales tax funding methods generate and, more importantly, can raise substantial money for road improvements.

Seven cities in Missouri have adopted local gas taxes. By law, the money raised from these taxes can only be spent on roads within those communities. All of the local gas taxes enacted have been very low—none higher than two cents per gallon. Even at that low level, they can raise significant money, but none of these seven cities have the combination of local population and tourism that Lake Ozark has. With those tourists, a local fuel tax of just two cents per gallon could potentially bring over one hundred thousand dollars per year on top of the existing road revenue sources. That money would fund a substantial amount of road improvements for Lake Ozark, all while properly maintaining the connection between the act and cost of driving. Or, if Camden and Miller county leaders have similar concerns, countywide gas taxes could be implemented that would raise even more money.

Lake Ozark is the heart of an area vital to our state. The residents who live there and the tourists who visit need and deserve quality roads. A local gas tax would be an efficient and beneficial way to fund road maintenance and improvement. Community leaders and residents should strongly consider passing one this year. Lake Ozark does not need a hidden code or a secret garden to deal with its transportation issues, just community support to address these key improvement needs.

The post Local Gas Taxes Are the Secret Garden of City Road Funding Options appeared first on Show-Me Institute.

These policies have been implemented successfully in many states, but in this post I’ll address some objections to these policies and see if they hold water.

Objection: We shouldn’t toll commercial trucks because the trucking companies will pass those costs along to the people buying their products.

Part of the price of a product is the cost it takes to transport the product somewhere. If trucks carrying products are causing more damage than they’re paying to repair, then underpaying for the products’ transport is in effect subsidizing it. Any tolling costs passed on to customers would be less overcharging for a product and more reflecting its true price.

Objection: Tolling is unfair to local communities near interstates that depend on highway traffic for their customers.

As my colleague Graham Renz has said before, this is another way of saying that communities near toll roads will not be subsidized. Not paying the true cost of driving means that some businesses benefit from more drivers due to an artificially low cost of driving.

Tolling may mean that traffic on these routes decreases, but adequately charging drivers for the damage they do to the roads can hardly be described as unfair. Moreover, the current situation of Missourians who do not live near interstates subsidizing the travel that benefits communities near interstates hardly seems like a fair proposition.

Ultimately, while these two objections may initially seem like they raise serious problems for tolling proposals, they only tell half the story. The benefits of tolling still outweigh the costs, so tolling should be on the table as an option for funding road maintenance needs.

The post Objections to Tolling Only Tell Half the Story appeared first on Show-Me Institute.

The city claims it needs $3 million to repair an important local road but lacks the funding to do so. The city’s leaders are considering a transportation development district (TDD) to raise money for the road through an extra sales tax, which would effectively subsidize road maintenance via shopping. My colleague David Stokes has already written about why a TDD is a poor remedy for this problem.

Fortunately, there is a better solution—local fuel taxes. Fuel taxes can be an economically sound and fair way to raise money for roads. They ensure that those who benefit from the roads also pay for them.

As the National Surface Transportation Infrastructure Financing Commission has noted, funding roads through methods not related to their use (such as sales taxes) promotes inefficient vehicle and travel choices. This, in turn, leads to faster road deterioration, wasted fuel, traffic congestion, and air pollution. If the sales tax (via the TDD) is a ploy to get tourists to help foot the bill for road maintenance, it should be noted that the same tourists would also pay the fuel tax. However, fuel taxes connect the cost of driving and the cost of using the roads.

Local fuel taxes allow localities to raise money for roads within their jurisdictions. When enacted, an additional fee is added to the price at the pump in a given jurisdiction. And since the Missouri Constitution requires that money raised from local fuel taxes be spent only on road construction and maintenance, it reduces the risk of this revenue being spent on other, potentially wasteful projects.

One potential challenge is that local fuel taxes can be tough to enact. The Missouri Constitution requires that local fuel taxes be passed with a two-thirds majority among voters. If it chooses to pursue it, Lake Ozark would be one of the first localities in Missouri to enact a local fuel tax. Foristell tried to enact one several years ago, but the measure fell just short with 65 percent voter approval. However, it was able to pass a 1 cent local fuel tax the following year.

Ultimately, before sales or other tax increases, local fuel taxes are an option worth considering as a fair solution to the City of Lake Ozark’s funding predicament.

The post The City of Lake Ozark Should Consider a Local Fuel Tax appeared first on Show-Me Institute.

A recent state audit of TDDs highlights the problems with these districts. Five of the twelve TDDs mentioned in the report collected incorrect tax amounts. I’ll let you guess as to whether they collected more or less than authorized. (Hint—it was more.) Statewide, 92 percent of TDDs have been formed by developers and were not subject to any votes or public involvement. Not surprisingly, when you allow private developers to raise tax dollars for private purposes (like improved parking lots for their own developments) they are going to act like it is private money, not tax money, and often spend it improperly. Audits on these types of special taxing districts by state auditors of both political parties have consistently found that they frequently violate the Sunshine Law, do not competitively bid out contracts, make errors in tax collections, and more. They are designed in the first place to act like fiefdoms, with little oversight of the tax dollars being collected and spent for private purposes by the developers that almost always dominate the board. The problems with these districts are, in fact, so consistent that they must be considered a feature, not a bug.

This proposed TDD will require voter approval in the April 2021 elections. Seeking voter approval here is, obviously, a good choice. However, only voters who live within the TDD itself can vote on the proposal, not all  Lake Ozark voters. I would expect the district to be gerrymandered until it looks like the lake itself in order to limit voter participation and help guarantee passage of the TDD. That is the prior experience in Missouri.

In a news story on the new TDD, supporters cite the “high quality of roads within the Horseshoe Bend Special Taxing District” as an example of why the TDD would be beneficial. The high quality of roads in that district may well be true, but Horseshoe Bend is not a TDD—it is a traditional, property tax-based special road district. The distinctions are important. Special road districts like Horseshoe Bend are subject to voter input, property tax rollback mandates (when assessed valuation increases), and much more comprehensive budgeting and financial reporting requirements. If Lake Ozark residents want better roads along with oversight, transparency, checks, and balances, the creation of a taxing district like Horseshoe Bend is a legitimate option. Other good options include passing a local gas tax to pay for the road improvements or simply raising city or county property taxes to fund the road improvements.

Honesty demands that I admit the Lake Ozark Community Toll Bridge is a TDD and has been successful for the community. In this case, the tolls collected pay for the bonds that built the bridge, and most importantly, the act of driving is connected to the cost of driving. Sales tax TDDs, such as this proposal, do not have that connection.

If people want a new taxing district with questionable dealings, little oversight, and limited voter involvement, then a TDD is the way to go. While Marty Byrde might approve of that, I trust the rest of the residents and taxpayers of the Lake Ozark region do not.

The post Lake Ozark Area Going in the Wrong Direction with Transportation Funding appeared first on Show-Me Institute.

Missouri’s gas tax—MoDOT’s largest in-state funding source—has not been adjusted since 1996.  Inflation, the rising costs of road maintenance, and increasing vehicle fuel economies have all lowered the value of the static gas tax over time.

However, many states have found ways to keep their gas taxes in line with changing times.

For instance, numerous states have indexed their gas taxes to inflation to keep gas tax levels in step with the rest of the economy. Some states index gas taxes to other metrics. For instance, North Carolina’s gas tax is indexed to account for changes in the state’s population, as well as for inflation. Nebraska’s gas tax adjusts based on a combination of the state transportation budget and a tax that varies based on the price of fuel. Georgia’s gas tax is indexed to vehicle fuel efficiency to keep up with auto industry advances. Other states apply the state sales tax to gasoline on top of a base cents-per-gallon rate, so that the total fuel tax revenue collected varies with the price of fuel.

In other states gas tax increases are revenue neutral, a point which is worthy of consideration, especially this year. South Carolina is in the process of increasing its fuel tax in two-cents-per-gallon increments over six years. However, residents can write off the extra gas taxes paid at the pump from their income taxes. This essentially restructures where the taxes go, as residents don’t necessarily pay more taxes, but more of the taxes they pay go toward transportation.

Lawmakers have already proposed measures to raise Missouri’s gas tax by 10 cents per gallon over five years in the new legislative session. And while gas taxes are not a perfect solution, as they do not always align road usage and damage to payment for their upkeep, they are one option. And as evidenced by other states, Missouri policymakers have options as to how to approach this problem.

The post Gas Taxes Around the States appeared first on Show-Me Institute.

Over $700 billion of products travel over Missouri’s roads each year, and transportation and warehousing industries support over 83,000 Missouri jobs. These numbers are only expected to increase.

It is surprising, then, that the Greater St. Louis, Inc.’s report’s recommendations for improving our transportation infrastructure contain few details on funding mechanisms given that Missouri is currently coming up short on transportation funding.

Here are a few recommendations for the policymakers reading the report to consider.

People who use the roads in Missouri should, as much as possible, be the ones responsible for paying for the roads. This could mean policies such as adequate fuel taxes or location-specific tolling. If new lanes on interstates are planned—and the plan mentions rebuilding some sections of I-64 and I-70—tolling on new lanes would not require federal approval. Many states operate lane-based tolling, also known as high-occupancy toll lanes.

There are other funding mechanisms for transportation that ought to be avoided. For instance, a new sales tax or earnings tax in the region receiving the transportation upgrades could raise a large amount of money. But these taxes are not connected to how much the roads are being used. Non-users end up subsidizing users.

The consequences of such a funding disconnect would mean that those using the roads are shielded from the true cost of doing so. Not being exposed to driving’s true cost leads to inefficient road usage. This, in turn, leads to higher maintenance costs as well as other hidden costs such as wasted fuel and time, air pollution, and congestion.

While the creators of this plan seem to understand that transportation is critical for Missouri, they don’t articulate how to fix what’s wrong with Missouri’s infrastructure.  What Missouri needs is a plan to address our infrastructure funding issues with real reforms, not just platitudes.

The post Greater St. Louis 2030 Plan Scant on Transportation Funding Mechanisms appeared first on Show-Me Institute.

According to the most recent data from 2011, roughly $711 billion worth of freight crosses Missouri each year, and this is projected to increase to $1.2 trillion by 2030. More than 83,500 Missourians work transportation and warehousing jobs, and more than half of Missouri’s economy is affected through freight movement or systems.

However, according to a new study by the Missouri Chamber of Commerce, this vital part of Missouri’s economy is in danger of falling into disrepair. Missouri’s transportation infrastructure, specifically roads and bridges, is aging rapidly. Traditional methods of funding are inadequate to maintain current systems, let alone provide enhancements.

Missouri’s fuel tax of 17.4 cents per gallon has not been raised since 1996. Due to inflation, 17 cents then are worth 8 cents now. Additionally, vehicle registration fees were last increased in 1980, and a dollar in 1980 is worth about 30 cents today. Together, these two revenue sources make up nearly 40 percent of the Missouri Department of Transportation’s total road budget (and 65 percent of in-state revenue, once federal reimbursement is considered). As a result, $745 million in high-priority road needs go unfunded each year.

According to the Chamber of Commerce report, this funding crisis “is the biggest roadblock preventing the state from reaching our logistics potential.”

To start closing the gap in Missouri’s road funding, the Chamber of Commerce report recommends exploring tolling and also indexing the state fuel tax and registration fees to inflation. These measures would help keep funding sources up to date in terms of purchasing power and start to close the funding gap as well as keep a “user pays” principle.

While these methods are not always the best ways to match road damage to payment for upkeep, they are the type voters were most inclined to consider. Public opinion surveys of Missouri voters conducted for the report revealed that 57 percent support highway express lanes, akin to tolling individual lanes, although tolling proper received lower (40 percent) support. Fifty-one percent of voters support increasing the fuel tax, while 47 percent support raising registration fees. Mileage-based user fees can be effective, but only 24 percent supported the idea. Despite the different levels of support for different funding methods, 85 percent of Missouri voters agreed that Missouri needs more funding for transportation infrastructure.

Missouri’s roads are an economic asset that support jobs across the state. Making sure we have the money to keep them in good shape—while ensuring those who use them pay for them—is something policymakers need to address.

The post New Report Highlights Dangers of Kicking Missouri’s Infrastructure Funding Can Down the Road appeared first on Show-Me Institute.

A more accurate proxy for a road-damage fee would seem to be one based on the number of miles a vehicle is actually driven and the weight of that vehicle. How could such a system be implemented?

One of the simplest ways to assess how much someone has driven is by taking an odometer reading.

There are several ways this could be done. Drivers could self-report their odometer readings either as part of the annual registration process or at any other established time. Alternatively, a recording device could be plugged into the diagnostics port of most vehicles to measure the miles driven. This is the method employed by several states that have initiated road usage charge programs. As drivers pay for the miles driven, they are then reimbursed for the gas taxes they paid to travel those miles.

Recording miles traveled through odometer readings poses no threat to driver privacy, as even when a device is used to record mileage it does not track the vehicle’s movement.

There are a couple disadvantages to calculating miles traveled through odometer readings. This method could be impractical and arguably unfair for people who frequently drive out of state, as they would be charged for those miles too. In addition, many older cars don’t have a diagnostic port, and thus wouldn’t be able to accommodate a device used to track their miles.

Reading odometers is straightforward and raises no privacy issues; for those who don’t do much driving out of state, it has a lot of advantages. In the next post I’ll discuss one of the more controversial methods of measuring miles driven.

The post Think Miles, Not Gallons, to Fund Missouri’s Roads appeared first on Show-Me Institute.

Road upkeep in Missouri is paid for primarily by federal and state fuel taxes, and to a lesser degree by vehicle registration fees. Here’s what the average Missouri ICE-car driver pays in taxes and fees:

• Between Missouri’s state gasoline tax (17.4 cents/gallon) and the federal gas tax (18.4 cents/gallon), drivers pay 35.8 cents in taxes per gallon.
• The average Missouri motorist drives roughly 17,400 miles per year, and (as of 2018) the average fuel economy of all cars on the road was about 25 miles per gallon.
• So: 17,400 / 25 = 696 gallons of gas used.
• 696 ×35 = $249.11. The average driver pays this amount each year in gas taxes to help maintain the roads they drive on.

EV drivers don’t buy gas, so they don’t pay a gas tax. However, EVs still cause wear and tear on the roads, so shouldn’t their owners pay their fair share to keep those roads maintained?

Missouri policymakers seem to have recognized the imbalance, which is why EV drivers pay $75 per year in registration fees, which are put toward maintaining the roads. This fee is between 1.5 and 4 times higher than registration fees for ICE vehicles (depending on taxable horsepower), but still not close to the average of nearly $250 per year in gas taxes that ICE vehicle drivers pay.

While it appears that a simple fix for this problem would be to raise the EV licensing fee to $250, that wouldn’t be fair either. EV drivers would then pay the same amount for road maintenance whether they drive 5,000 or 25,000 miles per year.

So Missouri’s two systems for collecting taxes to fund road maintenance are troubled: a per-gallon gas tax that doesn’t apply to EV drivers, and a flat annual registration fee that doesn’t connect road usage to the amount paid to maintain the roads. Neither system is fair, and the cost of sticking with them is only going to get higher as more people drive EVs.

Tomorrow I’ll explore ways that mileage-based fees could help Missouri fund its road and highway system in a way that is fairer to all drivers.

The post Electric Vehicles and the (Almost) Free-Rider Problem appeared first on Show-Me Institute.

Not according to a new study from the Reason Foundation. The study highlights how residents can benefit from their state leasing a toll road and addresses many common concerns. As tolling is a potential solution to Missouri’s transportation funding woes, it is worth exploring this report.

How could Missourians benefit from a privately operated toll road? States usually sell toll road leases for several billions of dollars, and that money can be reinvested in other transportation projects. For instance, Indiana received $3.85 billion for its toll road lease, which was more than enough to fully fund a 10-year transportation improvement program to improve road quality. For a state like Missouri, with hundreds of millions of dollars in unfunded transportation priorities each year, granting a company a lease to operate a toll road could provide some of the revenue needed to maintain Missouri’s roads.

While this may be good for state revenues, individual drivers may have some concerns. For instance, couldn’t a private toll road company just keep raising rates? And who will guarantee that the road will stay in good condition? Both concerns are addressed during contract negotiations.

Lease agreements typically tie rate increases to an inflation index, and terms of potential increases are agreed to in the contract. Similarly, lease agreements usually include performance indicators that the operating company must achieve, such as meeting pavement quality and bridge condition standards, with a financial penalty for non-compliance. Many contracts also specify minimum levels of maintenance expenditures the leasing company must meet. There is typically a clause for the state to terminate the agreement and resume operations if such provisions are not met.

And what happens if the company operating the toll road goes bankrupt? This has happened before, with non-dramatic results. The road does not close, as the state still owns the road. For instance, the company operating the aforementioned Indiana toll road went bankrupt, and it simply sold the lease to another company that took over operations. A toll road company going bankrupt is hardly a foregone conclusion, though, as many toll roads have been privately operated by the same company for years.

While tolling is not yet a reality in Missouri, several bills have been introduced in the past few years to allow private companies to operate toll roads. The Reason Foundation study should help Missourians see the upsides of such a possibility.

The post Should Drivers Fear Privately Operated Toll Roads? appeared first on Show-Me Institute.

The Tax Foundation study focuses on funding for America’s highways, and how road usage has been growing while the revenue to maintain them has been shrinking. This is true nationwide and for Missouri.

The bulk of Missouri’s highway funding (and that of many other states) comes from the federal Highway Trust Fund—which is funded by a federal fuel tax that has not changed since 1993. The tax is levied on vehicles that are increasingly fuel efficient. State fuel taxes supplement the federal funding; each state approaches its fuel tax differently. Some index the tax to inflation, some periodically raise it, and still others keep it constant, as Missouri has since 1996, with inflation eating away at its purchasing power.

This funding formula disparity will only get worse as fuel economy improves and no change is made to fuel taxes. In fact, the Highway Trust Fund, which sends money to states for road maintenance, is on the verge of insolvency by the end of next year unless the current funding formula is changed.

The study’s author promotes a charge on highway vehicle miles traveled as a potential solution. This charge would vary based on how much the vehicle weighs to account for the damage it does to the road. As the study notes, this highway formula “gets closer to capturing the externalities and approximating the road maintenance cost of each vehicle.”

In other words, toll roads.

The highway funding situation in Missouri will need to be addressed soon. Travel on Missouri’s interstates has increased 17 percent since 2008, and travel on other Missouri freeways and expressways has increased 20 percent since 2010 (the most recent year for which data for the latter category is available). Conversely, since 2008, the Missouri Department of Transportation’s (MoDOT) overall revenue has decreased by 15 percent, with state fuel tax revenue—the largest state-contributed source of funding—falling 0.5 percent.

Making MoDOT do more with less led to an average of $745 million in unfunded road and bridge priorities between 2014 and 2018. And some of the most traveled roads in Missouri—Interstates 44, 55, and 70—will need to be reconstructed soon.

With these pressing problems, shouldn’t Missouri lawmakers heed the advice of the Tax Foundation report and consider tolling?

The post New Research Highlights Need to Modernize Transportation Funding appeared first on Show-Me Institute.

While people might not think of roads as something to “consume,” the same concept applies. We pay for roads through gasoline taxes, vehicle sales taxes, and license fees. However, over the past decade, we’ve “consumed” a lot more road in Missouri than we’ve paid for.

The Federal Highway Association tracks the usage of Missouri roads, measured with vehicle miles traveled (VMT). Between 2008–2018, Missouri’s VMT increased 12% while the Missouri Department of Transportation’s (MoDOT) budget declined by 15%. The divergence in trends can be seen in the graph below.

Federal stimulus money and bonds provided the financial buoy from 2008 to 2011, both of which were used quickly and the latter of which required repayment. Increasing maintenance costs and MoDOT’s shrinking budget has taken its toll on Missouri’s road quality; the 21st Century Missouri Transportation System Task Force described Missouri’s roads as “deteriorating.”

Other than the federal government, MoDOT’s main source of funding is the fuel tax. The fuel tax has remained at 17 cents per gallon since 1996 despite inflation reducing the real value of the tax. Moreover, the revenue that has been collected has not kept pace with the increase in road usage. Between 2008–2018, fuel tax revenue declined by 0.5 percent.

So how do we fix this?

Several other states have indexed their fuel taxes to some measure, whether that be inflation, state GDP growth, or highway construction costs. Such indexing ensures that fuel tax revenue automatically adjusts to the pace at which the rest of the economy grows, rather than being stuck at a static level.

As “consumption” of Missouri’s roads increases, the question of how to pay for needed infrastructure improvements will not disappear. The fuel tax is an effective method of funding road maintenance, and indexing it to a measure that reflects road usage or costs of upkeep could help ensure Missouri’s roads and bridges are kept in good condition.

The post On the Road Again appeared first on Show-Me Institute.

But what about the benefits of different types of user fees themselves? Gas taxes and tolls are the two main transportation user fees, and each has different advantages.

The biggest advantage of a gas tax is that it pays for the upkeep of all roads in the state, whereas tolls only fund the road the toll is located on. In Missouri, any purchase of fuel to drive on any road helps fund the maintenance of all of them. Proportionally, 70% of gasoline taxes fund state highways, while the remaining 30% goes to local and county governments for their own road upkeep.

An additional benefit of a gas tax is that it is already in place in Missouri, in contrast to tolling.

The benefit of tolling is that it matches the amount of road damage a vehicle does to the amount the driver contributes to the road’s upkeep. The heavier the car is (heavier cars do more damage to roads), the higher the toll. Additionally, drivers pay comparable amounts regardless of the fuel economies of their vehicles, since the cost is based on the wear of the car on the road.

Tolling can also help relieve traffic congestion. Congestion is estimated to cost Missourians up to $575 million per year. Tolling can save time and fuel wasted from idling while also decreasing air pollution. Most congestion pricing programs use electronic tolling, and as some drivers will choose not to pay the fee to drive on a busy road, average road speeds increase leading to clearer road conditions and better use of fuel.

The benefits of user fees are clear. Matching the costs of services to their use is an effective way to make sure our roads and bridges have the funding they need to stay in shape.

The post Dear User Fees: What’s Your Greatest Strength? appeared first on Show-Me Institute.

You may never have heard of the FHTF before, but the Missouri Department of Transportation (MoDOT) relies heavily on it. Forty-two percent of MoDOT’s budget is federal money, the bulk of which comes from the FHTF (page 7).

This pattern of dependency is not a reliable way to maintain our transportation infrastructure.

The FHTF, funded mostly by federal fuel taxes, faces looming solvency problems, especially as the federal gasoline tax is unlikely to budge. Since 2004 Missouri has benefited from the fund, at times receiving $1.45 for every $1 contributed. According to the latest information, Missouri gets $1.14 for every $1 contributed..

MoDOT recognizes this dependency problem (page 14). A solution? User fees like tolling or gas taxes, which are the fairest way to ensure those who use the roads most pay their fair share for upkeep. Most states employ some form of tolling, and many others index their fuel tax rates in some way to ensure the revenue keeps up with the economy.

By relying more on a system that collects revenue based on use, Missouri could mitigate the pitfalls of federal dependency and the need to push costs into the future by issuing bonds.

Federal grants awarded to Missouri this year illustrate how the problems of federal dependency and pushing costs into the future are related. Missouri received $100 million from the federal government to repair bridges, which triggered $300 million in state bonds to supplement those repairs. Those bonds will now need to be paid off down the road.

Federal money certainly helps MoDOT with budget issues in the near term, but it does not address the more serious problem of MoDOT’s long-term solvency. Missouri needs more robust  user fees if it wants to create sustainable funding for our infrastructure maintenance.

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Bob Poole of the Reason Foundation, a libertarian free-market organization, wrote of the study in a recent newsletter and addressed two concerns likely to be raised in Missouri:

One of the most important is the idea that a system using GPS would “track” everywhere the vehicle goes. He [the author of the study] points out, correctly, that GPS is a one-way system: it enables the car to know where it is at all times, but the GPS satellite and its operators do not know. The basic concept is that an on-board unit on the vehicle would total up the miles driven (and which states those miles occurred in) and transmit the totals to the relevant jurisdictions (e.g., New York and New Jersey) so each can levy per-mile charges.

Another oft-heard concern is that because rural residents drive longer distances, they would be made worse off by a miles-charged system. Drawing on research from Rand Corporation and others, Rob’s report explains that rural residents tend to own older, gas-guzzling vehicles compared with urban residents, so most of them would be better off paying by the mile rather than by the gallon. Detailed TRB research papers bear this out. Similar data call into question the equity argument; Rob reminds us that lower-income households tend to drive older, less fuel-efficient vehicles compared with wealthier people. Like rural residents, most low-income urban-area residents would be better off paying by miles driven than by gallons used.

Former Show-Me Institute analyst Joe Miller addressed the issues facing the Missouri Department of Transportation in a 2016 paper, which included consideration of user fees such as mileage-based fees. As Poole points out, the ITIF policy paper is too heavy on top-down federal and state mandates. Instead, he urges states to experiment with ways for drivers to track their mileage and report it to private-sector service providers rather than state or federal agencies—as drivers will likely view it a violation of privacy.

Advances in technology such as more fuel-efficient cars pose a challenge to the old ways of raising infrastructure funds. Technology also permits us many more ways of addressing policy needs. It should be no surprise that there are likely more efficient ways for governments to collect the revenue necessary to provide for basic services. Policymakers should be open to considering those opportunities.

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THE SOLUTION: User fees.

User fees are about having the people who use things pay for them. That means the people driving on the roads are the ones who pay for the roads. Raising Missouri’s fuel taxes—which haven’t been raised since 1996—to account for inflation would raise hundreds of millions of dollars to help MoDOT maintain the state’s road system in the near term. But other, long-term solutions, such as tolling on major interstates and bridges, can help keep infrastructure funding sustainable. Public–private partnerships (P3s) could also help raise funds. Furthermore, expanding MoDOT’s use of design-build (a project delivery method in which a single contracter both designs and builds and improvement, reducing costs and time to completion) could save roughly 20% per project.

WHO ELSE DOES IT? Various forms of tolling are either planned or implemented in many states. Dozens of projects are funded by P3s in more than 10 states.

THE OPPORTUNITY: Missouri has the 3rd-lowest gas tax and the 3rd-lowest diesel fuel tax in the country. Adjusting these fuel taxes to inflation—raising them by less than 10 cents per gallon—would provide the funding necessary to keep Missouri’s infrastructure in good repair. With I-70 soon requiring a full rebuild, simple tolling infrastructure and a design-build workflow could be implemented to help increase available capital and reduce costs.

KEY POINTS

• A robust and well-maintained transportation system is vital to a strong Missouri economy.
• User fees are the most fair and economically sound way to fund major projects.
• Design-build and public–private partnerships bring the strengths of the free market to public infrastructure investment.
• User fees could prevent unfair special taxing districts from forming to fund wasteful projects.

SHOW-ME INSTITUTE RESOURCES

Policy Study: Funding the Missouri Department of Transportation and the State Highway System

Blog Post: With MoDOT’s Tank Nearly Empty, a Fuel-Tax Increase Might Be the Answer

For a printable version of this article, click on the link below. You can also view the entire 2018 Missouri Blueprint online.

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Show-Me Institute researchers have analyzed numerous roadway funding policies, ranging from general revenue diversions to fuel taxes to tolls. We’ve concluded that the best policies are those that let the free market work and impose the costs of roadways on those who use them. That means tolling and fuel taxes should be the way forward for funding Missouri’s road system.

Not everyone agrees. An anti-tolling group is calling for a constitutional ban on tolling in Missouri, claiming that tolls are unfair and economically pernicious. The group claims to be committed to “solving Missouri’s transportation crisis,” but I can find nothing on their website about how the rebuilding of Missouri’s interstates should be funded. The group offers an abundance of negatives about tolling, but many of their claims are incorrect or misguided. Let’s break some of them down here and set the record straight.

• Tolling is double taxation. We already pay for roads with fuel taxes, so we shouldn’t have to pay tolls, too.

MoDOT cannot cut its way to a new I-70. Over the past six years, it has reduced costs by $605 million, but that’s not money for new projects—that’s money to keep shop open. So, for I-70 to get the attention it needs, new revenues will need to be generated. Whether those revenues come from tolls, fuel taxes, general taxes, or some other source, they will be new; they will be on top of existing taxes. One might worry that tolls constitute double taxation, but do tolls differ that much from a higher fuel tax or higher (or diverted) sales taxes? Is paying two taxes, $1 and $1 each, really any different or worse than paying a single $2 tax?

Important to note too is that discussions about tolling I-70 have mostly focused on tolling only new, additional lanes, not the existing lanes. That means only the drivers who use the new lanes would be tolled, so if you didn’t want to pay a toll, you wouldn’t have to.

• Tolling will hurt businesses near tollbooths and hamper the freight industry’s growth.

This argument is another way of complaining that businesses near interstates will not be subsidized.  When driving is made artificially cheap through general taxation (e.g., through sales taxes as opposed to fuel taxes or tolls), land near interstates becomes more valuable because of the higher consumer traffic. On the other hand, if drivers must pay to use the roads, the consumer traffic on interstates could be lower, reducing the value of nearby land. In short, a toll-free road means all Missourians are paying to create demand for a select few businesses along the interstate.

Some worry that tolling, which would show drivers the true cost of driving, would deter consumers from businesses along the interstate. While it’s true that tolling may hurt some businesses near interstates, it does so only by unburdening taxpayers in general. If roads are paid for with tolls, that means other taxes previously dedicated to roads can either stay in taxpayers’ pockets or be spent on other public services.

And just as taxpayers shouldn’t have to subsidize businesses near interstates, they shouldn’t have to subsidize trucking companies (many of which do not employ Missourians). Heavy trucks do well over 90% of the damage to our roads, so why shouldn’t they should pay for rebuilding them (via tolls)?

• Toll roads are poor investments, and when they fail, taxpayers are on the hook.

Some proposals to toll I-70 call for private firms to invest in the roadway in exchange for tolling concessions. Such an arrangement would let firms try to make a profit from tolls, but only by assuming the risk of major capital investment. Like other enterprises, toll roads run the risk of going under. But contrary to what anti-toll crusaders claim, taxpayers do not bear the risk of toll roads. Firms are required to invest in the roadway before collecting tolls, so the public gets a new road regardless of whether the company makes a profit. If a firm goes under, its assets are repossessed, but that just means a different firm owns the road—the new road the public gets to enjoy.

Tolling is by no means the only way forward, but it is a way forward. Dozens of states across the country have successful toll roads and bridges, and Missouri can, too. Banning toll roads won’t solve Missouri’s transportation woes; in fact, given policymakers’ reluctance to increase fuel taxes, it would cut off yet another free-market policy solution.  

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