1. Funding Options and Trends at the State and Federal Level Steve Pickrell Cambridge Systematics, Inc. Funding Options and Trends at the State and Federal Level Steve Pickrell Cambridge Systematics, Inc. 1

2. How Does Oregon Compare to Other States ? Primary State Transportation Revenue Sources – State and Local Gasoline Taxes – Vehicle Registration Fees Size of Surface Transportation Program – Total Roadway Lane Miles, NHS Lane Miles – VMT, Number of Vehicles and Drivers Size and Economic Activity – Population, Gross State Product 2

3. Oregon’s Rank Among States on Several Key Descriptors 3 Source: FHWA 2011; U.S. Census 2012; U.S. Bureau of Economic Analysis 2012; Idaho Transportation Dept. 2011; Washington Transportation Dept. 2011

4. When Other Taxes Are Accounted For, Oregon’s Fuel Tax is Close to U.S. Average 4 Source: American Petroleum Institute, 2014

5. Weight-Distance Tax Four states currently have a weight-distance tax: New Mexico, Kentucky, New York and Oregon Maine and South Carolina have recently considered adding distance-based tax on heavy vehicles, and higher tolls for them Rationale: Internalize the cost of damage that heavier vehicles inflict on public roads 5

6. Weight-Distance Tax Dollars per Mile Traveled, by Vehicle Weight $0.00 $0.02 $0.04 $0.06 $0.08 $0.10 $0.12 $0.14 18-2022-2426-2830-32 34-3638-4042-4446-4850-5254-5658-6062-64 66-68 70-72 74-7678-80 New York New Mexico Oregon Kentucky Dollars Per Mile Vehicle Weight in Thousands of Pounds Oregon’s weight-distance tax rate is the highest by far…. but its commercial vehicle registration fees are among the lowest in the nation (47 th lowest in rank).

7. General Typology of Revenue Sources Direct User Fees – Directly associated with a trip: Tolls, transit fares, VMT fees, weight-mile fees, parking fees, etc. Indirect User Fees – Collected from transportation users, but not associated with a trip on a specific facility: Fuel taxes, vehicle registration fees and excise taxes, driver licensing fees, etc. Specialized Taxes and Fees – Collected on non- transportation activities, but dedicated to transportation: local option taxes, value capture techniques, lease rents, etc. General Taxes – Collected on non-transportation activities but used for wide range of expenditures: Income taxes, property taxes, general sales taxes, other ad valorem taxes

8. Common Criteria for Evaluating Revenue Sources Yield: Revenue generation capacity Reliability: Predictability, sustainability of revenue stream Economic Efficiency: Promotion of economically sound behavior Equity: Disproportionate burden on low-income households or other disadvantaged groups Administrative Effectiveness: Ease and cost of collection, distribution, enforcement, etc. Public Acceptance: Possible or probable, and in what timeframe Policy Objectives: What does the state want to achieve?

9. What Revenue Sources Are Other States Considering ? There are few if any “new” sources of revenue for transportation being widely discussed Relatively few recent comprehensive studies of revenue at the state level…the work has previously been done Political will and public opinion are driving the decisions Most recent activity involves shifting from one known revenue source to another, reflecting a policy shift unique to each state 9

10. Current Trends in State Revenue Discussions Increase the state excise tax on fuels Vehicle sale and/or transfer taxes Increase vehicle- and driver-related fees Electric/Alternative fuel vehicle fees Area- and facility-based tolling Index existing motor fuel taxes to inflation and/or changing fleet fuel efficiency Shift from at-the-pump gas tax to wholesale fuel tax Mileage-based fees or road usage charges 10

11. Recent State Transportation Finance Legislation More than a dozen states have implemented legislation and policies in past three years Relatively few have actually raised or indexed their gas tax rates A comparable number have eliminated at-the- pump gas taxes in favor of wholesale fuel taxes Alternative fuel and electric vehicle fees are gaining momentum 11

12. Recently Proposed State Transportation Revenue Sources Tolls, including higher tolls for heavy trucks Wholesale fuel taxes Parity in propane and diesel taxes Alternative fuel tax & electric vehicle fees Sales tax on fuel General sales tax Elimination of current subsidies Assorted other: rental car taxes, lease rent 12

13. P3 Activity in the U.S. 35 states have enabling legislation Only about half have used it Legislation varies significantly across states Five states account for 75% of activity in U.S. – – TX, CA, FL, VA, CO Not as common here as in other countries – U.S. is 9% of the global P3 activity Source: Eno Foundation, 2014 13

14. Local Revenue Trends Local option sales and fuel taxes Area-based tolling (congestion pricing to generate revenue) Transit fares, peak pricing, station parking fee Private sector exactions and contributions: development fees, traffic impact mitigation fees, direct transit subsidies, access payments Freight-specific taxes, tolls and fees 14

15. International Revenue Characteristics High fuel taxes are common Sales and carbon taxes used as well P3 more prevalent in Europe, Australia, Asia – Europe is 50% of global P3 funding Dedication of specific revenue source to transportation is rare – General fund more common approach – Cultural preference for blended funds Source: Eno Foundation, 2014 15

16. Perspectives on Future of Federal Transportation Funding Future of the Highway Trust Fund in question Viability of federal gas tax as main revenue source Few perceived realistic alternatives Era of heavy reliance on Federal funding may be drawing to a close Support across the political spectrum for seriously considering these questions Source: Innovation NewsBriefs, www.innobriefs.com, January 2015www.innobriefs.com 16

17. Trust Fund Options T4America proposes shifting more funding responsibility to state and local level – Defacto approach underway in many states – 30 states passed transportation fiscal initiatives in last 3 years (including P3 projects) – 20 more poised to tackle transportation funding at state level in 2015 Eno Foundation proposes General Fund appropriation, citing: – Political opposition to gas tax hike – Declining travel per capita, improved fuel efficiency – Movement away from user-funded system – “Every person and business” benefits 17

18. Reauthorization Prospects Annual highway and transit expenditures exceed annual Trust Fund revenue by ~$16B/year Six-year reauthorization needs estimated to be $100B Federal gas tax increase seems unlikely today….but ask again tomorrow! Despite drop in gas prices, prospects dim for long-term T-bill or gas tax increase White House believes “corporate tax reform” is best option 18

19. Summary of Trends Long-term projections for declining fuel tax revenue, declining condition and performance of system Road Usage Charges gaining momentum in west, but implementation costs and other hurdles are large Increased future reliance on state and local sources, reduced expectations of Federal support Little political will to tackle revenue problem at Federal, but some evidence of changing attitudes “Tipping Point” theory: Nothing will happen until it happens….and then it may happen quickly 19

20. Questions / Discussion 20