Few things are duller than a committee meeting in the interim between legislative sessions. Witnesses drone on about policy choices involving arcane issues. Some of the committees exist only for a short duration and will vanish once the legislative session begins in January. The media almost never shows up for these meetings, which explains why the November 28 meeting of the Study Commission on Transportation Financing received virtually no attention. But a few minutes into the hearing, David Ellis, a co-author of a report by the Texas Transportation Institute (TTI) at Texas A&M, dropped a bombshell on the commission. He said that Texas could finance its highway needs without toll roads. The headline for this post is based on Ellis’s testimony. I have not come across any mainstream media reports of Ellis’s remarks.
Ellis provided the committee with some background on transportation policy. The demand for new and expanded roads in the state’s eight largest metro areas is increasing much faster than TxDot can build them. Over the next 25 years, the population of these areas is projected to increase by 2.8% per year, employment by by 2.3%, vehicles by 2.7%, and daily miles drive by 3%. Over the same period, the number of lane miles that can be built with currently available funding will increase by just .25% per year. Tx-Dot estimates that the state will need an additional $68 billion over the next 25 years to improve mobility. The TTI’s estimate is slightly lower, $66.2 billion. Two-thirds of the needed new construction will be in the state road system, or some $44+ billion; the remainder represents improvements to local roads.
The money for highway construction comes from three sources: vehicle registration fees, the state gasoline (more properly, motor fuels) tax, and reimbursements from the federal gasoline tax, of which Texas sends more revenue to Washington than it gets back. Of these sources, the one that matters the most is the motor fuels tax. But the tax has been losing ground to inflation in recent years.
Now, here is the crucial part of Ellis’s testimony: There are scenarios under which roads can be financed:
1. Raise the motor fuels tax, currently 20 cents per gallon, to 51 cents. Interestingly, a Tx-Dot engineer had previously told the committee that the motor fuels tax would have to be raised to $1.40 per gallon to pay for the needed new construction. Needless to say, the Legislature is not going to raise the tax by 31 cents, much less a buck twenty.
2. Raise the motor fuels tax by 8 cents and index it to inflation, using not the consumer price index, but a special highway construction index. The rate of inflation has been 1/2% to 1 1/2 percent per year.
3. Don’t raise the gasoline tax at all. Instead, index it and put the incremental revenue in the mobility fund, where it can be used to pay off bonds. And here’s the bombshell: “Under this scenario,” Ellis said, ” it wouldn’t be necessary to toll as a means of financing, although that’s certainly an option.”
The cat is out of the bag now. Tolls aren’t the only way to pay for new roads. Will the Legislature allow Tx-Dot to go forward with its mammoth toll road plan, or will lawmakers devise a solution that will allow revenue to be used to build free roads?