NGA Holds State Summit to Explore Innovative Transportation Funding and Financing Mechanisms

WASHINGTON—States must consider a wide variety of new and traditional types of funding sources and financing mechanisms in order to continue providing safe and stable surface transportation infrastructure now and in the future, experts concluded at the State Summit on Innovative Transportation Funding and Financing, sponsored by the National Governors Association Center for Best Practices (NGA Center) and supported by the U.S. Department of Transportation (DOT).

The nation's highway and transit systems currently are funded by an array of revenue sources, including fuel taxes, vehicle user fees, transit fares, impact fees, bonds, property and sales taxes, and general funds. However the total annual investment in highway and transit systems falls dramatically short of the amount needed to maintain the current status, let alone improve the status of the nation's transportation infrastructure.

The Summit convened state and federal leaders to examine innovative means of funding state transportation needs and explored options governors and states can use to finance transportation improvements. Virginia Gov. Timothy M. Kaine and U.S. Transportation Secretary Mary Peters provided the keynote address.

"Solving our transportation infrastructure needs requires federal, state, local, regional, and private funding and ideas," said Gov. Kaine. "We must all work together to keep our transportation system well-funded and focused on keeping Virginia and the rest of the nation competitive in a world economy."

"States are leading a quiet revolution in transportation financing and the way we build, maintain and operate our infrastructure," Secretary Peters said. "That is why the federal government must give states the flexibility to take advantage of technology to cut congestion and embrace more equitable and effective funding systems to unleash the greatest new wave of highway and transit investment this country has ever seen."

The Summit revealed both challenges and opportunities for states seeking to maintain and improve their transportation systems. States have the ability to use new financing tools and funding mechanisms, as well as federal policies allowing states to impose tolls on federal-aid highways and bridges to meet some of their transportation finance needs. In addition to generating needed revenue, these new financing tools and strategies can bring a number of benefits, most notably increasing highway capacity and reducing congestion. Some options debated at the Summit to help raise revenue for transportation infrastructure improvements included:

• Tolling—Expanding tolling of new and existing roads and using High Occupancy Toll lanes can raise revenue and reduce congestion.
• Congestion Pricing—Congestion or cordon pricing can be used as a means of rationing scarce road space during high-volume periods while simultaneously raising revenues which could be used to fund transit, road maintenance or other needs.
• Vehicle Miles Traveled Tax—Vehicle miles traveled tax (VMT tax) could supplement or potentially replace fuel taxes by providing users an incentive to consolidate or eliminate unnecessary trips. States examining VMT taxes may also be considering working with the private sector on related strategies, such as mileage-based insurance, to further reduce demand. Some have cited privacy concerns with the tracking and reporting technology necessary to institute the VMT tax.
• Debt Financing—Recent innovations in project finance has provided states greater flexibility in funding new construction, including the ability to finance large capital projects that may exceed available tax revenue.
• Public-Private Partnerships (PPP's)—PPP's offer states access to new capital and the ability to efficiently allocate responsibilities and risk to deliver projects in less time and at reduced cost.

The Summit is the first in a series of works the NGA Center will conduct on this topic. For more information, please visit www.nga.org/center.

Click here to view the summit agenda and presentations.

###

Founded in 1908, the National Governors Association (NGA) is the collective voice of the nation's governors and one of Washington, D.C.'s, most respected public policy organizations. Its members are the governors of the 50 states, three territories and two commonwealths. NGA provides governors and their senior staff members with services that range from representing states on Capitol Hill and before the Administration on key federal issues to developing and implementing innovative solutions to public policy challenges through the NGA Center for Best Practices. For more information, visit www.nga.org.