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Transportation finance has emerged as the foremost challenge for transportation policy-makers. Within a few years, the Federal Highway Trust Fund (HTF)—a major source of funding for the maintenance and improvement of the Interstate Highway System and other major highways—will not be bringing in enough money to fully fund the nation’s highway programs. State and local transportation programs also are running short of money. Our population is growing, our economy is expanding, and so is our need to transport people and goods. But the revenue to fund our highway and transit systems is not keeping pace with that demand. We are falling further behind, with consequent increases in congestion and losses in productivity and in the quality of life.
Recent research has documented the shortfalls in transportation revenue and investment, and identified and evaluated options to increase revenue for transportation programs. The options cover conventional and innovative ways to generate revenues, and options for both the short term and the long term. The options include raising and indexing fuel and vehicle taxes, hiking transit fees, introducing mileage-based or vehicle-mile user fees, adopting local-option sales taxes, applying impact and development fees, adding sales taxes, increasing property taxes, and using more general revenue to pay for transportation programs. The options also include introducing tolling to fund projects, using road pricing to manage demand, and expanding opportunities for public-private partnerships that attract private capital for investment in transportation facilities. The research showed that the funding shortfalls are large enough that a single option will not suffice; packages of funding options will be required. The research described successful examples of state and local application of these options. The keys to their success have been building consensus on needed action; developing specific plans and investment requirements; identifying appropriate roles and responsibilities for Federal, state, and local governments and the private sector; clearly describing revenue sources and rationales; fielding well thought out public education campaigns; sustaining leadership for the initiatives; and working to a clear timetable for action. The research concluded that action at all levels of government will be necessary to fill the transportation funding gap that is threatening our economic competitiveness, personal mobility, and quality of life.
Additional information or source material about the issue can be found at the following links:
U.S. Department of Transportation (DOT) – Surface Transportation Policy and Revenue Study Commission 
Federal Highway Administration (FHWA) – Innovative Finance Resource Center
American Association of State Highway and Transportation Officials (AASHTO) – Innovative Finance for Surface Transportation
Transportation Research Board (TRB) – Finance and Economics Topic Snapshot
Cambridge Systematics has been at the forefront of transportation finance and needs analysis studies for the U.S. DOT, FHWA, FTA, AASHTO, TRB, state DOTs, Hudson Institute, and National Chamber Foundation. A central component of this work includes the consideration of revenue measures and innovative finance opportunities that can leverage available Federal, state, local, and private funds and increase the financial feasibility of proposed investments.
Most recently, Cambridge Systematics described future financing needs and options to meet the nation’s highway and transit investment needs from now through 2017 for the TRB-sponsored NCHRP Project 20-24(49). For the National Chamber Foundation of the U.S. Chamber of Commerce, we examined the Federal role in funding highway and transit capital improvements and stimulating greater state and local investment. And, we provided an assessment of alternative sources of short- and long-term transportation revenue as part of the Hudson Institute’s 2010 and Beyond: A Vision of America’s Transportation Future.
For AASHTO, Cambridge Systematics led the team that prepared the needs analysis for the most recent AASHTO Highway and Transit Bottom Line Report, including both highway and transit investment requirements. We also are completing a series of Freight Transportation Bottom Line Reports for AASHTO. These AASHTO Bottom Line Reports contain policy and legislative recommendations to guide Congress in determining national highway and transit investment requirements. In addition, Cambridge Systematics is supporting the National Surface Transportation Policy and Revenue Study Commission in assessing highway and transit needs, freight system requirements, revenue and innovative finance options, and public private partnership opportunities.
Cambridge Systematics has been providing support for the FHWA’s Innovative Finance initiative for many years. We reviewed Federally-sponsored innovative finance programs and tools advanced by the U.S. DOT since 1996 and prepared an innovative finance brochure and primer, which has played an important role in building awareness and educating state and local officials in new, non-traditional financing mechanisms and the benefits of implementing such techniques. Cambridge Systematics also prepares the FHWA’s Innovative Finance Quarterly newsletter, which disseminates information on innovative finance programs, best practices, research, and training opportunities to state and local transportation officials. In addition, Cambridge Systematics staff provides technical support to the FHWA’s Office of Federal Aid Financial Management and the Department’s TIFIA Joint Program Office.
Cambridge Systematics supported the Washington State Legislature in assessing revenue options and financing statewide transportation needs. We examined the viability of the state’s Motor Fuel Tax: comparing the state’s dependence on fuel taxes with that of other states; the impacts of the State’s fuel price fluctuations on revenue; and the forecasted impacts of hybrid and alternative fuel vehicles. Alternative and emerging transportation funding efforts throughout the country and internationally, including vehicle travel pricing and tolling innovation, concession and/or private development of transportation facility improvements, and other funding sources were evaluated along with trends and long-term implications of applying debt financing to complete transportation projects. The study resulted in the development of recommendations for maintaining the medium- and long-term viability of the State’s funding portfolio.
Further, Cambridge Systematics carried out a Comprehensive Tolling Study for the Washington State Transportation Commission to create a process that facilitates Washington’s ability to make policy-level decisions on if, where, when, and how to toll. We brought a national perspective on infrastructure development issues to Washington, evaluated illustrated examples of potential tolling applications such as traditional tolling and congestion pricing, and conducted attitude surveys about tolling.
Cambridge Systematics was part of a team that recently explored highway and transit financing options and public private partnership opportunities for the Pennsylvania DOT. We also are supporting the Massachusetts Finance Commission in investigating finance options for the future.
You can learn more from some examples of our recent work:
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