17 May 2009

Roads Are Subsidized Too

...with their taxes. All transportation is subsidized by taxpayers:

...no road pays for itself in gas taxes and fees. For example, in Houston, the 15 miles of SH 99 from I-10 to US 290 will cost $1 billion to build and maintain over its lifetime, while only generating $162 million in gas taxes. That gives a tax gap ratio of .16, which means that the real gas tax rate people would need to pay on this segment of road to completely pay for it would be $2.22 per gallon.
So that’s a 16% cost recovery ratio for your basic non-toll highway. For constrast, Metrorail recovers about 81% of its costs (operating only; not construction).


John Schneider said...

One of the really original thinkers in our city, Brad Thomas, is working on a similar analysis for the expansion of I-75 through Hamilton County.

First, Brad takes ODOT's projected traffic counts and assumes the gas tax yield on cars averaging 24 miles per gallon that will be newly attrcted to new capacity of the road. He hasn't yet included the yield from heavy trucks, but they do the most damage to the roadway, so let's figure that's a wash. And, of course, a new and improved I-75 will attract cars and trucks from I-71, sort of "stealing" the taxes projected to pay for that road in the past.

Anyway, his so-far rough calculation is that it will take something like 120 years to generate enough gas tax money from the cars using this widened section of I-75.

It gets worse. If you apply a 4% discount rate to the yield from the collection of future gas taxes, the I-75 widening never, ever pays for itself.

Which is one reason Congress had to bail out the Highway Trust Fund last summer. Highways don't pay for themselves.

I've always wondered why the libertarians among us who howl that the Cincinnati Streetcar "will never pay for itself" seem to overlook what has been occuring right under their noses for the past fifty years.

I also think it's interesting the they dispute the benfit/cost ratio of the Cincinnati Streetcar but never ask why a similar analyis isn't peformed for highways. Perhaps the results would be inconvenient for their world-view.

CityKin said...

Great comment John, really enough thought here for a long separate post.

Quim said...

Mr S, as a past member of the Libertarian party, I can tell you there are libertarians, Libertarians and LIBERTARIANS! .
There are quite a few who would love to see every road in America a privately funded road with tolls.
Locally, it keeps looking more and more like a class issue.

John Schneider said...

Nothing against the libertarians.

They have a generally consistent belief system, and if everyone played by the rules, the world might be a better place because of them.

But in terms of transportation policy -- especially in the libertarian "think tanks" (where not a lot of thinking actually goes on)-- they are Neanderthals.

And here's the problem with toll roads. If you don't provide alternatives for people who can't or who choose not to pay the tolls, you have a real mess.

A perfect world would have major highways tolled as the preferred mode of travel and then use the proceeds from the tolls to build rapid transit in tolled corridors.

DP said...

I think we're starting to see some (ok, a tiny bit of) progress on the toll road front. A number of cities across the country are implementing HOT lanes, which while certainly not perfect, at least get people thinking about the idea of tolls paying for capacity expansion. I was disappointed that Mayor Bloomberg's congestion pricing plan (also not perfect) seems to have fizzled out.

As one who works on EIS's for major transportation projects (mostly highways), I can tell you that I've never done a full cost-benefit analysis for a project. The closest we come is the classic "this project will create XXXX thousands of jobs and will create travel time savings of XXXX millions of dollars. While there is the obvious argument for why that is (see John's post) I think another (fairly) valid reason is that you get into that whole ethical issue of how to value a natural resource, or noise impacts, etc. It becomes very sticky. Still I fully agree that the highway-transit funding balance is, well, completely out of whack.

Interesting note about the $2.22 gas tax estimate - isn't that about what the gas tax is in Europe? Where they have a nice, balanced transportation system?

kid-cincy said...

Are you all really serious?

Let's use the same logic for some other government services:

How much in taxes do we get back for police and fire services? I'm guessing it's less than 2% of their cost. Let's give them the axe!

How about all those section 8 vouchers? They surely aren't paying their way through the taxes they pay. Throw them all out!

I'm sure all the workers for the Department of Defense and their contactors pay a lot in taxes, but nothing close to the billions we spend on defense each year. Let's get rid of all of them!

No one seriously argues that government programs are to be justified on a dollar-based cost-benefit formula. We libertarian might wish they were, but we don't honestly believe that they are.

The reason that I support (in general) road projects, and don't support publicly-funded streetcar projects, is that 99% of the people who will pay for them don't want them, and have no intention of using them.

We all use roads all the time. The buses that take our kids to school use them. The police and firemen and EMTs who respond to our 911 calls use them. The food we buy at Findley Market gets there over the roads.

John Schneider said...

^Really? A million riders are projected to use the Cincinnati Streetcar each year, and urban rail projects almost always exceed projections, sometimes by a factor of two.

Apparently someone must want it.

I never use Hamilton County parks, but I pay for them.

I never had kids in CPS, but my real estate investments have paid many millions of dollars in property taxes over the years.

I seldom use the freeways, but I pay for them twice in terms of government subsidies and the air I breathe.

And, yes, with respect to the Department of Defense, 70-80% of Americans have concluded the the costs of the Iraq War have far exceeded the benefits. And that's why we're leaving Iraq.