Ohio Transportation Funding – A Look Ahead

PennyBlogAny discussion about the future of Ohio transportation funding must include a word about the Fixing America’s Surface Transportation Act of 2015. The FAST Act is a five-year, $305 billion measure that provides $286 billion for the nation’s federal highway and transportation programs. Under the FAST Act, Ohio will receive $8.77 billion over the next five years to invest in highway improvement. Unfortunately, the FAST Act fails to address the Highway Trust Fund’s permanent structural revenue deficit. As a result, the stability provided by the FAST Act will be short-lived. Without remedial action by Congress, another revenue shortfall will impact Ohio’s construction program as early as 2019.

Revenue growth will be driven at the state level

With no provision for long term transportation funding at the federal level, it is clear that any significant revenue growth for Ohio highway construction will be driven at the state level. Now is the time to consider some options.

Ohio Motor Fuel Tax – still the best single option for transportation funding

GasPumpBlogAt the state level, the Ohio motor fuel tax has stood at $0.28 for more than a decade. And while the funding it provides has remained flat, construction and maintenance costs have increased from year to year. In fact, things that cost $1.00 in 2006 cost $1.56 today and ODOT projects 3-4% inflation per year in the future. However, with sensible adjustments for inflation, the state gas tax remains the strongest method of increasing transportation revenue in Ohio.

  • Based on 2015 gas tax revenue of $1.88 billion, each penny of gas tax generates approximately $64 million. A reasonable gas tax increase phased in gradually over a few years, would ultimately generate hundreds of millions in annual revenue.
  • The motor fuel tax funding mechanism is already in place. By increasing the tax rate and indexing it for inflation, the motor fuel tax will remain viable for the long term.
  • The gas tax is an inherently fair user fee. Those who use the roads pay for better and safer roads.
  • An increase in motor fuel tax causes no “Pain at the Pump”. Based on a vehicle that travels 15,000 miles per year and gets 20 miles per gallon, a $0.01 per gallon increase would cost the vehicle owner an additional $7.50 per year.

What about other methods of transportation funding?

Supplemental fee mechanisms are also needed to ensure that owners of hybrid and alternative fuel vehicles pay their fair share for highway use as well. This becomes more important each year as the penetration of hybrid and electric autos increases. And as conventional automobiles continue to become more fuel efficient, additional revenue streams will be needed to supplement the motor fuel tax in the future. Methods ranging from to user fees based on Vehicle Miles Traveled to vehicle registration fees and other local funding options are all worthy of discussion.

With the FAST Act providing some revenue stability for the next few years, now is the time to discuss the future of Ohio transportation funding. Now is the time to plan! To learn more about current conditions, funding choices and how other states are meeting the transportation revenue challenge, check out Ohio Highway Funding – Paying Our Way.

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