Friday, June 1, 2007

The Truth About Roads

While folks like the Reason Foundation will ask for more roads, it seems to me that they are much more expensive than the transit solutions we are proposing and get to a worse end. Well here is the answer straight from the road kings at the Texas DOT...

The decision to build a road is a permanent commitment to the traveling public. Not only will a road be built, but it must also be routinely maintained and reconstructed when necessary, meaning no road is ever truly “paid for.” Until recently, when TxDOT built or expanded a road, no methodology existed to determine the extent to which this work would be paid off through revenues.

The Asset Value Index, was developed to compare the full 40-year life-cycle costs to the revenues attributable to a given road corridor or section. The shorthand version calculates how much gasoline is consumed on a roadway and how much gas tax revenue that generates.

The Asset Value Index is the ratio of the total expected revenues divided by the total expected costs. If the ratio is 0.60, the road will produce revenues to meet 60 percent of its costs; it would be “paid for” only if the ratio were 1.00, when the revenues met 100 percent of costs. Another way of describing this is to do a “tax gap” analysis, which shows how much the state fuel tax would have to be on that given corridor for the ratio for revenues to match costs.

Applying this methodology, revealed that 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.
Did you read that like I read that? $2.22 per gallon of subsidization for the road. And this isn't from some liberal think tank or a transit fanatic saying it, it's the organization that builds and collects taxes for them. And this is just the subsidy for the road, not the oil itself! So when simplistic folks from the Reason foundation propose building roads to relieve all congestion, you ask them who is going to be paying for that, or you shut them down with some good research on how much it will really cost versus your transit alternative. It seems to me that even more so now, rail looks even better than ever when it comes to cost effectiveness.

Thanks to Andrew for the link.


M1EK said...

This happens in Texas more than other states because we drastically subsidize highways at the expense of urban drivers using property-tax-funded roadways. IE, it's not that gas taxes only cover 16% of highway costs; it's that gas taxes incurred while ON HIGHWAYS only cover 16% of the cost. The remainder is from a combination of donations (property/sales taxes from localities) and gas tax incurred on locally-funded roads (which in more enlightened states are partially returned to localities).

Anonymous said...

While Texas is a deservedly easy target in many ways, let's be fair here. Read that quoted post again and then go look at all those no-toll interstates that have been built in the midwest rust belt over the last decade or so. Who is going to pay for maintaining all THOSE twenty years from now? Especially considering demographic trends.

M1EK said...

Yes, true, but true interstate highways (I-whatever, not US highways which are almost purely state constructions) are a different beast - there's a massive subsidy there too, but it's more of a urban and suburban drivers to freight trucking subsidy than it is a nondriver-to-driver subsidy. IE, in most states, no non-gas-tax money gets used for the interstates. We, of course, set the bar just a little bit lower.