Paying for Roads and Bridges

Henry Petroski. American Scientist. Volume 104, Issue 5. Sep/Oct 2016.

The generally unsatisfactory condition of our nation’s roads, bridges, and other transportation infrastructure- and how to restore it to first-world-class standards-should be among the issues being discussed and debated in this presidential election year. Unfortunately, other than uttering the word “infrastructure” now and then, often preceded by an adjective such as “crumbling” or “deteriorating,” and being in favor of improvement, the presidential hopefuls have not demonstrated a sophisticated awareness of the problems involved or the options available to address them.

We do hear plenty of campaign rhetoric about the importance of growing the economy and generating wellpaying jobs, but the connection between these laudatory goals and the state of the nation’s infrastructure is seldom made. Yet without roads that are pothole- and congestion-free, bridges that are structurally sound and functionally up to date, and mass transit systems that are safe and reliable, U.S. infrastructure is a drag on, rather than an asset to, the national economy. (In 2011, the combined spending by U.S. federal, state, and local governments on surface transportation-highways and other transit-was about $215 billion. However, the total spending as a share of the country’s gross domestic product has been falling, from about 3 percent in 1962 to 1.4 percent in 2014.)

Cars and trucks driving over rough roads require more frequent and costly maintenance, which means that the money spent on these repairs is not available for consumer spending in other sectors. Commuters and truck drivers stuck in traffic during rush hours not only are wasting productive time, but also are squandering fuel, which benefits no one but the oil industry. Idling internalcombustion vehicles are contributing only to air pollution and its concomitant effects-not to the efficient movement of people and goods to their intended destinations in a timely manner. For trucks in particular, many of which are owned by the drivers operating them, the mediocre condition of our nation’s highway infrastructure adds inordinately to their time and fuel costs, and so makes owning and operating a heavy truck a less than wholly attractive tax-paying enterprises for someone who might be considering that career.

Inferior road conditions can also discourage drivers who do not own their own equipment, causing them to seek other means of employment; dealing with miles upon miles of rough highway pavement and hours of stop-and-go driving in congested traffic is surely a contributing factor to the more than 90 percent annual turnover rate in drivers at some large trucking companies. The cost of hiring a new driver has been estimated to average about $5,000, so a company with 200 drivers will incur an annual cost approaching $1 million just to maintain the size of its driver workforce.

Such conditions are part of the motivation for recent efforts to lower to 18 the age at which drivers can legally operate 18-wheel tractor-trailers. The desire for greater efficiency has also placed lobbying pressure on state legislators to allow longer and heavier trucks to use their state’s roads, setting up clashes with other lobbyists representing organizations seeking safer and smoother highways. The effects of the condition of its infrastructure on a nation’s industry, economy, and public policy can seem to be without bounds.

Life Span Planning

It is the nature of infrastructure-especially that manifested in roads, bridges, and other transportation systems-to be worn down and out with use. Asphalt pavement, concrete viaducts, and steel bridges all have finite lifetimes. From the outset, they are intended and designed to carry a certain volume of traffic at a certain maximum vehicle weight and to last for a specified number of years (maybe 15 for a typical roadway, 50 for a common highway bridge). When politicians vote to allow larger trucks to use highways and bridges, and municipalities allow unchecked development that increases dramatically the number of vehicles using them, deterioration proceeds at an accelerated pace.

Thoughtful infrastructure planning includes looking ahead at the need to repave roadways and rebuild bridges in a timely manner. However, if because of extra-technical factors such as politics, the useful life of a piece of infrastructure comes to an end earlier than anticipated in the original design, then havoc is wreaked on long-term capital improvement budget planning. Municipal and state governments find themselves on the horns of a dilemma over whether to continue with a longstanding regular rotation schedule of maintaining ordinary roads by filling potholes and painting bridges each spring, say, or to instead repave and rebuild roads and bridges that are deteriorating so badly that postponing the improvements risks needing to rebuild them from the ground up.

And, of course, there is the everpresent question of where the money will come from. Ultimately it comes from taxes and fees paid by citizens and users of the infrastructure. With the enthusiastic backing of President Dwight D. Eisenhower, the Federal-Aid Highway Act of 1956 authorized the National System of Interstate and Defense Highways that have come to be known as the interstates. The federal Bureau of Public Roads, which oversaw the national project, initially estimated the final cost of the system of highways to be $27.5 billion, which after five years of construction had to be revised upwards to $41 billion. The 50 percent increase was due in part to inflation, but an estimated 10 to 20 percent-amounting to at least $100,000 per mile of highway built-was attributed to graft (a problem that continues to plague large infrastructure projects today).

The Highway Revenue Act of 1956 established the Highway Trust Fund, into which fuel taxes and associated user fees would be deposited. It was not the first time a gas tax had been levied. A one-cent-per-gallon tax on gasoline had been instituted in 1932 to help reduce the federal deficit. The tax stood at two cents in the early 1950s, but it .was not dedicated to road and bridge work. That changed with the establishment of the interstate system, when the gasoline tax was raised to three cents, with all fuel tax revenue going into the Highway Trust Fund, where it was dedicated to providing matching funds for state and local road and bridge projects.

The federal government’s portion of funding for the interstate highway system came out of the federally controlled trust fund. However, because the federal government is not authorized by the U.S. Constitution to own or construct roads itself, it dispensed monies from the fund to the states to build the system in preapproved sections that conformed to federal standards. With trust fund dollars paying for as much as 90 percent of project costs, the states readily complied. In the early 1960s, with the realization that the interstates were going to cost more than first projected, the tax on gasoline was increased to four cents per gallon, then in 1983 to nine cents, one cent of which was deposited in a new Mass Transit Account. In the early 1990s the tax was raised incrementally, first to 14.1 cents, and then, in 1993 to 18.4 cents per gallon, where it stands today. (Diesel fuel is taxed at a rate of 24.4 cents per gallon; the balance of the revenue feeding into the Highway Trust Fund comes from sales tax on trucks and trailers and other vehicle and tire taxes.)

The gas tax has remained at 18.4 cents for more than two decades now, and this rate is the equivalent of 11.6 cents in inflation-adjusted dollars. This static tax rate prevents the Highway Trust Fund from keeping up with inflation and with the growing demand for monies to maintain and upgrade our nation’s roads and bridges. The flattening out of revenue relative to growing expenditures has been attributed to unintended consequences associated with several technological improvements and, through tax credits and other incentives, the government’s encouragement of their adoption: more fuel-efficient internal combustion powered vehicles, which naturally consume less fuel; the introduction of hybrid vehicles, which also use less fossil fuel; and the growth in number of electric vehicles, which use no fossil fuels directly. The resulting Highway Trust Fund annual revenue has plateaued at about $35 billion, while expenditures have grown to more than $50 billion annually. Beginning around 2007, the difference has been made up by transfers from general revenue funds, but given all the other pressures on the federal budget, that clearly is not a feasible long-term solution.

Finding Money

The seemingly natural thing for Congress to have done was to raise the gas tax, at least to a level to take inflation into account. That this action has not been taken is generally attributed solely to the lack of an appetite for raising taxes. At the same time, with the trust fund enduring a clearly growing deficit, Congress has repeatedly passed ad hoc legislation to shore up the fund. For example, in July 2014 the U.S. House of Representatives passed a bill designed to add $10.8 billion to the trust fund and keep it solvent until May 2015. The source of the money included a $1 billion transfer from a fund established for cleaning up polluted sites, such as leaking underground storage facilities, which had been running a surplus. Another source was found in allowing corporations with defined benefit plans for their employees to assume higher future interest rates so that required tax-deductible contributions to the pension funds could be lowered, thereby raising their federal income taxes and so increasing revenue to the government. This so-called pension smoothing strategy was optimistically projected to raise $6.4 billion for the Highway Trust Fund, but was labeled a “gimmick” by Senate opponents to the plan. The Senate version of the bill claimed only $2.7 billion from pension smoothing, and would prop up the trust fund only through December 2014. At the eleventh hour, the Congressional Budget Office, in scoring the Senate bill, found a “critical error” that amounted to a $2.4 billion shortfall in claimed revenue. With Congress’s month-long August recess imminent, the Senate relented and the House bill was passed.

The Summer 2014 example is typical of a legislative process that has enacted short-term Highway Trust Fund legislation about three dozen times over the course of a half-dozen years. The practice of “kicking the can down the road” was ended at the close of 2015. With Paul Ryan as the newly elected speaker of the House, a five-year extension of the infrastructure legislation was passed, although critics noted that it only provided funding for three years. Nevertheless, state and municipal governments were elated that they could now make some relatively longrange plans involving road and bridge projects. Construction firms were also happy that they would be in line to compete for longer-term contracts. The highway construction industry anticipated a lengthier period of stability than they had seen in a long time.

However, with revenues feeding into the Highway Trust Fund projected to remain flat over the next decade, the fundamental problem remained, leaving states having to fend for themselves to take up the slack. The federal legislative focus on the gasoline tax rate of 18.4 cents-per-gallon and the Highway Trust Fund naturally captured much of the national media attention while debate made little progress in Washington. But many state legislatures recognizing the imminent need to address infrastructure issues, took matters into their own hands by adjusting the taxes and fees they also levy on gasoline and diesel fuel purchased within their state boundaries. It is not that politics necessarily plays a lesser role in state capitals, but the matter of poor roads and bridges is more immediate geographically and hence politically. It is literally an issue closer to home.

Indeed, it is overwhelmingly the case that state taxes exceed-by as much as two or three times in California and Pennsylvania-federal taxes on fuel. The lowest state gas taxes have historically been in Alaska and New Jersey, the former because of its income from oil production-something that dropped with worldwide oil barrel prices-and the latter because of its wealth of refineries. But state fuel tax rates have become very fluid, as states have passed legislation in response to the decreasing price of oil and the federal clampdown on offshore drilling leases, hydraulic fracturing, and the burning of fossil fuels. If the gas tax is no longer to be a reliable source of revenue for fixing our roads and bridges, what will replace it?

Although the concept of a gas tax may historically have been seen as tantamount to a user tax, in fact it never was completely fair, because a vehicle’s fuel consumption does not necessarily correlate with the damage the vehicle does to the roads and bridges it travels over. A use tax based on vehicle weight and miles traveled would be fairer in the minds of many public policy thinkers. Indeed, California and Oregon are presently carrying out trial programs to test the practicality and acceptability of doing so. And in March the U.S. Department of Transportation announced that it had set aside $15 million to fund grants through its Federal Highway Administration to state and municipal agencies that propose to carry out largescale programs directed toward demonstrating methods for tracking miles traveled and collecting user-fee revenue that would be channeled into the Highway Trust Fund. Ultimately, such a system could replace the gas tax entirely, although it is likely that with no excise taxes on fuel, state and municipal governments would be strongly tempted to place more tax on the lower priced product to help balance their budgets.

Construction Citizenship

Other means of dealing with infrastructure financing needs involve what is known as public-private partnership, often abbreviated PPP or P3. This approach typically involves a contract between a government entity and a private investment group whereby a long-term concession for a road, bridge, or other piece of infrastructure normally thought of as a public work is granted to the private entity, in exchange for money up front and a revenue stream. Thus, for perhaps billions of dollars, a state might permit a privately funded corporation to build or take over a toll road. The private body would agree to collect the tolls (giving a specified portion to the state), maintain the road, and turn it over in good condition to the state at the end of, say, 50 years. In theory, it can be a win-win arrangement. In practice, it can be an abuse of public stewardship.

The case of tire Indiana Toll Road is a recent example of what can go wrong. In 2006, in exchange for $3.8 billion up front, the state of Indiana gave up control of the 157-mile Indiana Toll Road for 75 years to an international joint venture. Within seven years, tolls were raised by 76 percent, and consequently traffic decreased by 13 percent. Tractortrailer drivers balked at the exorbitant tolls and began to use parallel state and county roads that were not designed for such added weight or volume of trucks, thus increasing their deterioration and raising the cost of their maintenance for public agencies. The toll road corporation went bankrupt, leaving the state of Indiana potentially holding the bag, and tax-paying citizens with poorer roads. A similar arrangement for a toll-road bypass of Austin, Texas, has also recently gone into bankruptcy.

The maintenance of existing roads and bridges is not a glamorous topic. It provides no sought-after opportunities for ribbon-cutting ceremonies, but it goes with the infrastructure territory. One way to fund the ongoing costs is to build roads and to construct bridges correctly in the first place, and such an endeavor starts with writing fair and honest contracts between government agencies and contractors. Graft and corruption are nothing new, of course; by one 1940 estimate, twice as much money was spent on roads as was justified by the results. Although the multiplier may be argued over, inferior materials, poor workmanship, and lax oversight continue to contribute to the phenomenon throughout our economy. Anecdotally this sad fact was brought home to me last March, as sizable potholes developed in a short stretch of road in my neighborhood that had been paved only two months earlier. Whether such a shoddy job was done by a city crew or a contractor, it still reflects a carelessness of operation that belies any commitment to the common good. It is emblematic of why our roads are in the condition that they are.

Another telling example occurred on a larger scale. In 2014, the executive of a road-paving firm pleaded guilty to charges of conspiracy to defraud the government and to launder money. Over the course of a decade, the company exploited its relationship with a minority-owned trucking business- misrepresenting its role in the bidding process-and so fraudulently obtained 37 federal construction contracts totaling more than $87 million. Furthermore, after the bids were successful, the paving company affixed to its own vehicles magnetic signs displaying the trucking company’s logo. The trucking company was paid the relatively minuscule amount of $375,000, while the paving contractor diverted money that should have gone to the trucker into a phony bank account that ultimately reverted back to the paver. This example was but one of about 80 cases involving paving companies that resulted from a sweeping federal investigation at the time.

Our system of infrastructure is indeed crumbling, and it is not just the asphalt roads that need fixing. The waste and abuse that seem to be endemic where construction projects valued in the millions of dollars are involved are unlikely to be eliminated with evolutionary systems of taxation or fee structures, or through seemingly win-win arrangements such as public-private partnerships. Fixing our infrastructure and its attendant problems will take a change of culture, to one in which all participants recognize it to be a civic obligation to partake in the process whereby roads, bridges, and other public works are seen as common capital that feed the nation’s economy. Good construction should be a product of good citizenship.

Unfortunately, however well-intended design and construction may be, mistakes and accidents will and do happen. How we recover from them tests our mettle as a community, state, or nation. The interstate highway bridge over the Mississippi River that collapsed during rush hour in August 2007 provides an example of how an infrastructure tragedy can motivate a successful recovery. Thanks to cooperation among the Minnesota Department of Transportation, engineers, construction companies, and other players, within six weeks of the collapse a new bridge design had been selected and a construction timeline established. The replacement span was completed within budget and ahead of schedule, carrying traffic only 11 months after the contract was signed. The new St. Anthony Falls Bridge added not only an attractively designed crossing to the Minneapolis riverscape but also put in place a smart bridge, which incorporates such features as temperature sensors that detect when weather conditions call for an anti-icing solution to be sprayed automatically on the road surface, as well as strain gauges that monitor the internal stresses in the structure and provide warnings when cracks and other undesirable structural conditions develop. It should not take a tragedy like the I-35W bridge collapse to create the conditions for such a success story; this should be the way all of our infrastructure is treated all of the time.