Where We’re Going We Don’t Need Roads
- Posted by ryan on July 8th, 2008 filed in Economics
The Overhead Wire reposts something from last year, which quotes a Texas DOT study on the expense of building and maintaining roads:
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.
Keep this in mind whenever you read a crap analysis from Reason or Cato about how transit is a money loser.
July 8th, 2008 at 8:28 pm
Thank God DC-MD-VA don’t over-engineer their roads to the extent they do in Texas. I’m not saying some of them aren’t bad around here, but in Texas even a court is wide enough to drive 50 MPH. This of course contributes to the construction and maintenance costs of the road, not to mention exacerbating problems with storm runoff.
Yes, I’ve been reading too much ‘Suburban Nation’
July 8th, 2008 at 11:32 pm
Well, transit is a money loser. Given that it competes with underpriced roads, it would be overpriced if it were not a money loser.
But I personally don’t think the “who gets more subsidy” debate advances the ball much. An improvement like a road or light rail line can be cost-effective even if subsidized. Just because government picks up most of the bill doesn’t mean the project was a bad one. This point obviously cuts both ways . . .
July 9th, 2008 at 11:18 am
AC,
The point is that public transit has all their numbers on the books, whereas roads and highways do not. The appearance is one where transit is directly subsidized and roads are not.
When people say transit is a money-loser, the implicit (and often explicit) implication is that roads are not money losers, when that isn’t true. What this does is help put forth the truth that all transportation is subsidized, and rightfully so. We’ve been doing it for a very long time, and for good reason. What needs to change is the kind of transportation we’re subsidizing - using the right tools for the job. We’ve been using highways for everything for a while now. A hammer is great for driving a nail, but not so good for painting the walls.
July 9th, 2008 at 12:01 pm
I basically agree with all of that. My point was simply that when deciding where to invest our infrastructure dollars, we should use a cost-benefit analysis, not worry about which form of infrastructure gets more subsidy.
For example, I could care less whether gas taxes cover all or just part of the cost of roads. Gas taxes are (or should be) levied to internalize externalities. What we do with the money after that is up to us; there’s no iron law that says the money must be plowed back into roads. If gas taxes earn a higher return somewhere else, they should be spent somewhere else.
July 9th, 2008 at 12:59 pm
AC, I agree with what you’re saying. What this information is useful for, from an advocacy standpoint, is as a building block to make that case.
In many places (such as my home state of Minnesota), the state gas tax is constitutionally dedicated to roads and roads alone.
The popular perception is that roads are paid for and transit is not. That perception is false, and needs to be dismantled in order to get to a standpoint where a general concept such as yours can actually be implemented.