1 Alternative Financing Methods and Roles of Different Levels of Government Presentation to the National Surface Transportation Infrastructure Financing Commission Jack Wells Chief Economist, U.S. Dept. of Transportation April 25, 2007

2 Four Key Issues in Adopting a Financing Method Public or private? If public, what source and structure for charge? What level of government? How much?

3 Public User Charges Fuel taxes Flat tolls Congestion charges Weight-distance charges Miscellaneous taxes and fees, such as: –Tire taxes, –License fees –Gas guzzler taxes

4 Public Non-User Charges Property taxes Sales taxes Income taxes General Fund Non-user charges have grown nearly 80% since 1995 –Faster than user charges

5 Private Financing User charges Availability fees –Performance-based availability fees Shadow tolls Taxable v. tax-exempt

6 Characteristics of a Good Revenue Source Administrative simplicity Enforceability Ability to keep up with spending needs Desirable incentive effects Fairness among users Public acceptability

7 Roles of Different Levels of Government Expenditures should be at lowest practical level of govt. But the level of government should be high enough to capture the benefits of the expenditure –Avoiding incentives to under-spend –Freight v. passenger –Maintain connectivity Lower levels of govt. may lack fiscal capacity to meet needs Higher levels may subsidize fiscally weak lower governments –Geographically balance economic development Leverage for national safety standards Issues of control