Transportation

Even after voters approved two state constitutional amendments to raise highway funds, officials say North Texas is still billions short of money needed for its to-do list. What is your assessment, and how should the Legislature respond?

You would have thought that our Governor who campaigned on providing for our transportation needs with no new taxes, fees, tolls or debt would have been smart enough to read the fine print on Department of Transportation proposed budgets and sources.  Somebody buy that man some new reading glasses.   And yes, you better believe in a general election Governor, I won’t tag you to Trump, your own incompetence will suffice. 

 

So let’s stop here a bit and understand what happened, the constitutional amendments above are 2014 Proposition 1 and 2015 Proposition 7.  These two propositions redirect or will redirect monies from the oil & gas severance tax, sales and use tax, and the motor vehicle sales and rental tax.  The predictions on these sources is that combined with other existing sources, they will produce some $70+ billion, without new tolls.  This seemed like a win, but when comparing the overall number to what we spent in the last decade WITH tolls, it ends up being the same amount.  Ooops! What about that pesky inflation or population growth?  The Texas Department of Transportation says it won’t be enough, so now the Dallas Morning News is asking how the legislature should respond.  Well, since we Dems aren’t serious candidates, maybe we should ask for the Governor’s $41 million advertising budget as a down payment. It has to be a better use of funds than another empty highway ad.

 

Ok, so highway financing is infrastructure financing and it actually is easier than education, if for no other reason than rebar and concrete are the main inputs.  The reality is, it is an investment.  But before looking at some possible solutions, let’s consider the current policy cycle we are being pitched, just to see if it meets the sniff test. Let’s ask how far we can stretch these limits.  Lower taxes, attract new businesses, new business attracts new families, at a growth rate of over 1,000 new residents a day. New families increase demand on public infrastructure and services, and these new residents bring with them varying levels of income, some with growing and others with stagnant wages. The policy proposal we are being pitched is that we can solve increased demands with no new taxes, fees, tolls or debt.  So let me start by pointing out how the cycle above could work. If the new businesses and residents came in paying more taxes into our system, this cycle could work, but it requires that we basically say, “hey, there is a base level of taxes you are going to have to pay to have access to our educational system, roads, foster care, security, environment, water infrastructure, electrical grid, etc.”  But here are some questions we may want answered: Are there fluctuations in that amount as you go through population spurts? In other words, if we were selling a product that was selling like hotcakes, would we go through growing pains needing more infrastructure before we could sell more? Are new businesses paying the base amount of taxes or were they given incentives to come here? Or are existing businesses given the opportunity to reduce their tax burdens? Does that further complicate the costs during a boom? If we set a benchmark level of taxation to supply our services, would we expect that level of taxation to increase with inflation?  What happens if we need taxes to grow with inflation (as the cost of our infrastructure and services grows) but the ultimate source of taxes, income as wages, remains stagnant? If we had a benchmark level of taxation, and inflation took place for public goods and services, could we keep selling a strategy of lowering taxes? How does that math work? 

 

Ok, so now to some thoughts on transportation funding. Ultimately, we still need to look at structural issues to see if funding for all of our infrastructure and services is sustainable.  Notwithstanding this overarching need, I do think the tools for transportation funding are available at a certain level.  Beyond identifying taxing sources, we have experience issuing bonds for infrastructure, which can be a valuable tool.  In my mind, there may be opportunities to drastically reduce the cost of capital for these projects, by introducing “carrot and stick” type mechanisms in a tax and bond hybrid structure.

 

Beyond strict financing, I think we need to understand our transportation infrastructure will dramatically change in the next 10-15 years.  We will need to make sure our information technology infrastructure is expanded along all of our major transportation corridors.  Self-driving vehicles are coming. The result will have impacts on transportation capacity.  Humans drive a certain way; computers can and will push the limits of traffic flows and this will impact the capacity of our current infrastructure.  Moreover, it will also be likely that we will no longer own cars but instead participate in car services, so we will need to devise systems for taxing those contracts to meet infrastructure needs and understand that our motor vehicle sales & rental costs will be impacted.  We may also see the following: savings on our law enforcement for traffic purposes (the flip side is the need to employ these displaced workers), an elimination of car insurance, and a potential increase of real estate due to reduced parking lot infrastructure.  We will have to help municipalities deal with new laws for self-driving cars, which will likely move toward only allowing self-driving cars for large portions of the day, as the costs and accident data will likely lead to moving toward predominantly self-driving cars on our highways.  We will also have to work toward securing the information technology infrastructure for these vehicles. As our transportation systems become smarter, they will become more linked and as such the security of the system will need to be bolstered.  We may have to develop long distance drone corridors that layer on top of our interstate highways, as this form of transportation may provide an additional form of local or interstate commerce.  Many of these initiatives will require public private partnerships, so establishing the ground rules for civilization building capitalism will be important.

 

Yes, there is a lot to think about.  Short sighted 30 second highway ads won’t be sufficient.