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Another possible source of NEC funding

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Another possible source of NEC funding
Posted by A McIntosh on Tuesday, February 28, 2017 8:21 AM

From conversations with various folks, I have heard it said that the fairest way to finance infrastructure improvements is the user fee. It is what built the interstate highway system in the first place. Regarding the Northeast Corridor maintenance and upgrades, if every passenger on every train, be it commuter, regional, Acela, or long distance be assesed a surcharge of, say, 50 cents every time he or she rides one of these trains, would that raise enough revenue to help with the cost of maintaining this system?   What say you?

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Posted by BaltACD on Tuesday, February 28, 2017 9:02 AM

www.fhwa.dot.gov

Did construction of the Interstate System contribute to the national debt?

President Eisenhower insisted that the financing mechanism for the Interstate System be "self-liquidating," so that it could not add to the national debt. The president favored a toll highway network financed by bonds, but his aides convinced him that traffic volumes would not generate enough revenue in most corridors to repay bondholders with interest. Therefore, the plan the President submitted to Congress called for establishment of a Federal Highway Corporation to issue bonds to pay for the Interstate System up-front, with the Federal excise tax on gasoline and lubricating oil (which then went to the general Treasury without a linkage to highways) was dedicated to bond retirement. Congress rejected this plan, but adopted a proposal to finance the Interstate System on a pay-as-you-go basis with revenue from highway user taxes. The revenue was credited by the Department of the Treasury to the Highway Trust Fund established under the Federal-Aid Highway Act of 1956.

The Interstate Construction Program, like the Federal-aid highway program of which it is a part, operates on a reimbursement basis. After FHWA authorizes a State to proceed with a project, the State pays the bills for eligible activities, and then submits bills to the FHWA, which reimburses the State for the Federal share. The FHWA makes a commitment (or "obligation") to reimburse the Federal share, but Interstate development takes several years. As a result, the FHWA obligation results in reimbursements to the State for the Federal share over several years. The 1956 Act included a provision named after Senator Harry Flood Byrd (D-VA), the Chairman of the Senate Finance Committee, to ensure the Highway Trust Fund would contain enough money to pay the bills. If sufficient funds are not available, the program must be reduced administratively in proportion to the imbalance.

The Highway Trust Fund financing mechanism established in the 1956 Act satisfied President Eisenhower's "self-liquidating" demand. As a result, construction of the Interstate System did not contribute to a Federal deficit.

(In 1982, the Highway Trust Fund was divided into a Highway Account and a Transit Account, which also receives some highway user tax revenue.)

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Why did it cost so much more than expected?

During debate leading up to the Federal-Aid Highway Act of 1956, Congress used an estimate of $27 billion. This estimate was flawed in several ways. It was based on a report by the U.S. Bureau of Public Roads (BPR), which covered only the 37,700 miles designated in 1947. The BPR estimated that to build this mileage in 10 years to meet 1974 traffic needs would cost $23.2 billion, based on midyear 1954 prices. Second, President Eisenhower's Advisory Committee on a National Highway Program under General Lucius D. Clay (Rt.)—known as the "Clay Committee"—added only $4 billion for urban feeders and collectors, bringing the total to $27.2 billion. Considering that the BPR had assumed urban-rural costs for the mileage designated in 1947 would be split $12.5 billion-$10.7 billion, and that an additional 2,300 miles of urban routes had been designated in 1955, the Clay Committee's estimate was flawed.

Beyond the errors in the initial estimate, the 1956 Act added 1,000 miles to the Interstate System. The Federal-Aid Highway Act of 1968 added 1,500 miles, and subsequent legislation increased the mileage as well. In addition, design standards were stricter beginning in 1956, and compliance with essential environmental requirements enacted in the 1960s added to the cost of projects. As might be expected, inflation was a major factor as well.

Never too old to have a happy childhood!

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Posted by conrailman on Tuesday, February 28, 2017 12:10 PM

I would be willing to pay Extra 5 dollars or maybe $10 to help save Amtrak System and buy more new cars and engines for LD trains.Big Smile

RME
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Posted by RME on Tuesday, February 28, 2017 1:54 PM

A McIntosh
I have heard it said that the fairest way to finance infrastructure improvements is the user fee. It is what built the interstate highway system in the first place. Regarding the Northeast Corridor maintenance and upgrades, if every passenger on every train, be it commuter, regional, Acela, or long distance be assesed a surcharge of, say, 50 cents every time he or she rides one of these trains, would that raise enough revenue to help with the cost of maintaining this system?

Think for a moment.  How would this be different from, say, increasing ticket prices on some fair pro rata basis to 'raise enough revenue to help with the cost of maintaining the system'?  And what do you think would happen to ridership ... and political action! ... if you did to any extent that made a meaningful 'contribution'?

The Highway Trust Fund grew fat because large numbers of cars, often running long distances, with relatively poor fuel mileage, were contributing.  You may have noted that in a number of contexts, new construction and maintenance of roads are suffering, badly, because those contributions ... still orders of magnitude larger than anything that could likely be charged to willing riders ... aren't sufficient. 

There was, if I recall correctly, considerable squabbling leading up to the decision in the early '80s to open up some of the Highway Trust Fund to 'transit use' -- the excuse being that good transit would have an effect on road congestion and hence benefit drivers.  I have a grim suspicion that as the HTF becomes incapable of even keeping the whole of the Interstate system well-maintained, there will be arguments about removing the non-road aspects of transit, possibly even support for dedicated roadways (for example, busways) not shared directly by major contributing groups.

The 'fairest' way in the late 1950s to finance the infrastructure improvements for New York-area commuters would have been, as you say, to ask the patrons of the systems to cover the amortized cost of the improvements.  That was recognized, certainly by PRR and CNJ, as a manifest non-starting option even if the PUCs involved had allowed unregulated fare increases-- the amortized costs run 24/7 while the commuter trains are valuable at almost any built scale no more than a few hours per day, and may be an actual impediment and cost generator (for yards, security, etc.) at other times.

A great part of highway use has always been the 'free' aspect of good roads, in a manner similar to cellular telephone service where the phone itself is said to be free.  If the road network was charged by the mile or access to highways charged by the day (think, for example, of the $4.95 'convenience fee' rental-car agencies charge if you use the built-in wireless 'toll pass' even once, by mistake!) you'd see much less driving, and much less satisfaction, and probably much more complaining about value received.  While there are people and groups in our society who'll rub their hands together in glee thinking of this Sorosian prospect, it's extremely difficult to extrapolate this so that the people who use a given improvement are the only ones 'soaked' for it, when so many of them would be finding alternatives left and right were they to be told they had to pay.

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Posted by CSSHEGEWISCH on Tuesday, February 28, 2017 1:55 PM

conrailman

I would be willing to pay Extra 5 dollars or maybe $10 to help save Amtrak System and buy more new cars and engines for LD trains.Big Smile

 
Note that the proposal by the OP suggested a surcharge on every passenger, both Amtrak and suburban agencies, for the maintenance and upgrading of the NEC.  Nothing mentioned about new equipment.
The daily commute is part of everyday life but I get two rides a day out of it. Paul
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Posted by BaltACD on Tuesday, February 28, 2017 2:20 PM

With the Highway Trust Fund using fuel taxes for it's funding source - all the efforts of the EPA, Highway Safety and CAFE requirements then work against the HTF as their result is in improving fuel economy of vehicles and thus reducing the fuel used and the amount of fuel tax collected.

It would be proper to say that the Government is its own worst enemy.

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Posted by Deggesty on Tuesday, February 28, 2017 2:25 PM

Off TopicAnd, how many people who use electricity to power their vehicles pay for their share of the costs to keep streets and highways in good repair?

Back to the topic.

Johnny

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Posted by Paul of Covington on Tuesday, February 28, 2017 2:58 PM

BaltACD

With the Highway Trust Fund using fuel taxes for it's funding source - all the efforts of the EPA, Highway Safety and CAFE requirements then work against the HTF as their result is in improving fuel economy of vehicles and thus reducing the fuel used and the amount of fuel tax collected.

It would be proper to say that the Government is its own worst enemy.

 

   And hasn't it been 20 or 25 years since the fuel tax has been raised?   Since it's based on a per gallon rate, with inflation it's actually been reduced by about one-third (I'm guessing).   My eyes glass over with any discussion of accounting or finance, so someone else can figure the actual difference if interested.

_____________

   My mind's made up.   Don't confuse me with the facts.

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Posted by zugmann on Tuesday, February 28, 2017 4:45 PM

Deggesty

Off TopicAnd, how many people who use electricity to power their vehicles pay for their share of the costs to keep streets and highways in good repair?

Back to the topic.

 

A concern some states are already dealing with:

http://blog.caranddriver.com/the-tax-man-cometh-these-10-states-charge-extra-fees-for-electric-cars/

The opinions expressed here represent my own and not those of my employer or any other railroad, company, or person.

And why does the truth seem too hard to be true?

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Posted by JPS1 on Monday, March 06, 2017 8:48 AM

Paul of Covington
And hasn't it been 20 or 25 years since the fuel tax has been raised? 

The federal fuel taxes were last increased in 1993.  The tax is 18.4 cents on a gallon of gasoline; it is 24.4 cents on a gallon of diesel.  Had the tax on gasoline kept pace with inflation, it would be approximately 30 cents today.
 
According to Status of the Federal Highway Trust Fund Fiscal Years 1957 – 2015, fuel taxes are the source of roughly 85 to 90 per cent of the income for the Highway Trust Fund.  The other income is derived from excise taxes on tires, trucks, buses, heavy vehicles, etc., as well as fines, penalties, and investment interest. 
 
Until 2008 the users accounted directly or indirectly for all of the income for the Interstate Highway System.  Beginning in 2008, however, because Congress had not authorized an increase in the federal fuel taxes to keep pace with inflation, the Highway Trust Fund began receiving substantial transfers from the general fund.  

Rio Grande Valley, CFI,CFII

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Posted by Paul of Covington on Monday, March 06, 2017 9:04 AM

   Thanks, JPS1, for doing what I was too lazy to do.

_____________

   My mind's made up.   Don't confuse me with the facts.

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