T

his report concentrates primarily in the areas of major Federal responsibilities and interest. Individual modal reports for airports, highways, pipelines, public transit, railroads and waterways are included. The specific areas for which needs estimates have been made are outlined and the data sources are also indicated.

The needs estimates include some private sector investment requirements, particularly in the areas of railroads and pipelines. They do not include any equipment requirements for private automobiles, trucks, intercity buses, aircraft, tugs, or barges. However, they do include public facilities for each of these modes.

Equipment needs were also considered for each of these areas. Since it appeared that the analysis would require a far more meaningful discussion, the available data appeared to be more confusing than useful

In some cases, categories of requirements were omitted because they do not appear to be sufficiently relevant to the "bottom line" objective of defining Federal funding needs. In a few cases (notably Amtrak), fu

ture cost estimates were omitted because of their highly speculative nature.

In every case, a strong effort was made to provide conservative and fully supportable transportation funding needs figures. The earlier estimates were reexamined and, wherever appropriate, actually scaled down.

The figures included in the following table represent needs which should be met within a ten-year period, namely 1978 to 1987 They do not represent the total dollar amounts which would be required to bring all transportation systems up to adequate levels of service. The figures were developed initially on a modal basis by representatives of each mode. The modal representatives do not necessarily have knowledge of or endorse the level of needs cited for any of the other modes

In sum total, the figures indicate that Federal support should be increased from the level of approximately $13 billion in Fiscal Year 1977 to an average level of $22 billion in the next decade The total transportation needs figure, including all sources of funding, averages out to $64.79 billion per year during the next decade.

Mode

TABLE I

$250.88

36.56

38.40

48

2420

$373 02 $.373

4. 20

22 50 9.00 24 20

Sex47 87 $64.74

the form of loans and han quarantees

43.00 4.1

1645 900

$222.08 $ 22 21

T

he time is very appropriate to consider major changes in the way the Federal government provides funding support for transportation development programs. There are several reasons for this conclusion

1. As indicated herein, existing Federal-aid programs are grossly inadequate to maintain an acceptable rate of transportation development, State and local governments obviously must increase their current level of transportation spending. However, it is highly unlikely that increased spending at State and local levels will even come close to closing the gap between transportation construction needs and available resources.

2. Under existing law, the Highway Trust Fund will expire on September 30, 1979. In order to maintain program continuity, basic decisions must be made as early as possible with respect to the continuation of the Highway Trust Fund and any changes in the tax base.

3. The great majority of State legislatures are currently, or will soon be, considering increases in State motor fuel taxes. There is a tendency to defer such increases while State and local legislators wait to see what action Congress will take. Firm, long-range action by Congress would be very helpful in clarifying the nature and scope of the financing problem to be faced by State and local governments.

4. The Airports and Airways Trust Fund is scheduled to expire on September 30, 1980. In the past, Federal policy on airport development has been erratic and inconsistent. It is most important that it be put on a more dependable footing in the future.

5. The development of a rational and consistent Federal transportation policy has long been a leading concern of the Department of Transportation. Former Transportation Secretary William T. Coleman, Jr., issued (a) "A Statement of National Transportation Policy" on September 17, 1965, (b) "National Transportation: Trends and Choices" on January 12, 1977, and (c) "Reorganization of the Department of Transportation and Its Programs" on January 19, 1977. These publications contain considerable valuable information pertinent to the development of improved transportation pro

grams.

6. The reorganization of the Executive Branch of the Federal government is a major goal of the Carter Administration Transportation Secretary Brock Adams came into office with an outstanding Congressional record in both the transportation and budget fields. Secretary Adams is truly in an excellent position to deal effectively with Congressional leaders and the appropri ate committees in these matters.

The numerous organizations and individuals who par ticipated in the development of this report represent a very wide spectrum of transportation interests. They are obviously not in complete agreement on many subjects. However, they are all in total agreement that additional funding is required for transportation purposes. The subject of funding, in particular, is one where intelligent and informed persons may well hold opposing views.

We have, therefore, refrained from taking any one position in support of any particular Federal funding mechanism covering all forms of transportation. What follows is a thorough discussion of several options that have surfaced to date.

Unified Transportation Funding

The earlier cited publication, "Reorganization of the Department of Transportation and Its Programs," recommends the establishment of a "unified transportation account." It is stated that this is a means of "highlighting the budgetary trade-offs that must be made among the various Federal transportation activities."

The "unified transportation account" is described principally as a tool to be used in the budget process. It has been advanced by its supporters as a means to more closely identify transportation spending within the Federal budget. On the other hand, it can also be assumed that this advantage could be obtained without reorganizing the current funding procedures.

Transportation Secretary Brock Adams, in testimony before the Subcommittee on Transportation, House Committee on Appropriations, on February 3, 1977, said:

"These functional categories are the focus of the budget priorities decisions which Congress must make in adopting the Budget Resolution. Transpor tation programs are now lumped together with the Postal Service and various housing programs in the same category. There may be some obscure logic in putting the post office in the same category as the Penn Central, but I think transportation should be treated separately."

The "Reorganization" publication makes a further point that it is imperative that Federal-aid transportation programs be funded in such a way as to make possible advance funding commitments. This type of advance commitment is one of the major advantages of Trust Fund financing. The report suggests that Congress might be persuaded to extend the advance funding arrange ment to cover all programs in a transportation "account." Trust Funds

The Highway Trust Fund has served exceptionally well as a means of providing complete program stability to the Federal aid highway program over the last two decades. However, past experience has shown that the mere existence of the Highway Trust Fund is no certain guarantee of financial stability. Budgetary limitations in the form of "impoundments" have been placed on trust fund obligations on several occasions in the past.

A trust fund also has the major advantage of clearly identifying those dedicated tax revenues which are placed into the fund. Although the disposition of these funds is subject to acts of Congress, any diversions must be made in the light of full public scrutiny A case in point was the "urban systems" provision of the highway law, making some Highway Trust Fund income available for transit applications.

6

ATAC REPORT

At the present time, trust funds exist for both highways and airports/airways. In the light of the very successful experience with these trust funds over the years, many believe that the same principle should be considered for other transportation development programs wherever possible.

User Charges

The two existing trust funds, highways and airports, are supported by specific charges on transportation users. To the extent feasible, all government transportation development programs should be financed by user charges. An exception to this principle may be made where the overall public interest fully justifies or dictates a subsidy.

This specific statement has been challenged by some industry representatives. It is fully understood that the maintenance of adequate public transit service requires some governmental subsidies. Nevertheless, it is argued that public transit should not be excused from paying its fair share of any across-the-board transportation tax The reasoning is that higher subsidy payments which would obviously result would present a truer picture of the total amount of the governmental subsidies required.

It would serve no useful purpose to exact a special tax on the users of public transit Federal assistance to transit is predicated on the general community benefits derived from public transportation systems. Many suggest that public transit is basically a social responsibility and should be considered in the same vein as public health, public education, public welfare, public police and public fire protection.

Therefore, some tax much more broadly based than a user charge would be most appropriate. Such a broader tax base should in no way preclude the establishment of a public transit trust fund.

Waterways present a special case. The waterway improvement program is sometimes multi-purpose in nature. Waterway transportation users should not be expected to pay for the cost of improvements made specifically for flood control, conservation and recreation purposes. However, it seems reasonable to separate out those expenditures attributable to navigation. These costs should serve as the basis for considering the insti tution of user charges, on a gradual scale.

Additional Funding

The urgent need for additional funding for all transportation construction and capital improvement programs is critical. These needs can be met in several ways, some of which are discussed below.

1. Additional user charges

Very recently, the Chairman of the Surface Transpor tation Subcommittee of the House Public Works and Transportation Committee proposed an expansion of the Federal-aid highway program. This expansion would provide increased funding for the primary highway program, the special bridge replacement program and safety construction. In connection with this program, Congressman Howard suggested an increase of 3 to 4 cents

per gallon in the Federal motor fuels tax. Currently each cent of Federal gas tax generates revenues of about $1.1 billion annually.

The motor fuel tax is also currently the principal source of State highway revenue. Therefore, the Federal government should recognize the problem of reliance on this source to such an extent that State governments are constrained from increasing their own direct reve nues. A compromise plan that has been discussed would be the so-called "formula back" tax provision.

Under this plan, a portion of any new motor fuel tax enacted by a State would be credited against any new increase in Federal gas tax. Under this arrangement, any new revenues collected by the Federal government would revert, in part, to those States enacting their own motor fuel tax increases.

The U.S. Department of Transportation has calculated the revenue which could be derived if an additional 4c per gallon motor fuel levy were to be applied uniformly to all transportation modes. The calculations are shown in the attached table on page 8. They indicate that this new revenue, plus existing user charges, would very nearly fund the current Federal transportation assistance program.

MAY 1977

7

Funding Options Continued

The culmination of these studies was the approval by the AASHTO Executive Committee, in March, 1977, of "A Proposal for Transportation Funding."

The AASHTO proposal suggests a three-tier system of Federal assistance. "Systems of national interest," including the Interstate highway system, an "interstate and defense" railroad network, international and large hub airports, and waterports and waterways of national significance would be eligible for 90 percent capital assistance. This high level of Federal funding would also be made available to public transit during an interim period during which antiquated facilities would be replaced. The capital needs of urban and rural systems of lesser national interest would be eligible for 80 percent Federal capital assistance. Any operating subsidies paid to any system would be on a 50-50 matching basis.

The AASHTO plan would permit the transfer of as much as 10 percent of first level or second level Federal funding from one level to another or from one mode to another.

The highway and airports/airways trust funds would be continued, with new trust funds created for waterways and railroads.

AASHTO suggests that the present Federal tax of 4¢ per gallon on motor fuel used in highway vehicles be extended to railroads and waterways. AASHTO further suggests that the present 5 percent Federal tax on air freight waybills be extended to cover highway, rail and water cargoes.

A table showing the estimated revenues which would be derived from the taxes proposed in the AASHTO plan is shown on page 9.

Several ATAC participants have expressed serious concern with this plan. AASHTO describes it as an "equalization" tax plan. The objection which has been expressed is that the present competitive balance among modes would be altered substantially.

Other ATAC commentators expressed the view that

revised fuel taxes should be applied on a percentage basis so as to adjust automatically with any future price inflation or deflation.

3. The Energy Tax

Both the Department of Transportation and the American Association of State Highway and Transpor tation Officials' studies discuss the advantages and disadvantages of a general tax on petroleum, levied at the wellhead or at the point of importation Table IV on page 9, prepared by DOT, estimates the amounts that could be raised at various tax rates. It is assumed that the taxes on petroleum not used for transportation purposes would be rebated or applied to non-transportation pur poses.

AASHTO hypothesized a per gallon charge of about 8.5 cents, with a double tax rate applied to all imported oil. The AASHTO plan would provide about $18.6 bil lion for all Federal transportation programs. However, under this plan all existing Federal taxes on petroleum products would be repealed

4. Other tax sources

An argument can be made that user charges should be used to the greatest extent feasible to support Federal transportation programs. In addition, where the public interest dictates otherwise, financial support should come from general funds.

At present, Federal assistance to transit is completely dependent on this funding source. Continued expansion of the Federal transit program in the immediate future will require a continued and increasing contribution from the general fund.

In the past, trust funds have been traditionally sup ported by special user taxes. However, there is no com pelling reason why such funds cannot be supported by general fund contributions. The DOT analysis makes the claim that the use of general funds would bring the discipline of the entire Federal budget process to bear on all transportation assistance programs

Amtrak Northeast Corridor

Rail Safety Other

$600 million 180 million 4 millon

400 million

8

ATAC REPORT