The Nevada Department of Transportation lists 13 current projects [NDOT] and the planning division suggests another round of major projects running from 2015 to 2018. [NDOT pdf] This makes sense given that the population of Nevada in 1990 was 1.221 million, the population was 2.019 in 2000, and the population grew to an estimated 2.839 million as of 2014. The problem, of course, is how to pay for the construction and maintenance of roads and highways to meet escalating population demands. The current financial resources are explained by NDOT:
“State highways maintained by the Nevada Department of Transportation are financed with dedicated highway-user revenue and federal funds. No General Fund (general tax) revenue is used. State and federal highway funds are principally derived from vehicle fuel tax and registration fees.” [NDOT]
Clark and Washoe counties index their taxes to the price of fuel, a ballot measure in 2016 would make such indexing statewide, and this should be considered in the light of two factors. First, the relative volatility of fuel prices, and second, the increasing population of the State, up 132% since 1990. [LVSun] So, where does the money come from?
“Figures compiled by The Associated Press show the total amount of money available to states from the Federal Highway Trust Fund has declined 3.5 percent during the five-year period ending in 2013, the latest year for which numbers were available. During that span, the amount of inflation-adjusted federal highway money dropped in all states except Alaska and New York.
In Nevada, the 6 percent drop from 2008 to 2013 comes in spite of a 41 percent increase from 2003 to 2013. At the same time, needs in Nevada are mounting. Current funding levels only provide 60 to 70 percent of what’s needed to maintain state highways, according to a recent report card from the American Society of Civil Engineers.” [LVSun]
The idea that current funding levels from both state and federal sources only meets 60 – 70% of our needs isn’t an appealing thought. Could it be that the state might see more assistance from Federal sources?
“A temporary funding patch on highway funding is scheduled to expire in May and lawmakers in Congress have been at odds over a long-term plan. A federal fuel tax increase appears unlikely.” [LVSun]
We should note that the last time the Federal gasoline tax was increased was in 1993, when it was raised to 18.4 cents per gallon. [WaPo] That was when the population of Nevada stood at approximately 1.411 million, and the price of a gallon of gasoline was about $1.16/gallon. Nevada’s state gasoline tax was 24 cents in 1993 and has dropped to 23.804 (-0.2%) as of 2014. [TPC pdf]
One of the obvious problems with pegging highway construction and maintenance financing to the price of a gallon of gas is that more fuel efficient cars on the road means fewer trips to the pump. Another factor to consider is the increasing use of public transportation. Indeed, in spite of the drop in fuel prices recently, national transit ridership figures are up. [NYT] While increasing revenues from higher gasoline taxes would help resolve some immediate funding issues, the source is less robust than we might need in the long run.
As noted previously, AB 21 introduced in the Nevada Legislature as of December 20, 2014, calls for the issuance of ‘special obligation bonds’ for the financing of highway projects. Specifically, it allows for extending the maximum maturity from 20 to 30 years. This, too, is problematic. The extra ten years may allow for an extension of repayment schedules, but it also allows for the piling up of interest. If the “coupon” on a transportation related bond is approximately 4.0% [MuniNV] then that extra 10 years could be rather expensive.
At compound interest rates, $10 million would end up costing about $21 million in 20 years, or about $32.4 million in 30 years. [MC] Even simple interest rates would add $8 million to the cost of a $10 million project at 20 years, and $12 million in 30.
There’s always the Throw Up Your Hands and Let Someone Else Do It Solution, i.e. Privatization.
“Another idea tossed around in the Legislature is high occupancy transit lanes — better known as toll roads. The fast lanes, aimed at reducing congestion, could be financed by a private company, which would own the lane and keep the toll revenue for a set period of time.
“We’re going to look to private industry to help us with some of our issues,” said Republican Assemblyman Jim Wheeler, who chairs the Assembly Transportation Committee.” [LVSun]
This, too, comes with some significant costs. A few of these can be categorized under the general heading of “public control.” For example, how can taxpayers be assured of the implications of “non-compete” clauses? Must adjacent municipalities add traffic lights and decrease speed limits in order to guarantee usage rates (i.e. toll revenues) for privatized roadways or access lanes? Is the state required to agree to compensation clauses which demand that the state pay the investors if it adds an exit ramp or other fixture which might reduce toll revenues? What of the effects of clauses which seek to divert traffic to the toll lanes or roads? For example, if a state were to contract with a private corporation for a toll road it might agree to 4.5% of the revenue if the speed limit were set at 45 mph, or 9% if it agreed to set the limit at 60 mph? What implications might that have for public safety and general transportation policy? [PIRG pdf]
There’s also the old business adage to consider: You can’t control what you don’t own. This leads to more questions. Does the contract require that the private corporation adopt the best practices and most modern maintenance standards? Will the state get what it is due? Again, if the contract is for 99 years and the investors are assured they’ll get their returns in 20, then is the state actually losing money on the deal? When speaking of long term contracts, it’s also important to consider how long the contract should last. It’s not only difficult to value projects over a 50 year period, it’s also a iffy proposition to determine if that 50 years is too much to give away to private corporations. [PIRG pdf]
Sometimes, getting things done “on the cheap” can lead to more problems than the initial ‘solution’ intended.
There are other ideas we might want to consider:
#1. Take some of the pressure off the road/highway system by improving options for public transit. If congestion is causing havoc in some urban areas, consider light rail or bus transport to ease the problems. Some consideration might be given to comparative costs involved in installing options from funding sources other than the highway funds, and providing the public with transit choices other than using private cars. This could be especially useful in crowded urban areas.
#2. Give some consideration to options other than in 10 year intervals for special obligation bonds. If the costs are increased with a 20 year bond, then they’d be less at 25 than they would be at 30.
#3. Consider the current structure of Nevada’s vehicle registration fees, some of which are earmarked for transportation needs.
There are no magic solutions, no silver bullets, when it comes to addressing public infrastructure projects like roads and highways. What is needed is some careful study of the implications of transportation policy with an eye towards Nevada’s future population trends, projected revenues, and estimated capacity to pay for long term projects.