$21 billion is a meaningless number. That’s how much more the 2012 Transportation Finance Advisory Committee estimated Minnesota needs just to maintain all modes in the current system. The total is certainly big, but all government figures are. There are so many billions tossed around in the realm of public finance that voters’ eyes glaze over.
It’s worth dragging down these big picture figures into on-the-ground dollars and cents from time-to-time. One easy measurement for roads is how much these proposals would cost drivers per mile – or cost per vehicle mile traveled.
This is an admittedly imperfect measurement. As per mile costs increase, people drive less. In the short term, fewer miles traveled on the same amount of road would drive up maintenance cost per VMT. In the long term, people may choose shorter commutes or developers could abandon big-box retails in favor of more, smaller stores serving more-local areas. Road systems could shrink as that happens.
But this is exactly the point. It gets people thinking about how they would change their habits if they had to pay the full cost of maintaining roads. Would I have accepted a better job in Faribault while living in Uptown if it meant losing an hour’s pay each day just to gas taxes, never mind other fuel costs? Would companies find that cheaper land in Greater Minnesota no longer outweighed fuel costs and the difficulty of finding workers?
$21 billion is a number designed to raise more money because the answer of whether we need more money to support our current system is clear: We do. But instead of asking how much money we need to support our system, we need to ask what kind of system we’re willing to support.
Unfortunately, numbers illuminating that conversation aren’t as readily available. When I asked the Minnesota Department of Transportation, a spokesman gave me the estimated 20-year trunk highway funding need, the 2015 appropriation and the total vehicle miles for Interstate, U.S. and state trunk highways. He added:
“Hopefully this will give you the information you were looking for to calculate cost per vehicle mile travel.”
It didn’t because those totals mixed different road systems and funding figures.
The good news is that road information could be easily calculated through two existing state documents: The Transportation Finance Advisory Committee’s “Minnesota Moving Ahead” report from December 2012 and MnDOT’s“Daily (Average) and Annual (Total) Vehicle Miles 2013.”
The TFAC report details the forecasted receipts and estimated funding gap for each road system except interstates and U.S. highways. Combine this with MnDOT’s latest vehicle miles traveled from 2013, and you get a cost per VMT.
I ran these calculations for the two transportation funding alternatives that TFAC considered. The first is the estimated amount needed just to maintain our current system. The second is the amount needed for Minnesota to have what TFAC considers an “economically competitive” system.
“Maintain” option
System
2013 VMT
Est. 20 year
Receipts
Estimated
Gap
20 year need
Annual
Need*
Cost per
VMT
MN Trunk
11.14 billion
$18 billion
$5 billion
$23 billion
$1.15 billion
$0.1033
County State Aid
12.84 billion
$5 billion
$3 billion
$8 billion
$400 million
$0.0312
Municipal State Aid
4.67 billion
$1.6 billion
$1 billion
$2.6 billion
$130 million
$0.0279
TOTAL
28.63 billion
$24.6 billion
$9 billion
$33.6 billion
$1.68 billion
$0.0587
County
1.03 billion
n/a†
$4 billion
$4 billion
$200 million
$0.1937
Township
1.17 billion
n/a†
$300 million
$300 million
$15 million
$0.0128
Municipal Streets
4.40 billion
n/a†
$5 billion
$5 billion
$250 million
$0.0568
* This is a simple division over 20 years, although the total in year 20 would actually be higher than in year 0 because the TFAC report factored in 5 percent annual inflation. When I inquired whether MnDOT had a cost per VMT estimate, a spokeswoman cited the same annual figure for the trunk highway system. I’m calculating the same way because those are the figures available and because they’re suitable for the purpose at hand.
† Receipt estimates aren’t available. The state auditor estimated that in 2012 cities budgeted about $630 billion for construction and maintenance, according to TFAC. Similar figures for county and township roads weren’t available.
“Competitive” option
System
2013 VMT
Est. 20 year
Receipts
Estimated
Gap
20 year need
Annual
Need*
Cost per
VMT
MN Trunk
11.14 billion
$18 billion
$11 billion
$29 billion
$1.45 billion
$0.130
County State Aid
12.84 billion
$5 billion
$9 billion
$14 billion
$700 million
$0.055
Municipal State Aid
4.67 billion
$1.6 billion
$2 billion
$3.6 billion
$180 million
$0.039
TOTAL
28.63 billion
$24.6 billion
$22 billion
$46.6 billion
$2.33 billion
$0.081
County
1.03 billion
n/a†
$9 billion
$9 billion
$450 million
$0.436
Township
1.17 billion
n/a†
$500 million
$500 million
$25 million
$0.021
Municipal Streets
4.40 billion
n/a†
$8 billion
$8 billion
$400 million
$0.091
To be honest, I expected the numbers to be higher. Costs could still creep up further with the miles of rural interstates and U.S. highways that weren’t included here. That’s probably especially true on a national scale when accounting for the long stretches of roads in low-population western states. In Minnesota, the county roads are the big outlier. This lends credence to the statements from Charles Marohn at Strong Towns that some rural routes are probably best left as dirt roads.
But even 10 cents per mile causes the cost of the approximately 20-minute average Twin Cities commute time to quickly add up. North Country commutes, which average in excess of 45 minutes in some areas, would be a deal breaker for me. I can’t imagine commuting from Rochester, as some people do now, with such a price tag.
And even the lower-cost county state aid highways and municipal state aid routes are high compared to revenue from the existing gas tax. The Minnesota gas tax is 28.5 cents per gallon, and the average sales-weighted fuel economy since 2013 has been in the 25 mpg range.
That works out to 1.14 cents per mile — not even enough to cover the lowest-cost roads, never mind subsidize the most costly. You’d need a $2.025 per gallon gas tax to hit the 8.1 cent per gallon cost per VMT. That’s a European-level of gas tax Americans aren’t willing to pay even though we say that’s the road system we want.
Policy changes
Of course, the gas tax only provides a portion of the money that the state distributes to trunk highways, county state aid highways and municipal state aid routes. In 2012, the Highway User Tax Distribution Fund got 48 percent of its money from the gas tax, 33 percent from the registration tax and 19 percent from the motor vehicle sales tax. County and municipal state aid routes also required a local match. These fall well short of the TFAC’s goals, but they still serve to divorce vehicle taxes from vehicle use. For purely local roads, property taxes, street assessments and bonds do the same thing.
It’s like a buffet. When you pay for a buffet, you’re apt to go back for seconds or grab dessert even it’s bad for your waistline. You’ve already paid; you might as well get your money’s worth. That’s not the case when you visit a traditional restaurant where you’d have to buy another whole entrée or fork over eight bucks for dessert.
The same thing happens with vehicle registrations and the vehicle sales tax. People pay their money up front and no longer have any financial incentive to curb their driving. Like the proprietor at a buffet, the state is forced to ensure there’s enough supply for everyone to get their fill and then charge enough to cover that cost. Except with roads, our appetite is bottomless. Hence, induced demand.
Overcoming a regressive tax
The common objection to the gas tax is that it’s a regressive tax. But as David Levinson has argued about transit here on streets.mn, you could simply subsidize low-income residents through non-transportation sources if that’s your goal. This could be done through rebates for fuel purchases or vouchers that entitle them to a specific amount of fuel. The U.S. military actually allows overseas service members to put money on fuel ration cards – essentially vouchers – that they use to buy discounted fuel at off-base service stations. Such a program in Minnesota would help low-income residents while still providing financial feedback to all users about the real cost of maintaining our roads.
Whatever route we choose, we need to start talking about and using real numbers that communicate the price of people’s driving decisions. $21 billion isn’t the way to do that.
Streets.mn is a non-profit and is volunteer run. We rely on your support to keep the servers running. If you value what you read, please consider becoming a member.