Winners and Losers Under Various Surface Transport Policies for Texas
By Vincent MayIntroduction
I have known that the trucking companies are quietly supporting Perry's toll plans and I now have some good data. I have written up my findings in the following document.
My suspicions were first aroused after hearing this repeatedly, "TxDOT is spending 60% of its funding on maintenance and doesn't have enough for new construction." I knew that maintenance arises from truck damage. Cars do negligible damage. Then I read a trucking industry paper 2 weeks ago saying that, "Truckers pay 40% of all of the road use fees and taxes."
If truckers pay 40% then car drivers are being seriously overcharged since:
1) Truckers' contributions don't even cover their damage costs and
2) Truckers pay zero towards new construction, then
3) Car drivers are paying all of their costs plus nearly half of the truckers costs.
The toll plan is worse than a state income tax. The toll rate can be raised at any time and not a single elected official will have to vote to make it happen. Toll money will be used to build Krusee's commuter rail systems and the RMA's are already voting to give toll exemptions to favored parties. The plan is opposed by 95% of the people.
Vince
Summary
The Texas highway network, now barely adequate, has declined in recent decades. The cause of this decline is well known in academia, the Governor's office and the hierarchy at TxDOT and the Texas Transportation Commission.
The amount paid into the Highway Trust Funds by the heavy trucking industry has been insufficient to pay for the wear and tear that normal weighted trucks impose on Texas roadways. The industry pays nothing towards new construction. This has been going on for at least 20 years.
Most of the heavy trucks operating in Texas have TxDOT-granted 'over weight permits' which cause exponentially more damage than trucks carrying normal loads. (Car and light truck drivers have been paying 100% of the cost of new construction, 100% of the cost of wear and tear they impose, and a growing share of truck generated wear and tear.)
For more than 20 years our state and federal Highway Trust Funds have been raided by politicians for non-road spending projects. These losses, combined with insufficient contributions by the trucking industry, and careless administration by TxDOT in allowing over weight trucks to operate on Texas highways, have left our road network at least 10 years behind what our capacity needs would dictate, and the network is rapidly deteriorating.
NAFTA rules require signatories to adopt uniform standards for road and bridge networks. Mexican and Canadian standards are higher than U.S. standards and will probably be adopted here. This will impose huge costs. Rebuilding of U.S. bridges to Canadian standards was estimated at $329 billion in 1994. Politicians have dawdled for 12 years and still have not decided on a common standard.
Conclusions
Bigger and heavier trucks are more efficient and should be operating on our roads in the not too distant future. (Studies have shown that they are no more dangerous than conventional trucks and have environmental benefits when operated on roads that are designed and built to accommodate them.)
Truckers should pay the full cost of upgrading the road network to the new standards, and the maintenance costs they impose on the network. (Studies show that maintenance costs due to truck wear and tear may actually decline with the new generation of trucks. Better distribution of loads onto more axles and the reduced number of trucks to carry a given number of tons are some of the reasons cited. But there is a substantial upfront cost of strengthening bridges to carry the larger loads.)
a) Subsidizing truckers (or any industry) is economically wasteful and morally repugnant.
b) Subsidizing Texas truckers has cascading negative economic effects such as promotion of job loss to Mexico or other states.
c) Anything that is subsidized tends to be over produced. We do not want to seize homes and farms to build redundant roads. (Or 1,200 foot wide roads if 300 foot wide roads will suffice.)
Tolling is a suitable method of funding highways, with 3 caveats. First, only trucks should be tolled (as long as other users' inputs cover their costs). Second, tolling should be done on every road, by GPS sensing. Finally, toll rates should vary by location, load and temporal factors.
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Scenario One
Mrs. Baird's used to bake bread in Austin but the bakery shut down and it is now baked in Houston. A Mexican company recently bought Mrs. Baird's and they have begun moving production to Mexico. If Mexican workers can produce bread at a lower cost than Austin workers, so be it. But, should Texas taxpayers subsidize the Mexican workers with below cost shipping rates?
A Mexican entrepreneur is now taking highly skilled jobs from Texas auto mechanics. He picks up 50 cars at a time, anywhere in Texas, ships them to Mexico for repairs.
To the extent that truckers in Texas don't pay the full cost of their usage of public highways, the outsourcing of Texas jobs is subsidized by Texas workers.
Scenario Two
Texas consumers benefit if shipping rates are lower (provided that a consumer is not paying the subsidies which keep the rates down.) A shopper in Dallas might save a few pennies on Florida grown tomatoes.
What about tomatoes that are grown in Mexico, shipped through Texas, and sold in New York? We could even imagine that New Yorkers would have bought New Jersey grown tomatoes had it not been for shipping subsidies paid by Texas car drivers.
New Yorkers are winners. Mexicans are winners. Texans are losers, in more ways than you might think. First, we subsidized the shipper. But, we also have to deal with the air pollution emitted by trucks passing through Texas, and excess traffic on our roads.
The best Texas policy would be to have the best roads in the world, bar none, available to anyone who is willing to pay the actual cost of using them.
The Perry highway plan is based on a short term, 10 year, economic stimulus as billions of borrowed dollars pour into the state for road building. Individual Texans will then have 40 years, or more, of paying $2,000 to $4,000 per year of increased road use taxes (tolls) after the Perry boom turns to bust.
History One
In 1983 President Reagan increased the federal gas tax by 100%. Rather than honor the Federal Gas Tax pledge to spend every penny of gas tax on building and maintaining highways (the Federal Highway Trust Fund) Reagan decided to spend some of the new money on building passenger rail lines and other pork for special interests.
The state gas tax was increased in the early 90's and the federal gas tax again in 1993. For the last increase, Republicans in Congress demanded that part of the increase would be used to pay down some of Reagan's and Bush Sr.'s accumulated deficits. (Republicans officially dishonored their vow with the people regarding the "Trust Funds" just as L.B.J. violated the Social Security Trust Fund promise in 1969.)
Since the mid 1980s, Texas has seen about 15 to 20% of its federal gas tax funds pissed away. Some of our elected representatives 'trade' our highway funds for new NASA facilities or new military programs or continuing wool and agricultural subsidies. District 10 Representative, Mike McCaul, traded away central Texas' road funds for a Bike Trail between Manor and Austin in 2005. Lamar Smith gave his discretionary road dollars to a toll road project that will be owned by a private company and isn't even in the Austin region.
History Two
Empirical studies have shown that heavy trucks carrying legal weight loads (below the design limits of the highways they operate on) cause more damage (wear and tear) than the operators pay in road use fees and taxes. The sign on the back of the truck may say, "This Truck Pays $7,145 Per Year In Road Use Taxes" but the actual cost of operating on Texas highways is, on average, much higher that that. (There is nothing available for new construction.)
More than 20 years ago the Texas trucking industry asked TxDOT for permission to drive overweight trucks on Texas highways. It is well established that increasing the weight of a truck (more specifically, the axle load) increases the damage at an exponential rate. (The exponent was initially found to be the 4th power back in the 1950's. Today, with varying truck suspensions, and varying road surfaces, the power may range from 2 to 8. But even a 2nd power increase is very significant.) The average cost of an overweight permit is $238 per year. The additional damage done by overweight trucks has been calculated at $493 to $51k per year, with most trucks closer to the upper figure.
For all intents and purposes, cars impose negligible damage on highways.
History Three
By 1996 it was becoming apparent that traditional funding of highways through gas taxes and other road use fees was constrained and could not keep up with increases in demand due to rapid population growth (and the depredations mentioned above). Governor Bush signed a toll road bill that year but it was more in the way of a resolution than an action plan.
In 2003 Governor Perry pushed for passage of HB 3588. It passed unanimously. This disaster, written by Rep. Mike Krusee, had 4 main thrusts:
It created Regional Mobility Authorities. RMAs have the power to float bonds to fund toll roads, enhanced power to condemn private property, and the power to use toll revenue to build and operate commuter rail lines. (Krusee is a fanatic for commuter rail.)
It allowed the conversion of existing highways into toll roads.
HB 3588 also authorized the building of a new class of highways called the Trans-Texas Corridor.(T-TC)
Finally, it authorized TxDOT to take up to 20% of the Texas Highway Trust Fund and use it as seed money for for the T-TC.
In 2005 Perry and Krusee passed (again unanimously) HB 2702. It further looted the Highway Trust Fund by increasing the amount of money that can be diverted to the T-TC from 20% to 40%. It also imposed some limits on how existing roads could be converted to toll roads.
The Future - NAFTA
One of the requirements of NAFTA is that all of the highways in North America will be built to a common standard so that trucks from any country can drive on any other country's highways. All federal aid highways in America, the 48k mile National Highway System, are built to the Federal Formula adopted back in the 1950s. (Bridges must be strong enough to carry 80k pound trucks, bridges must be high enough to let 14' trucks pass underneath, etc.)
Mexico and Canada allow trucks that are longer and / or heavier than are allowed on American highways. (E.g., bridges must carry 132k pound loads, trucks can be up to 120' long) We could upgrade our roads and bridges to standards that our trading partners agree to, or we could pay them cash damages and force them to use smaller, lighter trucks when they travel in America.
Despite some scare propaganda, the Longer Combination Vehicles (LCVs) used by Canada and Mexico are safe, economical, and will eventually become widespread on American roads. About a dozen states already permit them on some of their roads. It is a shame that American politicians, 12 years after signing NAFTA, have not upgraded the Federal Formula so that rational planning of our infrastructure can begin. Every bridge built today, to the existing standard, will have to be upgraded in a few years when the New Federal Formula is codified.
States can act unilaterally and Texas probably has done so (even if it hasn't so stated.) T-TC 35 is almost certainly designed to the maximum and then some. It should be noted, building T-TC 35 doesn't relieve us of the obligation to upgrade IH 35 (and every other road in the National Highway System.)
One estimate found that upgrading of American bridges would cost $329 billion (but most of that figure was accounting for congestion delays while work is underway.) There are other huge costs too.
Conventional trucks have a hard time turning at intersections. LCVs can't safely turn at most existing 90 degree intersections. Modifications will have to be made. LCVs also need longer stopping distances and have poor acceleration. This aggravates problems at intersections.
The sensible solution will often be to build flyovers with long graceful curves, especially at intersections of two interstate quality roads. Flyovers are also very expensive.
TxDOT plans to upgrade the intersection of 71E and 183S at a cost of ~$300 million. This intersection has direct connectors now for every possible travel direction. Cars and conventional trucks have used this intersection for many years without having to stop at signal lights. The upgrade has some marginal benefit for car drivers but very few would be willing to pay $600 per year to use the upgraded version. (Which is what TxDOT will charge car drivers who use this intersection after upgrading it.) Why is TxDOT proposing the upgrade? To accommodate future LCVs is the best answer.
If the upgrade is primarily for the benefit of shipping, why is TxDOT proposing that car drivers pay for it with tolls? Let's assume that some upgrade will be needed soon. A less elegant upgrade solution could be done for $75 million. It would accomplish multiple goals and could be funded with traditional means but would not accommodate LCVs. A more robust upgrade that would cost $150 million, and would carry LCVs, could be built but it would not be possible to toll car drivers since it would have no frontage roads (the 'free' alternative promised for every tolled road.)
Adding frontage roads, and thus the ability to toll car drivers, doubles the cost of the project. I previously contended that forcing one class of road user, car drivers, to subsidize another class, truckers, is a bad thing, on multiple accounts. Now we have another reason; designing and building roads so that cars can be tolled inexorably drives up the cost providing roads.
*The $300 million figure above is speculative, based on TxDOT's published estimate of $135 million for engineering, right of way and utility relocation, but not construction, for the project. A similar project in Dallas cost $268 million.
Resolution
The gas tax (which functions more like a user fee than a typical tax) is one of the best ever devised. It is extremely efficient compared to other taxes. It has allowed us to build a laudable road network. But there are some flaws.
The gas tax overcharges users of rural roads (which are cheaper to build.) Excess taxes paid by rural folk are remitted as welfare to Houston and Dallas road projects.
Other gas tax inequities exist but none approach the disparity of what truckers pay vs. the benefits they obtain. This disparity is remediated somewhat by the steep registration fees paid by truckers. (When the 7 ton truck became popular 90 years ago, the state of Maryland charged $500 per year per truck. That would be $10,000 in 2006 dollars.) Texas truckers get a bargain on 40 ton trucks any way you look at it, and truckers who pay less than $1 per day for overweight permits have a license to steal.
We now have reliable technology that can accurately measure the exact cost of road use, down to a tiny fraction of a cent. Why not charge every road user exactly those demands he places on the system?
First, let's eliminate the gross differences. (Then, we may decide that it's not worth pursuing the fractions of a cent.) Tolling truckers, but not cars which are already paying more than their fair share, will go a long way towards perfecting our system.
Several years ago I read that all new Volvo heavy trucks had sensing units installed (like GM's OnStar system) which report its location and numerous other data (like speed, safety info, load, etc.) Older trucks that don't have this system can be retrofitted for a reasonable cost.
I believe that this reporting system could be used to accurately charge truckers for their demands on the road system. Variable pricing would be employed on all roads:
Loaded trucks would pay more per mile than empty trucks.
Overloaded trucks would pay much more.
Trucks would pay more per mile on congested routes during rush hours than during other hours.
Trucks with superior suspension systems (well distributed axle loads) would pay less.
Trucks with deficient noise, safety or emission systems could be charged more.
The trucking tolls would be passed on to consumers but many of those consumers would be in other states.
The average price increase would be ~2% but would vary widely. Heavy, very low value goods like dirt and gravel would cost ~10% more.
The increase in price of most goods would be more than offset by the lower cost of shipping on LCVs which deliver goods more efficiently. Overall, prices would probably remain the same but we would all benefit greatly from having increased mobility on a first class road system.
Reference:
Much of the information in this paper was found in a document by David M. Luskin and C. Michael Walton at the U.T. Center for Transportation Research.http://www.utexas.edu/research/ctr/pdf_reports/2122_1.pdf
