First of four parts

We have a transportation funding crisis in America, a crisis that gets played out on both the federal stage and in each of the 50 states. The crisis is not simply one of insufficient funding – it is a more fundamental failure of public and political will to understand and pay for the cost of our mobility preferences and needs. People want to drive alone in their cars, people want to park those cars conveniently and at low cost, people want to fuel those cars with low-cost gasoline, people want public transportation to be reliable and convenient, and people want to bicycle and walk streets in safety. In short, people want everything. But when asked to pay the true costs of such a system, many of the same people recoil and resist.

This conundrum has effectively translated itself into legislative fear of taking the steps necessary to fairly and sustainably fund our transportation system. The idea of raising the gas tax at the federal or state levels has been largely off the table, and policy makers increasingly resort to non-transportation revenue sources like the sales tax or gimmicks like asset sales. The use of gimmickry reached its zenith this year when Congress sent a temporary highway bill to the President that was funded through a scheme known as “pension smoothing’ – a bookkeeping scam that purports to increase federal revenues by increasing corporate profits generated by allowing those corporations to underfund pension obligations. How anyone can accept such a scheme without embarrassment is beyond me, but that is the state of affairs in America today.

Here in Massachusetts, the effort to finding a sustainable transportation-based revenue solution has been frustrated over the years, sometimes by right-leaning anti-tax and anti-toll activists and sometime by legislators who are fearful of the political consequences of taking votes to raise revenue. It’s been seven years since the bi-partisan Transportation Finance Commission identified a 20-year transportation funding gap ranging from $15 billion to $19 billion. The commission offered a menu of policy choices to eliminate that gap, stressing that the funding approach of the past was no longer sustainable as a reliable way to fund our transportation needs. Challenging Massachusetts policymakers to think expansively, the commission recommended an 11.5-cent state gas tax increase and introduction of a direct road user fee, calling on policymakers “to change the way we collect revenue to enable a solid framework for economic growth and prosperity into the future.” We have not paid heed to that recommendation.

In Massachusetts, raising the gas tax in any meaningful way is politically difficult to do. As a result, its purchasing power has significantly deteriorated over time. I tried unsuccessfully in 2009 to raise the gas tax by 19 cents a gallon; last year the Legislature enacted a paltry 3-cent-per-gallon hike – the first such increase since George H.W. Bush was president. Also last year, for the first time, the Legislature acted to allow the gas tax to be automatically adjusted for inflation. That common sense notion is now under attack by right-wing activists who have placed a repeal proposition on this year’s general election ballot. The fight over the gas tax inflation adjustment, while important in the short term, is a distraction to the conversation that needs to take place regarding finding a long-term fair and sustainable approach to transportation funding. One thing seems certain: the gas tax is not the future of transportation funding. As automobiles become more fuel efficient and hybrid/electric oriented, the gas tax will diminish as a reliable source of transportation revenue. We need to find sustainable alternatives, derived from transportation sources. First, though, we need to put an end to the old habits of evading responsibility by turning to political slogans, financing gimmicks and excessive borrowing.

There are many ways to raise substantial net new transportation revenue. One of them is not through more reform. Having been in and out of government for most of my professional life, I can say this without reservation: there is a distinct difference between the alluring optics of reform and the reality of revenue saved as a result of reform. We adopted many reforms in 2009, and the facts five years later demonstrate that reform alone cannot fill our yawning transportation funding gap. Reform certainly is important as a way to extract efficiencies and accountability, but it is not effective as a way to generate sustainable and meaningful net new revenue. Robust net new revenue has to come from a sustainable and reliable revenue source, and that means either taxation or user fees.

Gimmicks, one-time deals, and excessive borrowing are other tax-avoidance strategies frequently used as ways to kick the revenue can down the road. One-time deals can appear creative, but they often underprice the true value of a public asset over time, leaving most of the risk with the public sector and most of the reward with the private sector. One of the first acts I took upon becoming state transportation secretary five years ago was to put all of the service plazas along the Massachusetts Turnpike out to bid. I did this in part to test the marketplace for privatization and also, anticipating that I would need to ask the Legislature for a gas tax increase, to demonstrate that we were being creative in finding ways to raise new revenue. The result was highly disappointing: only one serious proposal was made, and it was for such a low return that it would have been irresponsible for me to accept it.

The city of Chicago and the state of Indiana famously entered into public private partnerships several decades ago that generated big upfront paydays, only to find that the outcomes over time were not always in the best interests of toll payers or citizens. Chicago’s privatization binge of a decade ago, which also included a highly unpopular privatization of parking meters, has taught the citizens of the Windy City to look with skepticism on privatization schemes that appear too good to be true. Whether sound or not, one-time deals are like rabbits in the magician’s hat: sooner or later, there are no more rabbits.

Seeking non-transportation sources of revenue is also neither wise nor feasible. We have deprived other state priorities of hundreds of millions of dollars by dedicating 1.5 cents of the sales tax to transportation needs. Last year, the Legislature tried to raise transportation revenue on the back of the innovation sector, by taxing computer and software services – the so-called “tech tax.” This attempt to shift transportation costs onto the tech industry quickly became toxic as the very same industries we are looking to as major jobs creators complained about being singled out to pay for mobility needs that impact all sectors of our economy. The result was a quick repeal of the law, without any replacement of the lost projected revenues. If ever there was an example of the folly of extracting transportation revenue from non-transportation sources, it was the late unlamented tech tax.

Finally, excessive borrowing is a time honored way to pay for today’s needs on the back of tomorrow’s. I do not object to using borrowing and debt issuance as a strategy in the right circumstances – particularly for large expansion projects – but I do object to using borrowed money to pay for operating costs (a practice that exploded exponentially during Gov. Mitt Romney’s term in office), or to pay for routine or programmed maintenance and repair. Borrowing for those costs masks the reality of limited revenues, and lulls people (including legislators) into a false comfort that we have all the money we need for the level of service we want.

So where does that leave us? Here are three options that can introduce a new era of fairness, equity, and transparency in the way we generate transportation revenue.

1. Transition to a Dedicated Road User Fee.

All Electronic Toll systems (AET) and Vehicle Miles Traveled user fees (VMT) can become powerful tools for raising net new revenue from transportation sources. During the past two years we have been moving toward an electronic toll system to replace the current hybrid manual/electronic toll collection systems on the turnpike and metropolitan highway systems. The Tobin Bridge was the first segment to undergo the transition to electronic tolls, and the transition went very smoothly both in terms of technology and public acceptance.

While electronic tolls are a significant improvement over the current hybrid system, I am an advocate of VMT because I believe it is the most fair and transparent way to collect net new revenue: you pay for what you use. VMT can charge every motorist using a designated road a “base price” per mile, and then charge additional increments according to travel time and/or use of congested corridors. Out-of-state license plates can be captured and assessed through conventional border tolls and video technology. VMT would be fair, transparent, and dynamic, charging motorists less while driving off-peak or in rural areas, charging them more while driving on congested urban roads or during peak hours.

Equally important, VMT can establish a new paradigm for funding equity, enabling us to level the playing field by using revenue generated by vehicles to support transit. Under my proposal, the “base” VMT price per mile would be dedicated to funding highway, road, and bridge projects and the congestion/time-of-day “delta” would be dedicated to transit. In other words, the cost of vehicles traveling on congested roads (and increasing congestion and emissions) would be captured as a payment toward alternative modes, improving them in order to encourage modal shift.

I do not suggest this last point lightly. A fundamental re-think of our approach to transportation funding must be based upon a commitment to modal equity. Modal equity begins with funding equity. For decades, transportation policy makers have maintained a silent and substantial subsidy for automobiles whose owners/drivers do not pay anywhere near the actual costs of their impacts on our transportation system. The accumulated costs of highway, bridge, and tunnel infrastructure design, engineering, construction, and (most important over time) operation and maintenance, have overwhelmed most state transportation agencies. Transit system costs are also high, largely as a result of the high cost of specialized equipment and infrastructure (locomotives, train sets, busses, signaling systems). As a result, transit systems have historically required some form of public subsidy to maintain both a high standard of good repair and affordability. Transit systems may always need some form of subsidy, but we can do more to inject net new revenue into our transit system. This is one effective way to do that.

2. Place a carbon assessment on daily urban parking for non-residential spaces.

The concept is simple: allow local communities meeting certain population or destination thresholds to impose a carbon impact parking assessment on nonresidential parking facilities with 10 or more spaces, and dedicate those funds to transit or bike and pedestrian improvements. This assessment could be the foundation for funding Transit Improvement Districts (TID), a new approach to generating significant net new revenue. A TID would be a specific targeted area within a city or town that seeks to encourage new development or redevelopment, and that depends in large part upon the availability of public transportation. A TID would operate in two ways: first, it would identify parking as a specific set-aside revenue source; second, it would enable the public and private sectors to leverage this dedicated fund to make important investments in public transportation (and safer pathways for pedestrians and bicyclists). For communities that do not host public transportation stops, this revenue would be available as a dedicated fund that would support bond funding for local pedestrian, bicycle, and other non-vehicular mobility improvements. In the 2009 transportation reform legislation, I called for a $2 per day carbon assessment on all parking at Logan Airport, and would have dedicated the revenue generated by that assessment to transit projects designed to improve transit connections to and from the airport. That idea should be renewed as an appropriate way to inject new life into getting people to Logan via the Blue and Silver Lines.

3. Smart Public Private Partnerships

Public-private partnerships work best when they are designed to build important infrastructure, not when they are used as one-offs to generate a big payday. In Florida, a “design-build-finance-operate-and-maintain” approach to developing the Port of Miami Tunnel is quite successful. That’s because the Miami Port Tunnel project isn’t about selling off an asset; it’s about using private sector capital, risk management, and overall management discipline to build and operate a public asset at costs that are favorable to both the public and private sectors. The private side puts up a share of the capital equity, and it also assumes a good deal of construction and delivery risk. In return, the public side provides regular ‘availability” payments that incentivize performance as well as high standards of maintenance and good repair.

I hope that each of us can take a look at the facts, and at the history of the past 20 years, and agree that we must find a sustainable and fair solution to the transportation funding gap. The gas tax is increasingly fading as a reliable way to fund our needs. Let us bring creative thinking to how our changing mobility behaviors can frame and establish a new transportation funding system. A truly multi-modal transportation system begins with funding equity, and we are on the doorstep of a time that provides fertile ground for innovative thinking about revenue generation.

James Aloisi is a former state transportation secretary and a principal at the Pemberton Square Group.