Federal Role in State Transportation Finance

Abstract

The federal contribution to surface transportation funding has stagnated, and this situation is likely to continue or worsen as a result of continuing fiscal and political problems. The federal government remains the biggest single contributor to transportation capital investment on federal-aid projects, and stagnation or cuts will have a substantial impact on cities, states, and the entire country. Because of their own challenges with respect to raising revenue for transportation, federal grantees may not be able to replace lost federal funds. Therefore, new ways for the federal government to incentivize existing grantees to develop new sources of revenue must be considered. This issue was approached by first analyzing the existing programs the federal government had in place that were intended to leverage or permit additional revenue sources. These programs included the Transportation Investment Finance and Innovation Act (TIFIA), private activity bonds, grant anticipation revenue vehicles, tolling pilot programs, and discretionary grant programs. The analysis demonstrated that some of these programs, particularly TIFIA and the discretionary grant programs, leveraged substantial revenues, but they were all limited in their ability to leverage additional funding by a lack of incentives as well as regulatory barriers. Then implementation of these incentives and what types of revenue should be incentivized were explored. Options were examined from a political, national, and revenue-generating perspective to understand their relative trade-offs better.