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The Future of Transportation Funding

Posted on July 2021 By George Place, Senior Vice President

The Future of Transportation Funding

With the importance of securing future transportation funding, our team has been doing research to really understand the possibilities and how this is likely to change in the coming years. It is such a crucial topic and as a specialist transportation recruitment team, we want to be ahead of the game in understanding the future of this industry.

The transportation system has been funded by fuel tax since 1919 when the state of Oregon introduced it, with every other state following suit in the next 10 years following Oregon’s adoption. It has now been in place for 100 years to fund infrastructure projects. I was personally amazed to hear that the average American only pays $263 per year on gas tax to fund infrastructure development; this certainly sounds like it is not sustainable for the future, with it only going to reduce in coming years.

The ability for the gas tax to fund infrastructure projects is becoming less viable due to the increase of fuel-efficient and electric vehicles (EV’s), as well as the solvency of the highway trust fund where the outlays are far above the revenue. Currently, only about 2% of current vehicles are EV’s; however, with increasing technology, they are becoming more affordable. Their battery range is also increasing, as well as the availability of charging stations.

It is now time for a new solution to future-proof the funding of transportation infrastructure. There are several possibilities that could help DOT’s keep up with, maintain, and improve the already under-funded infrastructure.

In a recent webinar, "Re-imagining How to Fund Transportation in the U.S.," John O’Neill III, Senior Tolling & Mobility Advisor at Gannett Fleming, summarized some of the potential options:

  1. Vehicle registrations fees – While differing from the usage fee, this would certainly help provide revenue by increasing this alongside some other funding options, with only some states having to pay $17.

  2. Expansion of tollingThis is already being used effectively to fund projects and many of these tolling facilities are becoming cashless/electric such as the Florida Turnpike in South Florida recently beginning this process to make the process more convenient. Again, this is set on a user-based fee and can incorporate dynamic pricing to manage traffic.

  3. P3’s and ConcessionsThese types of projects are becoming more popular as DOT’s shift risk and provide faster project completion.

  4. Dedicated transportation taxes - Can be added on a local basis with counties and municipalities.

  5. Road User Charging (RUC’s)Ultimately this would be very similar in it’s principle to the gas tax as it is based on mileage use. There will be several trials to find out the best way this could be tracked but options include smartphones, GPS, or on board units.

Many states are starting to trial these RUC’s such as Utah, who still gets a good source of funding from the gas tax but realizes this is going to reduce within the coming years. They have begun trialing charging electric and other alternative fuel vehicles based on their use, and plan to fully integrate road user charging by 2030.

How will this affect hiring?

Right now, the transportation hiring market is as competitive as ever, despite some concerns about funding, the market is categorized by there being more work than engineers available to do it. We advise our clients that now is the time to prepare and get your transportation team in place for the shorter-term funding, which is being described as a generational investment. However, a long-term fix for beyond the next 5 years is certainly needed. Moving to a system where you pay for transportation like you do electricity and water is likely one of the many options on the horizon. This should future-proof funding for the transportation system and give the industry the security it needs to prevent projects from slowing down or having to be shelved.

For more industry insights, or to discuss how talent can play a role in preparing for the future, get in touch with the LVI Associates team today.