Alternate Financing Sources for Alabama Highways

Building and maintaining an effective highway system is important to safeguard the mobility and safety of the traveling public, as well as to support economic growth. Aging infrastructure and the continuing increase in vehicle miles traveled, coupled with increased construction and maintenance costs, place added burdens to already strained transportation funding resources. To make things worse, declining transportation funding is a reality that is faced by most states across the country and is a concern of the Federal Highway Administration. To address such issues this study investigated both traditional and innovative highway financing options and assessed their potential for securing funding for highway related projects in the near- and long term. Options considered include: (a) vehicle mileage road user fee, (b) heavy truck road user fee, (c) public toll roads, (d) private toll roads, (e) privatization of highway projects, (f) private funding using bonds, (g) inspection fees, and (h) increase in the fuels tax. For each option, implementation requirements, institutional issues, and anticipated costs and benefits from adoption were identified and assessed. The evaluation of alternative revenue sources performed in this study was based on revenue potential, equity, efficiency, and political acceptability to tax payers and government decision makers. Based on the comparison of alternative revenue generating options considered, recommendations were offered on financing solutions with the best potential for implementation. The review and evaluation of available options indicated that, for the immediate future, the most desirable solution to funding Alabama’s highways with respect to efficiency and effectiveness is to increase the fuel tax to at least $0.27 per gallon. However, as the gasoline tax revenue declines, additional options should be considered and future plans made to implement alternative financing solutions to complement or replace the fuel tax revenue. The most promising options include inspection fees, toll collection, and reallocation of funds generated from vehicle registration fees and title fees.