Sunday, April 28, 2013

Technology and Its Effect on the Future of Financing Roads in Florida

As a Floridian, I am used to paying for toll roads. It wasn't until I moved to Minnesota that I realized not every state uses tolls.

Now, Florida is on the verge of facing tough decisions on how to finance new road construction and road repair and maintenance.

Due to greener cars and better technology, cars are now getting much better gas mileage than they did decades ago. For example, hybrid and electric cars use far less gasoline than traditional economy cars that are gas guzzlers. However, better gas mileage also means less revenue from gas taxes, and thus, fewer dollars for new road construction and road maintenance. Although gas prices have been increasing over the years, this hasn't necessarily increased state revenue since the gas tax is on per gallon of gasoline purchased, not on the purchase price, as shown through information collected by the Department of Revenue. Despite the increase in taxes, a decrease in fuel consumption, illustrated by the two graphs below from the Florida Transportation Commission, Florida is bringing in less revenues.
Over the last 20 years, officials have shied away from increasing the gas tax, even though the cost of road repairs have been increasing. Therefore, Florida, like many other states, have a few options to address this diminishing revenue:

1. Increase gas taxes
Florida Transportation Secretary has said gas taxes are unsustainable. State officials say that gas tax revenue simply won't be enough. Furthermore, if gas taxes are increased, this is seen as more of a regressive tax. The wealthier are the ones able to afford the more fuel-efficient cars. As a result, much of the gas tax burden would fall on the poorer who are driving gas guzzlers because they can't afford $30,000 hybrids.

2. Increase toll roads
Florida is considering using tolls to fund roads connecting key economic regions, for example, from Tampa to Jacksonville. One argument against the use of toll roads is that it might be a huge burden on the poor. Some argue that tolls could cost a minimum of $3 a day. That could be a lot to a minimum wage worker. Is this fair? The following graph is from the Florida Turnpike showing the historical and projected revenues from the system.

3. Use a GPS system to charge based on mileage driven
Another option officials are considering is to charge drivers based on the miles they drive. The state would track the vehicle movement by GPS or a device installed in cars. This is a huge controversy due to privacy issues. Essentially, the government would be able to track where someone is going and when.

Florida has to grapple with what is a fair way to raise revenues, and also what is politically feasible to implement.

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