Texas DOT fesses up about endless subsidies for highways — will Wisconsin be next?

If you've ever been in an argument with a highway booster who claims that highways "pay for themselves" through gas tax receipts while transit requires dreaded "ongoing subsidies," you'll appreciate the candor of the Texas DOT in this posting to its Keep Texas Moving website. TxDOT answers the question "Do Roads Pay for Themselves?" with a simple "no," using a very straightforward calculus to demonstrate that the gas tax receipts generated by any given stretch of highway fall far short of the combined construction and maintenance costs of that highway. In other words, highways require those dreaded ongoing subsidies, mile after mile, year after year.

The backstory here may be that the Lone Star state — in its quest to keep its Texas crews moving, building and expanding highways — has been more forward than most states in acknowledging the limits of the gas tax and shifting towards toll roads. As a result, the DOT and state government are coming under pressure to explain the new tolls to populist critics. Since citizens were led to believe that highways, uh, paid for themselves, a lot of them now want to know why they have to pay for them again through tolls. It's a good question that may now be leading to what formerly would have been startling admissions like the following: a typical highway project like State Highway 99 in Houston will generate only 16% of the $1 billion needed for construction and maintenance through gas tax receipts. Maybe CNU board member and Texas House Transportation Committee chair Mike Krusee -- who has supported transit projects, better surface street designs and the DOT shift to tolled highways -- had something to do with TxDOT coming clean and starting to put transit and highways on something closer to equal rhetorical footing.

Now it's time this type of "truth in transportation" comes to more states -- like Wisconsin. As top Badger blogger Jim Rowen notes, the Wisconsin DOT still has its head buried in asphalt. With gas tax receipts failing to deliver the dough to pay for colossal (and difficult to justify) highway expansions across Southeast Wisconsin, they're quietly passing much of the bill for these projects on to future taxpayers through expanded borrowing — a fiscal bubble that may well burst as skyrocketing prices of petroleum-based asphalt make highways more and more expensive to pave and repave.

Excerpt from TXDOT:

Until recently, when TxDOT built or expanded a road, no methodology existed to determine the extent to which this work would be paid off through revenues.

The Asset Value Index, was developed to compare the full 40-year life-cycle costs to the revenues attributable to a given road corridor or section.

The shorthand version calculates how much gasoline is consumed on a roadway and how much gas tax revenue that generates.The Asset Value Index is the ratio of the total expected revenues divided by the total expected costs.

If the ratio is 0.60, the road will produce revenues to meet 60 percent of its costs; it would be “paid for” only if the ratio were 1.00, when the revenues met 100 percent of costs.

Another way of describing this is to do a “tax gap” analysis, which shows how much the state fuel tax would have to be on that given corridor for the ratio for revenues to match costs.

Applying this methodology, revealed that no road pays for itself in gas taxes and fees.

For example, in Houston, the 15 miles of SH 99 from I-10 to US 290 will cost $1 billion to build and maintain over its lifetime, while only generating $162 million in gas taxes.

That gives a tax gap ratio of .16, which means that the real gas tax rate people would need to pay on this segment of road to completely pay for it would be $2.22 per gallon.

This is just one example, but there is not one road in Texas that pays for itself based on the tax system of today. Some roads pay for about half their true cost, but most roads we have analyzed pay for considerably less.

Image of supersized intersection of Lyndon B. Johnson and Central expressways in Dallas, TX via Jeremy Stump at Flickr.