Financing Transportation Networks
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Financing Transportation Networks

David M. Levinson

Pollution, alternative fuels, congestion, intelligent transportation systems, and the shift from construction to maintenance all call for a reconsideration of the existing highway revenue mechanisms, especially the gas tax. David Levinson explores the fundamental theoretical basis of highway finance, in particular the use of tolls, and supports that theory with empirical evidence. The author examines highway finance from the perspective of individual jurisdictions and travellers, and considers their interactions rather than specifying a single optimal solution. Congestion pricing has long been a goal of transportation economists, who believe it will result in a more efficient use of resources. Levinson argues that if the governance were to become more decentralized, and collection costs continue to drop, tolls could return to prominence as the preferred means of financing roads for both local and intercity travel. An approach that creates the local winners necessary to implement road pricing is required before it can be expected to become widespread.
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Chapter 6: Intertemporal Equity

David M. Levinson


INTRODUCTION Local jurisdictions must balance present and future needs against costs when financing infrastructure. When a fixed piece of infrastructure is funded and built by one group, and then a new group comes in and uses it without paying, there is a free-rider problem. When one group comes in and borrows money to build infrastructure, and another group is held liable, there is also a free-rider problem. The extent of the problem depends on site-specific circumstances, the nature of financing, and the placement of the tax burden. This chapter will consider these factors and evaluate suggested solutions. In the past two decades, many localities have levied impact fees to finance new and expanded infrastructure. The fees are designed to be associated with the ‘impact’ of the development on public services. The impacts include the full gamut of publicly provided services, including roads, sewers, schools, and parks. While development has generally been held responsible for constructing on-site public services, off-site facilities are often addressed by impact payments. Some communities have adopted value capture districts, to tax adjacent development for the benefits associated with new transportation infrastructure (Stopher 1993). Others have implemented stringent growth management regulations tied only weakly to financing (Levinson 1998; Pollakowski and Wachter 1990). The underlying need for taxes on development arises due to the financing mechanisms used to pay for infrastructure. Suppose a community has adopted ‘pay-as-you-go’ financing and pays outright for a road. When a residential or commercial development comes along, it does not pay the one-time...

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