Press Release (pdf)

Executive Summary

Taxpayers spend an extraordinary amount of money to maintain and expand America's network of roads, rails, bridges, bike paths, and sidewalks. With this investment, we have a right to expect fair and efficient use of our tax dollars. Unfortunately, the current system instead wastes billions of dollars on inefficient and unnecessary projects and fails to equitably balance all transportation needs.

The majority of surface transportation money is spent on highways and roads. In 2000(1), federal, state, and local taxpayers spent approximately $104 billion on highways, and $27.8 billion of that total came from federal funds. Transit spending that year totaled $32.4 billion, with $5.3 billion from federal funds(2). Federal policy has created a system where highway projects receive more money and are more easily approved than other transportation projects, yet highway projects are subject to less federal oversight. The resulting inefficiency has created a situation in which spending on highways has soared to record levels, yet congestion is increasing and many of our existing roads and bridges remain in disrepair.

Road to Ruin highlights 27 proposed federal-aid highway projects from every region in the country. All of these projects face significant public opposition because they would waste tax dollars and cause significant and unnecessary harm to communities, the environment, and public health. Hundreds of projects were reviewed for Road to Ruin. Each highlights problems with federal transportation spending and raises questions about how transportation projects are approved.

Federal taxpayers would be forced to spend more than $24 billion to construct these projects, based on conservative cost estimates. This figure will balloon over time when inflation, inevitable cost increases, and project changes occur.

In addition to direct construction costs, these projects would also amass enormous secondary costs that would also be passed down to taxpayers. New road capacity creates additional maintenance costs. Many of the areas where projects are proposed already fail to meet federal air quality standards. More road capacity would exacerbate this problem by encouraging more driving, resulting in increased spending on health and environmental damage. Finally, new and wider highways and roads would continue to encourage sprawling development, forcing local governments to provide additional and costly public services.

The last federal transportation authorization bill, the Transportation Equity Act for the 21st Century (TEA-21)(3), provided $218 billion for surface transportation projects from 1997 to 2003. Roughly 80 percent of that money was directed to highway programs, leaving transit and other non-highway programs with only one-fifth of the funding pie.

Congress is in the process of reauthorizing TEA-21. The Senate and House of Representatives have each passed versions of a bill, but there is no agreement yet between the two bodies as to the bill's final cost. The House-passed bill authorizes $275 billion in spending over six years, plus another $10.6 billion in earmarked funds-money for specific projects-used in larger part to secure votes of individual legislators. The Senate bill authorizes $318 billion over the same time period. While a conference committee from the two chambers meets to hammer out differences between the two bills, only two things are certain-federal transportation funding will increase sharply, and the 80/20 split between funding for highways and transit will continue.

Although federal investment in transportation is significant, every project request cannot be funded. The maintenance and repair of existing infrastructure should be of first priority, and tough choices regarding new projects must be made.

At a time of record federal budget deficits, we cannot afford to continue squandering money on damaging and unnecessary road projects. For this reason, all 27 projects included in Road to Ruin should be cancelled or seriously scaled down.

Problems with Federal Policy

Bad projects result from bad policy. Federal transportation policy has created a system in which highway projects receive a free ride to funding and approval. Expensive, destructive, and unnecessary roads are built partly because federal rules favor roads over other transportation projects and too often fail to require agencies to consider the full range of alternatives and impacts.

Several factors lead to easier approval for highway projects, which results in wasteful highway projects and inefficient use of federal dollars:

• Uncle Sam Pays More of the Tab for Highway Projects–No matter the need or expense, Uncle Sam pays for the vast majority of every highway project. Federal tax dollars cover 80-90 percent of the cost for road, highway, and highway bridge projects. In contrast, the federal New Starts program-which funds new rail transit projects and rail system expansions-provides no more than a 60 percent federal share for these projects.(4) The Bush administration has proposed cutting the federal share for New Starts even further, to 50 percent, while maintaining the current highway cost share of 80-90 percent.(5)

  These policies create an unbalanced funding playing-field that in some instances results in new highways even when transit is a community's preferred choice. The U.S. General Accounting Office (GAO) found that the disparity between road and transit funding could “bias the local decision-making process in favor of highway projects.”(6)

• “Free Money” for Roads–State governments often provide the non-federal share for highway projects, minimizing or eliminating the need for local investment. As a result, many local officials view highway funding as “free money,” making them more likely to approve road projects.(7) In contrast, transit projects often require local investment, making them less attractive to local officials and forcing transit projects to compete with other important local needs, such as fire, police, and education. When state funds are dedicated to a transit project, this money is often drawn from general revenues instead of using dedicated funding sources such as gas taxes, which places transit dollars in competition with other state needs.(8)

• Building Today, Paying Tomorrow–Many states are going into significant debt to fund highway projects by selling transportation bonds to avoid raising gasoline taxes or user fees. In 2001, bonds represented the largest revenue source dedicated to highway spending in Indiana, Massachusetts, and New Jersey. In addition, Massachusetts, Connecticut, Arizona, Georgia, and New York each committed more than half of their gas tax receipts to paying off transportation bond debt.

  Since 1990, outstanding transportation bond obligations at the state level have increased by more than 70 percent.(9) Instead of paying for highway projects with available money, states are issuing bonds against anticipated federal or state transportation funds. This raises a number of significant concerns. First, debt financing drives the cost of transportation projects higher. Second, states' bond ratings may suffer, affecting their ability to issue bonds in the future, including for needs other than transportation. Third, bonds make highway projects more attractive because there appears to be money to pay for them, although it will take decades to pay off these projects. Lastly, anticipated revenues may never materialize, damaging a state's credit rating or forcing a state to divert revenues from other programs.

• Uneven Playing Field–To gain approval and federal funding, transit projects face far more intense scrutiny than highway projects. While this policy helps ensure that federal transit dollars are well spent, it also discriminates in favor of highways.

  The Federal Transit Administration (FTA) evaluates and rates each New Starts proposal and requires a comprehensive planning and project development process that considers impacts on employment, operating efficiency, cost effectiveness, land-use policies, and local funding commitment. Highway projects face a far less stringent analysis. Most projects receive an exclusion from review, while less than 3 percent require an Environmental Impact Statement, which is primarily a consideration of the project's direct environmental and traffic impacts. Even in these cases, cost-benefit, land-use, and performance analyses are rarely required or conducted, and state departments of transportation (DOT) do not have to provide hard evidence that a proposed project will be economically or socially beneficial. And while the FTA measures transit projects against similar proposals and projects in other states, the Federal Highway Administration (FHWA) draws no such comparison between highway projects.

  FHWA provides limited project oversight once a highway project has been approved, but FTA carefully monitors the progress of each transit project, including financial performance and schedule adherence.

• Highway Projects Bring Home the Bacon–Congress stuffs the six-year transportation authorization bill and annual transportation appropriations bills with billions of dollars for earmarked highway projects. These projects are specifically identified in the legislation and each receives its own funding.(10) Even more projects receive funding in annual transportation appropriations bills. This process enables legislators to obtain funds for specific projects in their districts, regardless of whether those projects are included in local or state transportation plans, comply with federal law, or enjoy broad local support. All earmarked funds a state receives are in addition to other federal transportation “formula” funds. As a result, Congress improperly bypasses the decision-making authority of transportation agencies at all levels of government and wrestles transportation decision-making away from the public.

  A number of projects in Road to Ruin were earmarked for funding in the House version of the transportation bill reauthorization. The biggest porker of the group is the Ohio River bridges project, which would receive $49.4 million in federal funds as the result of two earmarks.

Limiting Public Input

The administration and some members of Congress are attempting to ensure that highway projects face even easier approval, no matter how ineffective or damaging a project would be.

One example is Executive Order (EO) 13274(11), signed by President Bush in September 2002, which may undermine rigorous review and limit public participation and input. Under EO 13274, the administration is handpicking transportation projects for fast-track review and placing them on a “Priority Project List.” The criteria for selecting projects are so broad and vague that virtually any highway may qualify. Several projects on the “Priority Project List” are highlighted in Road to Ruin-Interstate 93 in New Hampshire, West Street in New York, Interstate 66 in Kentucky, and the Inter County Connector in Maryland. The administration has moved two other Road to Ruin projects-the Circumferential Highway in Vermont and the Ohio River bridges project in Kentucky-from the “Priority Project List” to a “Transitional List,” meaning that FHWA has issued decisions in favor of these projects. In some cases, the administration is pushing projects that have been rejected by various federal agencies or governors on the grounds that they would cause significant damage while offering few benefits.

Attempts are also being made to roll back decades of federal law governing environmental protection, public health, and transportation. The National Environmental Protection Act (NEPA) and the Clean Air Act require review of transportation projects to ensure that projects serve broader community needs. NEPA further requires significant public disclosure and public participation. Rolling back these laws would reduce the already limited accountability that is required of federal and local highway agencies, limit the public's access to information regarding a project's impacts, and reduce taxpayers' options to be involved in decision-making.

Conclusion

Most highway projects benefit from federal “blank check” policies. When federal and state governments pay 100 percent of a project's cost, local governments are more likely to approve a bad highway project over anything else, even if the highway project is unnecessary, faces significant opposition, harms the environment, or contradicts local planning goals. Approval of wasteful highway projects is also easier because states and local governments know they will not be held accountable for how the money is spent or how the project performs, and the federal government does little to verify a project's economic viability. The uneven playing field makes federal highway dollars a much more attractive option to local officials, who in turn have little incentive to efficiently use the money they receive. These problems plague the projects highlighted in Road to Ruin. These projects are poor federal investments that would needlessly cost federal taxpayers more than $24 billion.

Federal dollars are wasted on inefficient projects, little oversight is exercised, and few opportunities for accountability exist, creating a system in which taxpayers are spending too much money on projects they know too little about.

The good news is that this problem is not incurable. Steps can be taken to improve efficiency, oversight, and accountability of transportation spending. The transit funding and oversight process provides an example of how this may be accomplished. Local and state governments pay a much larger share of each transit project, so they have a vested interest in managing costs effectively. The result is more financially sound projects with greater community support.(12) In addition, greater scrutiny of transit projects makes for better projects. Highway projects should receive the same strict review as transit projects, and impacts and costs should be as transparent as possible. This way, the public would have the information necessary to learn more about local projects and help insure the best and most necessary projects are built first.

Recommendations

To increase cost efficiency, improve project oversight and accountability, and level the playing field between transportation modes, Road to Ruin recommends the following:

(1) The federal share for new or significantly expanded highway projects should be reduced to 50 percent. This will significantly increase highway project efficiency by creating greater incentive for local governments to build only the most necessary projects, and will help ensure that costs are kept as low as possible.

(2) All projects should face equally tough scrutiny before receiving federal funding. Transit projects go through a rigorous review process to ensure they will meet financial targets and perform as promised, and the result is well understood and fully considered projects. If highway proposals undergo the same process, better projects will result and the requirements for road building and other modes will be brought more in line with each other.

(3) Transportation agencies at every level of government should be required to provide information to the U.S. Department of Transportation (USDOT) detailing expenditure of all federal funds for every project they oversee. USDOT should make this information publicly available and accessible on its website in a format that is easy to understand. Increasing transparency will allow the public to make fully informed decisions and shine a bright light on how and how well federal tax dollars are invested in transportation projects.

(4) The role of the federal government in transportation decision-making must be redefined. The most important role for the federal government is to ensure that federal funds are spent efficiently, that the public is kept fully informed about transportation spending, and that state and local governments are held accountable for spending decisions. The federal government should not unduly influence local decision-making by providing earmarked funds for projects, undermining necessary environmental review, limiting public participation, or “fast-tracking” projects. Ideally, decisions regarding project choice would be made at the local level of government, and without influence from Congress or the administration.
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(1) This is the most recent year for which transportation spending data is available for federal, state, and local governments across all transportation modes.
(2) U.S. Department of Transportation, Bureau of Transportation Statistics, Government Transportation Financial Statistics.
(3) This legislation was first enacted in 1991 as the Intermodal Surface Transportation Equity Act (ISTEA), and was renewed in 1997 as TEA-21. As enacted, this legislation must be renewed every six years.
(4) “Department of Transportation and Related Agencies Appropriations Act, 2002,” H. Rept. 107-308, 107th Congress (Government Printing Office, 2001).
(5) The Safe, Accountable, Flexible, and Efficient Transportation Equity Act of 2003: Section-by-Section Analysis. Federal Highway Administration.
(6) U.S. General Accounting Office, “FTA Needs to Provide Clear Information and Additional Guidance on the New Starts Rating Process,” GAO-03-701, 12, 2003.
(7) Edward Beimborn and Robert Puentes, Brookings Institution, “Highways and Transit: Leveling the Playing in Federal Transportation Policy,” 6, Dec. 2003.
(8) Robert Puentes and Ryan Prince, “Fueling Transportation Finance: A Primer on the Gas Tax,” 10, March 2003. Thirty states have laws preventing any portion of gasoline taxes from being used for transit projects in 30 states.
(9) Ibid.
(10) TEA-21 contained 1,850 demonstration projects, many of which are for highways, worth several billion dollars over the life of the legislation.
(11) Office of President George W. Bush, “Executive Order 13274: Environmental Stewardship and Transportation Infrastructure Project Reviews,” Sept. 18, 2002.
(12) Edward Beimborn and Robert Puentes, Brookings Institution, “Highways and Transit: Leveling the Playing in Federal Transportation Policy,” 6-7, Dec. 2003.