Rock to Road

News
New study looks at generating infrastructure dollars


June 20, 2014
By RCCAO

June 20, 2014, Toronto, Ont. – A new study from the
Residential and Civil Construction Alliance of Ontario shows that fuel taxes to
pay for transportation infrastructure is a second best option when compared to
road and parking pricing.

June 20, 2014, Toronto, Ont. – A new study from the
Residential and Civil Construction Alliance of Ontario shows that fuel taxes to
pay for transportation infrastructure is a second best option when compared to
road and parking pricing.

 

The breakthrough report, prepared by Professor Harry Kitchen
of the Department of Economics at Trent University in Peterborough, Ont., was
commissioned by the RCCAO to explore how much revenue might be generated from a
GTHA-wide fuel tax over the next 20 years. Kitchen concludes "that gas and
diesel fuel tax revenues are unlikely to generate enough revenue to fund future
road and transit expansions and that it is a blunt instrument to address
congestion."

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Instead, he recommends that innovative parking technologies
and levies as well as road pricing will prove to be much more effective at
reducing traffic congestion while at the same time generating revenue to fund
transportation/transit projects.

 

Among Kitchen's findings:

 

  • Fuel taxes to pay
    for transportation infrastructure is a "second best" option when
    compared to road and parking pricing.

 

  • Dedicated fuel
    taxes will result in additional revenue, but these monies will not shift
    driving behaviour during peak travel times.

 

  • Fuel tax revenues
    have helped municipalities fund some infrastructure needs, but these
    revenues have not increased in 20-years and are likely to decline due to
    an increase in more fuel efficient vehicles, an increasing
    reliance on electric and hybrid vehicles and people simply driving less.
    Hence, other revenue sources must be implemented to offset these losses.

 

  • As an alternative
    to fuel taxes, provincial politicians must stand up and take a good
    look at parking levies and road tolls as better ways to fund road and
    transit in the future.

 

  • Parking is
    currently inefficiently priced and tends to promote cruising for on-street
    parking in high-demand areas. Consequently, drivers spend a lot of time
    looking for a vacant spot which adds to traffic congestion,
    pollution, and results in lost productivity.

 

  • Efficiently
    implemented parking levies, including progressive pricing (where prices
    increase for longer stays), will result in better turnover of vehicles and
    will increase municipal revenue. Deployment of cell-pay parking will
    result in lower policing and traffic enforcement costs.

 

  • Road pricing
    applied at a regional scale is widely recognized as an effective travel
    demand management tool to internalize congestion, pollution, and
    other external costs of driving. More so than parking fees, they can
    influence all dimensions of travel choice: trip frequency,
    destination, travel mode, time of day or week and route.

 

  • Tolls can generate
    significant sums of revenue. In 2011, Highway 407 International
    earned gross revenues of $675 million (net income $128.3 million). The
    Province of Ontario plans to implement tolls on the new 407 East which
    will be built over the next few years.

 

  • In comparison, it
    is estimated that a one-cent fuel tax increase will yield about
    $90-million per year. Fuel tax revenues are not expected to increase by any
    notable amount over the next two decades. It's debatable if a fuel-tax
    increase will generate an adequate and sustainable source of revenue.

 

  • Road pricing and
    parking levies/taxes are a "first-best" policy. These instruments target
    those who use the roads, and are effective in tackling congestion
    and the problems that it creates.

 

Professor Kitchen's findings provide a cautionary tale.
"While this revenue stream will continue to be an important source of
revenue to fund transportation infrastructure in the coming years, it should
not be relied upon indefinitely," said Andy Manahan, Executive Director of
the RCCAO.

 

A full copy of the report can be viewed at: http://www.rccao.com.