As I drove into work this morning, Nashville Public Radio had a piece this morning about TDOT’s resistance to borrow for bridge construction.  In case you did not know, TDOT employs a pay-as-you go method, which means the state will not borrow for new projects even when it has the opportunity.

Last year, the Legislature granted TDOT the authority to borrow money through bonding for the more than 200 bridges that needed repair in the state.  In a recent hearing, new TDOT Commissioner John Schroer confirmed TDOT’s payment plan: "All the money that we’ve done for bridges has come out of cash from state funds and federal funds, and we don’t expect to actually bond any of those bridge jobs." 

When talking about project financing, one tends to wonder: Where’s all that money coming from?  Here are few major sources: 

  • Highway use taxes and gasoline taxes, which help fund highway projects at the federal level and other transportation projects at the state level;
  • State taxes and fees, such as motor vehicle sales tax and registration fees; and
  • Federal aid programs, which are generally federal assisted, state administered programs that are tied to specific projects.

If a state chooses not to borrow funds for road and bridge construction, then what other options remain?  Again, without cash or debt, it is about raising sources of revenue for investment in these projects.  Options can include:

  1. Raise fuel and vehicle taxes
  2. Increase transit fees or consider new mileage-based or vehicle-mile user fees,
  3. Add sales taxes or increase property taxes
  4. Re-apportion general revenues for transportation investment
  5. Consider tolls and highway use programs
  6. Evaluate public-private partnerships

Question: What other options exists for the states?

Image: thomas23