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Transportation Funding & Financing

Funding

Overview

The vast majority of surface transportation funding in the U.S. is derived from public sources at the federal, state, and local levels. Upwards of $200 billion per year is invested in surface transportation, most of which is revenue from various taxes and fees. Taxes on motor fuel are a significant source, about one-third of surface transportation funding. Vehicle and other taxes and fees, including sales taxes and property taxes provide another 25 percent. Appropriations from general funds, themselves primarily supported by taxes, account for about 16 percent. Tolls and fares-facility-specific user charges-comprise a small share of funding (less than 10 percent), but are nonetheless a significant source of revenue for innovative finance, in the case of tolls, and mass transit, in the case of fares.

The various revenue sources that contribute to federal, state, and local surface transportation funding are summarized in the table. The numbers are taken from 2004 FHWA data and are representative of current funding levels. Notably, of the approximately $187 billion available to transportation that year, the vast majority was provided not by the Federal government, but instead by state and local governments-79 percent in total. Also, within the three categories of funding, the contributions from types of revenue differ significantly. Most Federal funding comes from the excise taxes on motor fuels-about 82 percent-which, conversely, is a very small contributor of local funding. Most local transportation funding is provided by property taxes and general fund appropriations, as well as fares for mass transit. At the state level, motor fuel taxes are significant, but motor vehicle taxes and fees and bond proceeds also play important roles.

Revenue Sources for Surface Transportation Funding ($ billions, 2004)
Revenue Type Federal Share State Share Local Share Total Share
User Charges                
Motor Fuel Taxes $31.1 82.1% $29.7 36.9% $1.2 1.8% $62.0 33.5%
Vehicle Taxes and Fees $3.1 8.2% $16.8 20.9% $0.9 1.4% $20.8 11.3%
Fares $0.0 0.0% $0.0 0.0% $9.1 13.7% $9.1 4.9%
Tolls $0.0 0.0% $5.6 7.0% $0.9 1.4% $6.5 3.5%
Subtotal $34.2 90.2% $52.1 64.7% $12.1 18.2% $98.4 53.2%
Other Revenue                
Sales Tax $0 0.0% $2.1 2.6% $4.8 7.2% $6.9 3.7%
Property Taxes $0 0.0% $0.1 0.1% $8.0 12.0% $8.1 4.4%
Other Taxes and Fees $0.3 0.8% $4.6 5.7% $5.0 7.5% $9.9 5.4%
Bond Proceeds $0 0.0% $10.4 12.9% $5.4 8.1% $15.8 8.5%
Investment Income $0 0.0% $2.6 3.2% $4.9 7.4% $7.5 4.1%
Other Income $0 0.0% $0 0.0% $2.0 3.0% $2.0 1.1%
General Fund Appropriations $3.4 9.0% $6.8 8.4% $19.5 29.4% $29.7 16.1%
Other Public Funds $0 0.0% $1.8 2.2% $4.7 7.1% $6.5 3.5%
Subtotal $3.7 9.8% $28.4 35.3% $54.3 81.8% $86.4 46.8%
Total Revenues $37.9 100.0% $80.5 100.0% $66.4 100.0% $184.8 100.0%
Reserves Withdrawn $2.2   $0   $0   $2.2  
Total Expenditures $40.1 21.4% $80.5 43.0% $66.4 35.5% $187.0 100.0%