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Oil Report

Panel: hike gas tax for roads and curb privatizing

WASHINGTON (Reuters) - U.S. gasoline taxes should be raised at least 25 cents over five years to pay for upgrades to highways, bridges and other transportation networks, a congressionally appointed panel recommended on Tuesday.

A motorist fills his car's tank with unleaded fuel at a service station in Washington January 2, 2008. REUTERS/Jason Reed

The National Surface Transportation Policy and Revenue Study Commission, which was created in 2005 to assess transportation systems and find ways to finance improvements, said policy changes alone will not get the job done.

“Significant new funding also will be needed,” the panel said in its report, which recommended $225 billion in annual spending per year from all federal, state, and private sources.

Transportation Secretary Mary Peters, who chaired the panel, refused to sign the final report because of the gas tax recommendation.

The commission called for raising the federal gasoline tax between 25 and 40 cents per year over five years.

Gas tax revenues are collected by states and used for construction and transit projects.

The panel also endorsed as promising new tolling strategies, including one to charge motorists in major metropolitan areas more to use highways at busier times.

“Governments on all levels should encourage public-private partnerships as a means of attracting additional private investment to the surface transportation system,” the group said.

Peters favors congestion pricing on highways and public-private partnerships. Two other commission members sided with her in rejecting the call for higher gasoline taxes.

“Raising gas taxes won’t improve traffic congestion,” Peters said in a statement. “It will only perpetuate our ineffective reliance on fossil-based fuels.”

Some 23 states have enacted laws that allow public-private partnerships, the commission said, but some have faced voter backlash. Critics say some of the deals, which are much more common overseas, have benefited developers at taxpayers’ expense.

The commission recommended some curbs on these often billion-dollar public-private partnerships that Wall Street banks and developers are eager to launch in the United States after Chicago’s ground-breaking deal for a commuter link in 2005.

For example, the commission said deals should not include non-compete clauses but should cap tolls at the inflation rate minus an adjustment for productivity, and ensure the public share in revenues from toll increases.

The commission also said the private sector financing should provide better value than public financing, taking into account the loss of federal tax revenue if tax-exempt bonds are used.

The Bush administration has long opposed gasoline tax increases but some powerful members of Congress -- including some Republicans -- have expressed support for the idea with U.S. roads and bridges deteriorating in many states and revenues to pay for improvements limited.

A fatal bridge collapse in Minnesota last year has focused attention on upgrades to U.S. roads.

Other proponents of higher gas taxes suggest that raising the fee significantly might be an effective way to reduce consumer driving habits, driving down petroleum use, reducing tailpipe emissions, and creating demand for alternatives to gasoline-powered vehicles.

Federal gasoline taxes stand at 18.4 cents per gallon. Including state levies, consumers pay more than 40 cents per gallon in gas taxes. In addition to a higher federal tax, Peters also said the commission assumes states will increase their gas taxes as well if the recommendations became law.

(Writing and reporting by John Crawley and Joan Gralla; Editing by Bill Trott)

john.crawley@reuters.com; +1 202 898 8340

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