The Funding of Oregon Roads: Do Bicyclists Pay Their Share?

One of the common misconceptions about road funding is that bicyclists don’t pay their share and, therefore, are not entitled to the use of the roads. Many people who hold this view often think that the gas taxes they pay not only cover the costs associated with motorists’ use of the roads, but that the gas taxes are also used to pay for bicyclists’ use.

In fact, gas taxes cover a relatively small portion of the total road costs resulting from motor vehicle use. Federal, state, and local highway user fees, derived from a combination of gas taxes and other motor vehicle related fees, are sufficient to pay approximately 80 percent of road construction and maintenance costs.¹ However, the costs of road construction and maintenance are not the only costs of motor vehicle operations and the other costs are significant.

Bicyclists pay for roads because Oregon increasingly is using fixed fees, rather than mileage-based fees to fund road construction and maintenance:

• During the recent sessions, the legislature has increased highway fund revenues to pay for a series of bridge reconstructions, freeway expansions, and other road projects. However, rather than increasing the gas tax that is connected to road usage (albeit imperfectly), the state legislature has increased registration and title fees that are paid by all motor vehicle users regardless of the extent to which they actually drive the vehicles. In some cases, these fees have been increased more than five-fold in the span of a decade.²
• Almost 90 percent of bicyclists also own at least one motor vehicle. With the decrease in the portion of Oregon highway funds derived from gas taxes and the increase in the portion of fees associated with car ownership, motor vehicle-owning bicyclists now contribute a disproportionate share to state highway funds compared to those taxpayers who heavily use their motor vehicles.

Bicyclists pay for roads because local governments rely on property-based taxes to fund road construction and maintenance:

• During the 2007-2008 fiscal year, the $7 million that the City of Salem anticipated receiving as its share of the state highway fund was sufficient to pay only about 25 percent of the spending that the city budgeted for streets. This was prior to the city’s passage of a $99.8 million general obligation bond measure to be repaid with property taxes at the approximate rate of $64 per year for a typical home.³
• In the Portland area, Metro’s budget includes almost $200 million for transportation projects, with only about 15 percent of the funding coming from the state highway fund.
• The costs incurred by developers in constructing streets represent another property-related fee that may increase the cost of a new home by as much as $5,000.⁴
• These communities are not atypical in imposing the costs of streets on all residents of the community, regardless of whether they own or operate a motor vehicle, either through their property taxes or rent payments.

Bicyclists pay for roads because they, as well as all other roads users, incur the external costs of imposed by motor vehicles:

• Motor vehicle use imposes many costs on communities including those from congestion, air and water quality, noise, and health care after crashes. Inclusion of these external costs (costs to society in general) more than double governmental expenditures on roads.⁵
• The marginal cost of operating an automobile is 2.91 cents per mile on a rural interstate and 10.41 cents per mile on an urban interstate highway.⁶ The efficiency of the average US passenger car is 22.5 miles per gallon. Thus, the gas tax would have to be more than $2.34 per gallon to fully pay the costs of operating an automobile on an urban freeway. (Oregon’s gas tax is 24¢ per gallon, scheduled to increase to 30¢ per gallon not later than January 1, 2011 and the federal excise tax on gasoline is 18.4¢ per gallon.)
• The current user fees from the purchase of gasoline fall far short of paying the full costs of motor vehicle operation. As taxpayers, bicyclists incur a portion of the unmet costs regardless of their lower impact on roads.

Bicyclists pay for roads because other taxes that they pay are used to subsidize motor vehicle operation:

• Not only are the user fees for motor vehicle use inadequate to pay the associated costs to the public, motor vehicle use is subsidized in a number of other ways. Subsidies are provided through corporate income taxes, sales taxes, property taxes, and personal income taxes.⁷
• Other public costs that have been identified as incurred, but not included in the costs of motor vehicle operation include those resulting from free parking, sprawl, and energy security.⁸

Bicyclists pay more than their share of the costs of roads. The external costs of motor vehicle operation are in excess of 10¢ a mile and may be as high as 28¢ a mile. However, the external costs of bicycling are about 1¢ per mile.⁹ Because of the large difference in the costs and the variety of subsidies provided for motor vehicle operation, those road users who minimize their operation of motor vehicles ultimately pay a portion of the costs imposed by those who use motor vehicles more extensively.

¹ US Department of Transportation, Federal Highway Administration, 1997 Federal Highway Cost Allocation Study Final Report, August 1997.
² HB 2142 (2001), HB 2041 (2003), and HB 2001 (2009).
³ City of Salem, City of Salem Streets and Bridges General Obligation Bond Authorization, November 2008.
⁴ See Mid-America Regional Council, Smart Choices, Understanding the Cost of Development, December 2001 for case study examples of development cost components.
⁵ The FHWA cost allocation study estimates the external costs as follows: noise, $4.3 billion; congestion, $61.8 billion; water quality, $5 billion; and crashes, $120.6 billion. The 2000 addendum to the report estimates air quality costs as ranging from $30 to $349 billion per year.
⁶ US Department of Transportation, Federal Highway Administration, Addendum to the 1997 Federal Highway Cost Allocation Study Final Report, May 2000.
⁷ Mark A. Delucchia and James J. Murphy, How large are tax subsidies to motor-vehicle users in the US?, Transport Policy 15 (2008) 196–208.
⁸ US Department of Transportation, Federal Highway Administration, 1997 Federal Highway Cost Allocation Study Final Report, August 1997.
⁹ Todd Litman, Whose Roads? Defining Bicyclists’ and Pedestrians’ Right to Use Public Roadways, Victoria Transport Policy Institute, November 2004.

I wrote this for use by the Bicycle Transportation Alliance and other cycling advocates during discussions about funding with lawmakers.

Tired of Hearing that Bicyclists Don't Pay for Roads?

One of the common misconceptions about the source of road funding is that bicyclists don’t pay their share and, therefore, are not entitled to the use of the roads. The people who hold this erroneous view think that the gas taxes they pay not only cover the costs associated with their use of the roads, but that the gas taxes are also used to pay for facilities for bicyclists. The problem with this viewpoint is that gas taxes cover only a small fraction of the total costs that are imposed by the use of motor vehicles.

To cover the full costs of operating a motor vehicle, the gas tax would have increased to more than $3.50. Currently, the Oregon state gas tax is 24¢ per gallon and the federal excise tax is 18.4¢ per gallon. How much more would depend on which “soft” costs were to be covered—pollution cleanup, medical costs, policing, the war in Iraq, etc. The bulk of the funding comes from other sources, including taxes that have nothing to do with the burden that the taxpayer places on the public road system.

Since voters approved a constitution amendment in 2001, the use of the net proceeds from the state gas tax and vehicle registration and title fees after the costs of administration have been limited to highway construction and maintenance—including bike lanes within the highway right-of-way. (Previously these taxes also funded traffic patrols and state parks.) Subsequent efforts to restore funding for policing have failed. The money collected is distributed among the Oregon Department of Transportation (60%), counties (24%), and cities (16%).

Historically, the vehicle registration and title fees were calculated to cover the fixed cost to the public of an individual’s ownership of a vehicle. The gas tax (and the similar weight-mile tax paid by trucks) were intended to cover the variable costs associated with operating the vehicle. However, beginning in 2001, the state legislature initiated a major departure from this funding philosophy. Because an increase in the gas tax was politically difficult and registration and title fees were relatively low, the legislature decided to increase these fees to fund road expansion and repair costs—clearly costs associated with the use, rather than the ownership of vehicles. The fee increases equate to a gas tax increase of 2 - 3¢ per gallon, distributed disproportionately on individuals who drive their motor vehicles fewer miles than the statewide average.

The difference between the cost of $3.50 or more a gallon and the 30¢ or so a gallon actually paid by drivers has to come from someplace, and does. However, the source of the difference has nothing to do with the costs imposed by the operation of motor vehicles.

During the 2007-2008 fiscal year, the City of Salem anticipates receiving about $7 million as its share of the state highway fund. This will not be sufficient to even cover the city’s costs of operation and maintenance of the street system. Another $3 million will come from other sources. The money budgeted for capital improvements, primarily street expansion projects to handle increased motor vehicle traffic accounts for an additional $17 million of the city’s budget. The primary source of these funds is property-based taxes. Thus, only about 25 percent of the money that the city spends on streets is paid through user fees on motor vehicle use. Salem is not atypical. In the Portland area, Metro's budget includes almost $200 million for transportation projects, about 15 percent of which will come from the state highway fund.

Todd Litman of the Victoria Transport Policy Institute (www.vtpi.org) compared costs of providing for motor vehicles and bicycles with the contributions by each of these groups to transportation funding. In Whose Roads? Defining Bicyclists’ and Pedestrians’ Right to Use Public Roadways, Litman concluded that, “Pedestrians and cyclists pay more than their fair share of roadway costs.” Because of the disparity between the relative contributions to support the road system and the costs of providing the services, pedestrians and bicyclists tend to subsidize motorists.

The concept can be hard to grasp because motorists do pay both highway user fees and property taxes. However, consider this example: You and your friend decide to have a barbecue, purchase all of the food, and split the cost evenly. Your friend has a bag of briquettes that he uses in the grill, so he has contributed more to the total cost of the barbecue. But, your friend brings his wife and three children along and among them, they eat 3/4s of the food. Who subsidized the other?

The direct costs of roads do not encompass all of the costs of motor vehicles. The health care costs imposed by motor vehicles are in the billions of dollars. Many employers provide free parking, a benefit that costs the employer money that otherwise would be available for salaries for all workers. The list is endless. So, now, who is receiving the free ride?

I originally wrote this for publication in the September 2007 issue of Spokes, the newsletter of the Salem Bicycle Club.