Highway finance and the private sector: Issues and alternatives

Private participation in all aspects of transportation has been prevalent throughout the history of the United States. The U.S. approach to transportation finance evolved from European influence. Particularly, the English economist Adam Smith described the role of public works in facilitating national commerce. The notion of user charges or tolls as opposed to general revenue as the source of financial support was offered as a means for constructing and maintaining roads. Highway and transportation development has undergone significant changes in the last few decades. The 1970s ushered in an era of escalating costs of highway development and maintenance. Dependency on imports of foreign oil, global economics, and related events affecting the supply and demand of motor vehicle fuel have had dramatic effects on contemporary means of funding highway programs in the U.S. In responses to this funding dilemma states highway officials began exploring various alternatives for funding transportation improvements. The role of transportation agencies has changed in emphasis since the 1950s. A variety of financial, legal, and logistical issues have forced governments to closely evaluate options for transportation development and finance. State responses to these issues vary. However, there remain a variety of funding alternatives including financing districts, impact fees, tax increment financing, toll financing, and private sector funding.