Slanted Pavement: How Ohio's Highway Spending Shortchanges Cities and Suburbs

Executive Summary

The geographical distribution of transportation funding revenues has become a hot issue at both the federal and state levels.

In the last reauthorization of the federal transportation bill, numerous states and constituencies called for a revised system of allocating states' shares of the Highway Trust Fund-- more than 60 percent of which are generated by the federal gas tax. Some states argued that their shares of federal transportation dollars should be proportional to the amount of gas tax revenue they paid into the trust fund. Others wanted their shares determined by need. To a large extent both groups of states prevailed in obtaining greater equity.

In Ohio, and some other states, state transportation dollars flow to localities on the basis of neither of these standards for revenue distribution. The result in Ohio is a spatially skewed pattern of state transportation spending that is essentially anti-city and even anti-suburb. In effect, funds are diverted away from the very places that struggle with the greatest transportation needs and pay the most in gas taxes.

This paper examines the geographic pattern of state transportation spending in Ohio between 1980 and 1998. In particular, it examines the spatial patterns the location of state transportation finance and spending--including current highway contracts, gas tax collections, and vehicle registration tax revenues--and compares them to indicators of transportation demand and need.

In doing so, the paper seeks to decipher one state's confusing system of highway finance to determine whether state transportation dollars are being spent in ways that meet the myriad challenges--aging infrastructure, traffic congestion, and decentralizing economic development-- faced by metropolitan areas. In addition the paper also seeks--since Ohio's system of transportation finance resembles that of many states--to throw light on spending patterns within numerous states.

To this end, this analysis of state trends and data on transportation spending from the Ohio Department of Transportation (ODOT) and other sources finds that:

  • Between 1980 and 1998, Ohio's highway dollars were spent disproportionately in rural counties, which received more funding relative to their transportation needs than urban and suburban counties. One might assume that counties with high travel demands on its roads would receive more funding to deal with the resulting wear and tear, congestion, and other challenges to its road network. In Ohio, however, urban counties consistently took home a smaller share of state highway funds than suburban and rural counties relative to their amount of vehicle traffic (vehicle miles traveled), car ownership (vehicle registrations), and demand for driving (gasoline sales). On the flipside, rural counties received more dollars for each indicator of need than did urban or suburban counties.

  • At the same time, urban counties in Ohio contribute significantly more gas tax revenues to state transportation coffers than they get back in return, and essentially act as "donors" of transportation dollars to rural-county "donees." Gas and vehicle registration levies, in this regard, generate approximately 60 percent of Ohio state highway funds. Of these revenues, a significant portion is redistributed to localities for building, improving, and maintaining roads. But once again, urban counties fared worse than rural and suburban counties by comparison to what they paid into the system. Highway spending in urban and suburban counties matched neither the volume of gas tax funds generated in those counties nor their levels of transportation need. At the federal level, the funding inequity between "donor" and "donee" states was debated and addressed. The Transportation Equity Act for the 21st Century (TEA-21), passed in 1998, guaranteed each state a return of at least 90.5 percent of the share its contribution to the highway trust fund. Despite the embrace of this funding logic at the federal level, similar rules exist neither in Ohio nor in most other states.

  • These anti-urban biases arise from three principal sources. First, the formula for distributing revenues generated from the gas and vehicle registration taxes does not favor cities. To the contrary: Counties and townships receive these revenues in equal shares without regard to population size, numbers of vehicles, the amount of vehicle miles traveled, or which jurisdiction has responsibility for the roadway network. That means rural Harrison County, with a population of 15,000 receives the same level of funding from the county share as Cuyahoga County, home of 1.4 million urban residents. A second bias follows from the fact state highway funds are spent on interstate highways, state roads and highways only, which principally run through unincorporated areas, townships, and rural counties. This generally leaves municipalities responsible for maintaining their own roadways while rural counties benefit from greater state attention and state investment. Finally, Ohio restricts the use of gas tax revenues to highways only, which limits the ability of urban and suburban areas to invest in transit options or air quality improvements. That, too, tilts spending toward rural and suburban pavement.

  • Overall, these spatially uneven transportation policies place a disproportionate fiscal burden on urban jurisdictions while supporting the spread of development into exurban and rural areas. Given the state's funding tilts, municipalities frequently must dip into their own funds, or impose taxes, to pay for the maintenance and improvement of their portion of their region's transportation network. This means local residents and businesses wind up assuming the burdens of maintaining roads that form vital economic links for the entire state. Compounding the problem is the fact that the state's current spending formulas (which favor new construction in rural areas) contribute to the spread of low-density development in the country. Such growth patterns undermine urban and inner-suburban jurisdictions by enabling people and businesses to locate miles from urban centers and still benefit from metropolitan life.

  • To end the fiscal drag on its urban areas Ohio should reduce the bias of its transportation funding system with a number of specific steps. The state must first fix its tilted road classification system by including all major urban arterials in the "state highway system" that ODOT maintains. The state should also readjust funding distribution formulas that have clear spatial biases to better match where travel occurs, gasoline is purchased, and where vehicle registration fees are paid. On a more basic level, Ohio should remove the restriction that reserves gas tax revenues for highway projects only. This will require amending the state constitution, but that is not an insurmountable hurdle. In addition, Ohio needs to embrace transparency in its system of tax collections. Information on gas tax collections should be released annually by the state on where motor fuels tax revenues are generated. These data should be listed by local jurisdiction--city, township, or village--as well as by county. In sum, Ohio's system of highway finance should support a balanced transportation system in order to keep Ohio cities and businesses competitive for the future.

In the end, Ohio and other states need to take a comprehensive look at how they distribute federal and state gas taxes--the primary sources of state and local highway funding--across their landscapes. Rural highways remain important to state road networks. But the roads located in Ohio's seven major metropolitan areas are especially critical to the social and economic health of the state--and require attention. With that in mind, the emerging debate over the reauthorization of TEA-21 offers a prime opportunity for congressional leaders to move beyond the distribution of federal gas tax dollars across the 50 states to consider the very real donor-donee inequities within their own states.