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.

FULL REPORT