Funding America’s Transportation System The real story on subsidies. America’s huge investment in her transportation system over the past 200 years is in part responsible for her rise to greatness as a world power.   Our unity as a nation is sustained by free communication of thought and by easy transportation of people and goods...Together, the uniting forces of our communication and transportation systems are dynamic elements in the very name we bear-United States.  Without them, we would be a mere alliance of many separate parts. President Dwight Eisenhower Maintaining that system, renewing it, and employing useful technology to solve its problems is essential to our global competitiveness. Transportation Infrastructure and Ownership Of our three main transportation systems, rail is unique in that 99% of U.S. route-miles are owned, managed, financed, and maintained by private sector railroads.   By contrast, 99% of the nation’s roads and most bridges are financed, owned, and usually maintained by the public sector.   Likewise airports are government owned, financed, and maintained while air traffic control systems and weather information services are provided by government agencies.   The Public/Private Partnership Operators of private sector highway vehicles and aircraft have developed market-driven transportation services that move people and goods as the infrastructure has been provided by the public sector.  These largely profitable, tax paying enterprises enjoy popular support at all levels of government and have seen investment in their modes’ infrastructure system continually increase.     An implicit public/private partnership has developed between our government and private sector.  This healthy system has been crucial to the creation of some of the world’s most advanced and extensive air and road facilities.   The advent of the American rail system came about in a different time when the central government was much less interested in providing internal improvements and instead left the task to states and the private sector.   Since 1916 when the states and federal government made building a modern air and highway transport a national priority, our railroads have been at a competitive disadvantage.  Each successfully invested dollar in private sector railway infrastructure must produce a competitive timely return in the capital markets.  But railroad managers must compete with other modes where investments in asphalt, concrete, and traffic control systems do not have to pass the same investor test.  They must only pass a political and administrative one.  Low margin bulk freight shippers may accept that 15 mph train dragging across town but the traveling public, accustomed to  65 mph urban expressway, won’t.         Subsidy or Investment? Rail advocates are constantly frustrated by the media which brands proposed spending on passenger rail a “subsidy,” while spending for aviation and roads is considered an “investment.” The implicit public/private partnership works well for aviation and roads because private sector operators and users make a contribution towards construction and  maintenance of public owned infrastructure in the form of user taxes.  Depending on what costs are assigned, as a group highway users are generally accepted to be paying their own way.  But start examining different routes and use patterns and you would have a hard time seeing how private industry alone, answerable to stockholders like the railroads, could have made the system of roads we enjoy today possible.  Cross subsidies are what make it work for the government.   Most fuel taxes are generated from travel on a relative few miles of the national system of roads, usually in urban areas. In fact 30% of vehicle travel occurs on city streets whose costs are borne by all taxpayers whether they are users or not.  Travel on most segments of intercity highway is simply too light for them to pay their way.  Even in situations where tolls are collected, using Oklahoma’s turnpike system for example, some must rely on cross-pledged revenues.  An explicit subsidy. For the commercial aviation industry to continue to operate profitably,   general tax revenues are essential.  Airlines passengers were not assessed ticket taxes until 1971 nor did they pay airport facility charges until 1991.   Significantly, virtually all commercial airfields in use today had been built before the institution of passenger use fees.  Today ticket and aviation fuel tax revenues are used to build new airports, runways, air traffic control systems, and navigation aids.  However, an additional three billion dollars per year is required to operate and administer these facilities and it is paid by all taxpayers whether they fly or not. Prior to 1962, rail passengers also paid ticket taxes and today railroads pay a 4.3 cent per gallon diesel fuel tax.  These funds however have been deposited to general revenue and not invested in rail infrastructure.  The federal government has acted twice on rail’s behalf to create new quasi- government corporations to sustain critical rail operations in the face of private sector failure.  Government named CEOs used public general revenue funds to partially support vertically integrated infrastructure, maintenance, and operations.  This all-public scheme differs again from the successful public/private partnership model.  It is a primary reason why spending on rail is held to a different standard than that used for aviation and roads. Recalling again that the implicit public/private partnership has helped make our air and road system the best in the world, we don’t propose changing the institutional paragon.    The problem though is that this system favors air travel and highways to the detriment of  rail and its potential users.  Its time that we rethink how our passenger rail system is organized and the share of transportation resources it deserves.