State Leaders Should Remember that Rhode Island’s Transportation Funding Crisis Evolved Primarily From Debt- Driven Financing Practices
Statement from Gary Sasse:
A recent Hassenfeld Institute public opinion survey found that 76% of Rhode Islanders felt the State was spending too little on road and bridge maintenance. This finding is consistent with the bipartisan agreement that Rhode Island’s bridges urgently need to be improved.
The key question that the General Assembly will need to address is what would represent the most efficient, economically neutral and fairest way to finance and deliver a bridge safety and improvement initiative. To answer this question the General Assembly has four optional approaches it may choose to consider.
The first is the Governor’s plan that is financed by borrowing backed by truck toll revenues. The second is a PAYGO plan that has been recommended by House Republicans. This plan would be financed by reallocating existing resources, and would not contain new tolls, fees or taxes. The third option, put forward by the Rhode Island Center for Freedom and Prosperity, constitutes a P3 public-private partnership between the State and private partner. The private partner, in exchange for pre-determined revenue guarantees, would finance, repair and maintain bridges for an agreed upon time. The final option is a hybrid PAYGO- debt plan would be based on some additional public debt, but also the use of current general revenues.
In studying these options state leaders should remember that Rhode Island’s transportation funding crisis evolved primarily from debt -driven financing practices. These practices have served to inhibit the state’s ability to properly maintain its roads and bridges. Therefore, in considering the best way to finance and deliver a bridge improvement program, the General Assembly should remember that borrowing is expensive. The most costly public debt may occur when there is a limited history with a new revenue source and any debt financing should be designed to avoid the carrying charges of issuing a large bond upfront.
While the REMI study provided additional information about the economics of the Governor’s truck toll proposal, questions remain regarding the impact of this proposal on sectors of the Rhode Island economy and operationalizing the tolling system.
In order to serve the best interests of the Rhode Island taxpayer, the General Assembly should take the time to fully evaluate all four options, leaving no stone left unturned.
About the Author:
Gary Sasse is the director of Bryant University’s Institute for Public Leadership. He is a former executive director of the Rhode Island Public Expenditure Council, and for several years directed the state’s Department of Revenue and Department of Administration during the Carcieri administration.