November 18, 2015

As originally published in the New Hampshire Union Leader

The Pappas-Van Ostern Express is a good example of bad math driving debt and leaving taxpayers with an empty wallet. Last week’s news release was not a new train plan but simply the old unaffordable plan with all the estimates revised down to make it appear cheaper but grotesquely unrealistic. This sort of new math is how governments go bankrupt.

Efforts to spend $300 million on a train that would require large annual operating subsidies have stalled. In an effort to revive the plan — or perhaps just to put out a news release — Executive Councilors Colin Van Ostern and Chris Pappas put out what they described as a “draft financing option.” Their goal is to jump start discussions that have lagged.

Pappas and Van Ostern have been the leading supporters of the train since their elections in 2012. And for Van Ostern, he has it at the heart of his economic development agenda in his gubernatorial campaign.

Their news release is not a new plan but rather a wildly optimistic reworking of already unrealistic numbers in a train study from a year ago.

The train would require a huge capital investment and then an annual operating subsidy. Underestimating each of these factors leads supporters to conclude the train is suddenly more affordable.

The Manchester option would require a total capital investment of $303 million. As the initial study did, the Pappas-Van Ostern plan counts on a capital investment from Massachusetts of $63.6 million. Given the significant budget problems in Massachusetts, their aid seems less than realistic as does the hope that the federal government would count the Massachusetts contribution as part of our local commitment to be matched.

The federal matching program supporters hope to tap is described as “chronically oversubscribed and thus extremely competitive.” But then again there is no financial cost to optimism.

If all goes well and Massachusetts rides to our rescue and we win the competitive federal process, supporters would then have us use about 75 percent of the state’s bonding capacity for one year on the train project. The annual cost of bonding, if all goes well, will be about $6 million.
At this point, supporters are merely guilty of optimism. Now the problems come in.

Supporters would have to believe that — unlike any other commuter train in existence — operations will more than pay for themselves and reduce the state’s annual costs below the $6 million bonding payment.
The closest analogue to the proposed train is the Portland-Boston Downeaster. It is remarkably successful by train standards, carries 530,000 passengers per year, but requires an annual subsidy of $8.4 million. Despite that, the Pappas-Van Ostern projection is that their train would be the best performing in the entire country — better than any New York train where the population density is extraordinary, better than all the other Boston trains in any direction, and exponentially better than anything seen or projected. Rather than covering 45 percent of its costs like most trains and the Downeaster, the PVO projection is closer to 90 percent.
That sort of optimism leads to financial problems. In planning for our own train, we would be more realistic to think of the $8 million the much-touted Downeaster loses. That raises the state’s annual need to $14 million each year.
Both last year’s plan and the PVO news release assume some offsets. The plan anticipated parking revenue of $500,000 to $900,000. The PVO release raises that to $1 million on higher fees.

As a discussion starter, the PVO release suggests local property taxes — through a local development district and supplemented by a local charge when that falls short — to cover $1-$3 million. I’m sure that will be very popular in Manchester and Nashua.
Even if they’re right about parking and local property taxes, they need $10-$12 million per year or double their estimate.

The policy goal is to aid commuters. The Downeaster moved 530,000 people for $8.4 million. The express buses in the I-93 corridor moved 550,000 people for just $750,000 — and didn’t require $300 million in capital costs.
Too often government loses sight of the policy goal and the most efficient way to achieve it.

Even worse, politicians are regularly tempted to use unrealistic numbers to make choices easier. Optimistic but unrealistic budget numbers created a huge hole, required a federal bailout, and led to the largest budget crisis in history. This is how it starts.

Josh Elliott-Traficante

May 2015

Supporters of bringing commuter rail north from Lowell into New Hampshire have been touting the economic development potential of the project. But does rail in and of itself, construction and operation aside, create jobs? While studies of proposed passenger commuter rail lines often predict job creation, studies of lines that have been built and operating have found that these projects do not create jobs by themselves, but they can influence where already planned investments will happen.

The proposed MBTA extension would not be New Hampshire’s only passenger rail connection. The Downeaster, which runs ten trains a day between Boston and Maine, makes stops in Exeter, Durham, and Dover.

Service began in 2001, which provides an excellent case study to gauge the impact of rail here in the state. According to US Census data, after more than ten years of passenger rail service, the number of jobs increased in Dover, remained virtually unchanged in Durham, and fell in Exeter.[1]

Rail Chart 1


The St. Louis Federal Reserve has some words of wisdom for those who view rail as a tool for boosting the economy: “Rather than relying solely on rail to create economic development, city planners and officials should first address a key question: Why is economic development not occurring in a given area in the first place?”[2]

The Experience Studies:

While most proposed rail projects usually include projections of job growth, it is important to remember that these are projections, not actual experience. Rather than rely on these, looking at studies of passenger commuter rail lines that have been in service for a few years is more helpful. These studies have shown that simply having rail service does not create jobs.

The most comprehensive analysis of rail’s impact on job creation was commissioned by the Federal Transit Administration and concluded that “(r)ail transit investments do not stimulate real economic growth; rather they only influence where already-committed growth takes place,”[3] adding that “rail investments cannot overcome the effects of a weak regional economy.”[4]  One example the FTA study looked at was the experience of two cities along a commuter rail line in Pennsylvania. One city had substantial growth in both apartment development and commercial real estate, while another city had nearly none. They concluded that the rail line had not influenced outcomes, but the difference was a result of different attitudes towards growth, zoning laws, and land availability.[5]

More recent studies have come to similar conclusions. The experience of the Coaster commuter rail line in San Diego is particularly helpful because it shares many similarities to the proposed Capitol Corridor project. Both are roughly the same length and both connect midsized cities (40,000-100,000) to the largest city in the region. A study of the impacts of the Coaster found that though there were minor gains in value for some types of residential property near the non-Downtown San Diego stations, commercial property values fell nearly 10%.[6] Though an inexact proxy, weak demand for commercial property is not indicative of strong job growth. If the same experience is realized for the Capitol Corridor, Boston could gain jobs at Manchester and Nashua’s expense.

Researchers at the Brookings Institution also found little evidence that rail transit investments have significant impacts on urban form. The only way for rail to have an impact, they found, would be to make private car ownership and usage prohibitively expensive.[7]

Closer to home, a study of the MBTA commuter rail system, the operator proposed for New Hampshire, found that “development patterns are governed by the dominant forces of the day, and even given the large investments, commuter rail is no longer one of those forces.”[8] The director of Harvard’s Rappaport Institute, which conducted the study, summarized the findings stating “(T)he history of commuter rail in Massachusetts suggests that while commuter rail can be helpful, it generally has not revitalized communities or reduced sprawl.”[9]

The St. Louis Federal Reserve Bank conducted research into the economic impacts of light rail, and found that “the general consensus from the academic literature and the findings in this report is that light rail is not a catalyst for economic development, rather light rail can help guide economic development.”[10] In other words, rail does not create growth, but can impact where that growth happens. Though light rail and commuter rail fulfill different transit needs, the underlying argument that proponents use, that rail creates jobs, is the same.

The New Hampshire Experience: The Downeaster

New Hampshire has an excellent test case with the Downeaster, which runs from Boston north to Brunswick, Maine, and makes stops in Exeter, Durham, and Dover. Service to all of these stations began in December 2001. Though the Downeaster is technically not a commuter rail service, it is a functional equivalent by offering multiple departures a day and runs over a fairly short distance.

According to the data from the US Census Bureau, job creation between 2000 and 2012 between each of these towns is mixed. In Exeter, the total number of jobs located in the town dropped about 300. In Durham, the number of jobs was virtually unchanged, while Dover saw just over 1,000 new jobs.

These municipalities do not exist in a vacuum, so it is useful to pair them with similar, non-rail served communities, to act as control. Exeter was paired with Epping and Dover with Rochester. Durham, only seeing minor changes in jobs numbers, was left unpaired.

Epping and Exeter:

From an infrastructure point of view, Epping and Exeter are quite alike; both have access to NH 101, which links the Seacoast with Manchester. Exeter has three exits off the highway, with a fourth just over the line in Stratham.  Epping has two exits off 101, with a third just over the line in Brentwood and is roughly equidistant between Interstate 95 and Interstate 93.

Demographically, Exeter is more than twice the size of Epping, although Epping added nearly four times the number of people (935) between the 2000 and 2010 census that Exeter did (298). Despite having similar highway access, and Exeter having a much larger population and a passenger rail station, Epping added 1,442 jobs over the time period, while Exeter lost 328.

Rail Chart 2

Rochester and Dover:

Rochester and Dover are similar communities in in terms of transportation connections. Both are close to, or on the Maine border and have four exits off of the Spaulding Turnpike, which connects to Interstate 95 in Portsmouth.

Population wise they are virtually identical; Rochester has 29,752 residents, while Dover has 29,987. In the last census, Rochester added 1,291 people, while Dover added 3,103, displacing the former as the fifth largest city in the state. Though the two cities are next to each other, the economies are quite different.

Dover’s job base is more service oriented, with a large number of jobs in insurance and finance (Liberty Mutual) and healthcare (Wentworth Douglass Hospital). The latter is particularly significant as one of the few bright spots in jobs market has been in the healthcare sector. Rochester’s economy on the other hand is more manufacturing oriented, a sector which saw 35,000 jobs lost statewide in this time period. The city was not immune to that decline, losing more than 1,700 jobs.

Rail Chart 3


Drawing Conclusions:

An analysis of town by town jobs numbers here in New Hampshire shows that merely having access to passenger rail does not create jobs. After a decade of continuous rail service in Dover added jobs, Durham remained unchanged, while Exeter lost jobs.

Can Dover’s impressive growth be attributed to regular passenger rail service? Not necessarily; both Epping and Concord saw greater growth rates over the time frame, and neither has passenger rail service. With the exception of the redevelopment of the downtown mills, the majority Dover’s growth has been on the peripheries of the city in industrial and business parks.

Rail Chart 4

It does not appear that Rochester’s loss has been Dover’s gain either. Comparing the jobs figures, there is no evidence that Rochester’s lost jobs simply moved to Dover. Rather, larger employment trends explain this shift. Statewide, the number of manufacturing jobs has fallen by more than 35,000, replacing them with roughly the same number of service sector jobs. Dover, with its large service sector, was well positioned to benefit from this trend, while Rochester, with its large manufacturing sector, was harmed by it.

Exeter’s loss of jobs is particularly telling because it turns the entire notion that rail service creates jobs on its head. The argument that rail minimized Exeter’s job losses does not hold much weight since neighboring Epping saw substantial gains.

What does this tell us about commuter rail’s ability to create jobs? From the studies that have been conducted after rail service has started and the experience of the Downeaster here in New Hampshire, simply having commuter rail does not create jobs. Rail, whatever its benefits may or may not be, is not a tool to spur job creation.

Click here to download a PDF version of this report.



[1] United States Census Bureau, ZIP Code Business Patterns Survey

[2] Thomas A. Garrett, St. Louis Federal Reserve, “Light Rail Transit in America” pg 25.

[3] Federal Transit Administration, “An Evaluation of the Relationships Between Transit & Urban Form” Pg. 11.

[4] Ibid 15.

[5] Ibid 16.

[6] Robert Cervero and Michael Duncan, “Land Value Impacts of Rail Transit Services in San Diego County” Pg. 24.

[7] Brookings Institution, Urban and Regional Policy and Its Effects, Vol. 3. Pg 284.

[8] Eric Beaton, “Impact of Commuter Rail in Greater Boston” Pg 46.

[9] David Luberoff, “Commuter Rail Can Take Us Only So Far”, Boston Globe, November 3, 2006.

[10] Garrett, St. Louis Federal Reserve, “Light Rail Transit in America” Pg 25.


Click on the image to view in full screen


Blue: The Road Toll, or ‘Gas Tax’. This tax generates the largest portion of revenue for the Highway Fund, is raised as a per gallon tax on all gasoline or diesel sold. Revenues are currently falling due to more fuel efficient vehicles using less gas.  However, vehicles are still putting the same wear and tear on the road, meaning expenses for maintenance are still the same. It was increased in 1991 and 2014.

Red: Motor Vehicle Fees (MV Fees). This is the portion of the Motor Vehicle Fee that is collected by the state. The amount paid depends on the weight of the vehicle.

Orange: Motor Vehicle Surcharge (MV Surcharge). This was a charge added on top of the existing Motor Vehicle Fees, that ranged from $30 to $75 depending on the weight of the vehicle. It automatically sun-setted in 2011.

Purple: The I-95 Transfer. In order to get money out of the protected Turnpike Fund, the state sold a 1.6mi portion of I-95 to the Turnpike System. The money was to be paid over a term of 20 years, but was accelerated to be paid in just 6. The total amount transferred, including interest, was 131 million.

Turquoise: Bond Proceeds. Bonds were issued in 2008 and 2009, backed by future Highway Fund revenue. The total amount raised from the issue was $60 million.

Periwinkle: Road Toll Increase (SB 367): This is the revenue raised from the most recent increase in the gas tax. The revenue in the first years was allocated to road work projects across the state, with funds in the later years dedicated to paying off the bonds for the expansion of I-93. This increase is due to sunset, once all of the bonds have been repaid in full. 

Green: Other. This is a catch all for other, minor sources of revenue to the highway fund, such as fines.

February 2015

Josh Elliott-Traficante

This week, the Capitol Corridor Rail and Transit Study’s final report was released. The study, which began in 2013, examined a number of transit options for the corridor, with most of the public and political attention focused on the possibility of extending commuter rail into the state. The final study looked at 7 transit options, three for commuter rail, three for bus and a ‘no build’ option. These options were reduced to 5 with the elimination of two of the bus proposals from further consideration. This piece details the commuter rail options presented in the report.


Q: What is the Capital Corridor Project?

A: It is a proposal to extend commuter rail service north from Lowell, MA to Concord, NH, with intermediate stops in Nashua, Manchester Boston-Regional Airport and downtown Manchester. The line would roughly follow the Merrimack River. Trains would run into North Station in Boston.


Q: What were the rail options looked at by the study?

A: There were three rail options that were explored:

Nashua Minimum: This would be an extension of the MBTA Lowell Commuter Rail line, with service identical to what is found elsewhere on the MBTA system. It would run from Boston north, with a single New Hampshire stop in South Nashua. The service plan would have 20 trains a day.

Manchester Commuter: This would be an extension of the MBTA Lowell Commuter Rail line, with service identical to what is found elsewhere on the MBTA system. It would run from Boston north, making stops in South Nashua, Downtown Nashua, Manchester Airport and Downtown Manchester. The service plan would have 34 trains a day to Nashua, with 16 trains a day continuing on to Manchester.

Intercity 8 (Concord): This would be an Amtrak style train service, similar to the Downeaster. It would run from Boston north, making stops in Downtown Nashua, Manchester Airport, Downtown Manchester, and Concord. As the name suggests, there would be 4 southbound and 4 northbound trains per day, for a total of 8 trains a day.


Q: How much would it cost to build?

A: Costs are highly dependent on the scope of the improvements, such as single or double tracking the line, how far the line would run and frequency of service. The study provided costs in 2014 dollars as well as ‘Year of Expenditure’ dollars. Year of Expenditure dollars, which are estimates of the cost when building actually begins, are used below.[i]

Nashua Minimum: $148.6 million

Manchester Commuter: $303.4 million

Intercity 8 (Concord): $316.9 million


Q: Will Massachusetts pay for the upgrades for the section of track from Lowell to the state line?

A: They could. New Hampshire did sign an agreement with Massachusetts in 2001, with New Hampshire taking responsibly for all capital improvements required for such a service, including those needed in Massachusetts.[ii] However, there are signs that the case may be different today. As part of a larger deal, the MBTA acquired the trackage rights from Pan Am Railroad to run commuter trains as far north as Concord.[iii]

In addition, there is limited space for expansion at the Lowell station, and the lack of a layover yard on the line requires 6 trains a day to run without carrying revenue passengers so as to have trains in the right place for rush hour. Expansion into New Hampshire could relieve pressure on the Lowell station and find space for a layover yard. However, there is still the question where the MBTA can find the money for it.


Q: How much would it cost to run?

A: Operating expenses are the day to day costs, such as salaries for employees and fuel for the locomotives. A number of factors that go into projecting operating expenses, such as the number of trains in service and how many runs a day they are completing.[iv]

Nashua Minimum: $4.1 million

Manchester Commuter: $10.7 million

Intercity 8 (Concord): $7.7 million


Q: Would New Hampshire need to subsidize commuter rail?

A: Yes. Commuter rail service will require annual subsidies to maintain service. The study estimates that passenger fares will cover between 41% and 64% of operating and maintenance costs.

Nashua Minimum: $2.3 million, with fares cover 44% of costs

Manchester Commuter: $3.9 million with fares cover of costs 64%

Intercity 8 (Concord): $4.5 million with fares cover of costs 41%

These percentages, called a ‘Farebox Recovery Ratio’ for the Nashua Minimum and Intercity 8 are reasonable. However, the 64% used by the study for the Manchester Commuter is out of line when compared to existing commuter rail lines.

Assuming a farebox recovery ratio of 64%, would make the Capitol Corridor route the best performing commuter rail line in the nation. For comparison, the Downeaster covers 55%, the MBTA Commuter Rail System as a whole covers 48%. The best performing in the country, MetroNorth, covers 62.4%.[v] Given the experience of the MBTA and the Downeaster, a more reasonable ratio for the route would be in the 45%-50% range.

Subsidies required if Manchester Commuter farebox recovery ratio adjusted to:

45%: $6.0 million per year

50%: $5.4 million per year


Q: But isn’t the Boston Express Bus Service subsidized too?

A: It is, but to a far lesser extent than rail would be. Like most public transportation, this service is subsidized by the Federal government, through CMAQ grants. The Everett Turnpike Route received a subsidy of $119,000 in 2013, with fares covering 95% of costs. Each round trip rider on the route is subsidized to the tune of $226.30 per year. Rail service on the other hand, would require subsidies of $1,730.10 per rider, per year, more than 7.5 times higher than the bus.

Q: Where would New Hampshire get the money to pay for the train?

A: The study offers a rough layout for paying the capital costs, include Federal grants, which would cover roughly half the project. It assumes, as mentioned above, that Massachusetts will pay nearly $96 million, for rolling stock, trackage rights, and improvements on the Massachusetts side of the border. That would leave New Hampshire with a balance of $26 million in capital costs, or $32 million in year of construction dollars.[vi]

That money would likely come from bond proceeds, but after the explosion of state debt from 2007 to 2011 the state’s borrowing capacity is limited. The last capital budget was roughly $125 million, with a backlog of nearly $400 million worth of other projects. Bonding for a rail would mean putting off other projects.

For the ongoing operating subsidies, the report offered a wide range of options, including an additional state wide property tax, increased car registration fees, or contributions from cities that have train stations, likely leading to increased property taxes. It also suggested using money from the federal highway program. However, using those dollars would mean other construction projects already in the 10 year highway plan, would go unfunded.[vii]

Q: Could the state use money from the Gas Tax to pay for both construction and the subsidy?

A: No, Part II, Article 6-a of the NH Constitution[viii] forbids the use of Highway Fund dollars on anything other than highways. In a particularly relevant case, the New Hampshire Supreme Court ruled unanimously in a suit brought by the New Hampshire Motor Transport Association (NHMTA v NHDOT 2004) that the state could not use highway funds to build a commuter rail extension into Nashua.[ix]

Q: How does the Downeaster, which runs from Brunswick ME, through the NH Seacoast into Boston, address these costs?

A: The capital costs of constructing the rail line were financed by the federal government, with the balance made up by a bond issue, backed by the State of Maine. Those bonds were repaid with general fund tax dollars. Funding for the extension of service to Brunswick was paid for entirely by federal Stimulus money.

Federal CMAQ money is used to cover some of the operating losses. Under normal circumstances, CMAQ money is only allowed for the first several years of service, however, through special Congressional approval, Maine is allowed to use funds long after they would have otherwise been phased out. The remainder of the operating loss is covered by a state tax on rental cars. The Downeaster covers roughly 55% of its operating costs through fares.[x]

Q: Won’t bringing rail to New Hampshire ‘pay for itself’ by creating jobs and expanding the tax base?

A: Unfortunately no. The Federal Transit Administration[xi] did an exhaustive study on rail stations’ impact and found that they rarely create new growth. Instead stations typically just redistribute growth that would have taken place elsewhere. Likewise the Brookings Institution[xii] found little evidence that transit impacts urban structures. They found that the only way to make transit have an impact, would be to make using private vehicles prohibitively expensive.

In layman’s terms, a train station plays no role in whether or not an entrepreneur opens a business, but it does play a role where it opens. For example, rather than opening up in Londonderry, a business might opt to open up on Elm Street in Manchester.


Click here to download a pdf version of this report


[i] Appendix 3: Financial Plan, Page 6:

[ii] “Joint Statement of Principles Concerning Proposed New Hampshire Capital Corridor Service” (2001)


[iv] Appendix 7: Technical Report, Appendix E, Pg 2:

[v] Data Table 26, National Transit Database (2013)


[vii] Appendix 3: Financial Plan, Pages 7-13:



[x] Data Table 26, National Transit Database (2013).

[xi] Cervero and Seskin, “An Evaluation of the Relationships Between Transit and Urban Form” Pg 3.

[xii] Urban and Regional Policy and Its Effects, Vol. 3, Pg 248.

Link to the full study:

Charlie Arlinghaus

January 14, 2014

As originally published in the New Hampshire Union Leader

Public policy is not about bright shiny objects. Too often politicians are so distracted by the shininess of an idea that they forget what their policy goal is. The classic example of this is the glassy eyed fascination so many people have with the romance surrounding trains. People think trains are really cool so let’s get one. It doesn’t really matter why. The excitement around the vehicle obscures the policy goal and the possible solutions.

Trains are and have always been very romantic. The mystique surrounding clouds of steam rolling across the platform of a train shed under Eiffel Tower like girders exerts a hold on our imagination that Greyhound was never able to capture. We all feel like Cary Grant in North by Northwest when he says to Eva Marie Saint, “Beats flying, doesn’t it?” Our attraction for the mode distracts us from the specific problem and economic considerations.

Regular passenger and commuter rail service to central New Hampshire ended in 1967. In an election year gift, the federal government paid for a year of commuter rail all the way to Concord in 1980. The election cut the money and the trains stopped.

According to the census bureau, about 85,000 New Hampshire residents commute to work somewhere in Massachusetts. A train along the I-93 or Everett Turnpike corridor would enable those who live in that corridor, live near a station, and work in Boston itself to commute to work.

Although some tout allowing Bostonians to commute to jobs in Manchester, very few people commute in reverse and the expense doesn’t justify the tiny number it would help. The real policy goal is to help people commute to Boston – or at least that area of Boston convenient to North Station – this doesn’t help much if you work in Woburn or Burlington or Framingham.

The major obstacle is price. Extending MBTA commuter rail to Manchester – the current preferred option – would require significant subsidies and an enormous capital investment which would never be recovered.

The capital cost of the program has been lowered to $250 million. To put that in perspective, the state borrows just less than $125 million every two years. So if we did no other borrowing whatsoever – for buildings, major projects, and other capital expenses that are generally funded at less than half of what agencies request – if we did none of that for four years, we could build a train.

At that point, we’re ready to start losing money hand over fist. One of the most successful train projects in the recent history of the United States has been the train from Portland to Boston known as the Downeaster.  Geographically and in its commuter focus it’s quite similar to the project advocates hope to build along I-93 instead of I-95.

The Downeaster carries 530,000 passengers in a year and needs $8.4 million from the State of Maine to cover its losses. And that’s the most successful passenger rail model in recent history.

If our goal is to move commuters to Boston efficiently, we already have a program. The Boston Express bus also moves more than a half million passengers a year (550,000 in the comparable time period) but does it at less than a tenth of the cost — $750,000 instead of $8.4 million.

If the policy goal is to operate a commuter service to Boston to satisfy the federal government mitigation requirements in a highway corridor, we already have one and it operates at a tiny fraction of the cost. But then Cary Grant rode the train and not the bus.

It is important to understand, however, that every policy choice displaces other choices. An additional $250 million in capital costs in a state that saw its debt explode by 40% from 2007-2011 is simply not available. The $8 million or more a year would have to come by cutting something else.

One plan is to use federal grants including the funds referred to as CMAQ. Some advocates don’t even count that as state money. Of course, that’s nonsense. Money being used today for needs identified in the state’s ten-year transportation plan would be displaced and their funds taken away.


The governor’s speech last week made a train the centerpiece of her economic development plan. Between now and her budget address next month we can only hope she might explain what will be cut to pay for this boondoggle.




Charlie Arlinghaus

September 11, 2013

As originally published in the New Hampshire Union Leader

New Hampshire’s Ten-Year Transportation Plan includes a deficit of $955 million. Ten years of projects that cost $3.5 billion are proposed while there is only $2.5 billion of funding available. Is this any way to run a railroad? Actually, it’s a pretty good way.

In 1985, then-governor John Sununu created a planning process called the ten-year highway plan by executive order. Now a state-law, the ten year plan is a roadmap of all of the projects the state’s plans to undertake over the next ten years and the funding available to pay for them. This again is an area where sensible government prevails in New Hampshire over a Washingtonian model (here as in most places you should read Washington as a synonym for indefensible lunacy).

Every two –years, New Hampshire debates a comprehensive list of state priorities in transportation – a list of bridges to be repaired or replaced, roads to be repaved, giant wasteful overhead tolling projects to be undertaken. The list is meant to be an actual plan not a wish list. We had trouble a few years ago when the sum total of the projects took 30 years of funding to pay for ten years of construction. Today, the list is realistic.

The Washington model, by contrast, is to funnel money as political favors to states and projects favored by the most powerful politicians whether their state has that as a priority or not. Washington spending is built on politics not priorities. Our ten year plan removes personal politics from the process almost completely.

At the beginning of the process, the state Department of Transportation creates a draft plan to serve as the basis of discussion in public hearings. That plan turns into a recommendation from the governor and amendment and adoption by the legislature this coming June.

The draft plan has a $955 million deficit. Ordinarily, I’d be critical of a planned deficit but in this case a deficit is a critical part of the planning process and counter-intuitively serves the cause of transparency.

First, the deficit is exaggerated. Funding for airports is limited to funds raised and grants received. There are $200 million of projects with no funding that will happen if federal air money comes and won’t happen if it doesn’t.

The other two deficits are a potential turnpike capital program and the ongoing highway shortfall. The small portion of roads we call turnpikes are self-funded by tolls and bonds and the bond payments themselves are also funded by tolls. The state proposed a series of projects that can only happen if tolls go up enough to fund increased debt payments. In this case, the deficit is essentially a proposal for $500 million of turnpike spending.

The administrators are not asking for more money in general. They have proposed projects and we are being asked whether those specific projects are important enough to us that we will pay for them. We support the projects, we have to support the tolls. Our choice.

This is good government. All too often, politicians tell us in vague terms that “more revenues are needed” or “to balance all spending, we need a general infusion.” The problem with this overly-general approach is that we don’t have any specific idea what government looks like if we say no and what the incremental funding would specifically support. Instead, to try and get us to support more money, they imply that that one specific project everyone loves and would be funded anyway is the one on the bubble.

The transportation approach is more honest. The money we have will pay for this. We would fund these additional things if given the chance but the money isn’t there. Then you and I get to decide whether or not it’s worth it.

The highway fund portion of the transportation budget (paid with proceeds from federal gas taxes, state gas taxes, and other vehicle fees), is actually another $237 million short. This is no surprise. Our gas tax was set 23 years ago at 18 cents and revenues don’t come close to keeping up with inflation. Each year, we must fix fewer bridges and pave fewer miles of roads. Rather than foregoing new projects, the highway fund side must find things we do today that we won’t do in the future. That gap over ten years is about $237 million.

The current phase of the ten year plan is about making choices. At this level of funding, only these priorities are funded for the next ten years. No politician can pretend that money is needed for an already funded project or pretend that he supports a project even without funding.

The House Finance Committee’s budget increases the diversion of Highway Fund away from the Department of Transportation to other state agencies to $28.5 million.

Under the House’s proposed budget, 67.3% of Highway Funds, net of block grants to the cities and towns, will go to Transportation, 31.7% to Safety, and 1.1% for other. These ratios represent an additional $500,000 over the biennium being diverted away from the Department of Transportation over the Governor’s budget.

RSA 9:9-a, which set the ratios of Highway Fund spending, would have required a minimum of 73% of the funds raised to go to the Department of Transportation, with caps of 26% to the Department of Safety and 1% for other agencies. The law, which was passed with broad bipartisan support several years ago, will be suspended as part of the language in both the Governor’s and House’s Budgets.

Updated Click here for a comprehensive spreadsheet

March 2013

By Joshua Elliott-Traficante

As detailed in an earlier piece on the Highway Fund diversion[1], the Department of Safety receives a sizeable portion of the revenue raised by the state Highway Fund. Historically the Department has received roughly between 24% and 32% of the amount collected, net of block grants to the municipalities.

This diversion, however, is completely constitutional. In 1938, the New Hampshire Constitution was amended, requiring all taxes and fees related to roads, fuel, and motor vehicles be dedicated to highway construction and maintenance. It was passed after attempts were made in the previous session to divert highway taxes to other purposes. While the purpose of the amendment was to “prohibit the use of motor vehicle taxes and gasoline taxes being used for any purpose but for highways,” the language specifically allows funds to be spent for “the supervision of traffic thereon.” That carve out authorizes funds, now segregated in the dedicated Highway Fund, to pay for things such as the state troopers who patrol the highways.

Contrary to popular belief, it does not all go to the State Police, which accounts for just under half of the Highway Fund money spent at the Department. Rather, the diversion funds pay for a number of activities, which can be broken up into three categories: Administrative, Motor Vehicles and the Division of State Police.

Administrative: $21.26 Million

The largest single expense under the Administrative grouping is the transfer to the Department of Information Technology (DOIT). DOIT is unique in that rather than receiving appropriations directly, it is funded nearly entirely through transfers from other state agencies. The Department of Safety transferred $8.79 million in FY13 in Highway Funds to DOIT, which accounted for nearly 87% of the Department of Safety’s total transfer.

There are a number of back office functions performed by the Department of Safety that are paid for by the Highway Fund such as the Road Toll Collection and Audit and the Office of Policy and Planning among nearly a dozen others. Combined they total $7.83 million.

General Personnel Costs account for $4.2 million in Highway Funds, which goes largely to retiree health insurance and pension costs.

Motor Vehicles: $18.89 million

At $16.65 million, the largest piece of this category is the Division of Motor Vehicles itself, which handles automobile titles and registrations as well as driver licensing. Roughly 98% of the DMV’s total budget came from the Highway Fund. The Bureau of Hearings, which hears license suspension cases and appeals accounts for the remaining $2.2 million spent in this category.

State Police: $36.74

At $27.4 million, the vast majority of the Division of State Police’s portion of the Highway Fund revenue goes to pay for the Traffic Bureau which is tasked with policing the state’s highways and roads. An additional $5.11 million pays for Enforcement.

However, not all of the money spent at the Division of State Police pays for troopers on the road. Both the Forensic and Toxicology Labs receive 100% of their funding from the Highway Fund, at a cost of $3.45 million. Rounding out State Police is Administrative Expenses, coming in at $780,000.

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Charlie Arlinghaus

March 6, 2013

As originally published in the New Hampshire Union Leader

New Hampshire’s gas tax and highway fund are little understood even as the legislature votes today on doubling the state’s gas tax. The state’s highways are paid for with user fees and only with user fees, revenues are stagnant even if costs aren’t, the Department of Transportation is one of the more efficient branches of government, but many gimmicks still surround highway funds and the diversion of resources.

New Hampshire’s constitution dedicates all taxes and fees associated with roads and motor vehicles specifically to construction, maintenance, and supervision of traffic on highways (think state police). But from time immemorial legislators have seen fit to divert some of what seemed like a flush pot of money to other uses.

Roads at the state level are funded by two main buckets: (1)the turnpike fund which receives all the money from tolls for a dedicated fraction of the state’s roads and (2)everything else lumped in the highway fund. The turnpike fund is paid for only with tolls and is flush with money. The highway fund’s major revenue source is the gas tax and is struggling to keep up especially as those funds are diverted to other sources.

In New Hampshire, all highway spending of any sort is paid for with user fees – gas taxes, tolls, motor vehicle registration fees, and a few smaller fees. These fees support all state spending and a large grant to municipalities for local roads. In addition, almost a third of these revenues are sent to other departments – largely to pay for state troopers.

The gas tax was set at eighteen cents per gallon in 1991. Revenues don’t rise with inflation or price and lessen as we get better gas mileage. Between 2002 and 2012, inflation was 27.6% but gas tax receipts rose by only 1%. Motor vehicle fees, a minority share of road money, kept up with inflation.

This has placed both good pressure and bad pressure on lawmakers and administrators. The gap between 1% growth in the gas tax and 27% inflation led to the Great Highway Robbery of 2009. To try to get at some of the turnpike money (flush from toll increases), then-Gov. Lynch concocted the scheme of selling a $1.6 mile stretch of I-95 to ourselves. It was moved from the highway fund to the turnpike fund. For the privilege of maintaining it, the turnpike agreed to transfer $120 million to the highway fund supposedly over 20 years. Payment for the first two years was $50 million.

This seemed like a great trick so the legislature of a different party repeated it in 2011, “escalating the payment” to another $52 million in 2012 and 2013. The current governor plans on repeating the trick but the loan is almost paid off so there’s only $29 million left. So the “loan” will be paid in six years instead of the 20 advertised. And that’s the problem with gimmicks. This one worked for two-and-a-half budgets and now there’s a hole.

The good pressure is the pressure to be efficient. Over the last twenty years, most departments saw a big increase in the number of employees then drop in the latest recession. The total number of state full-time positions is the about the same in 2012 as in 1994. But while the rest of state government increased by 2.5%, the number of positions at Transportation declined by 16% (1,959 to 1,650).

Lawmakers need to recognize they are out of gimmicks to shore up the fund. There is a not another $50 million biennial windfall waiting for them. But as a starting point, they can follow the laws they’ve already passed.

No one disputes that some gas tax money can and should be spent on state troopers. But the 2008 law that requires a minimum percentage of the tax (73% in the coming budget) be spent on repairs is reasonable. Even when the last legislature allowed extra money to be spent on troopers, they nonetheless kept the provision requiring a minimum percentage be spent at the department of transportation.

A four cent increase in the gas tax would raise about $27 million each year. Fifteen cents would raise about $100 million per year (current gas tax receipts are $123 million). Merely following the current law to make sure the existing user fees are spent as advertised would add $28 million over two years before charging anyone anything more.

There is a legitimate debate to be had about whether the current highway fund sources can pay for the highway system we currently have. That debate, however, will be difficult if we can’t trust the legislature to start by following the laws they pass.

March 2013

By Joshua Elliott-Traficante

In New Hampshire, not only is spending on highways paid for entirely with user fees like gas taxes and registration fees but the user fees are often diverted to other uses. The largest recipient is the Department of Safety, ostensibly to pay for state troopers but smaller amount of money have been transferred to other departments as varied as Cultural Resources, Health & Human Resources, and the Board of Land & Tax Appeals.

In 2008, legislation was enacted to limit the diversions and ensure a greater share of dedicated revenues remained at the Department of Transportation. However, Governor Hassan’s proposed budget, rather than building on the progress made, reverses the gains made over the last two budget cycles.


Figure 1: Spending as budgeted, net of Highway Block Grants to municipalities, not accounting for lapses

The Constitutional Carve Out: “…including the supervision of traffic thereon”

In 1938, the New Hampshire Constitution was amended, requiring all taxes and fees related to roads, fuel, and motor vehicles be dedicated to highway construction and maintenance. It was passed after attempts were made in the previous session to divert highway taxes to other purposes. While the purpose of the amendment was to “prohibit the use of motor vehicle taxes and gasoline taxes being used for any purpose but for highways,” the language specifically allows funds to be spent for “the supervision of traffic thereon.” That carve out authorizes funds, now segregated in the dedicated Highway Fund, to pay for those state troopers who patrol the highways.

Highway Fund Diversion Cap:

When the highway fund seemed flush with money, loose interpretation of the constitutional language permitted larger share of the total highway revenues to be transferred not just to Safety but to as many as a dozen other agencies as well to pay for things loosely related to highways.

In 2008, the Legislature passed HB 1618 to limit diversions and ensure a greater share of the limited revenue went to its primary purpose. Phased in over three budgets, the new law requires 73%of the total revenue to stay at Transportation, caps the amount diverted to Safety at 26% and limits all other uses to 1% of total revenue.


Figure 2: Spending as budgeted, net of Highway Block Grants to municipalities, not accounting for lapses

The FY10-11 required at least 68.5% to stay at Transportation, a goal budget writers exceeded. For the FY12-13 budget, the minimum ratcheted up to 70.75% which budget writers met although they suspended the second half of the law to allow Safety to spend slightly more if needed but not at the expense of Transportation. They ended up meeting the goals and rendering the suspension moot.

Looking Forward: The Governor’s Budget and Full Suspension

The Highway Fund Diversion Cap law would require 73% of dedicated revenues stay with the Department of Transportation rather than 69.8% in the Governor’s current proposal. The Governor’s proposal would allow safety to spend 29.1% rather than their 26% statutory limit and would divert 1.1% of revenues to other sources rather than the 1% limit required by law. Though the differences in percentages seem small, the result is a diversion of $28 million away from highways.

In the recently released HB 2, the budget trailer bill, the entire section of the law stipulating the ratchets for the FY14-15 biennium have been suspended.

Result: Less Money for Roads and Bridges

While it is easy to get bogged down in ratios and statutes, the end result is that under the Governor’s proposed budget, more of the state’s Highway Fund, which is entirely funded by user fees, is not being used to fix bridges and repave roads. Instead it is being used for spending on other state agencies.

Though substantially paring down the Department of Safety’s take of Highway Fund revenues would not be enough to cover all of the costs of repairing the state’s infrastructure, it would be a good start.

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