Transportation Funding Alternatives for South Dakota

State and local transportation agencies throughout the United States face increasing financial pressures to meet their surface transportation needs: (1) maintenance and rehabilitation needs have steadily accrued as highway infrastructure ages; (2) material and other construction costs have inflated significantly, especially in recent years due to global demand; (3) demand is rising for new highway capacity to serve higher levels of passenger and freight traffic and to support economic development; (4) improved fuel efficiency has led to flat or declining levels of revenues based on fuel taxes; (5) some vehicles, such as electric or hydrogen-fueled vehicles require no currently taxed energy supply; (6) other funding sources, such as excise taxes on vehicle sales, are flat or declining because of the weak automotive market; (7) changing national priorities may emphasize urban congestion needs more than rural mobility needs in the future; (8) national policies increasingly promote funding highway construction and operation from direct recovery of user costs by mechanisms such as tolls, public-private partnerships for highway construction and operation, congestion pricing, or other fees for vehicle miles traveled; (10) more populous states, which typically receive less federal aid for highways than they generate in federal fuel taxes, are demanding greater share of that revenue in exchange for their continued support for a national program. These pressures complicate agencies' long-term planning processes and threaten their ability to efficiently fund necessary highway construction and maintenance. Most agencies are facing significant reductions in their capital improvement and rehabilitation programs and many are considering alternative funding sources. Rural states like South Dakota, with low traffic volumes and heavy reliance on the Federal Highway Trust Fund, are particularly vulnerable to shifts in fuel tax revenues and changes in national policy. Depending on the nature of these changes, state and local transportation agencies in South Dakota may have difficulty delivering timely transportation improvements necessary to the public welfare and economic health of the state. Research is needed to assess the viability of current and possible alternative funding mechanisms for public roads and highways in South Dakota. The objectives of this project are to: (1) describe current local, state, and federal revenue streams for roads and highways; and (2) examine the value and practicality of current and alternative local, state, and federal revenue streams. The research tasks of this project are:: (1) Meet with the project¡¦s technical panel to review the project scope and work plan. (2) Review current recent literature relating to the viability of highway funding mechanisms currently employed and under consideration throughout the United States. (3) Interview officials in select state transportation departments that have seriously considered or are actually employing variations of fuel-based and alternative highway funding mechanisms to identify perceived and experienced advantages and disadvantages. (4) Analyze the value and practicality of potential local, state, and federal revenue streams, in light of their feasibility, implementation cost, technology requirements, potential revenue generation capability, and required deployment time. (5) In accordance with South Dakota's Department of Transportation (SDDOT's) Guidelines for Performing Research for the South Dakota Department of Transportation, prepare a final report and executive summary of the research methodology, findings, conclusions, and recommendations. (6) Make executive presentations to the South Dakota State Legislature¡¦s Interim Study on Highway Needs and Financing, the South Dakota Department of Transportation¡¦s Research Review Board, and the State Transportation Commission at the conclusion of the project.