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June 21, 2022Episode 35. Building by the Numbers: How economic indicators guide road construction.
FEATURING: Brianne Glover
Some statistics like population growth and the price of crude oil are directly linked to transportation planning in Texas. But others—like commercial airline boardings and home sales—play a role, too. Collectively, the numbers paint a picture that informs how we fund our transportation system.
About Our Guest
Associate Research Scientist
Brianne Glover is manager of TTI's Infrastructure Investment Analysis Program. She is also an attorney and counselor at law licensed to practice in Texas. Brianne has been involved with numerous research projects for various sponsors that focus on transportation financing, as well as the economic impacts associated with transportation improvements.
Bernie Fette (host) (00:14):
Welcome. This is Thinking Transportation — conversations about how we get ourselves and the things we need from one place to another. I’m Bernie Fette with the Texas A&M Transportation Institute. Road building in Texas is a multi-billion dollar endeavor, impacted by a wide array of economic forces, all of which are constantly changing. We can think of them as pieces of a puzzle, each of which is dynamic, shifting daily in shape and size. TTI Research Scientist Brianne Glover keeps a close eye on those evolving factors. She and her colleagues track a vast array of economic indicators from the price of crude oil, to airline passenger boardings, to unemployment rates, all to paint a clear picture of the fiscal realities and better inform the way that we fund our transportation system. Thank you for joining us, Brianne.
Brianne Glover (guest) (01:16):
Thanks for having me.
Bernie Fette (01:18):
So in a, in a research agency where we’ve got a lot of engineers, you stand out as not being one of them. Your background is quite different. Your research area is called infrastructure investment analysis, which to me anyway, sounds a bit complex. So in simple terms that a high school freshman could understand, please tell us what it is that you do.
Brianne Glover (01:43):
Sure. Yeah. It’s, it’s a mouthful — infrastructure investment analysis. So we do research regarding finance and economics. So that’s things like how do we pay for a road or how do we pay for an improvement at a port or an airport? We look at all modes, but it also looks at the, the economic side of things as well. So things like if we spend money in a certain area or on a certain type of infrastructure, what does that mean for the region or the state in general, in regards to economic impacts.
Bernie Fette (02:18):
Okay. And you do all of that without a crystal ball, right?
Brianne Glover (02:22):
<laugh> I wish I did have one. Sometimes our group, we’ve got a lot of folks with policy backgrounds. I have a legal background. And so we’re kind of one of the groups in TTI that doesn’t really have a lot of engineering background.
Bernie Fette (02:37):
Yeah. And even though you don’t have a crystal ball, you’ve got a pretty robust website that I’d love for us to talk about just a little bit later in our conversation. Maybe we can get to that in a few minutes. When we actually started this conversation a couple of weeks ago, we were talking specifically about the state motor fuels tax. That’s the tax that drivers pay in Texas on a gallon of gasoline or diesel. We talked about what that tax pays for, how it works. Can we continue there, pick up there and let you describe how and why you study the gas tax?
Brianne Glover (03:13):
Sure. So the gas tax, there’s two different forms of the gas tax. You’ve got the state portion and you’ve got the federal portion. The state portion in Texas is 20 cents per gallon. And the federal portion is 18.4 cents per gallon. Now, neither one of these have been changed since the early nineties, 1991 for Texas for the state tax and 1993 for the federal fuel tax. And so a very large portion of the transportation fund is made up of these revenues, these motor fuels tax revenues. And so the amount that comes in from that is a very important part of how we pay for our roads in Texas.
Bernie Fette (03:54):
And if it doesn’t change, what are we saying close to 30 years? What’s the result of that?
Brianne Glover (04:01):
So it’s gone up a little in the past. It’s continued to trend upward, but that is mostly because the population of Texas has grown. And so as our population grows, we put more cars on the road and those more cars are buying fuel. And so we’ve continued to increase the revenue, um, of the motor fuels tax. But recently that’s sort of slowed down, plateaued and may even be starting to decline. And that’s a lot due in fact, to fuel efficiency. We’ve got cars that can go further on a gallon of gas than they used to, especially since 1991. And you’ve got more electric vehicles and alternative fuel vehicles on the road. And all of these things tend to affect the amount of motor fuels tax that we’re bringing into the state to pay for roads.
Bernie Fette (04:48):
And there are other ways also that the state collects money to fund the transportation system, right? Can you tell us a little bit about those?
Brianne Glover (04:56):
Yeah. So traditionally the motor fuels tax and the, your vehicle registration fee have been the two big traditional funding sources for transportation in Texas. So in the mid-2010s, somewhere around 2014 and a few years thereafter, the Legislature passed proposition one and proposition seven, which were new forms of revenue for transportation in Texas. Proposition one is based on the oil and gas severance tax. And so what that does is it takes a portion of that and gives it to transportation. And what that means is that as Texas produces oil and gas, as they pump it out, that tax is based on the amount of production, but also the price of oil. And so that revenue stream can change depending on how much we’re pumping and what the cost of oil is. The other one, proposition seven, prop seven, that is based on sales tax. So everything you buy is taxed. You get a sales tax on it, almost everything. And so a portion of that goes to transportation, but that also includes sales tax when you buy a motor vehicle or when you rent a car, those also get included as well.
Bernie Fette (06:06):
And since you mentioned sales tax, I think maybe it’s worthwhile to make that reference or make that comparison with the motor fuels tax. Whenever we go out and buy a car, as you mentioned, or we go out and buy a television, or pretty much anything, we pay a sales tax that’s based on the price of the product that we’re buying. But the motor fuels tax doesn’t work that way, right?
Brianne Glover (06:30):
Correct. And that seems to be a point of confusion, a lot with the public when you talk about motor fuels tax. So the motor fuels tax is based on a 20 cents per gallon. So, you know, if gas is $2 a gallon or gas is $5 a gallon, you’re still only paying 20 cents per gallon in motor fuels tax. Whereas, you know, recently we’ve seen the price of a lot of things go up with inflation. So the more you’re paying for a good, let’s say, like you said, I go buy a television. As that price increases, well, I’m paying more sales tax on that. And so that’s not really a apples-to-apples comparison when you look at the tax for gas.
Bernie Fette (07:08):
Right. And whenever you have a situation like that, you mentioned earlier that that per gallon tax hasn’t been changed since the early 1990s, while you also mentioned that we are paying more for a lot of other things. And I guess that also goes for the materials that go into building roads and highways. Right?
Brianne Glover (07:27):
That’s correct. Yeah.
Bernie Fette (07:29):
And isn’t that one of the other things that you and your colleagues study, cuz I’d like to let you talk a little bit, if you could, about some of the other things that you study. Some of them seem to have a very direct connection to roads and bridges, others perhaps. And one that comes to mind right now is commercial airline boardings, which doesn’t appear to have the same kind of direct relationship with building roads and bridges, but you still that’s one of the things you study. Can you help us understand some of the other things that you guys look at and why?
Brianne Glover (08:00):
Yeah. So this really ramped up during the pandemic. Early in the pandemic, we started tracking a lot of different economic factors, economic indicators that we call them, across the board, not just transportation-related and this sort of helps us get a feel for what’s happening out there in the economy, not just in our narrow field of transportation. And so you mentioned a couple of things. One of the things that we look at is the highway cost index, the HCI for Texas. And so that’s what the cost of materials to build roads. It tracks them what they look like, what the, how much their cost. And so this sort of helps us see, you know, is it a good time to build the road? Is it a good time to spend the money right now? You know, sometimes it doesn’t matter. It’s a necessity and that has to happen anyway, but then that can in turn impact the other things that you can spend money on. If you’re having to spend more on project A, you have less money left over for projects, B, C, and D. And so that’s a good thing that helps us track and see what’s going on with the cost and how we pay for roads.
Bernie Fette (09:04):
Does that also help you foresee or consider the possibilities of, of the different combinations of funding that you could use to build a road, meaning tax revenue on one hand and perhaps bonding or, or having the state borrow money to build roads, does what you do help to find the right mix of those funding sources?
Brianne Glover (09:25):
It can in general. I think it gives us a better idea of not necessarily that we can predict what’s coming, but if we can say, Hey, over the past five years, we’ve been tracking pretty high on what it costs to build roads or, or whatever period of time we wanna look at. Whereas, you know, in a different time period, it was lower. We knew that we’d have the cash on hand to pay for things. But if we know things tend to be, you know, tracking higher in cost, well maybe then that’s a time when the state, as a whole needs to look into those things like bonds. But that also will depend on the other hand on interest rates and things like that that also can be tracked and looked at as the economic health in general.
Bernie Fette (10:06):
And some of those things you, for instance, interest rates heavily influenced by things outside of Texas. Federal reserve decisions and such. Can we look at a couple of other examples? Tell me how looking at data from the transportation security administration, commercial airline boardings, how does that figure into planning for roads and bridges?
Brianne Glover (10:29):
Sure. So, well, and also we, we don’t just look at roads and bridges. We’re looking at funding for all forms of transportation. And that can include, you know, airports as well. But as far as TSA throughputs go, like you said, the, the amount of people who are getting on and off of airplanes, this gives us an idea of not only how the airline industry is doing, but also sort of people’s appetite for travel. There’s been a few years where people have been very hesitant to fly. And in those times we saw that people were more willing to take a car say for the summer vacation, which is happening, you know, soon we’re heading into the summer. But it also, you know, we we’re seeing the price of gas increase. And so that can impact that as well. But it really just helps us get a feel for possible travel patterns.
Bernie Fette (11:15):
Right. Which can help state and local agencies sort of have their own predictive methods for figuring out, okay, how much of a road do we build here? And when do we build it?
Brianne Glover (11:28):
Bernie Fette (11:30):
Okay. Housing starts. I think that that’s another one that you study. Is that right?
Brianne Glover (11:34):
Yeah. We’ve looked at home sales and home inventories. But again, this goes towards the general feel for the economy and sort of people’s attitudes towards location and their ability to take risks. Let’s say everybody starts, you know, like right now the cost of housing has jumped a lot over the past year or two. Right. And so that may influence where people are buying homes. So let’s say I wanna buy a home, but I can’t afford close, you know, in the city, if I’m in a larger city, I can’t afford close to where I work. And so I’m having to broaden my search for a new home. And let’s say, I’m suddenly instead of Dallas, I’m in McKinney. And so that’s gonna make my commute longer to work. So again, that looks at travel patterns, but it also, we noticed early on in the pandemic that had a lot to do with people were looking to buy a different home because they needed a home office. That was one of the things I found kind of interesting. That was sort of anecdotal. Yeah. Yeah. And so that, again goes back to travel patterns as well. If you’re taking those people off the road and they can afford to live, you know, somewhere different.
Bernie Fette (12:34):
Right. So either short-term or long-term, it does have an impact on where roads need to be built or expanded.
Brianne Glover (12:41):
Bernie Fette (12:41):
Okay. So you work with a lot of moving targets.
Brianne Glover (12:44):
Yeah. There’s a lot of ’em and we like to keep tabs on ’em. Some of them may not be as important, you know, at the immediate time that we’re looking at them, but it’s good to track them because you never know when a specific factor maybe combined with another one could help tell a story of what’s happening in the economy.
Bernie Fette (13:02):
Or influence a third or fourth factor. So lot of moving targets. Can you give us an example of some of the scenarios that you work with in trying to answer the questions that you try to answer? Maybe this is an opportunity for you to describe your TRENDS website and how that works in terms, especially as it relates to some of the scenario forecasting that we’re talking about.
Brianne Glover (13:27):
Sure. Yeah. So we like to look at a bunch of different scenarios of different funding opportunities. And so what that means is we can look at how we currently fund things and we can change how we might fund them in the future. And to do that, we have created a model several years ago and we keep it up to date called the TRENDS model. The TRENDS model is the Transportation Revenue Estimator Needs Determination System. It’s a mouthful as well.
Bernie Fette (13:54):
So how does the TRENDS model work?
Brianne Glover (13:57):
So the TRENDS model takes a bunch of different data each month from the Texas Department of Transportation, as well as the Texas Comptroller — things that they’re tracking like sales tax, motor fuels tax, vehicle registration fees, all of these things. We get the historical data and we keep it updated every month. But what we’re able to do is then looking at population projections, we’re able to say, okay, out to 2050, here’s what we think the trend in these different revenues is going to be. And so we, we forecast out the fuel tax, the vehicle registration fee, prop one, prop seven.
Bernie Fette (14:38):
And you also look at oil prices too, right? Which have, have been pretty high lately for instance, and fluctuated a lot over the years.
Brianne Glover (14:46):
We do, we look at historical oil prices, but we’re very hesitant to forecast that out into the future. Um, if I could predict the price of oil, I’d be a millionaire right now.
Bernie Fette (14:56):
You wouldn’t be working for us.
Brianne Glover (14:58):
<laugh> yeah. <laugh>
Brianne Glover (14:59):
But, but with the TRENDS model, we’re able to look at a lot of different revenues that we don’t already use. So that’s things like a vehicle miles fee or say a local option fee, all of these different things. We’re able to project out and say, okay, if you were to implement this type of tax or this type of fee, here’s the kind of revenue stream you’re looking at. And one of those we’ve also recently added is alternative fuel vehicles. So one of the issues is they don’t necessarily pay the fuels tax. And so a lot of states have implemented a vehicle registration fee for these vehicles over and above what the regular state vehicle registration fee is. So if we pay $50 in Texas to register our vehicle, let’s say I have a electric vehicle. They’re gonna pay the $50 plus a hundred in certain states. And so that’s another option that the TRENDS model lets you look at as well.
Bernie Fette (15:52):
Now that we’re talking about a couple of other potential or future potential funding sources, like you mentioned an additional fee on electric vehicles to compensate for the fact that they’re not paying the gas tax. You also mentioned a vehicle miles traveled fee, which guess correct me if I’m wrong here, but you pay based on not the amount of gas you use, but the amount of miles that you drive. So it’s kind of a unit cost much like how we pay for electricity, right?
Brianne Glover (16:21):
Yeah. Very similar it’s more of a user fee is the way it’s typically termed and there’s states that have done pilot programs and have started implementing this to a small degree, Oregon, Washington, Utah. If they’re starting to look into these things and it’s typically considered a replacement fee for the gas tax. So not something in addition to it, but something that would replace it in theory.
Bernie Fette (16:45):
These other alternative potential funding sources that you’re talking about. Have you noticed any change in recent years in the interest in Texas, the policy interest, uh, or the appetite for those kinds of options, has that changed at all? Or is it growing? Is it receding?
Brianne Glover (17:04):
So the last Legislative Session, they did take a look at some sort of fee for alternative fuel vehicles. And so I think that’s something that’s gaining some traction and we’ll probably see again, as far as the road user charges or road user-based fees, like the, the vehicle miles traveled fee, that’s something that’s on the radar, but in the past we haven’t really had the appetite for it here in Texas. There’s an issue with privacy that tends to come up. And so as other states are working through that, that’s something that we need to keep an eye on for the future in Texas.
Bernie Fette (17:39):
And, and all of those different factors or funding scenarios are part of that TRENDS website that you described, which is maybe as close to a crystal ball as we’re going to get.
Brianne Glover (17:49):
Yeah. It, it’s a crystal ball that you can change as you want to, you can go in and try different things and see what they look like.
Bernie Fette (17:56):
Yeah. And it’s a crystal ball that’s actually scientific.
Brianne Glover (17:59):
Yeah. We, we tried to use a lot of public sources for the data that sort of is the foundation for the model.
Bernie Fette (18:05):
All right. You’ve given us a better understanding of the questions that you have been trying to answer over recent years. I’m wondering if there are any questions that you’d like to focus on more. Research questions, funding, policy questions that you’d like to focus on more or entirely new questions. What might you be studying on this front several years from now?
Brianne Glover (18:28):
Yeah, that’s a good question. I’m not sure. You know, when I started looking at these things, when I started working on the TRENDS model over a decade ago, fuel tax, that was the biggest question of the time. I didn’t even think about including things that had to do with alternative fuel vehicles. And so I think as that has changed over the past decade or so, I think, you know, into the future, we’ll see that take a larger part, start playing a bigger part in how we fund transportation. But I don’t know. I think there’ll be a lot of different options. States are starting to get creative and I think we just need to keep an eye on them and see what’s happening.
Bernie Fette (19:02):
You might have a lot of potential for adventure on that front in the coming years. You mentioned 10 years ago. So that was somewhat after the time that you finished law school and decided, you know, you walked off the stage at law school with your degree in hand and said, I think I’m going to become a transportation economist. That’s exactly how it happened, right?
Brianne Glover (19:24):
<laugh> Sure. <Laugh> I, I worked for a civil engineering firm before I went to law school as a designer and went to law school, not really wanting to be an attorney, just wanting to learn and do something different. And then when I finished law school, this opportunity popped up and I thought, you know, that, that sounds really interesting. These people are doing some cool things. And so I jumped in and didn’t look back.
Bernie Fette (19:49):
What is it then that makes you want to show up to work every day? What is it about your work that really motivates you?
Brianne Glover (19:56):
So I I’d have to say the people. I love the people that I work with. I have a great group. They are constantly questioning everything. And I think that’s fantastic. We have great in-depth conversations about what could be and what might be. And I think that’s great for research. It really allows us to think outside the box and come up with different things and maybe cool new ways to do things. And so I enjoy that and that’s what makes me come back every day.
Bernie Fette (20:25):
TTI research scientist and crystal ball reader, Brianne Glover. Brianne, thanks very much for helping us understand this topic a bit more clearly. We do appreciate it. Thank you.
Brianne Glover (20:38):
Thank you guys.
Bernie Fette (20:40):
Funding our transportation needs is a pricey undertaking, and it calls for precision in tracking myriad financial trends. Transportation planners and policy makers alike navigate an economic environment that transforms daily as they face complex questions related to transportation funding. Research helps them find the answers. Thanks for listening. Please join us again for our next episode, when we visit with David Bierling, who will walk us through some of the latest research related to tropical storm evacuation, just as the current hurricane season is getting ramped up. Thinking Transportation is a production of the Texas A&M Transportation Institute, a member of the Texas A&M University System. The show is edited and produced by Chris Pourteau. I’m your writer and host Bernie Fette. Thanks again for listening. We’ll see you next time.