Truth Be Tolled

High gas prices boost bus business

By James MacPherson

From Associated Press

PEMBINA, N.D. (AP) — Soaring fuel prices are proving to be a pain for most people in the country, but they may have helped save the jobs of hundreds of workers in North Dakota's oldest town.

The Motor Coach Industries plant is the biggest employer in Pembina — about a quarter the residents in the town of 640 work there. Four years ago, it was struggling to stay open.

Now, as more people across the U.S. shun gas-guzzling vehicles for public transportation, bus ridership is up. Transit systems from Houston to New York City are mulling expansion to keep pace.

"The bus industry is healthy right now — it's in a good place," said Michael Melaniphy, a Motor Coach Industries Inc. vice president.

It's a turnaround from just a few years ago when bus sales were down and the company was laying off workers, making the future of the Pembina plant uncertain.

MCI will begin delivering the first of 102 hybrid diesel-electric buses this summer to Houston's transit system, under a contract worth about $80 million. Another 126 diesel-only buses are being shipped out to New York City's transit system in a deal worth $67 million.

Mike Ohmann owns a hardware store in Pembina, a town that got its start in 1797 as a fur-trading post and was known as the first white settlement in the Dakotas. Ohmann said his business has gone up and down with the fortunes of the bus plant.

Layoffs hurt the economy in the region, since many the workers commute from within a 75-mile radius of town, Ohmann said.

"When there are layoffs, it means nobody is putting another nickel into their home," Ohmann said. "Losing that plant would be devastating."

Motor Coach Industries, based in Schaumburg, Ill., makes buses for public transportation and motor coaches that are used as luxury recreational vehicles.

MCI's main plant is in Winnipeg while the Pembina assembly plant is 60 miles away — just over the border in northeastern North Dakota to satisfy conditions of the federal Buy America Act, which requires buses involved in federal contracts be produced in the United States.

MCI blamed the terrorist attacks of Sept. 11, 2001 for hurting the tourism industry and putting the skids on bus sales. The state gave the company a $12 million package in 2003 that included federal job training money and low-interest loans to help keep the Pembina plant open.

The number of employees slid to 88 in January 2004, the lowest level since the company opened in the mid-1960s. MCI was turning out about a bus daily then. At its peak, it was making about eight buses a day, running three shifts a day, seven days a week.

The Pembina plant currently makes about three buses daily, with a work force of about 250 people, said Patricia Plodzeen, a company spokeswoman in Illinois. There are no plans to increase the work force beyond that, she said.

Plodzeen said the 45-foot long, 55-seat hybrid buses are being produced in Winnipeg with the final assembly in Pembina.

The hybrids run on either electric or diesel or a combination, depending on the speed of the bus, Melaniphy said.

The hybrid coaches use less fuel than standard diesel buses, create less pollution and run quieter; emissions are reduced by about 30 percent.

MCI's Pembina plant will begin delivering the first of the 102 hybrid diesel-electric buses this summer to Houston's transit system.

It is MCI's first major contract for hybrid buses, Melaniphy said.

Fifty buses are slated for delivery to the transit system by the end of this year, and 52 more are due next year, said Andrew Skabowski, Houston Metro's senior director of bus maintenance.

Houston Metro has a fleet of 1,210 buses, including 238 hybrids with the addition of the new MCI buses, which will be used to carry "park and ride commuters" for up to 40 miles, Skabowski said.

The MCI hybrids cost about $730,000 each, or about $180,000 more than a similarly equipped diesel bus, Skabowski said.

"The fuel economy savings augments the cost differential," Skabowski said.

MCI delivered four prototype hybrid buses to the transit agency in New Jersey five years ago and those buses are still in use.

Toronto's transit system also has placed an order for a pair of the buses, Plodzeen said.

The New York City Transit Authority claims to operate the largest hybrid bus fleet in the world, with 548, though none are from MCI.

Spokesman Charles Seaton said the transit authority will use the 126 diesel-only MCI coaches, which are more efficient for long distances.

Ohmann, the hardware store owner, said it doesn't matter if the company sells hybrid buses, or the traditional ones, as long as something is rolling off the assembly line.

"When they make more buses, it's excellent news," Ohmann said. "I'm breathing a sigh of relief right now."

Gas tax holiday no picnic

By John Broder

From the New York Times

WASHINGTON — As angry truckers encircled the Capitol in a horn-blaring caravan and consumers across the country agonized over $60 fill-ups, the issue of high fuel prices flared on the campaign trail on Monday, sharply dividing the two Democratic candidates.

Senator Hillary Rodham Clinton lined up with Senator John McCain, the presumptive Republican nominee for president, in endorsing a plan to suspend the federal excise tax on gasoline, 18.4 cents a gallon, for the summer travel season. But Senator Barack Obama, Mrs. Clinton’s Democratic rival, spoke out firmly against the proposal, saying it would save consumers little and do nothing to curtail oil consumption and imports.

While Mr. Obama’s view is shared by environmentalists and many independent energy analysts, his position allowed Mrs. Clinton to draw a contrast with her opponent in appealing to the hard-hit middle-class families and older Americans who have proven to be the bedrock of her support. She has accused Mr. Obama of being out of touch with ordinary Americans who are struggling to meet their mortgages and gas up their cars and trucks.

Mrs. Clinton said at a rally on Monday morning in Graham, N.C., that she would introduce legislation to impose a windfall-profits tax on oil companies and use the revenue to suspend the gasoline tax temporarily.

“At the heart of my approach is a simple belief,” Mrs. Clinton said. “Middle-class families are paying too much and oil companies aren’t paying their fair share to help us solve the problems at the pump.”

The split occurred as Senators Clinton and Obama were competing intensely in primaries in Indiana and North Carolina, where voters go to the polls next Tuesday. Opinion surveys have shown that the faltering economy and high gas prices are the top concerns of voters across the country, edging out the war in Iraq.

The Clinton campaign is running television advertising in Indiana contrasting her approach on gas prices with Mr. Obama’s.

Mrs. Clinton said the tax on the oil companies, which have been reporting record profits as oil prices soar, would cover all of the lost revenue from the federal tax on gasoline and diesel fuel. She also said no highway projects would suffer.

Mr. Obama derided the McCain-Clinton idea of a federal tax holiday as a “short-term, quick-fix” proposal that would do more harm than good, and said the money, which is earmarked for the federal highway trust fund, is badly needed to maintain the nation’s roads and bridges.

In 2000, Mr. Obama supported a bill in the Illinois legislature to suspend most of the state’s 6.25 percent gasoline sales tax. But he later opposed making the reduction permanent, arguing that the state needed the revenue and that the measure had saved consumers little.

Mrs. Clinton, of New York, has also taken varying stands on the issue of gas taxes. In her 2000 Senate campaign, she spoke against repealing the federal gasoline tax, calling it “one of those few taxes that New York actually gets more money from Washington than we send.”

At a meeting with voters in North Carolina on Monday, Mr. Obama said lifting the gas tax for three months would save the average consumer no more than $30, a figure confirmed by Congressional analysts. Mr. Obama has previously dismissed Mr. McCain’s proposal as a “scheme.”

“Half a tank of gas,” Mr. Obama told his audience. “That’s his big solution.”

President Bush’s spokeswoman essentially sided with Mr. Obama in saying that tax holidays and new levies on oil companies would not address the long-term problems of dependence on foreign oil.

Dana Perino, the White House spokeswoman, said gasoline prices were “entirely too high, but I think it would be disingenuous and unfortunate for American consumers for them to be led to believe that there is a short-term fix.”

“There is not going to be one,” Ms. Perino said.

It is not clear whether Congress will act quickly on a fuel tax suspension and a new levy on oil companies, particularly given the White House opposition. While Democratic leaders are sympathetic, aides said, similar plans have failed a number of times.

The debate erupted as both candidates rounded up more superdelegate endorsements on Monday, with Mr. Obama highlighting the backing of Senator Jeff Bingaman of New Mexico, who is the chairman of the Senate Energy and Natural Resources Committee, while Gov. Michael F. Easley of North Carolina was preparing to endorse Mrs. Clinton on Tuesday.

The split on the gas tax is a relatively rare one for Mrs. Clinton and Mr. Obama, who agree on the broad outlines of policy in most areas. They have both called for the suspension of purchases for the national strategic petroleum stockpile, a supply of oil to protect the country against sudden supply disruptions; new taxes on oil companies; measures to curb global warming; and heavy federal spending on renewable energy sources. They have also called for a federal investigation of possible manipulation in oil markets.

Mr. McCain has also called for a halt to purchases for the petroleum reserve and expressed support of climate-change legislation, but opposes the imposition of windfall-profits taxes on oil companies.

All three candidates have endorsed tougher fuel-efficiency standards for cars and trucks and diplomatic measures to pressure oil-producing nations to lower prices.

The federal tax on motor fuels — the tax on diesel fuel is 24.4 cents a gallon — yielded $28.2 billion in 2006, the last full year for which statistics are available. The last time the federal fuel taxes were raised significantly was in 1993 as part of President Bill Clinton’s budget-balancing package.

The highway trust fund that the gas tax finances provides money to states and local governments to pay for road and bridge construction, repair and maintenance. Mr. McCain and Mrs. Clinton propose to suspend the tax from Memorial Day to Labor Day, the peak driving season, which would lower tax receipts by roughly $9 billion and potentially cost 300,000 highway construction jobs, according to state highway officials.

Mrs. Clinton would replace that money with the new tax on oil company profits, an idea that has been kicking around Congress for several years but has not been enacted into law. Mr. McCain would divert tax revenue from other sources to make the highway trust fund whole.

The Senate blocked a $15 billion tax on oil companies last December that was part of a larger energy package.

A McCain spokesman sought to use the gas tax issue to drive a wedge between the two Democratic candidates and paint Mr. Obama as a flip-flopper given how he voted as a state lawmaker in 2000.

“It’s clear Barack Obama’s not strong enough to provide immediate relief at the pump, and it shows he doesn’t understand our economy or have the ability to deliver for hard-working Americans,” said Tucker Bounds, a McCain aide. “Senator Obama’s arguments against John McCain’s gas tax holiday are complete fiction, and the reality is that he used to support a gas tax holiday before he was running for president.”

Yikes!

Here comes $100 oil, and $3 gas

By Steven Hargreaves

From CNN Money.com

NEW YORK -- With oil prices setting records over $90 a barrel - and $100 looking ever more likely - experts say there's a good chance drivers will see $3 gasoline before the end of the year.

"Three dollar gasoline in this market is unavoidable," said Stephen Schork, publisher of the industry newsletter the Schork Report. "At this rate, we're going to see $4 a gallon."

Crude oil prices have soared nearly 30 percent over the last month, mainly over fears that supply won't meet demand, a falling U.S. dollar, and what some say is a high degree of speculative investment money.

But so far drivers have been lucky. The national average price for gasoline has risen barely one cent, going from $2.81 last month to $2.82 this month, according to the motorist organization AAA, although in many areas of the country gasoline is already over $3.

Analysts have said the relatively stable gasoline price is due to slack demand following the high-demand summer driving season.

$90 oil won't kill the bull
But the relatively cheap gas prices are causing profit margins to slip for refiners, who have to pay top dollar for crude but aren't passing along the extra costs for consumers, yet.

"That doesn't seem sustainable," said Kevin Norrish, a commodities analyst at Barclays in London.

Norrish said it's likely refiners will scale back gas production, just as the higher demand holidays approach.

"At some point, it has to happen," he said.

Schork also said a lack of refining capacity means U.S. refiners will struggle to produce both gasoline and heating oil, so the country will end up importing more gas during the holidays. And he noted that importing gas with a weak U.S. dollar is an expensive proposition.

"We could easily see $3 by the end of the year," he said.

Not all analysts agree.

Nauman Barakat, an energy trader at Macquarie Futures, the trading arm of Macquarie investment bank, said gasoline prices near $3 a gallon have kept demand down.

The Energy Information Administration says gasoline demand has been about flat for the last few months, whereas it usually grows by about 1.5 percent a year.

"We're not going to see a similar increase in gas prices," said Barakat. "But if [oil] prices stay at these numbers, then of course it will be a different story come spring."

And therein lies the catch. All the analysts in this story expect crude to hit $100 a barrel.

"It's a matter of when, not if," said Norrish.

Norrish said it was fundamentals, not speculative investment money, driving oil prices - strong demand, falling inventories, no production increases from OPEC.

"The underlying market balance will continue to tighten, and if the geopolitical situation worsens, we'll get to $100 very quickly," he said.

Barakat said there are now more traders betting oil will rise to $100 than there were betting it would cross $90 back when crude was still in the $80s.

And Schork noted the sheer amount of oil contracts trading, and the fact that OPEC tried to cool prices back in September with a production increase, did nothing but send prices higher.

"There's a tremendous amount of bull energy in this market," he said. 'There's no reason we can't get to $100."

Brooklyn Bridge should be fixed with gas tax

A New York Times editorial

In its last state inspection, the Brooklyn Bridge rated 2.9 on a scale of 7, an unabashed poor rating, barely passing. It was not bad enough to close it or further limit traffic and city officials pronounce the bridge safe, but New Yorkers should be excused if they begin looking at the 124-year-old landmark in a different way.

Those who live in its magnificent shadow are in the same uneasy place as the millions of other Americans who traverse bridges daily. Many, in inspections prompted by the Minneapolis disaster, have been found to have structural, design or maintenance problems.

Crossings used to take place without much thought, thanks to necessity, and the public’s trust in government to take care of public structures. But that suspended disbelief should be shaken in anyone who heard President Bush on Thursday as he cavalierly dismissed the idea of raising the federal gas tax — set at 18.4 cents since 1993 — to pay for bridge repairs.

Representative Jerrold Nadler, whose district includes part of the Brooklyn Bridge, points out that the White House has so shortchanged repair work on roads and bridges, by some $90 billion, that it might make a list of structures it considers worth saving, and another list for what would have to be closed and abandoned for lack of money. The suggestion was offered tongue in cheek, but it’s not far off the mark. Draconian choices could be avoided with just an increase of a nickel in the gas tax.

Assuming the money is there, the Brooklyn Bridge is to undergo a federally financed overhaul in two years. City officials, trying to shore up public confidence until then, say the structure’s problems are certain components, including ramps that lead to the span. The not-so-sterling report card is unlikely to deter the 130,000 people who drive, walk or bike over the Brooklyn Bridge every day. But it should give everyone pause that the original bridge to a new century has become a fixer-upper.

Creative financing

By Ben Wear

From the Austin American-Statesman

I have a confession to make.

Tuesday evening, Statesman reporter Jason Embry called to tell me the Texas House had just voted for a three-month summer hiatus from the 20-cent-a-gallon state gas tax. My first reaction was: Wow, with Texas hurting for highway money, that's really bad public policy. And, frankly, political pandering.

Then, about 30 seconds later, I thought: Hey, that'll save me some real money!

All politics is localized, in other words, right down to my accelerator pedal. Pander away, boys and girls.

I came to my wonkish senses later. The tax holiday probably won't become law. But that vote to amend Senate Bill 1886, and a 122-19 House vote that day pancaking Williamson County Republican Rep. Mike Krusee's attempt to index the gas tax to inflation, perfectly capture what's been going on this session with transportation.

The Legislature has been vigorous in scaling back Gov. Rick Perry's toll road policies, particularly contracts for private companies to run and profit from state tollways.

So vigorous, in fact, that Perry threatened last week to call them back into a series of sweaty summer special sessions unless they back off. And there's been a feisty debate on the size of Texas' road funding shortfall over the next 25 years.

It's $86 billion, the Texas Department of Transportation says. We'd need to septuple the gas tax or have a gazillion toll roads! No way, others say, it's just $44 billion, and a mere 50 or 60 cents more tax will do it.

Then, last week, the House said "NO!" to what would have amounted to a half-cent tax increase. Lovely.

There have been some stirrings. Sen. Steve Ogden, R-Bryan, who helped create this brouhaha by carrying the 2003 bill that gave the Transportation Department all these powers, is now like a reformed smoker.

He's still OK with some toll roads, but in government hands, and he wants the tolls gone when the road bonds are paid off. But, being a money guy as head of the Senate Finance Committee, he's made some suggestions for ginning up road cash.

The Senate version of the budget would redirect $310 million of gas tax money away from the Department of Public Safety and back to transportation. He carried a bill allowing $3 billion more borrowing against the gas tax for toll roads.

And, in an innovative proposal that probably needs time to cook, Ogden would create zones around new roads where the state's 6.25 percent sales tax would go to the Texas Mobility Fund.

The state could borrow against that future sales tax, build toll roads and, as businesses set up along the roads, gradually replace tolls with sales tax revenue. When bonds were paid off, the sales tax would go back to general state needs.

Another bill would allow the state's fat pension and school funds to invest in state toll roads, rather than turning to the private sector. Hard to say what will happen with that.

But something needs to happen. Gas tax holidays and tollway moratoriums might feel good, but they won't buy any concrete.

Serious about congestion relief?

This French train just broke the world land-speed record at 357.2 mph.

European rail lines taking a giant leap

Excerpted from USA Today

The opening of several high-speed train lines this year will dramatically shrink travel times across the continent that, in some cases, will be faster than flying.

For Americans flocking to Europe this summer, the change will be most noticeable in France with the opening of the TGV-East line on June 10 that will finally connect the French and German high-speed rail networks.

Travel times from Paris to the popular northeast provinces of Champagne, Lorraine and Alsace will be slashed in half, allowing visitors to tour the region's famous Champagne houses by day and be back in Paris for dinner.

Europe is investing heavily in expanding its high-speed network. By 2020 it will stretch from Portugal to Poland.

"We're at the foothold of a revolution in short-haul travel in Europe," says Simon Montague, spokesman for the Eurostar high-speed train service, which operates between London, Paris and Brussels.

Traveling by train has always been a rite of passage for U.S. visitors. Over the past decade, trains have taken a back seat to airplanes, spurred by a boom in low-cost airlines.

But in recent months, a greater awareness of the environmental effect of traveling and the growth of "green travel" is swinging the pendulum back in favor of trains, says Mark Smith, rail industry consultant and editor of Seat61.com, a guide to traveling around the world solely by train or boat.

"We certainly are seeing something of a backlash against short-haul flights in Europe," Smith says. "People here are very concerned about lowering their carbon footprints."

Ball's in whose court, now?

A recap: the Feds haven't raised the gas tax since 1993; Texas hasn't raised its state gas tax since 1991; Mary Peters defends Perry's denouncement of the toll road moratorium bill now pending in Legislature; Perry says federal money has dried up, and there is no way other than his federally-sanctioned toll road privatization plan to raise money to build infastructure.

Gas tax called toll alternative

By Patrick Driscoll

From the San Antonio Express-News

Raise the gas tax slowly, year by year, and Texas wouldn't need most of the glut of toll-road projects now on the books, state Sen. John Carona, R-Dallas, said Monday in Austin.

The state surely would be able to resist the allure of cash from corporations looking to finance and operate tollways in hopes of raking in profits down the road, said Carona, chairman of the Transportation and Homeland Security Committee.

"It is a far less expensive approach to meeting our future transportation needs than the proliferation of toll roads that make up the bulk of our transportation projects," he said.

Referring to a recent report by the Governor's Business Council that compares gas taxes and toll fees as ways to fund roads, Carona offered these scenarios for 2030:

The 38.4 cents per gallon in combined state and federal taxes, untouched, would bring in a paltry $4.6 billion, not even enough to maintain roads.

Indexing the gas tax to consumer inflation, about 3 percent a year, would raise it by 43 cents and bring in almost $10 billion.

Indexing the gas tax to rising costs of highway construction, 7 percent a year, would raise it by 69 cents, and bring in almost $16 billion.

Stashing the proceeds into the Texas Mobility Fund for 20 years would finance 10 times that amount in bonds.

Motorists could see a tax of 81 cents to $1.07 a gallon in 2030, depending on the scenario.

Carona said a typical driver would pay an extra $21 a month — $13 when fuel savings from less gridlock is subtracted. For the same trip on a tollway, assuming $2.50 a round trip and going up 3 percent a year, the cost would get as high as $100.

As far as whether it would be fair for rural drivers to help foot the bill for solving big city traffic problems, Carona said all Texans need more roads no matter where they live, whether for movement of people or goods. And there are big needs now.

"No part of our state is an island," he said.

And on the messy problem of skyrocketing construction inflation, which in Texas has been averaging 20 percent annually for the past three years, the senator said he and other lawmakers are prepared to cap annual gas-tax increases to something like 4.5 percent a year.

Many advocates on both sides of what has become a bitter debate on state tolling policies find some common ground when it comes to the prospect of higher gas taxes.

The San Antonio Mobility Coalition, formed by government and highway interests, favor both toll roads and indexing the gas tax.

"We support any combination of new revenues," Director Vic Boyer said. "Whatever addresses those funding gaps, we're fine."

San Antonio Toll Party, a group of grassroots activists, wants nontoll traffic fixes ranging from better timing of signal lights to higher gas taxes.

"That's what we've been about from the beginning, promoting nontolled transportation solutions," Director Terri Hall said. Indexing the gas tax "is certainly one of them."

Carona and House Transportation Committee Chairman Mike Krusee, R-Round Rock, are working on legislation to index the gas tax and make other changes, including more oversight of tollways and privatization and stopping further diversions of gas taxes to nontransportation uses.

Some $800 million a year in gas taxes are drained away to other uses, Carona said Monday. Changes this session could reduce losses by $250 million to $400 million a year. But indexing the gas tax is necessary if the state is to cut back on toll projects, Carona said.

Not doing so is an invitation to privatize more toll-road projects, he said. While governments get millions of dollars in up-front cash, they agree to limit or pay extra for improvements to competing roads for 50 years and let companies collect billions in profits.

'Stay on track'

The following is an editorial from today's New York Times

Americans made 10.1 billion trips on public transportation last year, the highest that ridership has risen in nearly half a century. That’s good for congestion on the roads as well as the pollution that goes with it. But any mass-transit renaissance will come to a grinding halt unless a commensurate investment is made in upkeep and expansion.

As Libby Sander reported recently in The Times, Chicago’s elevated train system, known as the El, appears to be near a breaking point. The second-largest public transit system in America after New York’s is suffering from rising commute times as the century-old system deteriorates.

Public transit systems are financed through a combination of federal and local money, so parochial priorities play a big role in underinvestment. For instance, the Chicago Transit Authority’s financing formula hasn’t changed since 1983. But at the same time, the federal gas tax — which contributes money for public transportation systems as well as highways — hasn’t changed since 1993. That means it hasn’t even kept up with inflation in maintenance and construction costs, much less rising demand.

Part of the trouble with financing for mass transit is that the upfront costs always appear prohibitively large (for the next five years, Chicago’s regional authority is seeking $10 billion in state and local money) while the benefits are long term and extremely diffuse. As a result, projects often linger. Planners have been trying to build New York’s Second Avenue Line since the 1920s.

Worse still, when money is scarce it is insidiously easy to delay maintenance.

Once a system begins to break down, it can hurt the quality of life and economic growth of a city. And it isn’t just a problem for city dwellers. Buses and rail systems serve rural areas as well. Government officials around the country should take heed of Chicago’s problems. Meanwhile, Congress should at a minimum bring the gas tax in line with inflation.

Toll Road Argument Thrown Into Doubt

From The San Antonio Express-News, Dec. 9, 2006

By Patrick Driscoll

A new study throws cold water on a long-cherished claim of toll road advocates, surprising some of them, and could redefine a debate over if and how Texas should toll its highways.

For more than a year now, state officials have scared the dickens out of motorists by saying the gas tax would have to go up $1.20 a gallon to build all the roads needed statewide over the next quarter-century.

That would almost triple the 38.4 cents drivers now pay in federal and state fuel taxes. Since that's politically impossible to do, the argument goes, toll roads should be built wherever and whenever feasible.

But now a Texas Transportation Institute study says gas taxes wouldn't have to go up nearly as much.

Just indexing the gas tax to rising construction costs would be enough, the 139-page report says. The extra money could finance bonds through 2030 and pay them all off within five years after that.

Or, to avoid borrowing with bonds, the tax could be increased 12 cents in 2008 and indexed to construction inflation through 2030.

Even if the tax weren't indexed, a flat increase of only 39 cents a gallon would do the same — a far cry from the $1.20 that Texas Department of Transportation officials have maintained would be needed.

Toll critics embraced the news, saying it's proof TxDOT is pumping up numbers to justify toll roads.

"All of this is a charade to draw us into TxDOT's pointy-headed policy mindset that's obsessed with tolls and how to sell the public on it," said David Ramos of San Antonio Toll Party. "The bottom line is TxDOT is trying to create a crisis to justify their money grab."

Toll advocates were caught off guard when the TTI study was recently presented to the Legislature's Study Commission on Transportation Financing.

"That report was a surprise," said Ted Houghton, a Texas Transportation Commission member from El Paso who serves on the study commission. "It wasn't on the agenda and no one had any time to read it. So we're going through it and working on the assumptions."

The report, done for the Governor's Business Council, differs from TxDOT's assumptions in three key areas, said Michael Stevens, a Houston developer who's a member of both the Business Council and the transportation study commission.

TxDOT failed to account for how much tax revenues would go up over the 25 years from increased driving, he said, and overestimated unfunded needs for state roads by $8 billion.

And, when calculating the funding gap, TxDOT added an estimated $22 billion for local streets in the eight largest cities, though the state has no responsibility for such roads.

The study concluded that a bloated $86 billion in unfunded needs espoused by TxDOT is actually just $56 billion.

"These numbers are pretty tight," Stevens said. "We study it like we study our businesses. Before we published it, because we knew it was so different, we did a large amount of due diligence on it."

That included meeting with TxDOT and the governor's office after a draft quietly came out in September, he said.

Houghton said TxDOT is poring over the report and could respond next week.

State officials might question estimates for construction inflation, which is rising faster than consumer inflation.

Road building costs in Texas went up 33 percent last year because of higher fuel costs and increased global competition for asphalt, concrete and steel.

The study predicts construction inflation will go up just 3.4 percent a year.

Other issues could involve whether costs such as road maintenance were included.

Also, Houghton said indexing the gas tax to construction inflation could cause the tax go up faster than many realize — rising to 84.4 cents a gallon by 2030 or even a $1 or more, depending on the scenario — and would hit poor people the hardest.

"It's the most regressive tax there is," he said.

While the study doesn't recommend scrapping statewide toll plans, it does say toll dollars should stay in local areas and that the gas tax should be indexed to inflation to finance bonds.

It also calls for an end to diverting gas tax revenues to non-transportation uses.

Indexing the gas tax likely would mean fewer roads would need to be tolled, said Rep. Mike Krusee, R-Round Rock, who chairs the House Transportation Committee and co-chairs the legislative study commission.

But a bill he filed last year to index the tax to consumer inflation was killed. He said he'll try again when the Legislature meets in January, and may consider tying the tax to faster-rising construction costs.

The legislative study commission also will offer ideas, but a report will be held off at least another month while members mull the TTI gas-tax study.

"The study has thrown a kink into the process," Krusee said.