The purpose of this policy research has been to explore financing alternatives that would produce an increase in the annual revenues of the Delaware Department of Transportation (DELDOT).  This report discusses a potential revenue generating mechanism in the form of Transportation Utility Districts (TUDs for short).   As long as all other sources of DELDOT revenue remain in place, implementing the TUDs program will increase the total funds available to DELDOT.

        The proposed TUDs system is a fiscal mechanism to collect revenues for financing new road infrastructure activities defined in DELDOT's Capital Improvement Program.  As we show later, the TUDs system can generate revenues on an annual basis that finance approximately 90% of the yearly capital outlays for the State road network. Such considerable revenue capability is attainable because the TUDs system is merely a fiscal framework for recovering the capital costs of the Delaware road network.  The Delaware transportation system is viewed like other public utilities with the consequence that, like other public utilities, the capital road infrastructure costs can be paid for through an annual utility fee/charge levied on the beneficiaries of the road network.

        What makes TUDs slightly different from other utilities, however, is that the recovery of capital (road) costs is consistent with the amount of capital spending of the sub-areas within the State where the road infrastructure improvements are made. State Senatorial Electoral Districts are employed as the TUDs sub-areas.  Thus the annual utility fee is to be a charge for each motor vehicle owned by an individual, household, and firm.  The level of the fee in each sub-area will depend on the cost of the infrastructure put in place within each Senatorial District where households reside and firms conduct their operations.

        The structure of TUDs and its fee determination rest upon a foundation of economic principles.  Most prominently, the fee levied in each District reflects the view that motor vehicle owners should pay for access to road infrastructure that corresponds to value of the road infrastructure they receive.  A TUDs system also has long-run implications for financing of the Delaware road network. In Senatorial Districts, motor vehicle owners who demand and welcome new transportation infrastructure capital will have the option of having the infrastructure built together with the obligation for raising the money themselves through fees that meet the capital costs of their infrastructure.  Motor vehicle owners in Senatorial Districts that do not demand added capital spending or do not think additional roads are in their interest would incur smaller transportation utility bills.

        Other significant impacts are likely to flow from the TUDs system, some of which are explored in the present work.  A major impact would involve land use since lower utility fees per motor vehicle would be realized in more populated Districts.  Both open space/farm areas and denser land use patterns would be encouraged by making each Senatorial District bear the responsibility to raise directly most of the revenues needed to pay for area specific highway additions or improvements.  Also, some groups of households or business will gain and others would lose through a TUDs system.  Not only will annual utility bills vary by Districts, but taking into consideration all other motor vehicle and road fees and taxes, the total costs of road transportation for some households and firms could rise while for others it could fall.  The different fees among districts would be equitable/fair for motor vehicle owners since each area would pay for infrastructure in their District.  The political acceptance of the advantages produced by TUDs depends upon the willingness of citizens and public officials to move to a more effective financing arrangement for the Delaware road network.