States Ponder Future Transportation Funding

With another year winding down and a new federal surface transportation authorization bill still likely months away, a number of state governments are moving forward with plans of their own to seek new revenues to fund transportation going forward. Here’s an update on several states.

Michigan Gov. Snyder Proposes Changes

In a speech to road advocates this week, Michigan Gov. Rick Snyder proposed dropping the state’s 19-cents-per-gallon tax on gasoline and 15-cents-per-gallon tax on diesel fuel and replacing them with a tax of 6.7 percent on the wholesale price of fuel, The Lansing State Journal reported. While the switch would raise about the same amount of money for transportation as the gas and diesel taxes ($965 million annually), it would give the state a more stable source of funding.

Snyder said he would also like to see road funds distributed based on road use and traffic so that they can be spent where they’ll do the most good. He’d like to take away funds from some localities that receive $50,000 or less in road funding annually and give it to counties instead. He’d like to see the state given authority to audit county road agencies. In addition, the governor would like to see legislation passed to allow competitive bidding for road maintenance and construction from the public and private sectors.

“We need to find revenue sources to generate $1 billion to $1.4 billion a year (more) for our roads and bridges,” Snyder said. “We’ve ignored this for far too long.”

Higher vehicle registration fees could be a source of new revenue, the governor said. Charging motorists $120 more a year for each vehicle they register could raise nearly $1 billion in new revenue.

There is more about Snyder’s proposals here and here. The Detroit News also covered the speech.

Wyoming Legislation Advances

A joint interim legislative committee in Wyoming this week agreed to recommend five bills for the legislature’s 2012 session that would provide the state department of transportation an estimated $48 million more than its typical annual budget, the Wyoming Tribune Eagle reports. The bills would:

  • eliminate the state’s ethanol tax credit;
  • create a ballot measure to propose a constitutional amendment to use about $14 million in funds collected from speeding tickets and other penalties and fines to pay for highway construction and maintenance projects rather than public schools (Wyoming’s Constitution currently designates the money for the schools);
  • earmark sales tax revenues on off-road diesel fuel to go toward highway projects;
  • add fees to cover the costs of a vehicle ignition lock program; and
  • increase vehicle registration costs.

Another piece of legislation, calling for an increase in license and permit fees, failed to garner the necessary support from House members to advance the bill.

Maryland Commission Proposes 15-cent Increase in Gas Tax

The Blue Ribbon Commission on Maryland Transportation Funding, created by the General Assembly and Gov. Martin O’Malley, is proposing a 15 cents-per-gallon increase in the state’s gas tax, which would make it one of the highest rates in the nation, The Washington Post reports. The commission also proposed fee increases for every bus and rail passenger in the state.

The gas tax increase would be phased in over the course of three years. The costs of titling, registering and inspecting cars, as well as riding on bus and rail lines would increase all at once under the proposal.

O’Malley has said he would support some hike in the gas tax and has already asked lawmakers to begin debating the issue.

The commission believes the plan would raise an estimated $870 million annually (including $470 million from the gas tax hike, $165 million from car registration fee increases, and $26 million from bus and rail fee increases). The commission also would like to see a constitutional amendment to prohibit Maryland lawmakers from tapping into transportation funding, as they have seven times over the last decade to fill gaps in the state’s general fund.

The potential tax and fee increases would come in the wake of a move by the state’s transportation authority to raise tolls on many bridges by as much as $1.50.

But Maryland transportation officials say the price tag for the top transportation projects in each of the state’s 23 counties exceeds $12 billion and the commission’s plan doesn’t address directly how the state might pay for its share of some upcoming big ticket transit projects.

The (Gaithersburg) Gazette reports the Blue Ribbon Commission’s plan also calls for the possible creation of a state infrastructure bank, as states like Maryland’s neighbor Virginia have created. Such banks, which are capitalized by state and federal funds, allow states to make loans to counties, municipalities or private entities to fund infrastructure projects. Repayments to the bank at below-market or reduced rates fund the next round of loans. You can read more about State Infrastructure Banks in my Capitol Research brief on the topic from earlier this year.

Not everyone is entirely keen on the infrastructure bank concept however.

“At present, there are several state infrastructure banks (SIBs) in operation,” said Ron Utt of the Heritage Foundation in testimony before Congress earlier this month which described the benefits of a proposed national infrastructure bank as “limited.” “A quick review of some of these SIBs suggests that few of the projects they fund return a stream of income (if any) sufficient to cover debt service and operating expenses and that state and local tax revenues account for much of the revenues supporting these banks. This suggests that they may not be materially different from the workings of the state DOT and are not banks in the normal use of the term.”

Gas Tax Increase for Iowa?

A citizens’ commission in Iowa charged with finding money to fix the state’s roads has proposed increasing the state gas tax by as much as a dime a gallon, the (Mason City) Globe Gazette reports. The recommendation is included in a draft report that goes to the Iowa Department of Transportation for consideration on November 8. The department can make changes to the recommendations before turning them over to the legislature for consideration in 2012. The commission is also proposing raising registration fees for new vehicles from 5 percent to 6 percent and establishing a new user fee for hybrid vehicles. A state survey has indicated that roughly $215 million is needed to address the state’s critical infrastructure needs and more than $1 billion is needed to cover all the outstanding transportation projects.

Republican Gov. Terry Branstad has reportedly told lawmakers not to rule out a gas tax increase and other revenue options for upgrading roads and bridges.

Pennsylvania Putting Recommendations on Backburner?

An advisory commission appointed by Pennsylvania Gov. Tom Corbett issued recommendations in August calling for increasing registration and license fees and raising a component of the gasoline tax to produce $2.5 billion more for highways, bridges and mass transit. It now appears the governor may not push for the additional revenues this year as the state deals with other pressing issues and an economy that continues to be weak, The Philadelphia Inquirer reported today.

State transportation secretary Barry Schock, who chaired the Transportation Funding Advisory Commission, said the governor is considering the impact of the funding proposals on the state budget, the prospect of raising money by selling off the state-run liquor business, the effects on transportation of Marcellus Shale legislation and the impact higher user fees could have on Pennsylvanians in the weak economy.

State Sen. Jake Corman and state Rep. Dwight Evans say they will push forward with bills to implement the commission’s recommendations even without the governor’s go-ahead.

Pennsylvania Auditor General Jack Wagner said this week the state should move quickly to repair more of its deteriorating roads and bridges, calling the problem an embarrassment and a safety risk, The York Dispatch reported. Wagner said rebuilding the transportation infrastructure is the most pressing issue before state government and could be used to help boost the state’s economy.

A study issued last week by Transportation for America, a coalition of advocacy groups, concluded that Pittsburgh has the highest percentage of structurally deficient bridges of any metropolitan area in the United States.

Arizona Considers Tolling

A 29-mile stretch of Interstate 15 could become Arizona’s first toll road if state transportation officials get their way. The Arizona Republic reports that the Arizona Department of Transportation (ADOT) has asked the Federal Highway Administration for permission to be part of a federal pilot project to add tolls to sections of three interstates around the country. Virginia and Missouri have already received permission to proceed; Arizona is competing with two other states for the final slot.

ADOT officials say the interstate needs $251 million in repairs and the state has no money to pay for the work. In its request to FHWA, the department cited a “fairly immediate” need to rebuild bridge decks.

If the request is approved by FHWA, car drivers could pay $1 to $3 and truckers $6 to $10 to travel the Arizona stretch.

Interstate 15, a major route for freight and tourism, runs from San Diego, past Los Angeles, through Las Vegas, on to Salt Lake City all the way to the Canadian border. The remote stretch of the road through Arizona is seen as a good option for tolling because it is pretty much the only option for long-distance travelers. The only alternate route is a 200-mile detour along a mountainous state highway.

The Arizona Trucking Association has expressed opposition to I-15 tolls. The Associated Press reported that Utah Gov. Gary Herbert doesn’t like the plan either, saying Arizona should not make highway users or neighboring states pay because it has been negligent in maintaining the road. Herbert’s office says documents released by Arizona transportation officials indicate technology could be used to exempt Arizona residents who live near I-15 from the tolls.

Arizona is also considering tolls on the existing Arizona 189, a three-mile highway that caries freight from a commercial port west of Nogales onto Interstate 19. The state is exploring private investment and tolls to build a new 45-mile highway to connect Interstate 10 at Picacho Peak to U.S. 60 at Apache Junction, which could relieve traffic on I-10 and accommodate future growth in the far East Valley.

Other Recent News

  • The Washington Post had a long piece last week on the growth in the number of public-private partnerships to finance infrastructure projects in the United States.
  • USA Today reported earlier this month on how states and communities across the nation are raising tolls or imposing new ones to build and repair highways.
  • Missouri Department of Transportation officials say efforts to reduce staffing, facilities and equipment has resulted in $177 million being redirected to critical road and bridge projects in the state, KOMU reported.
  • Oklahoma Gov. Mary Fallin announced a new initiative earlier this month to fix all 706 structurally deficient bridges in the state by 2019, which she hopes will grow the economy and create jobs, the Associated Press reported. Oklahoma is second only to Pennsylvania in the number of structurally deficient bridges in the U.S. Fallin said expected growth in state revenue from anticipated increases in economic activity will help fund the bridge repairs.
  • Researchers at the University of Wisconsin-Madison said this month that the state gas tax in Wisconsin would have to increase by 50 cents to nearly 83 cents a gallon to cover road costs now being paid through property taxes or other general tax revenue, The (Milwaukee) Journal-Sentinel reported.
  • New York State Sen. James Seward argued in favor of rededicating funding for roads and bridges in his state in a recent op-ed for The (Greene County) Daily Mail. The New York Senate passed legislation this year to phase out the use of revenues intended for bridge and highway repairs on DMV operations and snow and ice removal. Seward supports legislation to create a dedicated fund for infrastructure improvements and a bill to allow the state DOT and other state authorities greater flexibility in contracting with the private sector for transportation and infrastructure projects.