Virginia’s Transportation Funding Plan Could Have Influence on Other States, In Washington

There are a number of recent news items suggesting several states could follow in the footsteps of Virginia as they seek ways to fund their infrastructure needs going forward. Some in Congress also appear to be taking a hard look at the Virginia plan, which included eliminating the state’s 17.5 cents-per-gallon gas tax in favor of new wholesale taxes on gasoline and diesel and an increase in the general sales tax. I also have updates on some other states looking at transportation funding issues and a preview of our upcoming Transportation Policy Academy in Washington, DC, where many of these issues will likely be part of the conversation.

Will Virginia Become a Funding Model?

Illinois will need between $63.5 billion and $74.4 billion over the next five years just to maintain existing road and transit networks, a report by the Transportation for Illinois Coalition said earlier this year. Some want the state to take an approach similar to Virginia’s to try to keep those networks in a state of good repair.

“Despite the need, taxpayers will not support that level of funding, but some reasonable amount must be raised to sustain our fiduciary responsibilities to sustain the systems our predecessors have provided for us,” write Doug Whitley and Ben Brockschmidt of the Illinois Chamber of Commerce in a recent guest commentary for The (East Central Illinois) News-Gazette. “The good news with all of this is that we have the ability to improve our transportation infrastructure. In May, legislators introduced (Transportation for Illinois Coalition)-supported legislation that would eliminate the flat rate per gallon tax on gasoline and replace it with a 9.5 percent tax on the wholesale price of fuel. While this approach is more volatile and harder to predict receipts, the wholesale approach is expected to guarantee an increase in tax revenue, while reflecting market pricing that has consistently grown over the years. The state of Virginia adopted this approach earlier this year — and under a Republican governor.”

Whitley and Brockschmidt also note that the Virginia approach is not the only option for increased funding for transportation.

“Just this year over a dozen states have passed, attempted to pass, or seriously considered legislation to increase taxes to pay for transportation infrastructure,” they write. “While Virginia is the only state to move to a wholesale tax, other states are considering it.”

One of those states could be West Virginia. Members of the West Virginia House of Delegates were in Richmond last week to get a briefing from Virginia House Speaker William Howell on how his state enacted the transportation funding legislation this year, The (Charleston) State Journal reported. Speaker Howell, by the way, will take part in a panel discussion comparing the Virginia and Maryland transportation funding plans during our Transportation Policy Academy next week (more on that below).

But could the Virginia plan be a model at the federal level too? Earlier this month I blogged about Senator Barbara Boxer’s recent comments about ending per gallon fuel taxes and switching to a wholesale tax. The Capitol Hill newspaper Roll Call followed up on the issue in a recent article.

“Several states are turning to a percentage highway fee that is paid for at the refinery level,” Boxer, the Senate Environment and Public Works Committee Chair, said at a recent hearing. “This could bring in more than all the other taxes bring in for transportation.”

But not everyone is a fan. Virginia’s tax changes were opposed by Grover Norquist and his group Americans for Tax Reform. And the ranking Republican on the EPW Committee, Sen. David Vitter of Louisiana, has said he couldn’t support a transportation funding solution that isn’t revenue neutral.

“I don’t think it’s fair or reasonable to expect middle class families to endure a net tax increase,” Vitter said recently. “And I don’t agree with that, don’t support that and I don’t think that’s doable in terms of this Congress at all.”

The Roll Call article goes on to say that even as states like Oregon explore mileage-based fees and other funding options for the future, most believe none can replace existing gas and diesel taxes at the federal level in the short term and raising those taxes now could provide a bridge to those future solutions.

“There are multiple revenue options that could work alone or in combination,” said Janet Kavinoky of the U.S. Chamber of Commerce. “But we continue to believe the simplest, most straightforward and effective way to generate enough revenue for federal transportation programs is through increasing federal gasoline and diesel taxes.”

Kavinoky’s boss, Chamber president Thomas Donahue, renewed his call for a federal gas tax increase this week. At an event in Washington hosted by the Christian Science Monitor, Donohue said Congress should phase in such an increase and index the tax to inflation.

“We have for the longest time avoided taking steps that we need to take to strengthen our infrastructure: steps that would not be driven by incremental expenditures by the broad population but that would be paid for by users,” he said.

One of the knocks against a tax swap like Virginia’s is that it is a step away from the concept of a user fee and further confuses an already confused public about how transportation is funded.

“Ask any American on the street the rate of the federal gas tax and you are likely to get a blank stare or an incorrect answer,” writes Joshua Schank of the Eno Center for Transportation in a recent Eno newsletter article. “Any wholesale tax would be even less transparent because, even if they wanted to, people would have trouble calculating how much of it they are paying. Wholesale taxes can be passed on to consumers, but they do not have to be. Transitioning to a wholesale tax runs the risk of exacerbating our current disconnect between the average citizen’s taxes and the subsequent investments in our transportation infrastructure. It also essentially gives up on the idea of managing demand through a user fee.”

Schank and Drew Preston of the U.S. Chamber will also be among the speakers at our Transportation Policy Academy next week.

Other Transportation Funding Updates

  • Indiana: Republican State Rep. Ed Soliday, who chairs the House Roads and Transportation Committee, announced last week that he will sponsor legislation in January which would allow volunteer motorists to opt out of the 18 cents-per-gallon gas tax and pay a fee for every mile they drive instead, The Times of Northwest Indiana reported. Oregon enacted a similar voluntary program earlier this year that will have 5,000 volunteer motorists paying 1.5 cents per mile beginning in 2015. Soliday’s proposed pilot program in Indiana would require the state DOT to test different technologies and methods for assessing the per-mile charge and report back to the legislature in two years. If Oregon’s 1.5 cents per mile standard were applied to Indiana, a driver who travels 12,000 miles a year and whose vehicle gets 20 miles per gallon would pay $180 in mileage charges, instead of $108 in gas tax. Soliday is a member of the CSG Transportation Public Policy Committee and attended our 2011 Transportation Policy Academy in Washington, DC. His colleague from the other side of the aisle, Rep. Ed DeLaney, will attend our latest academy next week in DC.
  • Massachusetts: Part of the transportation funding package lawmakers passed in July has already been repealed, The Boston Globe reported last month. The legislature passed and Gov. Deval Patrick signed a measure to abolish a 6.25 percent sales tax on computer and software services that would have raised an estimated $160 million annually. The state’s business and technology sectors had protested the tax following its passage. Patrick has called on lawmakers to find a replacement for the revenue. In other news from the Bay State, tolls recently returned to the Mass Turnpike in the western part of the state for the first time in 17 years, The (Springfield) Republican reported. Massachusetts Sen. Thomas McGee, the chair of the Joint Committee on Transportation and a veteran of two previous CSG transportation policy academies, will also be among the attendees in DC next week.     
  • Minnesota: The Minnesota Department of Transportation has a new website where Minnesotans can learn about the state’s transportation system, how transportation funding works and what will be needed to keep the system working, according to the AASHTO Journal Weekly Transportation Report. According to the website, Minnesota GO, the costs to “complete needed improvements and make strategic investments in the transportation network exceed our projected funding by an estimated $50 billion during the next 20 years, of which $12 billion alone is needed for state highways and bridges.” For more on Minnesota’s challenges and efforts to gain the support for new revenues, you can read my report on this summer’s transportation roundtable at the CSG Midwest Annual Conference in St. Paul at which MnDOT Commissioner Charles Zelle was the featured guest. The chair of the Transportation Finance Committee in the Minnesota House of Representatives, Rep. Frank Hornstein, will be among our policy academy attendees next week.
  • Missouri: A market research firm recently completed a statewide customer satisfaction study to evaluate the Missouri Department of Transportation’s overall performance as perceived by Missourians and to identify services and improvements they believe are most important. The study found that overall satisfaction with the agency was at 85 percent, tying the highest recorded satisfaction levels previously recorded in 2012 and 2009. Another key finding: 59 percent of Missourians believe MoDOT’s funding should be increased, the highest recorded since the question was first asked in 2009. The revenue option most preferred by those surveyed: tolling, at 27 percent. Coming in second at 22 percent was a sales tax increase, which was also the option preferred by some lawmakers this year. Legislation to have voters decide on a ballot measure to install a 1-cent sales tax dedicated to transportation passed the House but was filibustered in the state Senate. A group called Missourians for Safe Transportation and New Jobs has taken up the mantle, filing an initiative petition to accomplish the same thing that they hope will go before voters next year. The petition is subject to approval by the state’s attorney general and auditor before it can be placed on the ballot. The sponsor of the original House measure, Rep. Dave Hinson, will be among our attendees next week in DC. You can read more about the reasons behind MoDOT’s success and future challenges in my summary of our recent Transportation Public Policy Committee meeting in Kansas City that featured the agency’s Director, Dave Nichols, and Customer Relations Director Mara Campbell.    
  • New Hampshire: Regional planners and state DOT officials have identified a nearly $1 billion deficit between the cost of transportation projects they would like to tackle over the next decade and the revenues projected to be available to pay for them, Seacoast Online reported last week. The state is among the worst in the country when it comes to red-listed bridges. The state gas tax was last increased in 1991. A House proposal to phase in a 12-cent increase was rejected by the Senate this year.
  • Pennsylvania: A group of Democratic state legislators in the Philadelphia area told House Republicans and the governor’s office last week that they would be willing to support a bill to provide more than $2 billion for transportation in exchange for Republican support for a cigarette tax to fund city schools, the Philadelphia Inquirer reported. Earlier in the week Gov. Tom Corbett announced he would release $45 million for the cash-strapped city schools but an administration spokesman denied a connection to the transportation bill. Meanwhile, some lawmakers are reportedly looking at cutting wages on some state construction jobs in order to make more dollars available for transportation. Unions are said to be divided on the issue, which could have an impact on Democrats.
  • Texas: Lawmakers earlier this year couldn’t come up with a plan to guarantee additional revenues to build and maintain highways. They instead agreed to let voters decide next year on a constitutional amendment to divert money from a rainy day fund for transportation. But even if the amendment is passed, transportation officials don’t expect the additional funds to be anywhere close to meeting expected demand, The Dallas Morning News reported last week. While the Texas Department of Transportation will spend $6.2 billion on new construction and maintenance this year, the best-case funding scenario for 2015 would give the agency only $3.7 billion. Without the amendment, the agency would have only about $2.5 billion to spend on new projects in two years. And since that’s the only amount TxDOT is assured of getting, that’s the value of projects they’re planning for now. House Democrats say even if the amendment passes, lawmakers will have to consider new funding sources in the 2015 legislative session. Republican lawmakers have been reluctant to get behind a gas tax increase or to increase registration fees. “There are certain sources of revenue I will never be supportive of,” said Rep. Linda Harper-Brown, a member of the House Transportation Funding Committee. Harper-Brown will be another attendee at our Transportation Policy Academy in DC next week. And one more note from the Lone Star State, TollroadsNews reports this week that Moody’s Investors Service has just downrated the bank debt and TIFIA loans for the SH 130 Concession Company, the entity operating Texas State Highway 130, the Austin-to-Seguin P3 toll road known more for its high speed limit than its traffic. Moody’s is indicating they don’t think the company will have enough cash left to meet its June 2014 interest payments and that they could go into default before the second anniversary of the road opening to traffic. As a result TxDOT could exercise its right under the P3 agreement and terminate the concession allowing them to take over the 40-mile toll road at a tiny fraction of its cost to investors. The road currently sees just 6,000 vehicles a day, one-eighth its capacity, and produces toll revenue in the neighborhood of $20 million a year. A spokesman for the company told TollroadsNews they plan to be there for the long haul and blamed the low traffic on a lack of development along the corridor, which hasn’t brought the expected growth in commuter traffic.
  • Utah: Utah’s bridges may be rated among the best in the nation today, but that doesn’t mean the state doesn’t need to be looking at how to ramp up spending on replacing and rehabilitating them in the future, The Salt Lake Tribune reported recently. While 322 of the state’s 1,807 bridges are now 50 years old, by the end of the decade that number will rise to 576. By 2030, the number will rise to 920 or 51 percent. Utah’s 24.5 cents-a-gallon gas tax was last increased 16 years ago. The Utah Foundation has said that without a tax increase, the state would face a shortfall of $11.3 billion for high-priority transportation projects by 2040.  
  • Virginia: As I reported above, the state’s transportation funding plan may be getting lots of attention around the country but one aspect of it could be on the chopping block in 2014, The Richmond Times-Dispatch reported recently. A group of state legislators say they’ve drafted legislation to repeal the $64-a-year hybrid vehicle tax included in the transportation funding package. “I thought this was horrible public policy to begin with,” said Del. Scott Surovell, one of the sponsors of the repeal bill. “I feel the hybrid tax essentially amounts to a virtue tax.” … In other Old Dominion news, the state’s Republican candidate for governor, Attorney General Ken Cuccinelli, has been making the case on the campaign trail for devolution of state transportation decision making to county and local governments, The Washington Post reported.

CSG Transportation Policy Academy – Washington, DC – October 28-30

Ten state legislators from around the country, including several who chair transportation committees in their respective states, will attend our next Transportation Policy Academy in Washington, DC next week. Among the scheduled highlights:

  • Maryland Department of Transportation officials will lead legislators on a tour, highlighting plans for the Purple Line Metrorail extension and transit-oriented development in the White Flint area. Legislators will also travel the length of the Intercounty Connector, the toll road that connects Montgomery and Prince George’s counties. An article in the September-October issue of Bethesda magazine says the road may not be living up to what officials promised. “The 18.8-mile [Intercounty Connector]—the first stretch of which opened two and a half years ago after great hype and amid great controversy—is the road less traveled,” reports Eugene L. Meyer. “Traffic counts are well below early projections, and revenue from tolls—needed to pay off the bonds that were sold to build the road—is far less than originally anticipated.”
  • Maryland Secretary of Transportation James T. Smith, Jr. will deliver the keynote address, outlining the state's overall approach to transportation, how this year's funding package fits into the plan, how newly revised guidelines for public-private partnerships will benefit the state and other issues.
  • Our policy roundtable will feature Brian Pallasch of the American Society of Civil Engineers (ASCE), Joshua Schank of Eno, Drew Preston of the U.S. Chamber, Joung Lee of AASHTO, Emil Frankel of the Bipartisan Policy Center and Paul Feenstra of ITS America. Topics will include ASCE’s Report Card for America’s Infrastructure, the federal role in transportation, and state transportation funding initiatives.
  • The panel discussion on the Maryland and Virginia transportation funding plans includes Virginia Speaker Howell, Maryland House Majority Leader Kumar Barve and officials from the Virginia and Maryland departments of transportation.
  • Attendees will also have the chance to meet with their members of Congress during the three-day academy.

The invitation-only policy academy is made possible through the support of CSG associates including ASCE, Nissan and Toyota. I’ll have a full report on the event in the November 7th issue of the Capitol Ideas E-Newsletter. You can subscribe to the newsletter by going here. Or look for it next month here in the Knowledge Center.

Asphalt vs. Concrete in Kentucky Road Projects

I have an article in the October issue of The Lane Report, a Kentucky business and economic news magazine. It focuses on the asphalt and concrete industries in Kentucky and why the competition between the two for state road projects is much more one-sided here than in some other states. The article addresses state transportation cabinet efforts to achieve a more level playing field, including the use of alternate pavement bidding, indexes, penalties and double standards.

I had plenty of material that didn’t make the article, including this tidbit: I asked representatives of the state’s asphalt and concrete industries if they could concede situations in which the other paving type should be used.

“Bridges need to be built out of concrete,” Brian Wood, executive director of the Plantmix Asphalt Industry of Kentucky, told me. “What we like to say around the asphalt industry is ‘concrete’s a great product in the vertical direction; we like asphalt in the horizontal direction.’ We’re an industry that because of all the marketing and all the things that have happened and the evolution of things, we want to win every project and we want to be at the table on every project. But I would also say that asphalt is a viable paving material choice for every single project imaginable whereas concrete is not a viable option for a lot of (projects).”

Finley Messick, executive director of the Kentucky Concrete Pavement Association, had a different opinion, naturally. “Keep in mind, year after year asphalt is plus or minus 98 percent of the material used in paving by (the Kentucky Transportation Cabinet),” he said. “It is obvious asphalt is not the best choice 98 percent of the time.”

Design-Bid-Build vs. Design-Build

One of the questions that came up at the CSG Transportation Public Policy Committee session in Kansas City involved the benefits of the design-build method of project delivery. For those interested in learning more on how design-build differs from the more traditional design-bid-build method and the benefits of each, there is an article this month by engineers Laurence Farrell and David Covington in Better Roads magazine, a publication that serves both construction contractors and government agencies involved in road construction. The article is called “Design-Bid-Build vs. Design-Build: Understanding the process and what you need to know.”