With One Eye on Virginia, Maryland and Other States Explore Subbing In Other Taxes to Fund Transportation

Maryland Gov. Martin O’Malley this week offered his latest, long-awaited plan for shoring up the state’s transportation trust fund and averting a project funding cliff expected to hit in 2017. Like a plan recently approved by lawmakers in Virginia and a number of others under consideration around the country, it involves raising some taxes and lowering others to bring in additional revenues for transportation.

  • Maryland: Perhaps with one eye on neighboring Virginia, which recently approved a $3.5 billion transportation funding plan (see below), Maryland Gov. Martin O’Malley this week proposed a plan of his own that could produce as much as $3.4 billion over the next five years, The Washington Post reported. Flanked by the General Assembly’s two Democratic leaders, the Governor said his plan would decrease the state’s existing 23.5-cents-per-gallon gas tax by five cents and introduce a 4 percent sales tax on gasoline at the wholesale level indexed to inflation and phased in over two years. The gas tax would also go up in future years to reflect inflation. Maryland has no money budgeted for new highway construction after 2017 and no funding identified to pay the state’s share of regional rail projects like the Purple Line, which would connect Bethesda with New Carrollton. O’Malley’s transportation proposal comes more than halfway into the legislature’s 90-day session and after prodding from Senate President Thomas V. Mike Miller, who introduced his own plan recently. It also comes just as a new report from the national transportation research group TRIP reveals that inadequate roads in Maryland are costing $6.2 billion annually in operating costs, lost time in traffic and wasted fuel.  
  • Massachusetts: Gov. Deval Patrick last week renewed his call for tax changes that would raise nearly $2 billion in new revenue to boost funding for transportation and education, the Associated Press reported. Each legislator received a map from the governor’s office detailing how new investments would benefit their districts. Patrick is asking lawmakers to increase the state income tax rate and the cigarette tax, while lowering the sales tax.  
  • Michigan: A proposal from Republican lawmakers would reconfigure Michigan taxes to ensure that all road and infrastructure repair money in the future would come from fuel taxes and registration fees, The Detroit News reported last week. The legislators want to put a constitutional amendment on the ballot to dedicate a 1-cent sales tax increase to education. They would then repeal an existing sales tax on gas and diesel that currently helps finance schools and approve a higher fuel tax dedicated to road and infrastructure improvements.
  • Missouri: The Associated Press reported that the House Transportation Committee passed a measure (HJR23) last week that would send a constitutional amendment to voters to increase the state sales tax by one cent to help fund transportation to the tune of nearly $8 billion over 10 years. The proposed amendment would expire after 10 years. Ten percent of the revenues would go to local transportation needs. The state’s gas tax would be frozen while the higher sales tax was in effect. A similar measure (SJR 16) is under consideration in the Senate Transportation Committee.
  • Vermont: The House Transportation Committee is expected to approve a transportation funding plan that would be phased in over two years, the Associated Press reported. Under the plan, a 2 percent sales tax on gasoline would take effect in June. It would go up another 2 percent in July 2014. The existing cents-per-gallon gas tax meanwhile would drop by 6 cents. Supporters say the switch would bring in nearly $26 million more in revenues. The share of the state transportation fund that currently goes to the state police would decrease by $5 million under the plan.
  • Virginia: The compromise transportation plan approved by lawmakers last month is getting the thumbs up from bond-rating firm Moody’s, reports The Washington Post. In its U.S. Public Finance Weekly Credit Outlook, the firm said the funding plan, which is expected to generate as much as $3.5 billion in additional transportation revenues over the next five years, is a “credit positive” for the commonwealth and makes Virginia “the first state to address stagnant gas tax collections that have been increasingly insufficient to meet transportation funding needs, a problem faced by many states as they, consumers and automakers embrace higher fuel efficiency standards.” The Virginia plan eliminates the 17.5-cent-a-gallon gas tax, replaces it with a new 3.5 percent wholesale gas tax indexed to inflation, increases the state sales tax on nonfood merchandise, and devotes more existing revenue to transportation instead of education, public safety and other services. It also includes a regional funding mechanism for the heavily congested Northern Virginia and Hampton Roads areas. Virginia Gov. Bob McDonnell said the Moody’s report “is yet another demonstration of why it was so critical that we finally, after 27 years of inaction, come together in Richmond to get a long-term transportation funding plan passed.” But The Post also reports this week that the transportation deal could cause a political identity crisis for McDonnell as the governor contemplates his political future. Not everyone was a big fan of the outcome in Virginia. As DC Streetsblog and The Virginian-Pilot both noted last week, some believe the funding plan is likely to usher in a new era of wasteful road building at the expense of transit projects that could have a greater impact on congestion in the commonwealth.    

Other State Updates

  • Ohio: The state House of Representatives has approved Gov. John Kasich’s plan to sell $1.5 billion in bonds backed by future Ohio Turnpike revenue to finance projects in northern Ohio and free up road and bridge funding for the rest of the state, The Toledo Blade reported last week. It heads now to the state Senate.  
  • Pennsylvania: Here’s a new one: you’ve heard of state infrastructure banks? How about a county infrastructure bank? WITF.org reported this week that a county in Pennsylvania is teaming with the Pennsylvania Department of Transportation to create the Dauphin County Infrastructure Bank, which will offer $30 million in loans for area transportation projects over the next three years. County commissioners are hoping the new infrastructure bank and the projects it funds will help bring jobs to the Harrisburg area.
  • Texas: Lawmakers are considering options to fund road repairs needed as a result of the oil and gas boom of recent years in the Lone Star State, Roads & Bridges reported. The process of fracking requires as much as 5 million gallons of water to be drilled and that water is hauled in by huge trucks making multiple trips. “To move a full rig unit may take as many as 40 truck trips,” said state Rep. Phil King at a recent forum (read more about the forum here). “And on those thin blacktop county roads, it’s tough.” A recent study by the Texas A&M Transportation Institute said as much as $2 billion is needed each year for the next 20 years to repair Texas roads. Legislation introduced by Sen. Carlos Uresti would provide $400 million in one-time funding from the Texas Rainy Day Fund (which comes from drilling tax revenues). The Texas Department of Transportation put together a Task Force on Texas’ Energy Sector Roadway Needs to examine road repair financing methods. The group issued its final report late last year. Among the options examined by the task force’s finance subcommittee: road use maintenance agreements between the state and the drilling companies, property tax code alterations, commercial driver’s license fees, oversize/overweight violation fine increases, truck fees, severance tax bonding, dedication of severance taxes, dedication of severance tax growth, entering into a public-private partnership, creating new county road districts, creating an excise tax on oversized tires, establishing a tax increment reinvestment zone to implement tax increment financing and directing royalty payments for oil and gas extracted to counties or to TxDOT. Colorado is another state dealing with the impact of an energy boom and The Denver Post reported this week on how the oil industry is contributing to the upkeep of that state’s roads.

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