States Get Creative to Fund Transportation Projects
The big picture regarding transportation infrastructure funding typically centers around the rapidly declining revenues that are tied to the primary funding source for roads—the motor fuels tax.
But the real picture is even bigger than that for state governments.
“Adequate and ongoing infrastructure investments are critical for economic growth,” said Arkansas Sen. Bill Sample, chair of the state Senate Transportation, Technology and Legislative Affairs Committee and chair of SLC Economic Development, Transportation and Cultural Affairs Committee.
With that in mind, several Southern policymakers came together to share their experience in creatively funding infrastructure projects in a June 14 webinar, “States Act to Bolster Transportation Funding,” sponsored by The Council of State Governments’ Southern office, the Southern Legislative Conference.
“We’re all struggling with funding for transportation,” said Georgia Sen. Jeff Mullis, chair of the Georgia Senate Rules Committee and vice chair of the SLC’s Economic Development, Transportation and Cultural Affairs Committee.
Since most states fund infrastructure improvements through a gas tax, they’ve seen the revenues dwindle as people drive more fuel-efficient vehicles and consolidate trips or drive shorter distances, Mullis said.
Georgia began the infrastructure planning process by identifying funding sources for the future and reviewing condition of roads and bridges throughout the state.
“We realized that without a roadmap, we couldn’t get to where we needed to go,” he said.
So the state prioritized the 47,600 miles of road in the state based on level of need and strived to find creative ways to fund those needs. Georgia has the lowest motor fuel tax in the country—7.5 cents per gallon.
“We like to claim we have the lowest excise taxes on a gallon of gasoline, which is not always good,” Mullis said. “We’re all doing a lot more with a lot less and that does not leave out transportation.”
Georgia used alternative financing models, such as public-private partnerships and design-build-finance, to fund needed projects. It also looked at expanding sponsorship opportunities and focused on negotiating contracts with pay based on performance.
In addition, 2010 legislation gave voters the chance to fund road projects in their area through an additional penny levy. A panel of local elected leaders came up with special projects that went on the ballot, Mullis said. Voters in three of the 12 regions approved the tax, which will sunset after 10 years.
“We believe the people of Georgia will see those areas excelling in economic development opportunities,” he said. When that happens, he hopes other regions will consider the additional penny tax as well.
Like Georgia, South Carolina has a fairly low motor fuel tax—16.8 cents per gallon, which hasn’t been raised since 1987. The state maintains the fourth largest highway system in the country, but has the fourth lowest motor fuel use tax, according to Sen. Raymond Cleary, a member of the state Senate Transportation and Finance committees. He said the state Department of transportation derives more than 70 percent of its revenues through the sales tax on gasoline.
“We, in some aspects, have a crumbling transportation system,” he said.
The picture isn’t getting any better. Cleary said the state will fall short of transportation needs by $29 billion over the next 20 years just to move its roads from “poor” to “good” conditions.
“We all know it takes more money to repair a road if it’s in poor condition than it does if it’s in good condition,” he said.
The South Carolina legislature didn’t pass a funding plan in this year’s session, but Cleary expects members to take up various parts of several bills when it convenes again in January.
Among the proposals:
Indexing the motor fuel user fee to the Consumer Price Index, averaged over the previous 10 years;
Increasing the passenger vehicle registration fees from $24 to $36 biennially, the weight-based truck registration fees by 16 percent and driver’s license fees from $25 to $35 for a 10-year license;
Establishing an alternative fuel vehicle fee, charging $120 for vehicles that run exclusively on electricity or other alternative fuel and $60 for hybrids;
Establishing a road use fee in lieu of county property taxes for commercial vehicles and distributing the funds to counties based on local road mileage; and
Allowing counties to levy a 1-cent sales and use tax for transportation projects.
The Virginia legislature did pass a proposal for funding transportation in the 2013 session—a compromise between Gov. Bob McDonnell’s proposal to eliminate the motor fuels tax and a variety of Senate bills to increase them.
“Virginia has tried everything—every tool in the kit,” said Jason Powell, a legislative fiscal analyst for the state Senate Finance Committee.
That includes public private partnerships, toll roads, reform at the state Department of Transportation, and the use of bonds and debt to fund infrastructure projects. But the public is growing increasingly intolerant of tolling and the state was “pretty maxed out on the credit card,” Powell said.
That perfect storm of factors led legislators to House Bill 2313. The legislation replaces the fixed 17.5-cent per gallon excise tax with a 3.5 percent sales tax on motor fuel and 6 percent on diesel. It also calls for a $64 registration fee for alternative fuel vehicles and an increase in the titling fee from 3 to 4.15 percent.
When fully implemented in 2018, the bill will generate about $850 million for transportation each year. It also will generate an additional $500 million annually for two of the nation’s most congested areas—Hampton Roads and northern Virginia, Powell said.
One key to gaining support for the bill in the state Senate, Powell said, was dedication of a portion of the statewide sales tax for rail and transit projects in the state.
But passage of the legislation in the 2013 session likely isn’t the end in Virginia. Powell expects legislators to revisit issues such as the alternative fuel vehicle registration fee and additional bond authorizations. And, if Congress fails to pass the Marketplace Fairness Act, the state will need to replace the share dedicated to transportation projects in the state.