States Seek New Transport Funding Sources

This story appears in the Jan. 14 print edition of Transport Topics.

Many state leaders began 2013 grappling with how to create new revenue streams to fund transportation projects in their jurisdictions.

Gov. Bob McDonnell (R) announced a plan last week that would set Virginia apart from all other states: eliminating the state’s gasoline tax and increasing its sales tax, while keeping the diesel fuel tax.

“We simply cannot continue to do what we have always done and expect this problem to go away,” McDonnell said Jan. 8. “If we stick to the old means of funding transportation, we will find ourselves having the same debates and facing the same revenue shortfalls over and over again.”

The same day, a panel in Missouri released an analysis of a range of long-term transportation funding options, though it did not endorse a particular source.

Elsewhere, officials from Massachusetts, Kentucky and Maryland were finalizing plans expected to be released in coming weeks.

Virginia’s plan, which requires approval by the legislature, includes an annual fee for drivers of alternative-fuel vehicles, since, the governor said, those drivers aren’t contributing equal amounts of revenue because they’ve been buying less fuel but using the roads just the same as drivers of conventionally powered vehicles.

McDonnell’s plan would shift more money from the sales tax to transportation, generating an additional $844 million per year by 2018, he said.

In total, Virginia’s transportation programs are estimated to receive $3.1 billion over the next five years.

Virginia motorists pay a tax of 17.5 cents per gallon of gasoline or diesel. Calling the gas tax a “stagnant revenue source,” McDonnell proposed replacing it with a 0.8-percentage point increase in the state’s current 5% sales tax.

The diesel tax will remain, the governor said, “because heavy trucks have a disproportionately large impact on the deterioration of Virginia’s highways.”

He said heavy trucks account for only 4.2% of the miles driven on state highways but almost 80% of the load-induced damage to pavement.

The Virginia Trucking Association has not taken a position on the proposal as a whole, but President Dale Bennett took issue with what he saw as the governor’s targeting trucking.

“As proposed, this is a significant, disproportionate hit on our industry,” he said.

Increasing the sales tax would hit truckers when they purchase supplies, Bennett said. And he was disappointed that McDonnell did not use the plan to change his proposal to put a toll on Interstate 95 near the North Carolina border, which is currently under federal review.

Bennett also took issue with McDonnell’s figures on the damage trucks cause to roads.

“I was surprised at those numbers, because I’ve never seen those numbers before. I have asked the governor’s folks to provide me with the source and the explanation of how they reached those conclusions, and I have yet to receive it,” he said.

Joshua Shanck, president of the Eno Center for Transportation, said that retaining the diesel tax was easy in a political sense.

“People hate gas taxes, so he can say ‘Look, we’re getting rid of the gas tax. Aren’t you lucky?’ ” Shanck told TT. “Truckers are seen as a minority of highway users. And they are seen as a business, not personal use. So the political costs of keeping the diesel tax in place were probably judged to be less than the political costs of keeping the gas tax in place.”

In Kentucky, the Transportation Cabinet asked its residents to weigh in while it crafts a 20-year plan for transportation in the state.

“The updated plan will consider changes in communities, freight movement, financial resources, economic development, rural and urban transportation, the environment and other transportation issues,” the agency said.

Kentucky wants residents to answer a 19-question survey before Feb. 25.

Missouri, on the other hand, will consider a report from an independent commission that said the state’s transportation system needs an additional $600 million to $1 billion annually. The system currently gets about $600 million a year.

“This is barely enough to maintain the state’s existing system, much less tackle the projects that create jobs, increase safety, ease congestion and foster economic development,” the report said.

The panel, which included Missouri Trucking Association President Tom Crawford, analyzed multiple options.

“What we wanted was to be able to lay out all the options, what those options mean, what they raise, and the pros and cons of all those options,” Crawford said.

The report found that a sales-tax increase of 1 percentage point would provide about $700 million annually for transportation. But to pay for the entire funding gap with fuel taxes, the taxes would need to increase by about 30 cents per gallon.

Maryland’s Department of Transportation is holding meetings to gather ideas for its 20-year transportation plan.

“Demand on the system is increasing; population, miles traveled and freight traffic are all expected to increase in coming years,” MDOT said in a fact sheet about the process.

Massachusetts Gov. Deval Patrick (D) was due to release a report on that state’s options for transportation funding Jan. 7, but he delayed the release until Jan. 14, he told reporters.

After reviewing the report his staff prepared, Patrick asked that it focus more on parts of the state outside greater Boston, he said.

Pennsylvania Gov. Tom Corbett (R) plans to release a major transportation funding plan before the state’s legislative session starts Feb. 5. He said the plan will embrace public-private partnerships as a way to finance projects, according to reports.

In Wisconsin, Gov. Scott Walker (R) is due to unveil a proposal to overhaul transportation funding as part of the budget proposal he will give to the legislature in February, The Associated Press reported.

A commission in Wisconsin said in December the state needs an additional $480 million in taxes and fees per year to maintain the current transportation system. It will finalize its report later this month, the commission said.

Legislators in Wyoming will debate a 10-cent increase to the fuel tax in the session that started last week, according to local reports. Currently, the state charges a 14-cent tax on each gallon of diesel and gasoline.