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SE Highway Crisis Needs Big Solution

By: Eric Olson - CEG CORRESPONDENT

In Arkansas, the need to build, expand and modernize its increasingly antiquated four-lane highways got a big boost this past Election Day.
Scott Bennett, director of the Arkansas State Highway and Transportation Dept.

There’s no use denying it. America’s vaunted transportation infrastructure, particularly the roads and bridges that we all use, is simply falling apart.

From deep potholes in major roads to crumbling bridges, motorists across the country drive over these problems every day. In addition, they find themselves in increasingly longer lines of traffic as our highways become more congested.

And it is not just frustrated motorists that are affected by bad roads.

The nation’s economy also is negatively impacted as substandard roads hamper industry’s ability to move people, goods and resources more efficiently.

Adding to the problem is that all of this comes as America’s economy is still struggling to emerge from a debilitating recession.

Despite an economy that is still the world’s largest, business leaders say the United States no longer has a sustainable way of paying for road and bridge improvements.

Fuel taxes can only bring in so much money to state DOTs in an era when gas consumption is down and fuel-efficient vehicle sales are up. In addition, tax increase proposals to support transportation are seen as almost certain political suicide for most legislators.

Public Spending on Roads Shrinks

After 100 years of undertaking an ambitious earthmoving project that created roads, bridges and tunnels in every corner of the United States, including nearly 50,000 miles of interstate highways built between 1956 and 1992, total public spending on roads has fallen steadily since the 1960s.


Currently, it stands at just over two percent of Gross National Product (GDP), much less than what Europe and China invest in their roads and bridges.

According to data from the American Society of Civil Engineers (ASCE), the consequences of these conditions will cost the United States economy $897 billion in lost GDP and $28 billion in exports by 2020 as transportation costs rise.

In the Southeast states, those productivity losses will cause the region to underperform by $73 billion and up to 70,000 jobs will be lost unless effective steps are taken, according to the ASCE.

Increasingly, individual states themselves must come up with the majority of the funding for their transportation needs.

A look at what two Southeast states – North Carolina and Arkansas – are doing to combat the dual crises of deteriorating roads and lack of money to fix them, shows just what an uphill climb they have before them.

North Carolina

The Tarheel State is one of the fastest growing in the country. Figures from the ASCE bear this out: vehicle travel in the state increased by 63 percent from 1990 to 2010 while the population in North Carolina grew by 44 percent.

The ASCE also found that 54 percent of the state’s major urban highways are congested and 44 percent of its major urban roads are in poor or mediocre condition. In addition, 27 percent of North Carolina’s 4,937 bridges are either deficient or obsolete.

The sum total of those findings is that the state currently needs to spend more than $60 billion to build and maintain its roads and bridges. However, the state’s transportation revenue each year, generated by gas taxes, brings in only $3 billion, with another $1 billion coming from the federal government.

No matter how one looks at the math, it all adds up to the fact that North Carolina has a big problem.

This is exactly what Gene Conti has spent the last four years trying to find a solution to.

Conti, North Carolina’s current Secretary of Transportation, has studied the math and believes that gas taxes, while an important source of revenue to the states, really don’t work as a primary source any longer. Due to a combination of factors, fuel taxes are not the stable and predictable tap that they once were, he said.

“First of all, we are seeing that people are driving less and that has been particularly exaggerated during the recession,” Conti explained. “Another impact is that we are using more fuel-efficient cars. In addition, the use of more electric cars and more hybrid models have led to lower gas use, which affects the tax.”

Finding “Complementary” Sources

To make up the shortfall from less tax revenue, Conti and the state DOT are pursuing what he describes as “complementary” sources of funding to build and maintain North Carolina’s road system.

The most visible example of an alternative funding source is the almost-completed $675 million Triangle Expressway in the Raleigh area, a 19-mi. (30.6 km)-long road that is the state’s first tollway.

“I think that toll road will be the first of several in the state,” he predicted.

“We also have tapped into some federal programs, such as the GARVEE bond program where we can borrow against future federal revenues,” Conti added.

Conti added that the state is looking into a variety of ways to attract private capital on various projects, such as in the building of the Mid-Currituck Bridge, a 7-mi. (11.3 km)-long toll span that will link the Outer Banks with the mainland in the northeast corner of the state. The project is currently stalled, though, because of a legislative battle over its funding.

Another way that North Carolina has come up with to pay for its road needs has been the Mobility Fund. Gov. Bev Perdue, at Conti’s urging, proposed the fund in 2010 as a way to generate money for significant transportation projects.

After passing the measure, the state’s General Assembly immediately used it to fund the improvement of a stretch of Interstate 85 that crosses the Yadkin River between Davidson and Rowan counties. Included in the project was a new eight-lane bridge over the river. The state used the fund to contribute $65.5 million to the project, with another $136 million coming from other state and federal sources.

The improvement of that particular stretch of road was identified by the state DOT as its top priority due to the corridor being so heavily traveled by trucks moving goods throughout North Carolina, as well as between the Northeast and Atlanta.

What Will Work?

State business leaders recognize that gas taxes can only be increased so much and that a combination of taxes and other sources of funding, like toll roads and public-private investment, may be the most effective way to pay for needed improvements.

“Our sense is that the business community and the public at large will support investments when the selection processes are logical, the investments are strategic and purposeful and the timing practical,” said Joe Milazzo, executive director of the Regional Transportation Alliance, a regional business voice for transportation initiatives and policy in the Raleigh-Durham-Chapel Hill area.

He feels that a combination of different funding sources is best, but added, “Of course, sometimes the answer is not more funding but more efficient use of existing sources and/or the roads that we already have.”

Milazzo sees little political will for imposing higher fuel taxes, at least in the near term.

“However, if there were a targeted program of investments and the fee increases were seen as fair and reasonable, then a limited increase may be possible at some point,” he said.

Milazzo said that one example might be a “fair share fee” for electric and other alternatively fueled vehicles to give their owners an opportunity to contribute on a usage basis to the maintenance of North Carolina’s highway system, much as diesel- and gas-powered vehicles do via fuel taxes.

Arkansas

In Arkansas, the need to build, expand and modernize its increasingly antiquated four-lane highways got a big boost this past Election Day when that state’s citizens overwhelmingly passed a constitutional amendment that implements a temporary, half-percent sales tax to fund an upgrade of the system.

Known as Issue No. 1, the sales tax increase will begin next July and for the next 10 years will finance a $1.3 billion bond issue for those roads most in need of repair. Plus, the amendment will provide $20 million for a State Aid Street Fund to further help cities and towns with local street and bridge programs, without raising gas taxes.

The amendment’s passage was championed by a large contingent of Arkansas’ business leaders, troubled by the state having the 12th largest highway system in the country, but ranked only 42nd in its ability to pay for it.

The amendment’s passage, according to Madison Murphy, will only enhance the state’s economic development opportunities by increasing mobility and freight opportunities.

Murphy was the Arkansas business community’s point man on the effort to convince voters to approve the amendment. The influential Murphy is chairman of the board of El Dorado, Arkansas-based Murphy Oil Corp. and is the outgoing chairman of the Arkansas Highway Commission.

To his way of thinking, Arkansas’ citizens did the only logical thing by approving Issue No. 1.

“The positive vote is evidence that Arkansans believe in the importance of good roads, and that they are willing to invest in themselves and the future of our state,” he said. “The people of Arkansas were presented with an opportunity and they chose to pursue it.”

With about $24 billion worth of road needs, the revenue brought in will make only a small dent in addressing the problem, but, in tandem with the re-issue of their own GARVEE bonds, Murphy sees better days ahead for Arkansas’ roads.

“The best thing about the approval of Issue No. 1 is that the program does not rely on federal assistance — this is money generated in Arkansas, it stays in Arkansas and it improves Arkansas roads,” he added.

Every Bit of Funding Helps

According to Scott Bennett, director of the Arkansas State Highway and Transportation Dept., his agency expects about $4 billion in revenue from current state and federal sources over the next decade. The addition of the Issue No. 1 funding brings that revenue closer to $6 billion, an increase to the DOT’s coffers that he sees as “pretty significant.”

“One of the other things that helped sell Issue No. 1 was that it will fund improvements on major, corridor-type projects and if we can bite off these highway projects in this one big chunk, then it frees up our regular stream of revenue so that we can start to nibble away at all the other road needs around the state,” he said.

Among the projects set to benefit from Issue No. 1 is the completion of a four-lane highway connector linking I-55 to Arkansas Highway 18 between Jonesboro and Blytheville in the northeast corner of the state, as well as the nearby widening of U.S. Highway 412 to four lanes between Paragould and Walnut Ridge.

Amendment Buys Time, Too

Bennett said that because Issue No. 1 is a 10-year temporary tax, he describes it to people as a “bridge to give us time to find better ways to fund highways in Arkansas.”

Among those other ways that Bennett and his agency are studying is transferring the state sales tax on road user items — things like new and used vehicles and accessories like tires, batteries and auto repair parts and services — from the state’s general use to a transportation-specific fund.

And, yes, he also is looking hard at building toll roads to generate revenue, although he is not sure if that is a good option for his state.

“The problem with tolls is in two parts,” he said. “First, is the cost to build them. Second, we are still a largely rural state and there are not many routes that have enough traffic on them to generate enough revenue to make a difference as a tollway.”

Still, Bennett said that the state is considering building a toll road in northwest Arkansas on the future I-49 that will eventually connect Kansas City to New Orleans. In addition, his agency is thinking about making a toll road out of a loop around the central part of the state, as well as widening I-40 to six lanes from Little Rock east to Memphis and covering that cost with a toll.

States Need Answers Now

Obviously, the solutions to the highway funding crisis in both North Carolina and Arkansas, as well as in every state, can only be found through innovative thinking among governmental and business leaders.

With the transportation infrastructure funding gap in this country equaling about $94 billion a year, failing to find answers and act quickly will only result in even greater costs…down the road.