States that are Using Creative Ways to Fund Projects
By: Leonard Toenjes - Special to CEG
Faced with insufficient revenues and increased transportation infrastructure needs, a number of states are exploring new ways to fund highway and bridge improvements.
• On March 21, House Bill 1418 failed in a vote by the House Public Transportation Committee 10-9, one vote short of advancing to the House floor.
• House Bill 1418, sponsored by Rep. Jonathan Barnett (R-Siloam Springs), would have diverted sales tax revenue generated by the sale of new and used cars, auto parts and services to the state Highway and Transportation Department. The revenue shift would have occurred in increments over a 10-year period and would have eventually amounted to $450 million annually for the highway department, said Barnett in March.
• In November 2012, voters approved a half-cent sales tax increase to cover a $1.3 billion bond issue for roads and bridges. The sales tax increase took effect on July 1.
• Rep. Tim Brown (R-Crawfordsville) proposed a gas tax increase of two cents per gallon, from 18 cents to 20 cents, with the additional revenue allocated for bridge repairs. An estimated $2.7 million would go to the Indiana Department of Transportation and the remaining $2.7 million would be awarded to local governments based on need determined by INDOT, according to the Legislative Services Agency.
• The state budget passed by the legislature on April 27 ends funding for the Indiana State Police and the Bureau of Motor Vehicles from the motor vehicle highway account, beginning July 1, 2013.
This frees up $140 million annually in new road funding that will be shared by INDOT and local governments (53 percent to INDOT and 47 percent to locals). The budget also directs one percent of overall state sales tax collected in the state to the motor vehicle highway account beginning July 1, 2013. This will result in about $75 million per year in new road funding that will be shared by INDOT and local governments (53 percent to INDOT and 47 percent to locals).
• Senate Bill 479 will go into effect July 1, 2014, and will repeal the 7 percent sales tax on gasoline and replace it with a gasoline-use tax. The use tax will equal the average retail price per gallon multiplied by 0.07.
• Governor Terry Branstad has indicated he would be open to a fuel tax increase if it can be offset by overall tax reductions.
• The 10 cents per gallon gas tax increase proposed by various transportation groups lost three crucial GOP supporters, likely killing the bill. It proposed increasing the gas tax each year by three cents, three cents and then four cents. Each cent increase was expected to bring in an additional $22 million.
• Kentucky’s gas tax increased by 2.4 cents to 32.3 cents per gallon on July 1. Kentucky automatically updates the gas tax based on wholesale prices of gasoline. The increase will generate $900 million over the next fiscal year, with $72 million for the Road Fund.
• Gov. Rick Snyder is calling for a new road funding model that would essentially double taxes on gasoline and diesel fuel while increasing registration fees for passenger vehicles. The plan would raise gasoline and diesel taxes by about 33 cents per gallon through a wholesale tax. If approved by the legislature, the plan would also hike annual registration fees by 60 percent for passenger vehicles and 25 percent for large trucks.
• Additionally, Snyder is recommending a local option allowing Michigan counties a chance to raise additional revenue for roads they maintain. Subject to voter approval, counties could implement a registration tax of up to 0.18 percent of a vehicle’s list price, generating roughly $280 million for local roads.
• In 2013, House Transportation Committee Chairman Robert Johnson approved a fuel tax increase in his committee. The legislation was double referred and quickly failed in the House Ways and Means Committee. In the Senate, there was legislation that would take payouts from the state’s casino industry to provide for infrastructure needs. The legislation was never discussed and subsequently failed.
• A new law took effect in 2012 removing requirements that made it almost impossible to build toll roads in the state.
• The state revised its design build requirements to allow MDOT to offer one design build job a year for $10 million or more. Prior to this, MDOT could only offer two projects per year under $10 million and one project per year over $50 million.
• On March 13, Missouri senators endorsed a proposed penny sales tax increase that could raise nearly $8 billion over a decade for transportation projects. The increase would require voter approval and, if passed, would be resubmitted to the ballot after 10 years so Missourians could decide whether to continue it. This bill was filibustered and died in the Senate on the last day of session.
• Gov. John Kasich signed on April 1 a two-year, $7.6 billion transportation and public safety budget bill. It will supply about $4 billion in state and federal funds — mostly gas tax revenue — for road and bridge contracts. The bill also allows the state, for the first time, to use toll revenue from the Ohio Turnpike for projects beyond the 241-mi. (388 km) toll road’s borders.
• In 2005, a new Commercial Activity Tax (CAT) was imposed in Ohio which replaced several other targeted taxes. The idea was to tax all commercial activity to broaden the tax base. This allowed for a lower tax rate on more sales instead of the high rate on just a few products and services. The CAT also applied to motor fuel. A constitutional issue redirected CAT funds to the General Revenue Fund, but after an appeals process the money is going back to transportation. At the present rate, this amounts to a new revenue source of $140 million per year for highway and bridge construction in Ohio, equivalent to a nearly three cent increase in the state gas tax.