Georgia transportation officials are examining several options to deal with a $200 billion shortfall in revenues needed for transportation projects during the next 30 years.
Mike Evans, chairman of the State Transportation Board, said he and other government leaders will likely testify about the looming “crisis” before state House and Senate committees during the current session of the Georgia General Assembly, which convened Jan. 8 in Atlanta.
“I think we are in a crisis,” said Evans, a former state representative. “It’s something, frankly, I am reluctant to say, but it is a crisis.”
Georgia has gained more than 1 million residents in the past five years and is projected to gain another 3 million over the next 20 years.
The state needs approximately $340 billion for transportation projects through 2035, but is projected to get only $143 billion in revenues, according to the Georgia Department of Revenue (GDOT).
Of immediate concern, according to Evans, is a projected $7.7 billion transportation shortfall anticipated during the next six years. The shortfall will delay or put off indefinitely an estimated 510 projects through 2013 in all areas of the state.
“I’m just trying to get the facts out there,” said Evans. “It will affect everybody.”
Evans created a Web site in early December, www.whatsthebigidea.us, to provide information to the public.
In Georgia, like many states, revenue from the Motor Fuel Tax hasn’t kept up with rising construction costs or the demand to build new roads and bridges and maintain existing infrastructure. GDOT estimates in six years, 84 percent of the state’s pavement will be rated “fair, poor or bad” and need to be replaced. Approximately 30 percent of the state’s bridges are expected to be structurally deficient.
Rising costs also have hammered GDOT’s budget.
Construction costs rose 28 percent between July 2005 and July 2006. The cost of right of way acquisition jumped 400 percent, asphalt rose 106 percent, concrete jumped 43 percent, aggregate 28 percent and steel rebar increased by 10 percent.
Officials are considering several options to fend off the shortfall, including a statewide 1 percent sales tax earmarked for transportation. Another option would let voters decide on an eight-year regional Special Purpose Local Option Sales Tax (SPLOST) for road projects. All sales tax options would require approval by Georgia voters.
The options also weigh whether to keep or abolish parts of the state’s Motor Fuel Tax.
According to a study released last April by Georgia State University’s Andrew Young School of Policy Studies, Georgia’s Motor Fuel Tax includes a 7.5 cents per gallon excise tax on the sale of gasoline, diesel, aviation grade gasoline, liquefied petroleum gas, compressed natural gas and other fuels. In 2004, the excise tax brought in $527 million in revenue, the study said.
The state also collects the Prepaid Motor Fuel Tax (formerly called the Second Fuel Tax), which is 4 percent of the average retail price of each fuel. Three percent of the 4 percent total is dedicated specifically to GDOT and 1 percent goes into the state’s general fund for other transportation projects. The tax rate was 7.8 cents per gallon for gasoline and 9 cents per gallon for diesel based on last year’s retail prices.
The university study showed Georgia had an effective tax rate of 15.3 cents per gallon on gasoline and 16.5 cents per gallon for diesel last year, making the rate one of the lowest in the nation.
All sales tax scenarios presented by state officials produce a revenue shortfall. Even by keeping both parts of the Motor Fuel Tax and imposing a statewide sales tax for transportation and regional SPLOST tax, only approximately 74 percent of the state’s revenue needs will be met during the next 30 years. In this best-case scenario, the funding shortfall would be $92 billion.
Evans said other revenue-generating measures will likely be needed, such as managed lanes, where drivers would pay for the use of high-speed lanes, or privatization of roads.
Politically, a penny sales tax earmarked for transportation might sell better to voters if one or both parts of the Motor Fuel Tax were dropped. Raising the Motor Fuel Tax has been ruled out by legislative leaders.
Mike Kenn, president of Georgians for Better Transportation, a lobbying group that promotes highway construction, said he would prefer to see the 7.5 cents per gallon excise tax dropped rather than the 4 percent Prepaid Motor Fuel Tax.
“The seven and a half cents devalues over time,” Kenn said. “One of the options we are looking at is to go ahead and do a one percent general sales tax and replace one or both of the motor fuel taxes.”
Kenn said the shortfall is a major concern to road contractors.
“It’s gotten to the point where it is so severe you can accurately characterize it as a catastrophe,” he said. “You have an immediate crisis for the next six years. Not only are you going to have to create new revenue, but you have to be a lot smarter on what projects you spend money on.”
Several Atlanta area chambers of commerce are asking for a regional penny sales tax, but Kenn said there’s no existing framework to divide revenues on a regional basis.
“We haven’t found a way to allow a regional district to impose a tax,” Kenn said. “We have a number of lawyers looking at it. Hopefully, they will resolve the issue and if they do, we will divide the state into regions. The last thing we want to do is create something that won’t hold up in court.”
Contractors also are worried about the shortfall because it could force a slowdown in the construction industry if businesses decide not to relocate in Georgia, particularly in the Atlanta area, because of traffic congestion.
Michael T. Dunham, executive vice president of the Georgia branch of Associated General Contractors, said his organization is very concerned.
Dunham said construction has benefited from the state’s booming economy, but the business climate could change if road construction stalls and gridlock becomes prevalent.
“We have a very robust economy right now, but this could be a storm cloud on the horizon,” Dunham said. “This is one we are going to have to take heed with. It has grave consequences.”
Evans said this year might be the best time to float the idea of a statewide penny sales tax for transportation. Legislators won’t face elections this year and Georgia’s governor is on the first year of his last term in office, he said. By law Georgia governors can only serve two terms.
“Every idea would ultimately be decided by the voters — that should give comfort to the legislators,” said Evans. “I’m not married to any of the ideas. The only thing I have said is something needs to be done.”
Evans said a long-range look at transportation funding needs to be examined.
“We’ve got to start looking at how we fund transportation,” he said. “I’m sure when it was first formulated years ago the Motor Fuel Tax was fine. I would not go so far as to say the way we fund transportation is antiquated, but it is in transition. I’m looking at it not only from a shortfall situation, but how we fund transportation 30 or 40 years down the road. If all the cars went electric tomorrow — it’s not going to happen — but it would mean zero money for transportation.”
Evans said in the past he has helped recruit industry to the bustling Golden Corridor of Ga. 400 in Atlanta’s northern suburbs.
He said several executives who decided to relocate to the area later expressed remorse because of traffic congestion.
“How many companies will we lose because of it?” Evans said. “My patience for it [traffic] has about had it.” CEG