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S.D. Governor Not Ready to Raise State Motor Fuels Tax

Fri September 28, 2007 - Midwest Edition

PIERRE, S.D. (AP) Skyrocketing construction costs are limiting South Dakota’s ability to rebuild highways, but Gov. Mike Rounds said he’s not ready to support raising the state motor fuel tax that pays part of the tab for road projects.

Rounds said he has asked the state Transportation Department to look at ways to economize, including more resurfacing instead of total road reconstruction. If the state is still short of money after those steps, increasing the fuel tax could be considered, he said.

“Before I would go with a tax increase, we’re going to take a look at how we spend the existing money and see if we can’t stretch it farther,” Rounds told The Associated Press.

The Republican governor said he has always believed the state should do everything it can to match the federal highway money available to South Dakota, and the state so far has come up with the required match.

But since the state motor fuels tax was last increased in 1999, increases in steel, asphalt, concrete and petroleum-based products have essentially doubled the cost of road construction, officials have said.

Inflation and slow revenue growth have caused a crunch in both the federal and state highway funding systems. State funds are used to match federal money, with the federal funds paying 80 or 90 percent of most projects, state Transportation Secretary Darin Bergquist said.

The federal fuel tax is 18.3 cents a gallon, and the state tax is 22 cents a gallon. The taxes are based on gallons sold, so revenue does not rise as fuel prices increase.

Faced with stagnant revenues and rapidly rising construction costs, the state Transportation Commission recently approved a five-year construction plan that takes into account inflation and the uncertainty about funding.

The plan puts $20 million of the $339 million budget for the next year into preservation work, such as chip sealing, crack sealing and other projects to repair road surfaces instead of completely rebuilding highways.

“Probably the biggest step we’re taking is trying to move toward a preservation mode, doing a lot less total rebuilding of highways and doing more maintenance-type work, trying to preserve the condition of what we have,” Bergquist said. “The downside of that is we don’t get to some of the total reconstruction projects we’d like to do as soon as we’d like to do them.”

Transportation officials think inflation in the construction industry might slow a bit from the rapid increases in recent years, Bergquist said.

“If you compare construction costs from 1999 to today’s dollars, you’re essentially getting about half of what you used to get,” he said.

DOT officials are working now to keep South Dakota’s roads from falling apart while they wait to see what kind of new federal highway bill Congress passes, Bergquist said. The federal highway fund is expected to fall at least $4 billion short of planned spending by 2009, he said.

Some members of Congress have proposed a 5-cent-a-gallon federal gas tax increase, with some saying the extra money should be restricted to bridge repair in the aftermath of a deadly bridge collapse in Minneapolis last month.

But President Bush has said he would oppose such an increase, particularly if Congress does not stop the practice of putting much of the money into lawmakers’ pet projects for their districts.

Rounds said everyone realizes the federal highway trust fund does not have as much buying power as it used to because construction costs have risen. South Dakota could support a federal gas tax increase only if it preserved the formula to divide the money among states, Rounds said. He said the current method gives a fair share to states with low populations but many miles of highways.

Higher costs have hit not only construction projects funded with state and federal money but also snow removal and other maintenance work funded entirely with state money, the governor said.

Rounds said he has asked the Transportation Department to look for ways to economize and to shift some money into resurfacing rather than rebuilding roads. He said he also asked the DOT to look at projects that rehabilitate rural roads instead of more expensive urban stretches.

In addition, the state should avoid projects that grow more expensive because of lengthy court fights about obtaining rights of way from landowners, the governor said.

“After those things have been done, and if we are still short of resources, then we’ll consider additional revenues at the state level, including the fuel tax,” he said.

For now, South Dakota’s DOT is focusing on preserving its existing highway system, not on expanding it, Bergquist said.

“If you take a look at the overall statewide condition of our pavements on our highways in South Dakota, we’re in very good shape right now,” Bergquist said. “The challenge is really going to be in maintaining that level.”

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