- The Washington Times - Sunday, November 25, 2012

A backlog of proposed road projects and repairs to aging highways, bridges and transit systems has leaders in Maryland and Virginia eyeing the perennially unpopular proposal of raising their states’ gas taxes to generate revenue in what has become a national challenge for states to find funds for transportation fixes.

In Virginia, where efforts to relieve congestion in the D.C. suburbs are quickly overtaken by the demands of a growing and car-dependent population, officials say the cost of massive road construction is becoming unmanageable for the public sector. In Maryland, budget analysts say the state could run out of money for new projects by 2018, while transportation officials warn that crumbling infrastructure has reached epidemic levels and that state lawmakers must act soon or face the consequences.

“There’s going to be a push by a lot of people to do something in the upcoming [General Assembly] session,” said Gus Bauman, a lawyer who served as chairman of a Maryland commission last year that made yet-unheeded recommendations to raise transportation funds. “What’s it going to take? A bridge falling into a river here before they actually take this seriously?”

Engine of revenue

Most states use taxes on gasoline to offset the costs of transportation projects and maintenance. Across the country, state gas taxes range from 8 cents a gallon in Alaska to 49 cents a gallon in New York, on top of the federal tax of 18.4 cents a gallon. Maryland’s rate is 23.5 cents a gallon — the same as the District’s — while Virginia’s gas tax is 17.5 cents a gallon.

Fourteen states avoidthe delicate issue by taxing at a fixed percentage of the gas price or tying the tax to the rate of inflation, meaning the tax increases automatically. For example, gas taxes in Georgia and North Carolina increased last year, but only because built-in inflation indexes required them to do so.

Neither Virginia nor Maryland ties its gas tax to inflation, leading to pitched political battles over the prospect of tax increases — especially during times when prices at the pump are high.

But facing an increasing urgency to address transportation issues, Virginia Gov. Bob McDonnell, a Republican, said last week that he is evaluating a proposal to raise the state’s gas tax, which has not changed since 1986.

The state has leaned heavily on toll roads for revenue and has an extra 2.1 percent sales tax on gas in Northern Virginia.

In recent years, state Republicans have proposed diverting a portion of the sales tax to transportation as an alternative to raising the gas tax, but Democrats have argued that would unfairly take money from the general fund that pays for education and other programs.

Gas tax discussions returned to the forefront in Maryland this month when the Department of Legislative Services announced that state transportation officials may have overestimated anticipated revenue over the next six years by as much as $2 billion, and that the state desperately needs more revenue streams to fund road and major transit projects such as the Purple Line and Red Line light-rail systems.

Maryland’s gas tax has not been raised since 1992. Its tax is the 29th-highest in the country, while Virginia’s ranks 40th.

Maryland, Iowa and Michigan this year were among the few states where lawmakers considered increasing the gas tax. Each proposal failed to pass the state legislatures.

“It’s the third rail of politics now,” said John Townsend, a spokesman for AAA Mid-Atlantic. “If you touch it, you perish.”

Keith Madsen, who owns two gas stations in Baltimore County, said that in addition to hurting motorists, gas tax increases are bad for distributors and station owners. Lawmakers don’t consider that higher gas prices could cause drivers to buy less gas per visit and make more purchases, which would require station owners to pay more in per-transaction fees to credit card companies, he said.

“They aren’t out here like I am seeing the customers pay with change and buy $5 of gas until they get their paycheck,” said Mr. Madsen, who helped circulate an anti-tax petition in Maryland last spring. “These guys are out of touch.”

Other routes

With tax hikes under heavy scrutiny, many states have looked for alternative means to raise transportation revenues and cut expenses.

Pennsylvania Gov. Tom Corbett, a Republican, said last week that he will propose legislation next year to pay for $2.5 billion in road and bridge repairs. A commission recommended last year that the state fund the repairs by increasing vehicle registration and driver’s license fees and by lifting the limit on a tax paid by fuel distributors.

This month, Virginia opened electronic toll lanes on Interstate 495 that were built through a public-private partnership. The state had to pay $409 million for the $1.9 billion project, while most of the toll revenues will go to the two companies that footed the remainder of the bill.

“The cost of projects is getting to the point where it is very difficult for the public sector to fund and manage them,” said Virginia Transportation Secretary Sean T. Connaughton. “Public-private partnerships will become the norm for all large projects in Virginia and across the country.”

In 2007, Oregon became the first state to conduct a pilot program looking at a vehicle-miles-traveled tax, which would tax drivers on distance traveled rather than gas consumption as a way to ensure revenue despite the rise in fuel-efficient cars and electric vehicles. State analysts determined that such a tax could prove effective, but Oregon and other states have been reluctant to adopt it because of concerns that it could disproportionately hurt low-income residents with longer commutes and intrude on drivers’ privacy by collecting their mileage data.

Siphoning funds

In some states, the issue at hand is not just a matter of boosting transportation revenue but also is about making sure that the funds go to their intended purposes.

Maryland lawmakers have exacerbated their state’s infrastructure woes by raiding the state’s Transportation Trust Fund.

Over the past decade, $1.1 billion in transportation funds initially intended for local governments to use on roads and bridges has been put into the state’s general fund to help balance the budget.

Last year, Mr. Bauman’s commission proposed that lawmakers pass a constitutional amendment or other legislation that would bar such transfers except in cases of emergency and overwhelming legislative approval.

“The citizens of Maryland anticipate that the money is only used for transportation purposes, and that is not what has been happening,” Mr. Bauman said.

California’s voters approved a similar constitutional amendment in 2010 barring the state from diverting local transportation funds for other purposes.

Maryland Delegate Sheila E. Hixson, Montgomery Democrat and chairwoman of the House Ways and Means Committee, which vets tax proposals, said she plans to meet next month with officials from the governor’s office to discuss legislation.

Raquel Guillory, a spokeswoman for Gov. Martin O’Malley, said he is in the early stages of crafting an agenda for next year’s assembly but that a gas tax “is not something that’s come under heavy discussion.”

Mr. O’Malley, a Democrat, last year proposed an unsuccessful bill that would have added a 6 percent sales tax on gas at the wholesale level.

Maryland budget analysts have suggested alternatives such as public-private partnerships and special taxing districts, while the Montgomery County Council has expressed interest in seeking permission from state lawmakers to raise the gas tax within its county.

Mr. Townsend said that increasing the gas tax is one of the most effective ways for a state to generate transportation revenue, but that he isn’t anticipating it to happen anytime soon with year-to-year gas prices on the rise.

“We wish people would have the political courage to do it, but they haven’t shown it in two decades,” he said. “And if it was radioactive last year and nobody was willing to do it in the United States, it’s going to be even more radioactive this time around.”

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