VOL. 130 | NO. 157 | Thursday, August 13, 2015
View From the Hill
Raise Gas Tax or Borrow? How to Fund Road Projects
SAM STOCKARD | Nashville correspondent
Tennessee has an $8 billion backlog of transportation projects and not enough funds to pay for them, largely because the state gas tax, which funds those projects, hasn’t been increased in 26 years.
It also has a conservative General Assembly averse to raising taxes of any kind that will be forced to deal with this issue in 2016, either by raising taxes or borrowing.
Lt. Gov. Ron Ramsey softens the issue by calling it a “user fee,” but has stopped short of backing an increase.
In the middle is Gov. Bill Haslam, who is touring the state this summer to gauge support for a fuel-tax increase to fund the roadwork backlog.
Like Haslam’s unsuccessful push last year to implement Insure Tennessee, this is shaping up to be another policy battle between the Republican governor and the Republican-dominated House and Senate.
Tennessee’s 21.4 cent-per-gallon fuel tax, including a 1.4-cent petroleum fee, raises roughly $660 million annually. It hasn’t been increased in a quarter-century – 1989, to be exact – and the governor is committed to raising it or revamping the state’s mechanism for funding road and bridgework during his second term. He’s holding public meetings across the state to discuss the matter.
House Republican Majority Leader Gerald McCormick even brought up the four-letter word, “bond,” this summer to pay for road projects, meaning Tennessee could start borrowing money to pay for better highways and bridges.
Such a move would reverse Tennessee’s pay-as-you-go policy, something state lawmakers tout when talking about their conservative credentials.
“It will be talked about, it will be discussed,” says Rep. Jimmy Matlock, a Lenoir City Republican who chairs the House Transportation Committee.
“But I don’t think the stomach is there in the Legislature because we’ve done a pretty good job for the last 40 years at staying debt-free. But we are reaching the critical point that we can only fix so many potholes.”
Even though Tennessee’s roads are typically rated among some of the nation’s best, Matlock says he’s “convinced” extending the state’s infrastructure is a necessity. He says he’s listening to constituents, the Haslam administration, the Tennessee Department of Transportation and the Transportation Coalition of Tennessee, which recently highlighted 400 unfunded road/highway projects included in the $8 billion figure.
The coalition posted an interactive web page at www.tcoftn.org/unfunded-projects.html to raise awareness of the needs in Tennessee’s 95 counties.
Susie Alcorn, executive director of the Tennessee Infrastructure Alliance, and coalition members are traveling the state to talk with local leaders about reforming Tennessee’s funding mechanism for road and bridge construction.
“We can no longer keep up with the maintenance needs of our state roads and bridges, much less build new projects,” Alcorn says in a statement. “Failure to address this issue means unsafe roads and bridges and lost economic development opportunities for our state and residents.”
Matlock says part of Tennessee’s problems stem from the federal government, which collects an additional 19 cents a gallon from state gas sales but doesn’t send all of that money back here for roadwork.
“The federal government is putting Band-Aids everywhere. And it’s not just the party I don’t represent, the Democrats, it’s my party, and I’m embarrassed we can’t get federally the attention I think this issue deserves because it’s far beyond roads and bridges, it’s about economic development,” Matlock explains.
Building better roads is crucial to landing companies such as Volkswagen and Amazon, expanding Nissan and handling the needs of boat manufacturers in his 21st District in East Tennessee, Matlock says.
Tennessee is grading well as a low-tax state with a high quality of life and good roads, he says, adding: “What we don’t grade so well with is thinking five years out.”
Matlock contends numerous federal departments such as transportation could be eliminated or minimized, along with mandates requiring how dollars are spent. For instance, while he supports bicycle lanes, walking trails and downtown development, he doesn’t approve of transportation money targeting those areas.
Persuading Congress and the federal government to eliminate and streamline departments could take years, however. And even though some U.S. Transportation Department officials are saying it’s time to put more emphasis on road construction, Tennessee’s leaders have the authority to control the destiny of state road and bridge projects now.
Lawmakers have broached the need to transfer some $300 million back into road projects after former Gov. Phil Bredesen shifted it to shore up the state’s budget during the midst of recession.
Matlock agrees that needs to be done to “square the books.” He’s not entirely sold, though, on a proposal by Republican House Speaker Beth Harwell to use at least part of $500 million in extra state revenue for road projects.
Such a move could stave off a fuel-tax increase in 2016, but it doesn’t solve Tennessee’s “structural problem” with fuel taxes, which deals with all-electric vehicles, which pay no fuel taxes, and more fuel-efficient vehicles, he points out.
Plus, that money isn’t guaranteed to be available next year, he adds.
A study by Edmunds.com finds 0.3 percent of Tennessee vehicles are electric, which ranks No. 9 nationally.
As Gov. Haslam and Transportation Commissioner John Schroer are traversing Tennessee to talk roads, they’ll have to overcome Americans for Prosperity, which is holding its own town-hall meetings statewide to “galvanize” Tennesseans against a fuel-tax increase.
The advocacy group of the wealthy Koch brothers knows how to turn back the governor’s initiatives after playing a leading role in helping defeat Haslam’s Insure Tennessee plan this year.
“Haslam’s ‘Raise Your Taxes Tour’ will not be well-received, I think, by Tennesseans and we’re going to make sure everyone in the state is fully aware that at a time when they finally have relief at the gas pumps the governor’s going to penalize hard-working families,” says Andrew Ogles, who heads the Tennessee chapter.
Ogles calls the governor’s penchant for placing blame on the federal government “a copout” and says Tennessee needs to stop depending on federal funds.
“We need to do more with less. Let’s not forget we have almost $600 million in excess revenues this year,” Ogles says.
The state should immediately repay the $300 million Bredesen took out of the highway construction fund and avoid a $120 million project backed by Haslam to build a state museum, Ogles adds.
“If our bridges and our roads were in such disrepair, why are we spending $120 million on a museum? It’s reckless and irresponsible for the governor to spend money on what is nothing more than a legacy project for himself and then turn around and tax middle-class families,” Ogles says.
People commuting around the Nashville and Knoxville areas bear “the brunt” of the fuel-tax burden, he notes, pointing toward new research showing the average age of a vehicle on the road is 12 years.
In making his fuel-tax pitch, the governor consistently states new vehicles are getting much better mileage than 15 years ago.
“So the governor’s quoting efficiency standards from 2014 when the reality is more Americans are driving older cars because they can’t afford to buy a new car,” Ogles explains.
“Their data is disingenuous, just as it was with Insure Tennessee, and we’re going to light the torch of freedom here and make sure this policy is defeated.”
Ogles is critical of U.S. Sen. Bob Corker, as well, for pushing an increase in the federal levy on fuel, saying the proposals by the governor and senator “do not align with Tennesseans.”
Borrowing money to fund road projects is “not an idea that’s without merit,” Matlock says. However, Tennessee leaders want to avoid the philosophy that put the federal government in a financial jam.
And even Matlock concedes he won’t bring up a measure to borrow money for road construction.
“For people who sometimes push me and say, Jimmy, ‘No way, no way could you ever vote for a gas tax,’ I just point out to them, ‘OK, we can do what the federal government does and borrow money. How do you feel about that?’ Then they get even more irritated and say we don’t want to do that either,” Matlock says.
Regardless of that position, the possibility of borrowing money to build roads will be front and center in 2016, he predicts. As will the potential for a fuel-tax increase.
In a political year, though, with representatives and senators running for re-election, they’ll be weighing whether a vote to take out bonds or raise taxes will hurt them at the polls. No doubt, political opponents will use it against them in campaign ads.
In light of that attitude, the question will be: How many road and bridge projects from Memphis to Mountain City will be delayed further?
More than likely, the next presentation of the Transportation Coalition of Tennessee will show a $10 million backlog, leaving Tennessee commuters with a terrible case of indigestion every time they start the engine.
Sam Stockard can be reached at email@example.com.