AUGUSTA, GA (Anibal Ibarra) - Charge usage fees to those who own alternative fuel vehicles such as hybrids and electric vehicles -item 8- or “wean the state and local governments from use of sales taxes on gasoline for non-transportation purposes,” are among a dozen of proposals made by the The Joint Study Committee on Critical Transportation Infrastructure Funding. Since Richmond County approved the T-SPLOST, implementing a one-cent statewide sales tax could hurt even more to its residents.
The reports findings list a minimum of $1 billion to $1.5 billion in annual investment to prepare the state’s roads for increased traffic from a deepened Savannah Harbor, ensure the safety of urban and rural bridges and roads, mitigate congestion, improve Hartsfield Jackson Airport and provide multi-modal transportation options.
The Joint Study Committee on Critical Transportation Infrastructure Funding (the “Committee”) was created by House Resolution 1573 during the 2014 Legislative Session of the Georgia General Assembly. The Committee was charged with undertaking a study of the conditions, needs, issues, and problems associated with Georgia’s critical transportation infrastructure and the means of funding its construction, maintenance, and repair.
House Resolution 1573 expressed an urgency on behalf of the General Assembly that new sources and methods of funding transportation projects are needed to allow the transportation systems in Georgia to keep up with the needs of Georgia’s growing population and expanding industries and to address long-standing issues relating to road congestion, access to industry and economic development, and Georgia’s reliance on federal funding of its transportation systems.
According to data presented to the Committee by the Georgia Department of Transportation (GDOT), Georgia is home to the world’s busiest airport, the nation’s tenth largest road system, 1 and the fourth busiest container port in the United States. In addition, Georgia is home to 14,666 bridge structures, 4,500 miles of mainline and shortline railroads, 128 transit providers, and 103 general aviation airports. These assets have given Georgia a considerable strategic advantage in creating jobs and attracting new businesses to the state.
Georgia’s motor fuel excise tax is levied at a rate of 7.5 cents per gallon of motor fuel. In addition, the revenue generated by the first three percentage points of the four percent rate of the regular state sales tax that is levied on the sale of motor fuel is designated as the “second motor fuel tax” and is committed to GDOT.3 The other one percent of the regular state sales tax levied on the sale of motor fuel is diverted to general fund revenue.
Transportation projects in Georgia are also funded from state general funds (for the intermodal program only), through revenues received through the sale of general obligation bonds and Grant Anticipation Revenue Vehicle, (GARVEE) bonds, and through partnerships with local governments in state-funded projects. The previously mentioned debt is repaid from state motor fuel funds, federal funds, and, where applicable, toll revenues. Georgia cities, counties and numerous Community Improvement Districts (CIDs) also maintain parts of the state’s road and bridge network, and a wide variety of authorities operate airports, ports, toll facilities and transit systems.
For FY2014, GDOT’s state motor fuel budget was $1,002,773,264. In addition, GDOT also received roughly $1.2 billion annually in federal funds, which comprise roughly 54 percent of GDOT’s annual budget. By comparison, federal aid comprises only 27 percent of the state of Florida’s current 5-year work program.
(According to GDOT, with respect to the federal taxes on gasoline and diesel, Georgia receives $1.14 for every $1.00 in federal gasoline and diesel tax paid in Georgia. GDOT cited this data to counter a common misperception that Georgia is considered a “donor” state with respect to the federal Highway Trust Fund.)
Per the FY2015 budget, Georgia transportation funding breaks down as follows:
Capital Construction Projects
o State Matching Funds: $213,393,476 (24 percent of the program’s budget) o Federal Funds: $675,252,699 (76 percent of the program’s budget)
Capital Maintenance Projects
o State Matching Funds: 60,560,150 (32 percent of the program’s budget) o Federal Funds: $128,218,385 (68 percent of the program’s budget)
This funding model, particularly its reliance on motor fuel taxes levied at both the state and federal levels, creates numerous and serious challenges in meeting Georgia’s transportation needs.
First, the federal Highway Trust Fund is not an annual grant program. Georgia does not receive its allocation from the fund at the beginning of the year. Rather, funds are authorized from the Highway Trust Fund, but the state receives no cash from the Federal Highway Administration (FHWA) from the Highway Trust Fund until the state invoices the FHWA for a reimbursement for work already performed.
Any uncertainty as to the level or availability of funds from the Highway Trust Fund can thus result in project delays or conservative scheduling of projects.
Additionally, over the last decade, Congress has demonstrated an increased reluctance to deal with significant infrastructure funding issues in a responsible, forward looking manner. Recently, federal action on infrastructure authorization and funding issues has taken place in short spurts of three, six, or 12-18 month authorizations. This leaves state and local transportation agencies in dire need of stability and predictability.
Second, Georgia is required to comply with numerous federal requirements, including federal environmental and labor laws, when federal funds are used for capital construction projects. This creates numerous compliance challenges and often results in project delays and significant additional compliance and reporting costs.
Third, reliance on motor fuel taxes levied by both the state and federal governments has created a long-term funding challenge at the same time that legacy infrastructure is in need of repair and population growth in states like Georgia necessitates expansion of road networks and transit options.
Numerous studies indicate that Americans are driving fewer miles each year in cars that are more fuel efficient (or, in the case of electric powered cars, in cars that do not require gasoline or diesel), the price of gas (until very recently) has climbed, consumers have demanded more fuel efficient cars, commuters have grown to demand more transit and ride-sharing options, and businesses have expanded the ability of workers to work remotely or from home.
These trends have arisen over a period in which the federal government has not raised the gasoline and diesel taxes since 1993 and has not chosen to index such taxes to inflation.
In fact, this is already occurring, as reliance on fuel taxes as the primary means of funding transportation has already created challenges at the federal level.
Robert Poole of the Reason Foundation has indicated that in the past 15 years, federal highway spending has increased from $33 billion a year to $53 billion. The sharp increase in costs is driven in part by the deterioration of the federal highway system, which was mostly completed by the early 1980s.
In contrast, Georgia’s full 2015 budget is $20.8 billion.
Since 2007, as part of its annual appropriations, Congress has filled gaps left by the gas and diesel tax shortfalls from general revenues. See Chart 5 below. However, continuing gridlock at the federal level has recently required Congress and the President to resort to short-term spending measures that extend the solvency of the Highway Trust Fund for only a number of months at the time. Indeed, the current budget authorization passed by Congress only funds the Highway Trust Fund until May 2015.
More State-level Investment in Transportation is Needed
Investment in transportation infrastructure must be viewed in its larger economic context. Roads, bridges, transit systems and rail lines are critical means of connecting businesses with their customers and employees. However, congestion on major highways costs the state billions each year in lost productivity, including extended commutes and delayed shipments of goods. These problems are only expected to grow as the United States, and fast-growing states like Georgia particularly, continue to experience rapid population growth, increased use of freight and shipping lanes, and urban areas become more congested.
In order to remain nationally and globally competitive, and to meet these challenges, Georgia must take immediate and significant steps to increase its investment in transportation infrastructure.
According to GDOT, among the states Georgia currently ranks 49th in terms of state spending per capita on roads, and its investment in road construction and maintenance is relatively small compared to some peer states with similarly sized populations or road systems. As the table below illustrates, according to data provided by GDOT, Georgia’s 2012 investment in capital expenditures and routine maintenance significantly lagged states such as Illinois, Florida, California, Ohio, and Pennsylvania.
Parsons Brinckerhoff presented testimony to the Committee indicating that, according to the U.S. Census Bureau, the U.S. population will have an additional 100 million persons from its current level, and over the next 30 years, the Federal Highway Administration expects that there will be 60 percent more freight moving across the nation’s roads and rail lines.
These data indicate, for instance, that in 2012, Georgia spent roughly $13,982 per mile compared to $122,699 per mile in Florida. This spending deficit, as compared with other states, has permitted Georgia to resurface only about 2 percent of its roads annually in recent years, creating a 50-year resurfacing cycle. GDOT indicated to the Committee that normal maintenance schedules and standards suggest that roughly 6 to 7 percent of roads should be resurfaced annually, or each road every 14 to 16 years.
Georgia’s current investment in transportation infrastructure significantly constrains the state’s ability to meet its expected needs over the coming twenty years. According to GDOT, the Statewide Strategic Transportation Plan for the years 2005-2035 (the “SSTP”) calls for $160 billion in transportation infrastructure spending over that period. Currently, revenue projections for the period total only $86 billion, leaving a $74 billion dollar total state “funding gap” over the next twenty years.
The Committee received testimony validating this “funding gap” from infrastructure consultant HNTB. In association with Ernst and Young, (EY), HNTB was commissioned to assess and report on the magnitude of critical long-term transportation needs. Through key agency interviews and publicly available data, HNTB verified that in order to merely preserve the current transportation system, namely the maintenance of roads and bridges at acceptable levels, the state has a funding gap of $1.0 billion to $1.5 billion annually.
HNTB similarly estimates that addressing the state’s critical transportation needs, including boosting regional mobility, increasing interstate highway capacity, expanding transit availability, improving intermodal options, and building new interchanges, would require an additional investment each year of between $2.1 billion and $2.9 billion.
Finally, HNTB estimates that the full universe of transportation needs in the state, including establishment of passenger rail systems, would require additional funding of between $3.9 billion and $5.4 billion annually.
Without significantly increasing transportation spending to the levels identified above, Georgia’s existing transportation networks will deteriorate, the needs identified in the SSTP will go unmet, and Georgia’s longstanding position as a leader in transportation infrastructure and economic growth will erode.
Specifically, the SSTP indicates that, at current state spending levels, numerous transportation projects will go unfunded, including:
Managed Lanes full network;
Deficient bridge replacement;
Full network of arterial roads;
Rural transit operations;
Urban transit (Metropolitan Atlanta Rapid Transit Authority, (MARTA), Georgia Regional Transportation Authority (GRTA), Cobb County Transit (CCT), Gwinnett Transit, Augusta Public Transit, Chatham Area Transit (CAT), Columbus METRA Transit System., Macon-Bibb County Transit (MAT), Atlanta Streetcar, Atlanta BeltLine, etc.);
Governor’s Road Improvement Program, (GRIP)/Intermodal connectivity;
Maintenance and Operation at an acceptable level; and
Metro Atlanta “large scale” road projects.
Findings of the Joint Study Committee
The Members of the Joint Study Committee on Critical Transportation Infrastructure Funding report back to the Speaker of the House and the Lieutenant Governor the following findings of the committee based on the presentations and discussions heard during the eight days of hearings throughout the state:
A minimum of $1.0 – 1.5 billion in new annual transportation infrastructure investment is needed to address the challenges outlined above and produce the following results:
Enhance and expand Georgia’s interstate capacity to accommodate increased freight flows resulting from the Savannah Harbor deepening project and other factors,
Ensure safety and good repair of Georgia’s bridges and roadways, throughout Georgia, both in rural and urban areas of the state,
Mitigate congestion in the fastest-growing urban and business centers throughout Georgia,
Elevate Hartsfield Jackson Atlanta International Airport to the fifth largest air cargo hub in the United States, and
Provide Georgians, Georgia businesses and visitors to Georgia with multi-modal transportation options, ensuring positive, sustainable economic outcomes.
Return on Investment: While the spending levels identified by GDOT and HNTB represent significant new costs for the state to bear, they represent investments with tremendous upside potential for Georgia.
HNTB’s report asserts that new, large increases in transportation spending in Georgia would yield considerable economic benefits to the state. It estimates that every dollar invested in transportation yields between $4.00 and $7.80 in economic benefits to the state.
Funding Options to accomplish these goals include:
1. Establish a multi-year schedule through which the debt service for bonded indebtedness of the Georgia Department of Transportation (totaling approximately $3.6 billion) would be paid from the State’s general fund. The fourth percent of the sales tax (which is commonly referred to as the “fourth penny”) which is collected and goes to the General Fund has recently generated between $180 million and $185 million annually. $180 million to $185 million shall be moved over to the Georgia Department of Transportation, unless the General Assembly decides to go to an excise only tax on fuel.
2. Reform Georgia’s motor fuel tax structure by converting the 4 percent sales tax on motor fuel to an excise tax. The recalculated excise tax should be set to an amount equivalent at least the four-year average of prices set by the Georgia Department of Revenue. The new excise tax rate would be estimated to be 22 - 25 cents per gallon. One result of this change will be that GDOT would receive the equivalent of the full four percent sales tax of motor fuel, rather than one percent being diverted to the state’s general fund.
3. Index the motor fuel excise tax to preserve its purchasing power. The tax can be indexed to inflation, construction costs, or even the price of gasoline. Another option could be to increase the tax annually by a set amount. Suspensions of the indexed increases could occur only when the Governor has declared a state of emergency, to be ratified by the General Assembly.
4. Converting the sales tax on motor fuel to an excise tax would adjust Georgia’s participation in, and advantage of, the International Fuel Tax Agreement. By doing so Georgia would go to an excise only tax that would result in an additional $60 million to the state.
5. Recapitalize the Georgia Transportation Infrastructure Bank so that a revolving, self-sustaining, loan/grant fund is created specifically to incentivize governments, authorities, CIDs and other entities to provide matching funds for local construction of projects. A percentage of the Infrastructure Bank funds shall also be dedicated to go to lower tier counties of the State as similar to the OneGeorgia tier system. This also gives local governments the ability to have local control concerning their local transportation needs.
6. Implement a one-cent statewide sales tax which would generate approximately $1.4 billion dollars each year. The General Assembly will have discretion as to how it will appropriate such funds for transportation purposes.
7. Increase Georgia’s motor fuel tax, which has not been increased since 1971. Taxes on motor fuel are widely accepted and acknowledged to be “user fees,” and are therefore the most fair and direct way for users to pay for roads and bridges. If increased 10 cents per gallon, the motor fuel tax would increase revenue to the Georgia Department of Transportation by approximately $600 million per year. Over time, this revenue source is likely to decline but might be used to fully fund the expanded infrastructure banks.
8. Establish an annual road usage charge/fee for alternative fuel vehicles (hybrids, low-emission and zero-emission vehicles) to be paid in conjunction with existing annual registration fees. This annual fee, estimated to be $200 for non- commercial vehicles and $300 for commercial vehicles, could be indexed to inflation and/or Corporate Average Fuel Economy, (CAFE) standards. The Committee noted that drivers of electric vehicles are eligible for a $5,000 state tax credit and are potentially eligible for other federal tax credits.
9. Look to long term solutions to wean the state and local governments from use of sales taxes on gasoline for non-transportation purposes, while also taking into account local governments’ present long-term bond obligations and their need for tax revenue to meet their own local transportation needs.
10. Acknowledge the need for additional investment in transit systems around the state of Georgia. With 128 transit systems around Georgia, one of which is the eighth largest in the country, it is critical that the state of Georgia increase its commitment to the development of responsible, well-funded and coordinated public transportation in metropolitan areas. The 50/50 limitation on spending at MARTA should be examined to see if it should be permanently lifted through separate legislation. Funding is needed annually for investment in transit systems around the state and to assist in coordination of services between transit systems in metro regions. It is in the State of Georgia’s and numerous transit systems’ best interests to establish a separate, permanent funding stream for those interests.
11. Specific attention should be given to the development of new toll lanes/facilities and the creation and expansion of managed lane networks.
12. Double the funding for the Local Maintenance and Improvement Grants, (LMIG) from the FY 2015 level of $122.7 million.
Representative Jay Roberts of the 155th and Senator Steve Gooch of the 51st were the co-chairmen of the Committee, which held eight public meetings at locations throughout the State of Georgia.
Committee hearings were held as follows:
August 5, 2014 at the State Capitol, Atlanta, Georgia;
August 18, 2014 at the City Service Center in Columbus, Georgia;
September 2, 2014 at Abraham Baldwin Agricultural College in Tifton, Georgia;
September 3, 2014 at Mercer University in Macon, Georgia;
September 30, 2014 at Georgia Regents University-Summerville Campus in
October 1, 2014 at Savannah International Trade and Convention Center in
November 19, 2014 at Fannin County High School – Performing Arts Center in
Blue Ridge, Georgia; and
November 20, 2014 at The Forum in Rome, Georgia.
In addition to the co-chairmen, the Committee was comprised of the following individuals:
Representative Terry England of the 116th, Chairman, House Appropriations Committee;
Senator Jack Hill of the 4th, Chairman, Senate Appropriations Committee;
Representative Jon Burns of the 159th;
Representative Mark Hamilton of the 24th;
Representative Calvin Smyre of the 135th;
Senator Brandon Beach of the 21st;
Senator Tyler Harper of the 7th;
Senator David Lucas of the 26th;
Mr. Edward Lindsey, Citizen Appointee of the Speaker of the House;
Mr. Steve Green, Citizen Appointee of the Lieutenant Governor;
Mr. Chris Clark, President and CEO, Georgia Chamber of Commerce;
Mr. Ross King, Executive Director, Association County Commissioners Georgia;
Ms. Hala Moddelmog, President and CEO, Metro Atlanta Chamber; and
Mr. Lamar Norton, Executive Director, Georgia Municipal Association.
Georgians overwhelming voted against the 10-year T-SPLOST. However, 46 of the 159 counties in Georgia approved the sales tax.
46 Georgia counties voted to implement a 1% Transportation Special Purpose Local Option Sales Tax (TSPLOST), beginning January 1, 2013. TSPLOST is a tax that applies to sales of all taxable items, including groceries and medicines. Revenues generated by T-SPLOST fund are to “improve transportation” for counties across the state of Georgia.
Richmond County residents already are paying the 1% increase in sale tax (currently 12% sale tax for items purchased) and discussions about more tax increases are at the Augusta Richmond County Commission (already working on the SPLOST 7 by November this year) and the General Assembly, which starts its 40 days sessions January 12 until the end of April.
And for those car owners -environmentally friendly and trying to save in gas- the possibility of being punished for not buying fossil fuel -or not spending more in the case of hybrids- is probably the most perversive attack to their wallets and principles.
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