Federal transportation dollars could dry up this summer

by Bruce Siceloff, News and Observer, March 26, 2014.

North Carolina transportation improvement projects will stall if Congress fails to avert the expected bankruptcy this summer for the national Highway Trust Fund, Gov. Pat McCrory told state business leaders Wednesday.

“The business community has got to step up and get Congress unparalyzed up there,” McCrory said at a daylong conference on transportation and the state economy. “This is coming very quickly, and it could cost us a billion dollars here in North Carolina.”

Conference speakers warned that both the state and federal governments are failing to keep up with the rising cost of transportation needs.

A 2012 transportation spending authorization law called MAP-21 is set to expire at the end of September, and the federal government is expected to run out of transportation funds before then. Federal money accounts for about 28 percent of state transportation spending in North Carolina.

“We’re going to have to stop writing checks in July or August this year if the federal government does not reauthorize the transportation law,” said state Transportation Secretary Tony Tata. He shared the stage with McCrory at the conference sponsored by the N.C. Chamber, a statewide business lobby group.

Measure must be ‘sustainable’

In past years, Congress set long-term priorities with legislation that governed transportation spending for five years at a time, enabling the states to plan their own spending several years into the future. Federal transportation funds are dwindling because of flat collections from a fuel tax rate unchanged since 1993. Congress has not signaled interest in increasing the gas tax or finding new transportation revenue sources.

Nick Tennyson, Tata’s chief deputy secretary, worried that Congress might agree on just a stopgap measure to continue transportation funding for another six months.

“When we get a new act, we need to know that it is both going to be sustainable and will increase funding,” Tennyson told the group. “We’re going to need the Congress to hear from more than just DOTs and road-builders. They need to hear from people who use highways and all the other modes of transportation.”

The N.C. Chamber and 30 other state chambers of commerce signed a letter dated Tuesday asking House and Senate leaders to authorize transportation spending for five more years, in new legislation that would protect the solvency of the federal Highway Trust Fund and give states flexibility in how they make transportation improvements.

New funding source needed

The state DOT relies on combined state and federal gas taxes for 70 percent of its transportation money. Just as the gas tax has grown weaker as automobile fuel efficiency grows stronger, the state’s second-biggest transportation source – the highway use tax on car sales – also is being undermined by a changing economy.

Highway use tax collections plunged by one-third during the 2009 recession, but they have recovered partially as car sales increase again. Now, though, North Carolinians are buying cars that are less expensive and more fuel-efficient, and they wait longer than before – 11 years on average – to replace them with new cars.

McCrory and Tata said North Carolina will have to find new ways to pay for its transportation needs, but they weren’t ready to suggest new taxes or other revenue sources. First, they plan to offer new projections on how much money the state will need for long-term transportation improvements, as part of a 25-year plan to be released by DOT later this year.

That cost figure is expected to be billions of dollars more than the state now can hope to collect from current state and federal revenue streams.

“We’re going to need to make that investment beyond what we currently do, and that is very clear,” Tata said. “We’ve got some issues that are going to require some money to get through.”

Pressed by one audience member to reveal his thinking on new transportation taxes, McCrory demurred.

“We’re not going to leak anything to you at this point in time,” he said.