State Gas Taxes and P3s Fill Federal Transportation Revenue Void

Beginning last year, states increased gas taxes and entered public-private partnerships, as are some cities. But it's not an easy haul for cities nor states, and Congress has yet to agree how to furnish sufficient revenue to match current spending.

3 minute read

April 7, 2014, 6:00 AM PDT

By Irvin Dawid

"Before this burst, no state had raised its gas tax for nearly four years, according to the Institute on Taxation and Economic Policy (ITEP), a nonprofit research group," writes Josh Mitchel. The first state to break the gas tax increase freeze was Wyoming.

See ITEP's publication, "How Long Has it Been Since Your State Raised Its Gas Tax?" to see a chart that shows (as of April 1, 2014) "the number of years that have elapsed since each state’s gas tax rate was last increased." Alaska is the champion at almost 44 years.

More common is the use of public-private partnerships, also referred to as P3s, for specific projects that governments might otherwise be unable to finance.

Crimped for funds, a slew of cities and states such as New York, Texas and Indiana are teaming up with private companies to build roads, bridges and other public projects, moving into zones once funded by gas-tax dollars or traditional state bonds. These partnerships replicate a model long practiced in Europe, with private firms putting up initial funding in exchange for future guaranteed payments, through toll revenue or other sources.

One such city is Atlanta. "Mayor Kasim Reed, a Democrat, is exploring a public-private partnership to build a light-rail line [sic]. "Cities and metropolitan regions are having to figure it out for ourselves," he said.

Note: I suspect that Mitchel is referring to the Atlanta Streetcar, as a picture of such a streetcar accompanies the article. According to the city's webpage on the project, "Work to implement a modern streetcar transit system continues through the collaborative public private partnership between the City of Atlanta (COA), the Atlanta Downtown Improvement District (ADID), and the Metropolitan Atlanta Rapid Transit Authority (MARTA)." As we noted last month, one line is under construction while another is on hold.

Eleven states are now using such partnerships to raise funds for projects estimated to cost $15 billion, mostly for highway construction, according to the trade publication Public Works Financing.

Del. Gov. Jack Markell, also a Democrat, expressed his frustration with "Congress (that) has passed a series of short-term meaures to borrow money" to continue spending at current levels, rather than boosting the federal gas tax.

"There's no business in the world that can be successful with expenses that grow with inflation and revenues that don't, and yet that's basically what's happened" with transportation funding, he said.

However, Markell is engaged in his own struggle with the state legislature to increase the gas tax, which, according to the ITEP chart, has not been increased in 19.3 years (as of April 01).

Facing a growing backlog of road repairs, Delaware's Mr. Markell is pushing to win support for a 10-cent increase in the state gasoline tax, currently 23 cents a gallon. The governor hopes to raise $100 million a year—half of which would come from new borrowing—to upgrade roads notoriously choked by beachgoers.

Read the full story: States Raise Gas Taxes to Pay for Infrastructure

Saturday, April 5, 2014 in The Wall Street Journal - U.S.

Government / Politics Infrastructure Transportation United States Delaware Georgia P3s State Gas Tax Public-Private Partnerships Gov. Jack Markell Mayor Kasim Reed Institute on Taxation and Economic Policy Atlanta BeltLine Streetcar System Plan View More

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