Recently, North Carolina's law and policy establishments have been up in arms over the issue whether it's lawful or appropriate to let a private road builder partially fund the last section of the I-485 loop in Charlotte. Lost, however, in this worthwhile discussion is an even larger and more important reality that underlies it: our transportation finance system is failing us and the legislative mechanism by which money is allocated to projects badly needs repair.
Under Governor Perdue, great strides have been made to drain the Board of Transportation of direct influence over highway and minor road projects. Gone, hopefully, are the days when individual Board members could order up a set of traffic lights or a turn lane in front of their family's new shopping center or gas station. It's a good start.
Now, however, to take reform to the next level, state leaders should tackle an even tougher three-part "to do" list that includes: 1) reforming the Highway Trust Fund; 2) getting serious about revenue reform (including crafting a revenue source for the new but empty pot that was established to fund transit and rail projects); and 3) exploring the thoughtful re-assignment of more responsibility for transportation to local governments. Let's take them in that order.
The problems with the Highway Trust Fund (HTF) are well-documented. Right now, the Fund divides the state into districts and allocates money to them based on a 1989 list of intrastate highway projects, population share and regional "equity." Most of the money for the HTF comes from sales taxes on vehicles, plus a smaller portion from the gas tax and various fees.
Unfortunately, this means that there is not enough money to go around and that too much of it goes out the door to areas with less pressing needs. Big projects like the Yadkin River Bridge replacement on I-85 can completely use up the allocation to individual districts at the same time that sparsely-used bits of intrastate system are upgraded. It's a poor use of resources based on an obsolete formula.
The current HTF formula must be scrapped and replaced with two new guiding principles: a) the interstate highway system must have a new separate fund (that may or may not be augmented by toll revenues) and b) population must be the foundation of any new HTF formula.
Specific projects can no longer be mandated by the whims of state lawmakers. Project selection must be based on professional assessment, environmental sustainability and a process characterized by public input and review.
This brings us to the question of transportation revenue streams generally. Here, the unavoidable fact is that our future infrastructure needs cannot be met by current funding mechanisms. Toll roads may help underwrite large projects but they are generally politically unpopular. Moreover, road privatization is fraught with dangers and usually confers massive windfalls on private companies to the detriment of the public.
So what can be done? While there are small reforms that can help, in general, the finance reform challenge is more fundamental. First and foremost is the fact that the gas tax is an anachronism. As fuel efficiency increases, collections per mile travel fall. In the long run, North Carolina needs to take the lead on moving the region and the country forward towards a "vehicle-miles traveled" tax system. In a future with more hybrids and non-internal combustion engine vehicles, it is the rational direction.
In addition, the new "Intermodal and Congestion Relief Fund" (which is designed to fund mass transit) needs a permanent revenue source. It cannot survive on ad hoc transfers from the General Fund. Possible candidates include vehicle sales taxes, registration fees or, eventually, a portion of a vehicle miles traveled tax.
This brings us to the matter of the role of local governments. Though necessary when it took place, the 1930s-era state takeover of the road system reed revisiting. Local governments need to assume a greater role for financing local transportation. Along with this new responsibility, new rules guiding access to matching state money by locals should be predicated on the alignment of local transportation planning with local land use policies. For too long, local transportation and land use planning have developed in isolation.
In general, the local funding principle should be that direct beneficiaries of big transportation projects and upgrades should, if they are economically able, contribute more to the cost of those projects.
Two years ago, in one of the most important achievements of a high-profile study commission, state lawmakers established a system by which all counties could hold referenda on raising the sales tax to fund public transit. This was a huge achievement and a sea-change in North Carolina's transportation policy. Governor Perdue's DOT Board reforms have helped further. But the work is not half-done. Action on public transportation cannot forgive inaction on roads. Big challenges remain and demand our attention.
Stephen Jackson is a Public Policy Analyst at the North Carolina Budget and Tax Center