BillHobbs.com - Blogging about politics and media from Nashville.

February 13, 2008

Bredesen Longs For Higher Gas Tax

The Daily News Journal report on Gov. Phil Bredesen's speech to the Murfreesboro Rotary Club includes mention of Bredesen's support for increasing the state's gas tax.

Bredesen also spoke about the eventual need for a possible increase to the 22-cent per gallon gas tax to help pay for roads. "I don't think it will happen this year," he said.

The previous gas tax was enacted in 1989, but rising construction costs have made it difficult for the Tennessee Department of Transportation to keep up with needed road projects, Bredesen said.

The governor said restructuring the gas tax will take a bipartisan effort by the Tennessee General Assembly. "I think everyone has an interest in roads being completed," he said.

The Knoxville News Sentinel reported on that latter possibility recently:

Tennessee transportation officials are facing a shortfall of more than $5 billion in the next eight to 10 years because of stagnant fuel revenues and skyrocketing construction costs.

"We are facing, along with every department of transportation across the country, financial issues," Tennessee Department of Transportation Commissioner Gerald Nicely told a gathering Friday of state and local government officials."We have a trend where our costs are growing three times as much as our revenues," Nicely told the group at the annual Knoxville Transportation Planning Organization Legislative Luncheon.

Although Tennessee hasn't increased its gasoline tax of 21.4 cents per gallon since 1989, Nicely said Friday he has no plans to push for a hike in the existing tax. The fuel taxes provide the state about $644 million a year, with $383.2 million of that going to TDOT, according to budget statistics.

But Nicely noted Gov. Phil Bredesen is looking at other sources of revenue, including toll roads, to keep the transportation infrastructure from spiraling into disrepair.

Over eight to 10 years - the time period in which Nicely says TDOT faces a shortfall of more than $5 billion - that adds up to more than $2 billion.

Comments

In the last federal transportation bill(2005) was a poison pill that TDOT was forced to swallow. That poison pill was performance standards. Fortunately for Tennessee and a lot of other states, the Congress created a parallel spending program within that bill that prevented major damage except to the Highway Trust Fund which will soon be too broke to prevent an even bigger loss of income to TDOT.

A system or redistribution of resources back to the states was crafted that rewarded good management of demand instead of rewarding the state for having a certain area and population. The bigger your system, based on lane miles and diesel fuel consumption, and vehicle miles traveled, the more you get back. There is also a small fraction of the formula that distributes more money to states that have more population per lane mile of road. If there is no federal tax increase to restore the Equity Bonus provisions of the federal bill, TDOT would loose about $214 million per year in federal highway funds. The next president will sign into law how this is going to be handled.

TDOT does have a problem with inflation because so many items in road building are energy sensitive but it also has a problem with long range planning which assumes that inflation is going to be stable at 3%. TDOT's other problem is the legislature, both federal and state which likes to play highway engineer using anecdotal stories and questionable economic development motives rather than objective transportation need.

TDOT is only getting about 2 cents per vehicle miles to operate this system and I think they need to be at least into the 2.7 cent per vehicle mile range. This level of taxation however will be entirely ineffective if the current system of project selection is maintained.

Posted by: Danny L. Newton at February 13, 2008 2:27 PM