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Decline in Gas Tax Revenue Spurs Talk of Alternative

October 03, 2011
Decline in Gas Tax Revenue Spurs Talk of Alternative

Regional news from GreenvilleOnline

Decline in gas tax revenue spurs talk of alternative

Political will lacking for increase to pay for byways

Everybody wants good roads, but few people want to raise gas taxes to pay for the necessary maintenance and repair. South Carolina’s gas tax, essentially a fee on the users of the highway system, is 16.075 cents a gallon and hasn’t been raised since 1989, according to Samantha Cheek, spokeswoman for the state Department of Transportation.

“This is a perennial problem,” said Sujit M. CanagaRetna, a senior analyst with the Council of State Governments. “It’s not just a South Carolina problem. It’s a national problem. Fuel efficiency has improved so people are buying less gas. Hybrids use less gas. People also have cut back because of the recession” and the weak economic recovery. “State revenues are going down,” he said, and highway maintenance needs are increasing. “Infrastructure is a critical component in any solid economic base.”

The South Carolina Department of Revenue collected $514.7 million in gas taxes in fiscal year 2009-2010, down from $534 million in fiscal year 2007-2008.

South Carolina’s Department of Transportation has struggled financially this year, failing to pay some of its contractors on time and carrying relatively low bank balances as it has coped with a cash crunch caused by a combination of peak construction, flat revenues and inadequate cash planning. The letting of some projects, as a result, has been postponed, and Transportation Secretary Robert St. Onge has said the agency’s leaders have to choose between cutting expenses for a poorly maintained road system or finding additional revenue.

The gas tax and federal funding supply most of DOT’s money, but Republican lawmakers haven’t been interested in raising the tax in recent years.Policymakers “are between a rock and a hard place. The gas tax is a depleted revenue source” and something must be substituted for it, CanagaRetna said.

Jamie Alexander, a Taylors resident, said the roads are in terrible shape — potholes, faint lines marking lanes and ragged edges — but “people are in a recession. This is not the right time” to raise taxes “Now it’s all people can do to buy gas,” she said, adding, “I feel like they should use some of the lottery money” to fix the worst roads.

Dan Joyner, owner of the Prudential/C. Dan Joyner real estate firm, also doesn’t like the idea of raising taxes. Realtors don’t want to impede progress, but “our industry would probably suffer as much as any industry would” from increased fuel taxes, he said. “Even a five-cent increase would be costly,” he said, citing one of his agents who showed a family 29 houses in one weekend. “She said she didn’t do anything but fill her car with gas,” he said, adding that the family decided not to move to Greenville. Still, “We would not be opposed to progress,” he said. Joyner said that many areas where his agents drive have good roads because they are newer. The problem is older secondary roads, parts of Interstate 85 and bridges, he said.

Jeff Erickson, owner of Pressed4Time Greenville, a pick-up and delivery service for dry cleaning, shoe repairs and alterations, said a small tax increase “would be worth if if you would see noticeable improvement. Would I like a tax increase? No. But it’s a small part of the cost of gasoline. It’s part of the cost of doing business.” However, before taxes are increased, he would like to see the Department of Transportation put a maintenance plan before the public.“I want to see where my money is going,” he said.

Erickson said that he moved to South Carolina 10 years ago from Pittsburgh, so he sees South Carolina’s road conditions in a different light. Pittsburgh area roads, he said, are notoriously bad. “South Carolina roads are not that bad,” he said, adding that the climate helps.

As gas prices move up and down, currently near the $3 a gallon level, now could be the right time to raise the fuel tax, said Holly Ulbrich, a Clemson University economist. She presented the idea to lawmakers this week.

An increase of about five cents a gallon “would be a noise-level right change” with the way gas prices are moving, said David Bodde, a Clemson economist with expertise in the energy sector. “Just in my drive from Clemson to ICAR, I passed a 10-cent per gallon spread in the prices. Now would be the right time.” A nickel a gallon probably wouldn’t affect gasoline consumption, he said. “The users are the ones that wear out the roads and pay the taxes,” he said. “Trucks are probably undertaxed for the wear they put on the roads.”

CanagaRetna said, “The public is demanding better roads, but when it comes down to it the public doesn’t put enough pressure on lawmakers to come up with an alternate source” of funding.

Michael Blocker, who works for Greenville Parks and Recreation, also said he’d be “willing to spend five cents more for good roads. We want better roads when we hit a pothole. We want good roads, but we don’t want to pay for them.”

Otis Rawl, president of the South Carolina Chamber, said his organization believes something must be done to improve the state’s roads, especially the interstates. The business group has suggested that legislators first pull funding for maintenance and repair from the general fund. The second move, he said, would be to use any surplus funds left at the end of the year on the highway system. The third action would be to increase the user fee by five cents to seven cents a gallon. Each penny increase in the fee would bring in about $25 million.

The interstates “are the lifeblood of our economy. But our interstate system was not built for the population now using it,” he said. “We’re going to have to take a hard look at the user fee.” While lawmakers say a weak economy isn’t a good time to raise the fee, “There’s not going to be a right time for incremental increases,” he said. Other than stimulus funding for road improvements, “There has been no maintenance of our secondary roads in eight or nine years,” he said. Rawl cited economics for his suggestions.

“If we don’t improve the roads, I think you will see manufacturers and distributors moving to other places with good infrastructure so they can move their goods,” he said.  “South Carolina is on the cusp of greatness” if the state manages to improve the Charleston port to handle bigger ships and improves its road systems, he said. The state could become the major entry point to the Southeast from the Panama Canal. But, “If we don’t get it right, I think we will be bypassed again.”

CanagaRetna said, “The sense I’m getting around the country is that policy makers are aware of the problems, but it’s highly unlikely they will raise the gas tax.”

So lawmakers need to figure out alternate sources of revenue, he said.

Oregon has moved to a tax on miles driven rather than on gallons of gas bought. This eliminates the lower revenues brought about by lower consumption because of improved gas mileage, he said.

A mechanism is put on a car that tracks the miles driven but doesn’t track where a driver goes, he said.

That was a major problem when the program was initiated about five years ago. But other states are looking at that possibility. North Carolina had a hearing on the issue last year.

“I believe that would be a nightmare,” Joyner said. “If it were one of the two, I’d prefer the tax to that.”

The South Carolina Chamber of Commerce, the nation’s first state chamber Accredited with Distinction by the U.S. Chamber, is the state’s largest statewide broad-based business and industry trade association representing more than 18,000 businesses and more than one million employees, with 90 percent of membership comprised of small businesses. As the unified voice for business and industry, the Chamber is a catalyst for increasing wealth and enhancing the state’s global competitiveness in order to improve the quality of life for all South Carolinians.

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