Georgia House leaders are releasing details of the bill they will introduce to address Georgia’s statewide transportation infrastructure deficit, and the funding sources they intend to tap in order to address the problem.
Restructures Gas Tax:
The plan features a transition to change the formula from the current fixed 7.5 cents excise tax plus sales taxes to tax with a fixed excise tax of 29.2 cents, which by Georgia’s constitution is required to be allocated to GDOT. This number represents the average motor fuel tax Georgians have paid over the past four years, and thus is revenue neutral.
Currently Georgia’s sales tax on motor fuel breaks down as follows:
3% of sale goes to GDOT, which is required by our constitution to use the money on roads and bridges.
1% of the sale goes to the state’s general budget for non-transportation uses.
1-4% is taxed locally by referendum and may or may not be used for transportation uses.
By shifting these taxes from other sources to GDOT, roughly $800M currently taxed as a “user fee” will more closely match the source to use. In addition, Georgia currently loses out from long haul truck drivers who remit taxes to states based on excise taxes paid versus miles driven in each state. By shifting sales taxes to excise taxes, Georgia will reap an estimated $60M windfall from this program.
Preserves local revenues during transition:
In order to ease the burden of transition to local governments, taxes currently being collected locally on existing local option taxes may be grandfathered until the expiration of the existing SPLOST. Going forward, new SPLOSTS will not include motor fuels as part of their sales tax base.
Maintains adequate user fees going forward:
Because the value of the gas tax has been declining as fuel efficiency increases, the gas tax will be indexed annually going forward to CAFÉ standards – the fuel efficiency of cars on the road. By making the tax purely a flat excise tax, the volatility of the tax increasing while gas prices increase is removed.
New pathway for local funding:
In order to maintain local flexibility and control, counties and cities will each have the right to place up to 3 cents/gallon by vote of a city council or county commission. If the local governments wish to place additional cents on sales of gasoline a referendum from the local voters would be required.
All proceeds raised locally under this option would be required to be used on transportation projects. This would help counties and cities focus on local priorities, either on their own or by partnering with the state for major improvements, as Forsyth County recently did to expand GA 400 using a local bond referendum.
Transit & The Environment:
This money is also a direct pathway to additional investment in transit. Fulton, DeKalb, and Clayton Counties have already authorized a 1% sales tax to fund transit, but the current funding provides little left over for major expansion projects. Voters are also understandably reluctant to contribute an additional 1% for more transit when they already face the state’s highest 7-8% tax rates. Local gas taxes on top of the state excise tax may provide the needed avenue for MARTA to find the funding for the Clifton Corridor, South DeKalb, and/or North Line extensions currently being studied.
In keeping with the spirit of “user fees” to fund transportation, those driving alternative fuel vehicles will pay an annual fee. Passenger cars running of purely electric or CNG power would pay a $200 fee. Commercial vehicles would be assessed $300 annually.
The fees from these tags are to be earmarked to transit.
A new bond package to jump start projects with immediate funding:
The plan recognizes both a larger need but acquiesces to limited revenue. Thus, leaders are also committing to a “substantial” bond package to jump start priorities. These funds will be divided into three categories:
- Critical Bridge Maintenance
- Other essential transportation projects
It is presumed that the bond service debt for this new package will be paid out of the existing general fund rather than further saddle GDOT with a greater debt service burden. It should also be noted that Georgia is one of only a handful of states that continues to maintain a AAA rating from all major rating agencies.
Other tweaks to existing programs include expansion of the local match “LMIG” program, and the funding of a state sponsored infrastructure bank. Both of these items will further allow local governments to leverage their existing dollars with GDOT priorities.
Off the cuff assessment:
1) It’s an excellent step towards unwinding Georgia’s haphazard structure of how we finance roads & bridges. Georgia is currently last in highway spending per capita (2011 Brookings Institution study) despite having a gas tax that is roughly average. This is because we redirect roughly twelve cents per gallon from gas taxes to the state’s general fund or local, often non-transportation uses.
2) The amount of money raised is a significant improvement, but this package alone will not “fix” the state’s transportation problems. This is a lifeline, not a long term cure all. The transportation study committee found a need for between $2-3 Billion for a package that would address most current and future needs, suggesting almost $5 Billion annually for a “full universe” of infrastructure including rail.
This amount of money would allow us to get back to a normal maintenance schedule plus a small-medium project per year, annually. The local gas tax, such is used in Florida with a $.12/gallon cap, helps bridge the gap a bit. But this package alone is not a total panacea. It does, however, reside heavily in the world of the possible.
3) Transit is fully acknowledged, with a plan to move forward with a state role. There’s a new creative option for local revenues, Fees to be directed for transit with a state budget line item, and funds coming from a bond package to kickstart some sort of transit project(s). Given that just a couple of years ago no statewide elected Republican would even mention the word positively, transit advocates should appreciate the trend.
4) There still need to be changes to current referendum structures to allow for:
- “Fractional penny” splosts
- 2 or more counties to join as their own “regions” for local projects
- Referendum lengths extended up to 10 years or more in order to qualify for matching funds and bonding capacity. This is especially important for transit projects.
5) GDOT currently services debt in the amount of $402M/year for prior and current projects. The more of this debt than can be phased in to be serviced by the general fund, the more GDOT will be able to address the real needs for road re-design and capacity expansion.
As a matter of disclosure/reminder, I’m writing this piece as both the Editor of Peach Pundit and the Executive Director of PolicyBEST.org
One year ago today, we launched our organization with a press conference designed to begin a year long conversation about moving Georgia forward by improving transportation infrastructure. We focused on areas of agreement between previously opposing organizations. What we agreed on a year ago was admitted to be inadequate to meet the need, but was a demonstration that common ground could be found to focus on solving major & controversial problems.
Today’s blueprint continues on in that spirit. It is a major step forward and represents what is possible with consensus. If passed, we’ll be much better off than we are today. We will still need to keep the conversation going to find additional funding to prepare for Georgia’s future.