^Blog State Gas Tax Revenues Take Another Hit

Time To Bite The P3 Bullet
In The Olympian, Adam Wilson reports Washington state officials are bracing for a widening gap of $95 million between expected and actual gas tax revenues through June 2009, as sharply higher gas prices constrict the volume of fuel purchased at the pump. The renewed transportation revenue concerns are indicative of a larger, long-term challenge that’s also felt due to the nearly bankrupt federal gas tax trust fund and the shifting landscape in infrastructure.

…construction costs increased by 60 percent in five years, as demand in India and China drove up prices for steel and concrete, and the cost of diesel fuel for construction equipment soared.

In Washington, as elsewhere, some planned road and bridge projects to improve safety and reduce congestion on existing facilities will likely have to be postponed if not cancelled; and funding for important new projects looks even more problematic.
Despite two state gas tax hikes, in 2003 and 2005, totaling 14.5 cents more per gallon, the state is collecting less inflation-adjusted money from the gas tax and car fees in the current two-year budget cycle than in 1998-1999. That was before gas prices spiked, and before a controversial voter initiative, I-695, forced the legislature to dramatically reduce car license tab fees. Some lawmakers want to look at another gas tax hike, but others say that’s politically dead in the water and some sales tax revenues used for other priorities should be shifted to transportation. However, advocates for the environment, health care and education would object strongly, and the state faces a budget shortfall next year.
Congestion and safety projects on state roadways are still urgent. The apparent downturn in vehicle miles driven is in the low single digits, coming after years of growth in traffic volume and underinvestment in infrastructure. But it’s enough to begin wreaking havoc with plans to catch up with that growth in travel.
What now then? Impetus will grow for tolling. Time-variable tolling on major highway corridors needs to be implemented, but as much if not more to ration peak-hour congestion as to raise money for road projects and transit. Politicians will agonize over revenue enhancement measures, known to most of us as “more taxes.” Good luck there, with the economy in a tailspin.
It’s time for state lawmakers to consider much more seriously how they can open the door wider for transportation public-private partnerships in Washington state. P3s, as they’re sometimes called, are part of the solution to the funding conundrum. They can provide needed investment, stretch public funds farther, transfer risk to the private sector and help ensure stringent performance goals are met.
According to the state, $2 billion is needed for crucial pavement and interchange work on I-5 in Seattle, and another $1.84 billion for safety and traffic improvements on U.S. Route 2 in Snohomish County, the notorious “Highway of Death.” In Pierce County, the Cross-base Highway and extension of SR 167 to the Port of Tacoma languish for lack of funding. Federal and state funds would only cover a portion of these projects; a tiny fraction of the first two. When the full environmental mitigation plan is settled, expect total costs for the new SR 520 floating bridge to well exceed current estimates. Across the board in Central Puget Sound, tolls will help but won’t come close to paying full freight. Nor should that be their primary purpose.
It’s time to bite the P3 bullet. This includes a necessary public education effort involving political leaders, to clear up misconceptions that P3s equal “privatization.” That’s wrong. The assets are still owned by the public sector, which also retains control over rates and fees. If P3 interest costs can be somewhat higher than with traditional public financing, that’s a fair trade-off considering that the pay-off in project delivery comes much sooner; that the payback can stretched out over a longer period and offset with user fees such as tolls rather than general taxes; and can be pegged to construction and project performance milestones met by the private partners.
To get the ball rolling, political leaders should initiate a very public conversation about transportation P3s for Washington state.
Related:
“Are Privately Operated Highways In Your Future?,” KPLU-FM, Seattle;
“B.C. Paves The Way To Better Infrastructure,” Globe and Mail;
“The P3 Boom,” Financial Post;
“Report On The Transportation Innovative Partnerships Program,” Washington State Transportation Commission;
“Case Studies Of Transportation Public-Private Partnerships In The United States,” for U.S. DOT.