Another bypass — Latest gas tax hike won’t help roads, rail, bridges
The list of state transportation projects is impressive:
Extend Route 11 to the southeastern shoreline.
Replace the elevated Interstate-84 highway through Hartford, which is nearing the end of its serviceable life.
Add new lanes to Connecticut’s clogged interstates.
Unfortunately, there’s no money for any of these projects, which are on an ever-growing list of state transportation initiatives. And, no funding looms on the horizon, despite the arrival Monday of one of the largest gasoline tax hikes in state history.
Connecticut motorists are expected to pay an extra $60 million at the pumps over the next year. Meanwhile, state government will continue to siphon fuel revenues from the transportation system, as it’s done for nearly a decade.
“Connecticut has been systematically underinvesting in its transportation infrastructure, and this has been going on for years and years and years,” said University of Connecticut economist Fred V. Carstensen.
When policymakers launched an aggressive series of gasoline tax increases in 2005, they thought that modest consumer pain would be offset by a transformed transportation network.
They were wrong on both counts.
As gas prices skyrocketed, tax revenues grew by more than double what was expected. They became, and remain, a cash cow for the state.
Meanwhile, transportation spending limped along, as non-transportation programs gobbled up fuel revenues in good economic times and bad.
As badly needed projects continue to languish, transportation advocates and some state officials bemoan the loss of an economic spark plug.
“This is the big challenge for economic growth,” said Joseph McGee, vice president of the Business Council of Fairfield County. “It’s a long-term issue of underfunding in highways and in mass transit. And it spans multiple governors, and it’s no longer acceptable.”
A heavy gasoline tax burden
Connecticut imposes two taxes on gasoline that total 46 cents per gallon:
- A flat, 25-cents-per-gallon retail charge is imposed when motorists fill up.
- But the state also taxes gas — at 7 percent — before it gets to the station; another surcharge effectively raises that tax to 7.53 percent.
Gasoline station owners have long conceded that they pass the full cost of that wholesale tax — currently 21 cents per gallon — on to motorists.
And when the wholesale tax jumps to an effective rate of 8.81 percent Monday, motorists will pay another 3.6 cents per gallon, based on the average wholesale price last week at New Haven Harbor. The average price of a gallon of gas in Connecticut last week, according to AAA, was $3.79.
Connecticut’s combined gasoline tax will reach 49.6 cents Monday, topped only in California and New York, where motorists pay just over 50 cents.
The Nutmeg State will likely top the 50-cent mark later this summer if wholesale prices continue to rise.
Enacted in 1979 to pay for oil spill cleanups, the relatively modest wholesale tax became more important in 2005. Gov. M. Jodi Rell and the legislature launched a major initiative to replace an aging fleet of commuter rail cars and fund other strategic rail and highway projects.
The engine to make all of this possible: five summertime tax increases. The wholesale levy would rise each July from 2005 through 2008, and then one more time in 2013.
Lawmakers had expected that by 2014, the tax would collect $100 million more per year than the $179 million it raised in 2005.
But it needed just one year to surpass that growth target.
After three summers’ worth of tax increases helped push the price of gasoline over $4.30 per gallon in the spring of 2008, Rell and legislators suspended the fourth hike.
And while the state’s coffers were swimming in revenue from a wholesale tax that already had doubled, officials found other uses for the money besides transportation.
Rell had sought to raise the income tax in 2007 to increase education aid to cities and towns, but she ran into heavy opposition from her fellow Republicans. She abandoned the income tax hike, but the extra education funds survived in a General Fund propped up with fuel tax revenue.
Between 2005 and 2013, about $1.27 billion raised by the tax has been spent on non-transportation programs.
“$1.2 billion has disappeared,” said Michael Fox, executive director of an association representing about 400 Connecticut gasoline stations. “It’s not that we didn’t have the money. It’s that the legislature — and I use this word — stole the money.”
Weaning government off of fuel taxes?
Gov. Dannel P. Malloy blasted the state’s practice of siphoning off fuel revenues as he ran for governor in 2010.
But once in state office, Malloy, who inherited a mammoth-sized $3.7 billion operating deficit, relied on fuel revenues as his predecessor had.
The Democratic governor likes to note that the new budget he signed will dedicate an extra $181 million in wholesale fuel tax receipts to transportation.
But it also cancels another $151 million transfer to transportation and shifts an additional $91 million from this program into the General Fund.
Add up the pluses and minuses, and transportation loses $60 million in the new fiscal year — the value of Monday’s gasoline tax hike.
The new budget dedicates $1.24 billion to the Special Transportation Fund in the new fiscal year, $34 million more than last year — but $93 million below the level necessary just to maintain current services.
Still, Malloy insisted last week on “Where We Live,” WNPR’s public affairs program, “We are weaning off of the practice” of raiding fuel revenues.
The governor said that by the 2014-15 fiscal year, transportation would be required to share only $15 million with the General Fund.
“Following that it should be zero, zero, zero, zero, zero, zero, zero,” Malloy told host John Dankosky. “That’s what we’ve planned for, so no money would be coming out.”
‘Major, long-term unfundable initiatives’
“We’re going to have a world-class transportation system,” and that can’t happen until all fuel revenues are dedicated toward that cause, Malloy said last week.
“We need to do a lot of track improvements along the Metro-North line. We need (Interstate) 95 to be three lanes in each direction for its entirety. We need (Interstate) 84 to be three lanes in each direction in its entirety. We need to replace bridges in the state of Connecticut. All of this is going to cost money,” Malloy said.
In 2010, the state Department of Transportation classified $5.4 billion worth of highway and bridge projects as “major, long-term unfundable initiatives.”
In other words, these projects are too important to dismiss, but no source of state or federal money has been identified to make them possible.
Just three years later, and the pending projects that have a price estimate could cost as much as $8.5 billion. Two other projects — major widenings of I-84 west of Waterbury and I-95 east of Old Lyme — only are projected to cost “billions” each. Even at a potential price of $2 billion each, the total cost of “unfundable” highway and bridge projects potentially stretches beyond $12.5 billion.
Other major “unfundable” projects include reconstructing the I-84/Route 8 exchange in Waterbury, replacing the elevated stretch of I-84 in Hartford, and the Route 11 extension.
Business leaders in Fairfield and Hartford counties were dismayed last fall when they learned that their dream of a 10-year state investment to develop high-speed commuter rail between Hartford and New York City would not begin any time soon.
“The speeds to New York haven’t improved in 50 years,” said McGee, who noted that the aging Metro-North commuter line between New Haven and New York already handles a record-setting 38 million trips per year.
Rep. Gail Lavielle of Wilton, the ranking GOP representative on the Commerce Committee, was skeptical that major state transportation investments would happen until the Capitol gains better control over spending in other areas.
Lavielle said the new two-year state budget is not sustainable, noting that nonpartisan analysts project it would run $712 million in the red — a 4 percent operating deficit — in the first budget after the 2014 elections.
When the shortfall appears, officials again will be tempted to raid fuel revenues, she said.
“What ticks people off the most is that they perceive their (fuel) tax dollars are disappearing down a black hole,” Lavielle said.
“They are paying more for gasoline but they are not getting anything new. They are not getting anything better,” she said.
Even Malloy’s fellow Democrats sent a stern warning to the administration this past spring when the Finance, Revenue and Bonding Committee endorsed blocking a year’s worth of financing for future transportation projects.
“It seems like basic maintenance and repair is the entire long-term strategic plan in Connecticut,” said Rep. Kim Fawcett of Norwalk, who co-chairs the panel’s Transportation Bonding Subcommittee.
Keeping up with basic maintenance
The enormous cost of maintaining transportation infrastructure is “something that is not flashy, and people take for granted — until something happens,” said Karen Burnaska of the advocacy group Transit for Connecticut and former first selectwoman of Monroe.
Currently 331 out of 3,980 state bridges and 193 out of 1,286 municipal bridges have a structural deficiency.
“You’ll find that the investment that the state made after the Mianus River Bridge [led to] a dramatic improvement,” said Tom Maziarz, director of the DOT’s Bureau of Policy and Planning.
He was referring to the I-95 bridge in Greenwich that collapsed 30 years ago. Several motorists died in the incident, which sparked tougher design standards and a much more intense state bridge inspection program.
“The number of bridges in poor condition dropped dramatically,” Maziarz said. “What we’re starting to see some evidence of now, is that we’re seeing some very small creep back towards that direction.”
DOT spokesman Kevin Nursick said that while strategic initiatives sometimes are delayed when funds are tight, basic maintenance is not.
“We have dozens and dozens and dozens of basic maintenance-level projects going on every single day,” he said. “There is no question that all of the bridges we are responsible for are completely safe.”
Nursick added that “structurally deficient” does not automatically mean that a bridge is unsafe. It does mean that a portion of a larger structure needs to be repaired or replaced.
But poor road conditions cost motorists money — $313 extra annually per motorist in Connecticut, according to the Boston-based Public Interest Research Group.
DOT understaffed despite fuel tax windfall
And while the DOT insists it is keeping up with basic maintenance, shrinking staff has contributed to the backlog of major initiatives necessary to enhance transportation statewide.
Despite surging fuel tax revenues, average spending on personnel is up just 2.8 percent per year since 2005. As a result of major retirement surges in 2009 and 2011, the number of employees is down 8.8 percent since the tax hikes began.
The legislature’s chief investigative panel concluded in December 2010 — when the DOT had 318 more employees than it does now — that the department was struggling to complete projects on time and under budget.
Between 2001 and 2010, DOT finished 37 percent of its projects on schedule, the panel found, while in other states, the average was 53 percent.
“Obviously the amount of staffing that we have is far from adequate,” Ben Phillips, spokesman for CSEA-SEIU Local 2001, the union representing DOT planners, engineers and architects, said last week.
Jobs, economic growth hinge on transportation
Inadequate staffing isn’t the only obstacle to a better transportation network.
The state needs to be more aggressive in its financing efforts to ensure transportation projects don’t remain in fiscal limbo, Carstensen, the UConn economist, said.
Just before Rell left office in January 2011, the state had $1.7 billion in approved financing for transportation, but it hadn’t actually borrowed the money.
That number had risen to $2.7 billion by April 2013.
There always is some lag between the time financing is approved and when the dollars actually are spent. Sometimes the state waits for more favorable interest rates. Often on large projects, financing approval is needed before work is ready to secure federal dollars.
But lawmakers noted this spring that the amount of potential borrowing not converted into cash was trending disturbingly upward.
“We are either approving projects now that we have no intention of completing to grab headlines, or we are approving them faster than we carry them out,” said Rep. Vincent Candelora, R-North Branford, a veteran member of the Finance, Revenue and Bonding Committee.
But if Connecticut is going to start running up more charges on its transportation credit card, it has to be ready to pay the bill.
While fuel tax revenues have been increasing, transportation debt service has been starved for cash. This account is the lifeblood of the transportation capital program, paying off the principal and interest on state borrowing.
Wholesale fuel tax revenues have risen, on average, by 11 percent per year since 2005, and that climbs to 14 percent if the projections for this year are correct.
Yet over the same period, transportation debt service has grown by less than 1.3 percent per year.
Every $1 billion in bonding spent on capital projects translates roughly into 10,000 construction and related jobs, Carstensen said, adding that Connecticut’s transportation network has so many areas that need investment.
“Regional airports, deep-water ports, as well as rail and highway — these are very, very important economic drivers,” he said.
Carstensen, who heads the Connecticut Center for Economic Analysis, co-authored a report in mid-April citing 2010 U.S. Census Bureau numbers and showing that Connecticut ranked third-lowest among all states in investing in transportation.
“It’s an enormous mistake (not to invest now), and it’s going to be a major issue in the next gubernatorial election,” McGee, of the Fairfield County business council, said.
“This is having an economic impact. There is no question that these travel times are a real deterrent to economic growth.”
To hear a discussion between Neena Satija and Keith M. Phaneuf on the latest gasoline tax hike, listen to the podcast below.
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