Road block?

Declining tax revenue could mean deep funding cuts for highways and mass transit

July 31, 2008|By Michael Dresser | Michael Dresser,Sun reporter

Marylanders are driving fewer miles and using less gasoline. They're buying fewer SUVs and more small cars. The vehicles they are buying are more fuel-efficient and easier on the environment.

Good news? In the long term, certainly, said Maryland Transportation Secretary John D. Porcari. But over the next few years, he said, the consumer reaction to high gas prices could bring severe cutbacks in the amount of money available for highway and mass transit projects.

"What's good for the country in the long term is very painful for transportation programs in the short term - at both the federal and state level," Porcari said yesterday.

Maryland transportation officials are crunching numbers from the state comptroller's office that indicate that gasoline and diesel tax revenues are down for each month of the April-June quarter from the previous year. The drop in revenue will likely force the postponement of road and transit projects that would otherwise have been included in the state's draft transportation spending plan, which is to be unveiled in September.

The fuel tax numbers reflect a cutback in the number of miles that drivers are logging on Maryland roads. According to the Federal Highway Administration, Maryland motorists drove 218 million fewer miles in May than in the same month last year. The 4.2 percent decrease exceeded a nationwide 3.7 percent drop that saw Americans driving 10 billion fewer miles than in May 2007. It was the steepest month-to-month drop in the 66 years that the federal agency has been keeping such records.

The negative correlation between gas prices and transportation funding has federal and state officials scrambling to find other ways to pay for road and transit projects.

U.S. Secretary of Transportation Mary E. Peters said this week that the federal government should look into congestion pricing - tolls that increase at peak travel times - and other means to support its programs. Maryland lawmakers approved plans during a special session in November to increase transportation funds and to diversify their sources somewhat. The Baltimore Regional Transportation Board recently decided to dedicate all of the added money that would bring to the city and its suburbs - an estimated $340 million over 20 years - to mass transit.

As it stands, though, gas taxes are the largest single source of funding for state and federal transportation projects.

Each time a Marylander pumps a gallon of gasoline, 18.4 cents goes to the federal government and 23.5 cents goes to the state for transportation projects. Because state transportation projects are largely funded by federal money raised through its tax, the national drop in miles driven represents a double whammy for the states.

The impact of expensive fuel goes further than the gas tax - one of the three main ways that the state collects transportation revenue from motorists.

Porcari noted that vehicle sales in the United States have fallen greatly. With every sale lost in Maryland, the state collects less in titling taxes and registration fees.

Porcari said tax revenue is also affected by the type of vehicles that consumers buy. Sales of light trucks and SUVs are way down, he said, while light and more fuel- efficient sedans are making up a greater percentage of purchases.

That affects titling taxes, which are based on a percentage of the purchase price, because small cars are generally less expensive than the behemoths that ruled the market when gas was cheap. Lighter vehicles also bring in less in registration fees.

Light passenger cars will use less fuel and reap fewer taxes than bigger vehicles for years to come.

"Titling, registration, gas tax, they all get impacted by the change in the types of vehicles that are selling," Porcari said. He said drivers' decreasing number of trips will also likely bring a drop in toll collections by the Maryland Transportation Authority, which saw a 3 percent drop in Bay Bridge crossings during the Memorial Day weekend.

Maryland's fuel-related revenue problems have been compounded by soaring costs for building materials, Porcari said. The cost of liquid asphalt, which, like gasoline, is heavily affected by the cost of crude oil, has risen 105 percent over the past six months and has quadrupled since 2004.

Lon Anderson, a spokesman for AAA Mid-Atlantic, said the state's revenue problems could be compounded if Congress does not find a way to replenish the federal transportation trust fund, which will fall below the amount required to keep up its payments to the states next year unless legislators and the president come up with another source of revenue.

"In 2009, it's going to be broke anyway, and that's before we had this contraction of miles driven," Anderson said. "When the next president comes into office, the next president will not have long to contemplate this crisis."

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