By Adam Pagnucco.
Part One described how the state’s two transportation agencies – the Maryland Department of Transportation (MDOT) and the Maryland Transportation Authority (MDTA) – finance transportation projects. Part Two discussed their revenue problems. Part Three discussed their cost increases. Part Four listed some of the devastating transportation cuts the state has announced as a result. Today we will look at a few things that can be done to save Maryland from transportation Armageddon.
First, let’s quantify the size of the problem. The chart below from MDOT’s final capital budget overview shows revenue and expenditure by year from FY14 through FY29 (projected). The revenue bars are on the left for each year. Blue is state money while red is temporary COVID funds. The expenditure bars are on the right for each year. Green is capital spending and yellow is operating spending. These bars are supposed to be equal, or balanced, in each year. Note how the expenditure bars begin to exceed the revenue bars starting in FY25. The size of that gap is roughly a half billion dollars per year. That’s the magnitude of the cuts and/or revenue increases needed to balance MDOT’s operating and capital budgets.
Last year, the General Assembly established the Maryland Commission on Transportation Revenue and Infrastructure Needs (TRAIN) Commission to examine funding and prioritization options. This series has used many of the commission’s documents to illustrate the state’s problems. The commission’s chair has drafted an interim recommendation memo for the group’s consideration. This will be the first of several steps in the state’s process for dealing with this issue. The memo recommends two revenue measures.
Electric/hybrid vehicle fees
Electric vehicles pay no gas taxes and hybrid vehicles pay less gas taxes than standard vehicles. As discussed in Part Two, the growth in use of these vehicles is contributing to MDOT’s financial problems. The TRAIN Commission would like the General Assembly to authorize additional fees on them. MDOT estimates that a $200 fee on electric vehicles and a $100 fee on plug-in hybrid electric vehicles could raise more than $100 million a year by FY29. That’s not enough money to fix Maryland’s problems by itself but it helps.
Higher tolls
Currently, tolls are collected by MDTA and used to operate, maintain and build toll roads. The TRAIN Commission would like MDTA to raise tolls “to generate additional revenue to support Maryland’s broader transportation system.” That suggests transferring them to MDOT for use on non-toll projects.
There are a few problems with this. First of all, MDTA is bound by a series of trust agreements with the Bank of New York Mellon restricting how tolls are used. Any changes must be evaluated for compliance with these agreements. Second, MDTA has its own financial problems as explained in Part Four and may need to raise tolls for its own purposes. And third, the General Assembly’s Department of Legislative Services estimates that a 50 cent toll increase would raise $81 million – nowhere near enough to fix the state’s problems.
Even if they could be implemented, it’s clear that electric vehicle fees and toll increases won’t be enough to prevent huge transportation cuts. Here are two more ideas on revenues.
VMT taxes
Electric vehicles may not pay gas taxes, but they do utilize roads. That’s why a vehicle miles traveled (VMT) tax might make sense as an alternative to the gas tax. That said, it won’t fix the state’s problem by itself. The State Highway Administration has been tracking VMT for decades. The chart below shows the trend in VMT in both the state and Montgomery County since 1980.
See how VMT has mostly flatlined over the last twenty years? The chart below shows average annual growth in VMT by decade for both the state and Montgomery County since 1981. Again, VMT was barely growing even before the pandemic. We should not expect a revenue source based on VMT to keep up with rising construction costs.
County revenues
Some county leaders are calling for the state to give them additional revenue options for transportation if the state is going to cut back its own spending. Currently, counties are not allowed to levy sales taxes, gas taxes, tolls or vehicle fees. They would need changes in state law to do so.
The county officials’ position is understandable. That said, any additional revenue generation should be considered with caution. One example is the state’s decision in 2012 to allow counties to levy additional property taxes for education beyond their charter limits. Because money is fungible, counties can invoke this measure to spread money all over their budgets as County Executive Marc Elrich proposed last spring. Any additional revenues for transportation must be locked into transportation funding and not simply disbursed across all county functions.
Another variant of this is to allow the counties to establish regional transportation authorities to raise money and fund projects of joint interest. One example is the Northern Virginia Transportation Authority, which mostly relies on a regional sales tax to finance transportation projects in nine local jurisdictions. This approach might be helpful in paying for projects that cross county lines, such as an extension of Montgomery County’s Flash line to Howard County.
One final comment. Aside from former Governor Larry Hogan’s irresponsible toll cuts, Maryland’s transportation problems are primarily the result of a changing vehicle mix, construction cost increases, the pandemic, basic economics and – ironically enough – the state’s relative success in reducing the growth of auto travel. Maryland is not the only state to experience transportation funding problems, especially when it comes to transit.
Transportation spending is an investment. Economies with robust transportation networks attract employers, create jobs and build wealth. Economies which lack them stagnate. The governor and the General Assembly really have no choice. For the good of the state, they must act to fix Maryland’s transportation crisis.