Update on the Funding of the Metro Region’s Transportation Infrastructure

The Metro Region has and continues to suffer from a lack of funding for critical transportation and infrastructure projects. While a few larger projects such as the Northwest Corridor Managed Lanes and the I-285/ Ga. 400 interchange reconstruction move along, many other projects of regional impact have been slow to develop due to the high upfront costs and funding uncertainty.

Accordingly, the state of Georgia passed HB 170 back in April to raise the revenue for GDOT funding by approximately $900 million, according to state lawmakers. The bill’s major source of new revenue is by revamping the state gas tax formula and allocation. The state gas tax was changed to 26 cents-per-gallon excise tax in July 2015 with all the revenue dedicated to transportation funding, opposed to the previous 7.5 cents-per-gallon excise tax and a 3% sales tax with 1% of the sales tax returned to the State General Fund. The bill also increases the state hotel tax and adds new fees for alternative vehicles and heavy commercial trucks to create additional revenue.  Although the bill is a promising development in the state’s funding of transportation infrastructure, the increased revenue will only fund immediate and critical transportation and infrastructure needs.

Of course Georgia still relies heavily on contributions from the federal government to fund transportation projects. Unfortunately, funding from the federal level has become inconsistent and unreliable even for the most critical infrastructure needs. Federal funding for the U.S. highway system comes mostly from the Highway Trust Fund, a fund that receives money from a federal fuel tax that has not been updated since 1993. Inflation and increased fuel efficiency has led to the insolvency of the Highway Trust Fund. The previous fuel tax generates about $35 billion a year even though the funding need is $50 billion per year, according to GDOT. The Highway Trust Fund began to reach insolvency in 2009, and Congress has passed 34 short extensions of transportation funding authority, instead of reaching a long-term multi-year funding plan. The current Transportation Funding Act is due to expire on July 31, and if Congress does not address it, the federal government will be unable to meets its financial obligations to states, causing many transportation construction projects to come to a halt.

Under a fast approaching deadline, Congress has discussed many different options to come up with the money for the Highway Trust Fund. House members are poised to pass a five-month extension of transportation funding to allow for more time to construct a long-term plan. The Senate is working to design long-term plans to last anywhere from 3-6 years and to be passed as soon as possible. Since a reform of the federal fuel tax seems unlikely, legislators have discussed a number of new ways to generate the necessary revenue for transportation funding.  Potential revenue sources include a reform of the international tax code, which would add money to the fund from the taxation of multinational corporations. Other legislators have also discussed passing program changes and spending cuts to the federal employees’ retirement benefits program. Additional long-term payments options include reducing dividend payments the Federal Reserve makes to member banks, phasing out the Home Affordable Modification Program, selling oil from the strategic petroleum reserve, increasing Transportation Security Administration fees, and creating new tax compliance measures.  With so many different and tentative options to secure revenue for transportation funding, a hard fought clash is expected in Congress in the coming weeks and months.