Few people expected Georgia’s legislators to pursue any big new transportation initiatives this year. So far, legislators are meeting that expectation.
The rejection of the T-SPLOST in nine of Georgia’s 12 regions is still fresh, and most state agencies face budget cuts amid stagnant tax revenues. Yet, this is a critical moment for our state to figure out how to pay for transportation infrastructure.
But not only our state. All signs indicate the so-called budget sequester will force Congress to cut spending by tens of billions of dollars a year. And that will be just “the first of many large cutbacks” affecting transportation, predicts Robert Poole.
“There will be no more ‘nice to have’ things,” says Poole, co-founder and head of transportation policy at the libertarian Reason Foundation. “If we’re going to continue … to invest in transportation, the states are going to have to pick up the ball.”
But, Poole added during a Thursday speech at a Georgia Public Policy Foundation event in Cobb County, there’s a catch.
Federal funding for transportation stands to fall sharply for two chief reasons. Gas-tax revenues are in the middle of a long-term decline as cars become more fuel-efficient, and Congress will be hard-pressed to supplement those funds. In Georgia, federal money for roads and transit in 2030 stands to be nearly a third lower than in 2009.
The catch: States rely on their own gas-tax revenues, also trending downward. So, “unless there is the political courage to double gas tax [rates], which ain’t gonna happen,” Poole says, states must pay for more of their transportation infrastructure and do so from a new revenue source.
The best way to do that, he argues, is to shift from a “per gallon” charge, a la the gas tax, to a “per mile” charge. Tolls are the prime example.
As states face tighter budgets, thanks in large part to pensions and health care, Poole says they’ll need to shift from “funding” infrastructure with cash to “financing” it by issuing bonds or partnering with private investors. Either way, toll revenues would pay back the cost of the projects over a period of decades.
Unfortunately for Georgia, there’s another catch: We’ve been moving in the opposite direction.
In 2009, the DOT reversed course from the “financing” model and went back to cash funding. In 2011, the state pulled the plug on a public-private partnership (PPP) to build reversible toll lanes on I-75 and I-575 in Cobb and Cherokee. By the end of 2013, Gov. Nathan Deal has promised, the state’s only toll will come down from Ga. 400.
The abrupt move on the 75/575 project was particularly harmful, Poole says: “People don’t forget that.”
There’s some $200 billion worldwide waiting to be invested in public infrastructure, he says, and investors will shy away from places with “political risk.”
Places like Georgia, where companies have spent millions on PPP bids that never panned out. Poole calls our reputation for political risk “pretty bad” and says Georgia needs a series of incremental successes to become competitive with states like North Carolina, Texas and Virginia, which are tapping into that $200 billion pool of capital.
If legislators can’t spend more on transportation this year, a cheap alternative would be to spend time figuring out how we can get back in the game of attracting private capital to improve our public infrastructure.
– By Kyle Wingfield