Roadwork gas tax ahead?
Ohio’s money for new major projects is gone
Ohio legislators and the incoming Dewine administration will start off the new year staring down a huge transportation-budget problem: The state has run out of money for major new road-construction projects.
State revenue for road and bridge construction is trending in the wrong direction, and the prospect of significant delays in major projects has prompted the formation of a coalition that will push policymakers to find new transportation money, particularly through an increase in the state gasoline tax.
The status quo means no money for capacitybuilding projects awaiting funding. Those include
improvements to the Interstate 270/Interstate 71/ Route 23 area on the South Side, improvements to Interstate 70 ramps at I-270 and at Brice Road on the Far East Side, the I-71 interchange with Routes 36 /37, and reconstruction of I-70 and I-71 Downtown.
Parts of the I-71/I-70 work that is underway will continue, but future phases are not funded; those include an eastbound interchange, reconstruction of I-71 from Broad Street to Main Street, and work on the interchange with Route 315.
The Ohio Department of Transportation’s construction contracts, which include funding for potholes, paving, snow plowing and bridge maintenance, totaled $2.4 billion in 2014 but are set to drop to $1.5 billion in 2020. Local officials also have been warned about a 14 percent cut in state discretionary funding for 2021.
“It hits central Ohio harder because we’re growing and a lot of the state is not, so we have more people we have to accommodate,” said William Murdock, executive director of the Mid-ohio Regional Planning Commission.
MORPC has about $25.8 million in federal funding but $180 million in requests around central Ohio that cannot be funded, Murdock said. Plus, it has $29 million in public-works dollars for Franklin County to address $50 million in requests. He called the proposals “bread and butter” projects.
Without new revenue, MORPC reports, the region will get $89 million less in transportation funding than expected through 2025.
Central Ohio faces state road-funding shortages as it is working on next-generation projects such as smart mobility infrastructure and the Hyperloop, Murdock said. The Hyperloop is designed to move people or freight at hundreds of miles an hour through a vacuum tube.
“We’re concerned that if we can’t take care of the basics, then how are we going to get to the more sophisticated things we need to do to compete with other states and compete for businesses?” he said.
The root of the problem, coalition leaders say, is twofold: Ohio’s 28-cent gas tax has not increased since 2005, and $1.5 billion in turnpike bond funding that was approved in 2013 has run out.
Dean Ringle, executive director of the County Engineers Association of Ohio, said some officials have wanted to wait for the federal government to come up with a transportation solution, “but that’s not very realistic at this point.”
“Just about every state surrounding Ohio has taken matters into their own hands,” he said. “Ohio, just to be competitive, needs to do that.”
A coalition called Fix Our Roads Ohio (FOR Ohio) has formed to stress to lawmakers and the public the urgency of the problem while pushing potential solutions, including a gas-tax increase. The group includes local governments, local chambers of commerce, contractors, county engineers and truckers.
“If some things aren’t done, and done relatively soon, Ohio’s going to be facing a real problem here,” said Curt Steiner, a senior adviser to the coalition. As a former chief of staff for Gov. George V. Voinovich, he understands the political difficulties that come with asking elected officials to increase taxes and fees.
“The biggest consequence is that while some maintenance will continue to happen, many of the projects that are planned for new construction are just not going to be started,” he said. That, he argued, will increase congestion and reduce construction employment.
The last time the state faced a transportation-budget shortfall — a $1.6 billion hole that threatened to push back by decades some of the state’s largest transportation projects — Gov. John Kasich announced in December 2012 a $1.5 billion plan to issue bonds against future turnpike toll revenue.
That infusion of money meant that funding for major new road projects averaged $555 million per year from 2014 to 2017.
But that bonding money is gone. And without new revenue, the Ohio Department of Transportation expects major-project funding of just $20 million in 2020 and $15 million by 2021 — enough to cover potential cost overruns on current projects, but nothing else. That is on top of concerns that the state also will not keep up with maintenance costs.
“Our transportation system doesn’t degrade like turning off a light switch. You need to stay on top of it,” said Christopher Runyan, president of the Ohio Contractors Association.
Gov.-elect Mike Dewine is aware of the problem, and legislators certainly shouldn’t be surprised.
In the two-year transportation budget passed in 2013, GOP legislative leaders included the creation of a joint legislative task force to study transportation funding. Two years later, when Republican Rep. Terry Boose of Norwalk called the turnpike bonding a “Band-aid,” legislators again used the transportation budget to create a joint legislative task force to study transportation funding.
The second task force issued an underwhelming nine-page report in December 2016 — one year past its deadline — listing suggestions from a number of groups and urging that ideas be discussed in future budgets.
That future is here. Dewine will introduce a transportation budget in February.
But first, another study is likely. In July, Dewine told the Ohio Association of Regional Councils that he plans to appoint a blue-ribbon commission to “come back with a quick assessment about where we are on infrastructure and come back with recommendations” on how to fund a fix.
“We’ll then open discussion with the people of Ohio,” he told the group.
Although the FOR Ohio coalition is interested in seeing Dewine’s ideas, members say the obvious and most likely answer, especially in the short term, is well known: a gas-tax hike.
The coalition is pushing for a not-yet-specified increase in Ohio’s 28-cents-pergallon tax, which was last increased in 2005 by 2 cents per gallon. Nearly 10 cents per gallon of that tax goes to local governments.
A number of states have increased their gas taxes since that time. Pennsylvania in 2013 linked its tax to gasoline prices, nearly doubling its tax per gallon.
Ohio’s 28-cent rate is about 6 cents lower than the national average, and lower than that in four of the five neighboring states: Pennsylvania (59 cents), Michigan (44), Indiana (43) and West Virginia (36). Kentucky’s rate is 26 cents.
A 1-cent increase in Ohio raises about $70 million. As lower gas prices encourage people to drive more miles, the gas tax is expected to collect $1.2 billion in 2021, a roughly 10 percent increase over 2014.
But industry experts say the 28-cent rate today has 35 percent less value than it did in 2005 because of inflation — a reduction masked by the short-term turnpike bonding.
Keary Mccarthy, executive director of the Ohio Mayors Alliance, said nearly half of Ohio’s largest cities already have backlogs in their paving programs, a problem that started with the Great Recession.
“If we don’t do anything going forward, it’s going to be a major setback for the next generation, and it’s going to create huge setbacks in the growth curve we’ve seen in a lot of cities across the state.”
The coalition notes that ODOT, for the fiscal year that ends July 1, delayed 19 bridge-maintenance projects totaling $156 million. This, said Runyan of the contractors’ association, compounds the problem by adding even more projects next year to a list that already was underfunded. Bridge repair and replacement is set to go from $297 million in 2017 to $189 million in 2021, a decline of more than one-third.
“Everyone knew this problem was coming up,” Runyan said. “Politically, it’s a very uncomfortable issue to have to discuss because of the revenue generation that it mandates. But we’re getting to a point where the revenue curve is so far below the needs curve that we’re never going to catch up.”
The FOR Ohio coalition also would like to see future gas-tax increases indexed to inflation. Ohio’s gas tax rose with inflation from the early 1980s through 1993, when lawmakers put an end to that.
The coalition also would like to join 20 states, including Michigan, Indiana and West Virginia, that have enacted electric-vehicle fees. Ohio has an estimated 15,000 electric and hybrid vehicles, and the coalition views imposing fees as a matter of fairness, requiring all drivers to contribute to road maintenance.
The group also plans to advocate for more publictransit funding. Ohio ranks 47th in per-capita publictransportation funding. Again, this is not a surprise problem: ODOT released a study four years ago saying that funding needed to double to keep up with needs.
Outgoing state Budget Director Tim Keen said that counting state and federal money, plus more than $300 million a year generated by vehicle registrations, local jurisdictions have had substantial road revenue — about $1.5 billion in recent years.
“That is often lost in this whole discussion,” he said.
“Clearly, the turnpike bonding has provided for the ability to fund a lot of projects over the last six years that we might not have been able to do,” Keen said. That option probably won’t be available for Dewine unless he raises turnpike tolls.
Keen recognizes that without more revenue, there is no money for additional major projects.
“This is a regular story. We need more money to do these things.”
jsiegel@dispatch.com @phrontpage