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Road Fund Drops As Expenses Soar: Revenue Up Construction Costs Up Too

Posted on: Tuesday, 13 June 2006, 09:01 CDT

By Phil Kabler, The Charleston Gazette, W.Va.

Jun. 13--Soaring costs for road construction materials are far outpacing the state Road Fund's ability to raise money for highway construction and maintenance, a West Virginia University economist told legislators Monday.

Tom Witt, with the WVU Bureau of Business and Economic Research, said that with construction costs going up by about 20 percent a year in recent years, the "buying power" of the state Road Fund has dropped 25 percent since 2002.

"You basically have a Road Fund today where the [revenue] numbers look larger, but what it buys in road construction and maintenance has decreased 25 percent," he told an interim committee studying funding options for highway construction.

If lawmakers don't come up with alternative funding sources, Witt told the interim committee, "you're going to have a major crisis as it relates to funding our highways and bridges."

While construction costs soar, higher gasoline prices will hit two major sources of Road Fund revenue: the gas tax and the motor vehicle privilege tax, Witt said.

Consumers will respond to sustained high gas prices by reducing travel in the short-term and by buying more fuel-efficient vehicles in the long-term, he said.

Federal mileage mandates have also hurt gas tax collections, he said.

He cited figures showing that in 1973, passenger cars averaged 13.4 miles per gallon. In 2004, that figure had increased to 22.4 miles-per-gallon, he said.

"The decline in fuel consumption was offset in other states by an increase in total vehicles," he said. That didn't happen in West Virginia, which did not experience population growth during that period.

With higher gas prices, consumers will also delay new vehicle purchases, which will reduce state collections of the 5 percent motor vehicle privilege tax.

He said the loss of 1,000 new car sales a year could cost the state millions in privilege tax collections.

Short-term options to increase road construction funds could include elimination of programs that are funded through Road Fund revenue, Witt noted.

That includes about $40 million a year to operate 22 Division of Motor Vehicles regional offices around the state, and about $5 million a year to operate the state's Courtesy Patrol program.

"That's a significant amount of funds that otherwise could be spent on highway construction and maintenance," he said of the DMV regional offices. "Technology might allow you to deliver those services more efficiently than in the past."

Witt said legislators might also want to consider breaking the tradition of funding road construction strictly through taxes on drivers.

"Someone who doesn't drive a car, someone who doesn't buy gasoline, you could argue still benefits from having a safe and modern highway system," he said.

Witt said 33 states use general revenue funds for some highway construction costs.

Traditionally, the Legislature has opposed using general revenue tax dollars to fund road construction, and legislative leaders have given a cool reception to Gov. Joe Manchin's proposal to transfer $25 million of surplus general revenue funds to the Division of Highways.

To contact staff writer Phil Kabler, use e-mail or call 348-1220.

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Copyright (c) 2006, The Charleston Gazette, W.Va.

Distributed by Knight Ridder/Tribune Business News.

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Source: The Charleston Gazette

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