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NC panel recommends boosting transportation spending by 40%

By Gary D. Robertson, Associated Press

A blue-ribbon panel has called on North Carolina to boost transportation spending by 40% through the next decade to improve its “mediocre” infrastructure of highways, railroads and transit as the state grows and current revenue sources dwindle.

The North Carolina First Commission, formed nearly two years ago by Gov. Roy Cooper’s then-transportation secretary, suggests several options to locate at least $2 billion more annually to address challenges brought by a surging population, congestion and aging secondary roads. Increased sales taxes and fees at both the state and local levels would provide the biggest monetary benefit. Combined state and federal spending for North Carolina is now about $5 billion annually.

The 173-page report, approved by the commission of current and former elected officials, corporate and health industry leaders and academics, also recommends expanding into new money-raising ideas to reflect fuel-efficient cars and e-commerce. All the extra revenue should raise the state’s infrastructure condition to “good,” or the second-best reading in a five-level evaluation model developed by the North Carolina Chamber Foundation and N.C. State University.

The committee suggests taxing ride-sharing companies like Uber and Lyft and creating road impact fees for deliveries made by Amazon and similar online sellers. Such taxes reflect the heavier use of roads by e-commerce, which has soared during the COVID-19 pandemic, the report said. The panel also backed a long-discussed strategy to phase in charging vehicles owners based on miles traveled.

“Our transportation investments rely on just a few revenue sources, each of which is tied to long-standing assumptions about how many of us drive, how much we drive, what kinds of vehicles we drive, and how we purchase goods and services,” former Raleigh Mayor Nancy McFarlane and Martin Marietta CEO Ward Nye, the commission leaders, wrote in the report. “Those historic assumptions are now quickly becoming obsolete.”

The N.C. First Commission report is the latest from transportation study panels formed over the past 50 years, with mixed success as to implementing recommendations.

Tax and fee increases would need support from the Republican-controlled legislature and Cooper, a Democrat. While GOP legislators have been wary about raising taxes, they have been more willing to issue road-building debt, raise Division of Motor Vehicle fees for inflation and retool highway project decision-making.

The state’s motor fuels tax, currently at 36.1 cents per gallon, and the Highway Use Tax, which is essentially a 3% tax on vehicle sales, contribute nearly 60% of all North Carolina Department of Transportation’s annual revenues. DMV fees and federal dollars — mostly from another gasoline tax — provide much of the rest.

Longer-life vehicles and those with higher gas mileage are affecting road revenues nationwide. The average gas-mileage increase in North Carolina alone means state drivers paid $30 less per year in motor fuel taxes in 2020 compared to 2007, or a 15% decline, the report said.

“Relying as we do now heavily on the state gas tax to provide the financial resources for future transportation projects will probably not be feasible,” said N.C. State University professor Mike Walden, a commission member.

The report says increasing the Highway Use Tax from 3% to 5% would raise nearly $6 billion alone over 10 years. Another major option presented would increase the overall state sales tax by a half-penny or three-quarters of a cent, while at the same time cutting the motor fuels tax 9 cents or 14 cents per gallon, respectively. Those new sales taxes would be dedicated to transportation. Higher electric vehicle registration fees, new plug-in hybrid fees and more toll roads also are suggested.

Only Texas maintains more state-owned roads than North Carolina, but North Carolina ranks 44th in its per-mile investment for those roads, according to the report. North Carolina is currently the ninth-largest state and could move to seventh by 2040, the report said.

The report was released as the state DOT continues to dig out of a fiscal hole in part due to storm repairs, litigation over land for highway loops and falling revenues during the COVID-19 economic downturn. A state audit also blamed problems on DOT overspending and poor oversight. The legislature has given DOT two financial bailouts since fall 2019.

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