Leader Blues

Tuesday, July 22, 2008

TOP STORY > >Funding declines for road projects

Leader senior staff writer

As Arkansans respond to $4-a-gallon gasoline by driving fewer miles, both the state and federal governments collect less gas tax and have less to spend on maintaining, repairing or building highways, local experts say.

The gas tax—or excise tax, as it’s known—is tied not to the price of gasoline, but to the gallon.

Whether gas is $4 a gallon or $2 a gallon, the federal government still collects its 18.4 cents a gallon.

So when motorists in Arkansas drove about 7 percent fewer miles in April 2008 than the preceding April, that represented a 7 percent decline in the revenues collected that month for state highways, according to Randy Ort, spokesman for the state Highway Department.

The amount of diesel purchased in April was nearly 11 percent less that the preceding April.

It’s less clear what the effect will be on federal highway dollars sent to Arkansas, because there’s not a direct correlation between excise tax revenues col lected from a particular state and the revenues returned to that state, according to Ort.

But the federal highway trust fund already was in trouble, Ort said. “Congress has committed more than the trust fund currently has in it,” he said. “Unless Congress takes action, all the states will see a significant decrease.


Locally, this is not good news for completion of the North Belt Freeway from Hwy. 67/167 to I-430 at Crystal Hill. The job is estimated to cost $347 million and virtually no money has been secured for it.

A portion of the new natural gas severance tax, which will eventually bring the state more than $100 million a year in revenue, is dedicated to the highway department. That tax, although it will be first collected in October, should be enough to make up the shortfall in this year’s Highway Department budget from declining gasoline and diesel purchases, Ort said. So the department’s budget is not threatened this year by the decline in miles driven and fuel purchased.

Ort said the department could get as much as $65 million when the Fayetteville Shale natural gas production peaks in a few years. But with construction materials becoming more expensive, each dollar will do less work.


The increase in gas prices has grown enthusiasm for mass transit, car pooling, bicycling and other alternative modes of transportation, according to Jim McKenzie, executive director of Metroplan. But he said prices could recede or people could acclimate to paying the higher prices and cool the public’s ardor, for now.

McKenzie said that long-range, prices are only going up. The amount of oil is finite, production may have peaked and India and China are competing for oil to satisfy their growing middle classes.

Citing T. Boone Pickens, the billionaire oilman, McKenzie said the U.S. is sending about $700 billion a year out of the country—much of it to the Middle East. That’s a problem for national security and for the economy.

Meanwhile, without an influx in revenues, the existing roads, highways and bridges will continue to deteriorate.

In the U.S. the main revenues are from “per-gallon motor fuel tax.”

“As long as it’s based on consumption, we’ll have trouble, he said.


McKenzie said there are several potential ways to increase revenues.

Among the possibilities are user fees—sales tax on the sale of new and used vehicles, tires and parts — that go into a highway trust fund instead of general revenues.

Another alternative is some sort of vehicle-mile travel tax, which could be collected at registration- renewal time or billed according to the results of a radio-sending device that would alert officials to the amount each vehicle is driven.

There could even be time-of-day pricing, which would charge more for miles driven during rush hour than during more lax periods of the day.

Of the radio-transponder idea, he says, “When you get Hell’s Angels to go along, then you know the country is ready.”

More likely, Congress could simply raise the gasoline excise tax to a higher level and index it to construction inflation.

McKenzie said the degradation of the nation’s infrastructure is already underway, and some places, like Little Rock, haven’t had a road-overlay program or capital-road improvement program for years.

“Stuff lasts a long time, but not forever without maintenance,” he said.

McKenzie said people can cut energy fuel costs by conservation at home—insulation, more efficient lighting—and by buying hybrid cars, living close to work or telecommuting.