Due to rising fuel efficiency standards, the North Carolina and federal governments will have to find alternative revenues to fund transportation as the biggest source of revenue — the motor fuels tax — continues to decline.
In August 2012, President Barack Obama finalized the Corporate Average Fuel Economy Standards (CAFE), which will require cars and light-duty trucks made by foreign and domestic car manufacturers to meet a 54.5 miles per gallon fuel efficiency by 2025.
Former U.S. Transportation Secretary Ray LaHood said in an interview earlier this month that raising the CAFE standards was one of the biggest successes in transportation in the last few years.
“The president said we need to raise that much higher to take (carbon dioxide) out of the air and to get the car manufacturers to know what the standard is,” he said.
But as cars become more efficient, gas sales will decrease and less revenue will be collected from the motor fuels tax, which is the biggest source of transportation revenue on a federal and state level.
“We also know that as we raise the gasoline standards, we’re going to lose revenue,” LaHood said. “And Congress is going to have to address this.”
LaHood said Congress could address the revenue shortfall by implementing more tolls nationwide or using a method called vehicle miles traveled, where people are charged by the number of miles they travel.
He said the gas tax ought to be raised 10 cents per gallon, since it hasn’t been raised in two decades, and automatically adjusting the tax annually.
But raising the gas tax alone wouldn’t be enough to make up for revenue shortfall, LaHood said, so other sources of revenue must be considered.
“Everything has to be on the table,” he said.
The shortfall will also affect states’ transportation revenue — in North Carolina, 60 percent of the transportation budget comes from the motor fuels tax, but by 2025, the state will have lost about $1.9 billion because of decreased fuel consumption.
Burt Tasaico, the N.C. Department of Transportation state program analysis engineer, said the NCDOT needs to look at alternate sources of revenue, including interstate tolling, raising the highway use tax or gas tax and increasing vehicle registration fees.
By 2040, interstate tolling would produce $42 billion, a higher gas tax $19 billion and increasing registration and driver’s license fees $6 billion.
Another option is to levy a local property tax to pay for transportation, Tasaico said.
“The problem personally that I think you run with something like that is trying to convince local governments that property taxes ought to pay for transportation,” he said. “Whichever way we choose to do it, it’s going to be difficult.”
‘Choose our poison’
N.C. Sen. Bill Rabon, R-Brunswick and a vice chairman on the Senate’s transportation committee, said nothing has been done by the federal or state government to address the impending shortfall.
“The price of doing business is going to continue to rise, and the cost of the highways is going to continue to rise, and the money is going to go down,” he said.
Rabon said he has been investigating transportation funding solutions for three years, but few legislators shared his concern.
He said he thinks the N.C. General Assembly will address the issue in the next two years — but he said it is not likely legislators will ever raise the gas tax.
“We’re just going to have to choose our poison,” he said. “If we continue as we have been, we will tie things to user fees.”
The NCDOT is looking at what other states are doing to make up for the revenue shortfall. For example, Virginia is collecting additional transportation revenue through a hike in the state sales tax.
Chapel Hill Mayor Mark Kleinschmidt said he preferred alternatives similar to the vehicle miles traveled option.
“I’ve always been a fan and supported taxes that target the user,” he said. “Those revenues are important to us for being able to maintain our roads and make sure our citizens can easily and safely move around the Triangle.”
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