In order to meet our responsibility to keep the traveling public safe, increase their mobility and have our transportation system contribute to North Carolina’s economic growth, our decision makers must ensure they are exploring all options that could deliver better transportation systems in the most cost-efficient manner.
North Carolina is home to the nation’s second largest state highway system and the second-largest ferry system, 72 public and 300 private airports, extensive rail and public transit systems, numerous bicycle and pedestrian facilities, two water ports, and two inland terminals, as well as the Global TransPark located in Eastern North Carolina. In order to balance the diverse needs of our rapidly growing state, we must carefully plan in order to ensure that we are meeting the needs of North Carolina. In order to maintain this existing infrastructure as well as meeting the needs of a growing population, we must carefully plan and invest.
Since the start of the federal highway trust fund in the 1950s, North Carolina has remained a 'donor' state, meaning that the fuel taxes collected in NC and sent to Washington were more every year than the formula grants to NC from the trust fund. This historic imbalance has been mitigated in recent years, first by improving the percentage return starting with the Intermodal Surface Transportation Efficiency Act (ISTEA) in 1991, and more recently by infusions of federal general funds to the highway trust funds. The leadership of NC, in particular the state's congressional delegation, must remain vigilant in future renewals of the federal aid program to ensure that the state receives its fair share of federal transportation dollars.
There are a number of options available to complete necessary transportation projects for states, regions and localities. A list of possible opportunities follows:
- Motor Fuel Tax Indexing: North Carolina’s gas tax has historically been partially a fixed amount per gallon, plus an indexed portion to reflect the then current wholesale price of fuel. Over the last 15 years, in times of particular fuel price volatility, the state, both the executive and legislative branches, have proposed and/or made changes to the indexing formula. Most recently, in 2015, the total tax rate was reduced and fixed at specified levels (34 cents to 36 cents) over the next 2 years. Indexing, of the overall fixed rate, is scheduled to resume in 2017. The next administration, and the next legislature, should continue indexing of this vital revenue source so that the resources to rebuild and improve our state’s transportation infrastructure will be available in the future. Indexing is simply a hedge against the erosion of purchasing power for maintenance and construction costs that continue to rise.
- Toll Roads: In the current budget, the General Assembly recently authorized up to 11 transportation projects to be built and maintained through toll financing. Toll roads are an effective mechanism to add capacity sooner and to alleviate congestion in urban corridors. Toll roads are not the right solution for every community or project and discretion must be used in assessing how and when toll roads are employed.1
- Partnership Financing: Public-private partnerships (P3s) are contractual agreements formed between a public agency and a private sector entity that allows for greater private sector participation in the delivery and financing of transportation projects. North Carolina has an opportunity to adopt more effective, and less bureaucratic, P3 enabling legislation that is flexible, transparent and leverages multiple funding sources.2 Public private partnerships are not the right solution for every project (for example, private financing is almost always more expensive than public financing) and discretion must be used in assessing how and when public private partnerships are employed and the terms of negotiation.
- Vehicle Miles Traveled: North Carolina expects the fuel tax on gasoline to be a declining revenue source for our road system and should establish a task force whose purpose is to develop a design for funding North Carolina’s roads and highways that will supplement and potentially replace the current system. North Carolina should consider pilot programs similar to efforts underway in Oregon and California: Drivers in Oregon’s new program, which in the beginning will be voluntary and capped at 5,000 cars, will pay 1.5 cents per mile. Since these drivers are paying for VMT instead of a per-gallon gas tax, they will be reimbursed whenever they fill up at an Oregon gas station.3
- Equity-based public-private partnerships: Often major NC DOT transportation projects -- including new highways, new interstate interchanges, and new rail transit projects -- require land to be purchased. Often there are pieces of this public property that are not used and declared surplus when the transportation project is built. One promising option for NC is to use this surplus property in new ways that can help our state fund future transportation work. DOT could sell or lease its surplus land to private developers and negotiate a share of future profits. In this way, DOT could benefit from the enhanced value of the land and lighten the load on taxpayers to pay for future transportation projects.
- Value Engineering: Many of the major transportation projects on NC DOT's "to do list" or TIP have been on that list for years, and during that time there have been a number of small and large innovations and changes to how similar projects are designed and built. NC DOT could use an in-house team of engineers, facility designers and financial analysts to take a fresh look at the top priority transportation projects on the Department's TIP list. This team from DOT could work with citizens and officials from local communities impacted by each project to explore ways to revise project design and construction, thus reducing project costs while preserving the purpose and function of the project. In some cases in North Carolina, metropolitan planning organizations are doing this.
- Local Option Sales Tax: The local option sales tax has become a popular revenue source for transportation projects in the last 20 years. These funds are often sought by faster growing areas to supplement transportation dollars from traditional state sources. They can be used to fund new projects or accelerate projects that are already planned and funded. There are many potential advantages to a local option sales tax. These include the ability to produce significant revenue from a low marginal tax rate and the ability to exact tax revenue from non-resident users of local transportation infrastructure. The Legislature would have to authorize such taxes and determine how the program operates and how the money is spent.4 5
1 North Carolina General Assembly. 2015 Appropriations Act.
2 Eno Center for Transportation. (2014). Partnership Financing: Improving Transportation Through Public Private Partnerships.