(I’ll discuss tolling possibilities in a later post, because there’s a whole separate paper on how it works, the new costs that would have to be taken on, and whether or not it would even be legal for Wisconsin to do so).
On the “incoming money” side, the HNTB consultants give a good explanation of the stagnant revenue problem that the DOT faces for now, and in the future.
Revenue from the motor fuel excise tax is projected to decrease as gasoline consumption is forecast to decline.Gasoline consumption is estimated to decrease due to a projected 36.4 percent increase in new vehicle fuel efficiency, increasing gasoline prices and modest increases in disposable income….So this explains the revenue side of the DOT’s funding crunch.
In FY 16 the Department collected $1.037 billion in total motor fuel revenues. By FY 27 the Department estimates collecting $994.9 million in motor fuel revenues.
Vehicle registration fees, the Department’s second largest state revenue source, is projecting only modest growth from $705.2 million in FY 18 to $788.3 million in FY 27. The small growth is due in large part to a projected 200,000 increase in the number of light vehicle registrations over the 10 years.
On the other side, the HNTB consultants brought up three scenarios giving various levels of highway and other DOT spending over a 10-year period. Total revenues under the current level of taxes and fees totaled around $28.09 billion over that time period , and even though you should divide these totals by 10 to get a one-year estimate, what this shows is that even with massive (and unlikely) cuts to highway work, there isn’t enough money to fund things.
•Under Scenario One, expenditures were $28.94 billion, leaving a funding shortfall of $852 million over the decade. System conditions across all modes would decline and a significant number of state and local projects would go unfunded. The Department would not undertake planning for new highway expansion projects until 2055.Good luck selling that to anyone. This would mean the number of roads rated as “poor and below” would more than double over the next 10 years. An extra problem in Scenario One is that it causes a delay in the proposed I-39/90 expansion near Janesville, which the consultants say would likely result in the state losing a $40 million federal grant that was announced for the project in July and formally approved in September, since the work on 39/90 wouldn’t be done in time.
So let’s look at what we would need for a slightly less sucky infrastructure situation to occur.
•For Scenario Two, the estimated costs of $31.11 billion exceed available revenues by $3.03 billion. System conditions across all modes would decline although not as severely as under Scenario One. The Department would not undertake planning for new highway expansion projects until 2040.Remarkably, even in Scenario Three, the consultants claim that amount of state highway miles rated as “poor and below” still would increase by 60%.
•In Scenario Three, the estimated costs of $36.03 billion exceed available revenues by $7.94 billion. The decline in system conditions would still be only partially mitigated. The Department would not undertake planning for new highway expansion projects until 2034.
Yeah, I think this cartoon is as relevant as ever.
So how do we make up these gaps? From the state side, here is the revenue impact of various options over 10 years.
DOT revenue added from various options
Every $5 fee in driver’s license $37.5 million
Every $5 increase in title fee $71.5 million
Annual $75 “hybrid tax” for registration $141.1 million
Every $5 increase in registration fee $235.5 million
Each 1-cent increase in gas tax $319.7 million
Make registration fee based on value of vehicle $687.8 million
Pay sales tax on trade-in value of vehicle $953 million
Indexing gas tax for inflation $1.29 billion
2.5% “new car tax” $2.60 billion
5 cent gas tax increase, then 8% tax on fuel price $2.94 billion
Paying 5% sales tax on gas/diesel $5.65 billion
Your approval or disapproval of these options may vary.
There are also a couple of other new non-tolling revenue options for the DOT that have a few complications with it.
Move sales tax on motor vehicles, parts, etc. from General Fund to Transportation Fund
Right now when you buy a car, auto parts or other related items, the 5% state sales tax you pay goes into the General Fund like any other good or service. This option instead would put that money into the Transportation Fund, and it would raise a lot of money ($6.38 billion over 10 years).
Of course, the problem with this is that you have to come up with somewhere to fill in the $638 million a year in the General Fund. With the state already facing chronic General Fund budget deficits due to reckless tax cuts and other dumb policies in the Age of Fitzwalkerstan, those problems would multiply under this scenario.
Base registration fee on milage driven
The HNTB consultants describe a scenario where the registration fee for vehicles and light trucks is 1.02 cents a mile instead of the current $75 flat fee (interestingly, heavy trucks aren’t part of this), and the fee is charged for all miles driven between 3,000 and 20,000 miles. So all people who drive over 7,353 miles would face an increase, but the maximum fee would be capped at $204.
The problem is that the consultants note that “IT system development, fee processing, communication and enforcement” requires a sizable amount of start-up costs. In fact, this study says the mileage-based registration fee would lose nearly $10 million in the 2017-19 budget and would only start adding revenues in the following budget. This means that something would have to make up the difference while this system is set up, and if that doesn’t happen, there’s even more needed to be spent to “catch up” on needs in 2019 and beyond.
Obviously, borrowing can cut into the amount of taxes or fees that is needed to be raised to meet these needs. But that’s not such a great option when the HTNB consultants mention the state already is paying a combined $966 million in this budget from the Transportation and General Funds for past DOT borrowing, and interest rates are already jumping ahead of Trump becoming president, making future borrowing more costly.
So barring a massive bailout in the form of deficit spending from the Trump Administration and GOP Congress, you can see how paying for Wisconsin’s transportation is a major problem, and it likely explains why DOT Secretary Mark Gottlieb announced his resignation last week. This thing is a mess and given the Walker/WisGOP tendencies to reside in Fantasyland, blow their Bubble of BS larger and larger and not do much to fix real problems, I could see why a realist like Gottlieb might want to get out of there.