California Slashes Road Funding as Gas Tax Drops

ca-roadwork-caltrans-1.jpg

DALLAS – The California Transportation Commission has cut $754 million of projects from the next three years of the state's five-year road and transit plan because revenues from the fuel excise tax are falling along with pump prices.

The 38% drop in anticipated diesel and gasoline tax revenues is the biggest cutback in the commission's history and means that the state may have to rescind funding for approved local projects rather than delaying them as it did in earlier shortfalls, CTC chairwoman Lucy Dunn said late last week.

"What this means is that almost every county in California that relies on this source of funding for projects that improve traffic and air quality will have to cut or delay projects indefinitely," she said. "The commission adopted the most optimistic scenario we could make in good conscience."

The revenue shortfall could be worse in 2017 unless the Legislature adopts a number of reforms and agrees on some of the new funding sources now under consideration, Dunn said.

"Failing that, I fear we will be faced with even more draconian cuts next year," she said.

Projected funding in the current five-year plan was based on an excise tax rate of 14.1 cents per gallon of gasoline, but the outlook was revised in December to reflect a fuel tax of 10 cents per gallon due to falling oil prices, said commission spokeswoman Susan Bransen. The current rate of 30 cents per gallon of gasoline and 13 cents per gallon of diesel was set in March 2015.

Each 1 cent drop in the tax rate cuts revenues by $140 million per year, she said.

Local agencies must provide the commission with a list of projects that can be delayed or cancelled in February.

The $191 million of road and rail projects that Los Angeles County may have to postpone or terminate include $130 million that had been dedicated to the purchase of light rail vehicles.

San Francisco Bay area projects face a 40% cut in funding from the CTC's action, said John Goodwin, a spokesman for the Metropolitan Transportation Commission.

"There's no way to put a happy face on this," Goodwin said. "This is real pain that will be felt throughout the state, the Bay Area, and local cities."

A state law passed in 2010 dedicated revenues from the excise tax on fuels to road and public transit projects and allocated revenues from a 2.25% sales tax on motor fuels to local government operations.

The excise tax rate is adjusted each year by the state Board of Equalization based on the price of oil. The rate was initially set at 18 cents per gallon in 2010 and peaked at 39.5 cents in 2014.

The board will set a new rate in March, which will go into effect July 1. The current state tax of 40.62 cents per gallon of gasoline and 34.3 cents of diesel includes the excise taxes. California's combined federal-state gasoline tax of 59.02 cents per gallon is the fifth-highest in the U.S., according to the American Petroleum Institute. The federal tax is 18.4 cents per gallon of gasoline and 24.4 cents of diesel.

A bill pending in the California Legislature would raise the state gasoline tax by 22.5 cents per gallon and the diesel tax by 30 cents per gallon to generate an additional $8 billion per year for transportation. The tax rates would be indexed to inflation every three years.

The state is currently seeking 5,000 volunteer motorists to participate in a vehicle-miles-traveled pilot program created by lawmakers in 2014. The nine-month pilot effort will begin this summer.

For reprint and licensing requests for this article, click here.
Infrastructure Transportation industry California
MORE FROM BOND BUYER