DALLAS - A new report from a Louisiana public affairs group warns that significant revenue sources dedicated to road construction and maintenance must be found to avoid long-term deterioration of the existing highway system in the state.

Current levels of state and federal funds are insufficient to tackle the $14 billion backlog in needs on existing highways, according to the 21-page report from the Public Affairs Research Council.

Jim Brandt, president of the Baton Rouge-based public policy research group, said an additional $650 million a year is a reasonable level that could be put to work effectively.

The proposed annual funding level is equivalent to $210 of new or reallocated revenue for the road effort for each licensed driver in Louisiana.

"If the state is unwilling to make an effort of this magnitude, road conditions can only deteriorate further over time," the report warns.

The Department of Transportation and Development has a road project backlog that currently totals $14 billion, according to the statewide transportation plan.

The report outlines a number of potential revenue sources, but concedes that each one has "significant political or practical limitations."

A major share of the new funding should come from higher gasoline and motor fuels taxes, auto license and truck registration fees, and tolls, Brandt said, but the group declined to recommend specific actions.

"Any acceptable dedication would have to be from new revenue directly related to highway use," he said.

Higher taxes are not popular, Brandt said, but alternatives are limited.

"Unfortunately, raising new revenue is the only option for reducing the backlog of much-needed road construction and maintenance projects," he said.

Relying solely on an increase in the state gas tax would require an increase from the current 20 cents per gallon to 41.7 cents per gallon, but Brandt said that is not feasible. Louisiana motorists currently pay a total of 38.4 cents per gallon in federal and state gasoline taxes.

Financing options listed in the report include dedicating 8% of state annual revenue to highway efforts, which would produce $650 million a year. The state could also generate an additional $300 million a year with a 10-cent increase in the gasoline tax.

Several debt mechanisms are cited as options in the report.

The state has the authority to issue grant anticipation revenue vehicles, or Garvees, supported by the state's allotment of federal highway aid payments, but the report warns of uncertainty over future federal payments. Another proposal is the establishment of an infrastructure bank, capitalized through state bond proceeds, which would loan money for projects by local governments.

The state's bond-financed Transportation Infrastructure Model for Economic Development program is fundamentally insolvent, the report says. The four cents of the state's 20-cent gasoline tax that is constitutionally dedicated to the TIMED effort is insufficient to support the existing and planned bonds without drawing on the other 16 cents, and the remaining $500 million of TIMED bond capacity is insufficient to complete the remaining projects.

The report recommends that another two cents of the gasoline tax be dedicated to debt support of the TIMED bonds, which would fully fund the projects currently under way. Construction of the remaining two projects would not be awarded until additional tax revenues are available.

If there is no additional support for TIMED, the report said the remaining projects will have to be downsized, postponed indefinitely, or canceled.

The TIMED gas-tax bonds are rated Aa3 by Moody's Investors Service and AA by Standard & Poor's.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.