Backers say gas tax central to fixing Ohio’s road funding crisis
Ohio Department of Transportation Director Jack Marchbanks presented a plan Thursday to increase Ohio’s gas tax by 18 cents to plug a $1 billion annual funding gap for the state’s roads.
If approved, the increase would kick in by July 1 and would to raise an estimated $1.2 billion a year to repair the state’s roads. The gas tax in Ohio is currently 28 cents per gallon and has not changed since 2005.
The department of transportation had said it faced a funding shortfall of about $1 billion on average over the next 11 years.
"As you may recall, due to flat revenues, highway construction inflation, and mounting debt payments, ODOT is in jeopardy of being unable to fulfill its mission," Marchbanks said, speaking before the House Finance Committee. "The credit cards are maxed out and the long-term health of Ohio’s transportation system is now at stake,"
The gas tax increase is part of the Gov. Mike DeWine’s $7.43 billion transportation budget proposal, which has to be approved by lawmakers and signed by March 31. It's the Republican governor's first budget.
DeWine is like many other Republican and Democratic governors across the country who are eyeing the gas tax increase to deal with transportation funding shortfalls as a federal infrastructure package languishes. The GOP controls the Ohio legislature.
Marchbanks told legislators that without more revenue to address the "impending transportation crisis," there will be no funds for any highway improvement projects in the state, and roads will deteriorate. Statistics show that deteriorating road conditions lead to more crashes, which lead to more fatalities, he said.
Marchbanks said the increase will raise $750 million toward closing the state’s $1 billion shortfall for road construction and maintenance and raise revenue for local communities. He said it also will provide local governments with a significant increase in funding, including $1.6 million for every county in the state.
ODOT estimates every one-cent increase per gallon generates an additional $67 million that’s split 60-40 between the state and local projects, respectively.
The funds would be used for paving roads, fixing guardrails, filling potholes, clearing snow and ice, maintaining bridges and improving safety.
The tax would be adjusted annually with the consumer price index to ensure sufficient funding continues. “The indexing is crucial to ensuring we are not here again in four or six years giving the same presentation about deteriorating road conditions and safety hazards,” said Marchbanks in his testimony before the House Finance Committee on Thursday.
The agency also plans to find $100 million in operational savings over the next four years.
DeWine warned earlier this week that issuing additional debt to cover the gap would not be wise. “We can’t borrow anymore money,” DeWine said. “We shouldn’t borrow anymore money. It’s not the right thing to do. The prudent thing to do is to pay for highways as we go but not increase the deficit.”
The increase would boost Ohio's gas tax to the highest in the U.S., from second lowest.
The automatic inflationary increases is a concern forRep. Scott Lipps, R-Franklin, though he said during Thursday's hearing that he supports the 18-cent increase.
“Somebody has got to pay for the roads we all use," said Rep. Phil Plummer, R-Clayton. "They have kicked the can down the road too long. It’s time to fix the roads.”
Ohio's budget stabilization fund has been replenished after being drawn down during the recession. It now totals $2.7 billion, or 8.3% of GRF revenues.
Ohio's general obligation highway capital improvement bonds are rated AAA by S&P Global Ratings and Kroll Bond Rating Agency. Fitch Ratings and Moody’s Investors Service rate the bonds AA-plus and Aa1 respectively. The state has $925 million outstanding in highway capital improvement bonds and is constitutionally limited to an annual issuance of no more than $220 million.
Moody’s rates the Ohio Turnpike and Infrastructure Commission senior lien revenue bonds Aa2 and the junior lien bonds Aa3. S&P rates the senior bonds AA-minus and the junior bonds A-plus. Fitch Ratings rates the bonds AA and A-plus. The commission’s debt outstanding totals approximately $1.5 billion.