DALLAS –Voters in the Nashville area will have the chance in 2018 to decide whether to raise taxes to fund a proposed $6 billion regional transit plan now that the regional referendum has been authorized by Tennessee lawmakers.
The measure adopted Wednesday by the General Assembly will also raise the state’s gasoline and diesel taxes for the first time since 1989.
It will raise the state gasoline tax by six cents per gallon to 27.4 cents and the diesel tax by 10 cents per gallon to 30.4 cents. The higher taxes, which will be phased in over three years, will bring in $378 million a year for transportation projects when fully implemented.
Passage of the transportation bill is “a momentous day in Tennessee,” said Nashville Mayor Megan Barry.
“The General Assembly has voted to move our state forward on building the transportation infrastructure we need to remain competitive economically and improve the quality of life of our residents,” she said.
Barry praised the General Assembly for approving the funding measure’s “critical local option component that will let voters determine the future of transit in the Nashville area.”
The transportation funding bill will allow local transit tax referendums to be held in Nashville, Memphis, Knoxville, and Chattanooga as well as 12 of the state’s largest counties.
Local officials could put the proposed transit taxes on the ballot in elections next year in May, August, or November.
Half of the plan's $6 billion price tag will come from local sources, with the rest from federal or state funding.
The original transportation plan proposed by Gov. Bill Haslam limited the local option to a sales tax increase but the measure was amended to broaden the menu of available funding mechanisms. Property taxes or tourism-related tax surcharges are specifically excluded.
In addition, any new tax surcharge cannot be more than double the maximum levy of the current tax rate and the ballot question must include an ending date for the higher rate. Debt cannot be used to pay operational costs of the transit system.
Directors of the Nashville Metropolitan Transit Authority and the Middle Tennessee Regional Transportation Authority in September 2016 adopted the 25-year, $5.97 billion nMotion transit plan aimed at relieving congestion in Nashville and the surrounding region.
The three-phase, $5.97 billion proposal includes 46 miles of light rail, 98 miles of freeway bus rapid transit, 82 miles of arterial rapid buses, 200 miles of pedestrian upgrades, and 150 miles of express bus routes on the shoulders of existing highways.
A report released late last year identified several funding options for the 10-county transit proposal. The study by Canada’s Victoria Transport Policy Institute was funded by the pro-transit Moving Forward coalition led by the Nashville Area Chamber of Commerce.
"They're new taxes. We get it, nobody likes new taxes," said Don Abel, co-chairman of group’s finance committee. "But we have to do something."
Dedicated sales taxes are the most common way to fund transit in the U.S but increasing Tennessee’s local sales tax could be problematic.
Tennessee counties and cities can levy a local sales tax of 2.75%, but half of the revenues must be dedicated to public education.
Three of the 10 counties in the region have already reached the maximum allowable rate so any increases in the tax rate in those areas would have to be approved by the legislature as would any diversion of revenues away from education.
Adding $50 to the annual vehicle registration fee in the region would bring in $65 million a year, the report said.
A county gasoline tax of 1 cent per gallon that is allowed by the state would bring in $10 million per year across the 10 counties, but no Tennessee county has ever resorted to the local option tax.