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Tax Law

State Net Capitol Journal – November 18, 2013: States Turning To Tolls

Budget & Taxes

STATES TURNING TO TOLLS: With the federal gas tax not having budged in 20 years and Americans driving less and in more fuel-efficient vehicles, states are increasingly turning to an alternate revenue source to pay for road construction and maintenance: tolls.

Forty-two states now have tolling authorities or facilities, according to the National Conference of State Legislatures. Illinois Gov. Pat Quinn (D) recently won approval for a $1.3 billion toll road linking highways in his state with those in neighboring Indiana. Tolling in Washington used to be limited to a single bridge, but now there are three tolled facilities in the state, including a toll lane pilot project on SR 167, which runs parallel to I-5 between Seattle and Tacoma. Tolling is also increasing around Dallas and Houston, according to Peter Samuel, the founder of Toll Roads News. And many states with existing toll roads are raising their rates.

One of the pluses of toll roads is that they're not as unpalatable to voters as gas-tax hikes. As Maryland Gov. Martin O'Malley (D) recently put it, "If you ever put the word 'tax' in front of the word 'gas,' you're sure to get a whole collection of boos, hisses, throwing chairs and tables."

Patrick Sabol, a senior policy/research assistant with the Brookings Metropolitan Policy Program, said that with tolls, people pay specifically for the roads they travel instead of roads they may never use, as is the case with taxes.

Leonard Gilroy, director of government relations at the libertarian Reason Foundation in Los Angeles, echoed that view.

"There's a fairness argument," he said. "If you use the roadway, you pay. If you don't, you don't."

Gilroy said tolls also make motorists aware that there are costs associated with maintaining roads.

"People believe that because they poured asphalt into the ground, they've paid for it, and that is never true. A road is never, ever paid for," he said. "What tolling does is take the hidden costs and make them transparent."

Another major benefit of tolling, Gilroy said, is that "you are literally able to begin that project today instead of waiting years or even decades to do it. It's a good way to catch up on the unmet needs you have today."

Partnering with private companies can make building new toll roads even more appealing to state and local governments because it spares them from having to take on public debt or worry about collecting enough in tolls to cover their debt servicing and maintenance. Such agreements are becoming more popular, according to the NCSL's Jaime Rall. Thirty-three states have authorized them, she said, up from 29 in 2010. And she said at least 24 states considered legislation to create new partnerships this year, twice the number in 2008.

But the projects aren't always financially successful. Revenues from the Indiana Toll Road have been so weak that the facility may go into default next year. The state is now considering partnering with a different private company or taking over the toll road itself.

And some states are resistant to tolling. Connecticut abandoned it in 1985 after a tractor-trailer ploughed into four cars stopped at a Stamford toll booth, killing seven people. But with gas taxes coming up well short of the state's road needs, officials there are under increasing pressure to rethink that policy.

"There's been no politician I've found who embraces the idea," said Jim Cameron, a member of the Connecticut Rail Commuter Council. "But they're going to have to do something." (STATELINE.ORG, WSTC.WA.GOV, WSDOT.WA.GOV, BROOKINGS.EDU, REASON.ORG, STATE NET)

WA APPROVES BILLIONS IN TAX BREAKS FOR BOEING: The Washington Legislature approved $8 million in worker-training programs and $8 billion in tax breaks for the aerospace industry in general and Boeing in particular in a special session this month.

"This is a generational opportunity," Senate Ways and Means Chairman Andy Hill (R) said of the tax-incentive and training measures, SB 5952 and SB 5953 respectively. "This is about our aerospace economy."

But Sen. Bob Hasegawa (D), one of just two senators who voted against SB 5952, said he had "a philosophical issue with putting this economic development strategy on the backs of the Machinists."

"We're asking them to sacrifice the future of the next generation of Boeing workers," he said. "That is not a sustainable economic development strategy for the state."

Boeing wants the 31,000 local members of the International Association of Machinists District 751 to agree to a new eight-year contract with major cuts to future pension and health-care benefits in exchange for the company's commitment to build its planned 777X airliner and an advanced-technology wing in the state. That could be a tough sell.

But state lawmakers gave the company most of what it asked them for: an extension of tax breaks due to expire in 2024 until 2040 and the expansion of a sales-and-use tax exemption for the construction of buildings used for manufacturing airplanes, along with the training measure aimed at increasing aerospace enrollments for the 2014-15 academic year by 1,000 full-time students. Lawmakers, however, weren't expected to take up a transportation package Boeing also wanted them to address before adjourning the special session that was called by Gov. Jay Inslee (D). (SEATTLE TIMES)

BELL ISLE TO BECOME MI'S 102ND STATE PARK: Michigan's Local Emergency Financial Assistance Loan Board approved a 30-year lease last week that will allow the state government to assume operation of Belle Isle as a state park. The board unanimously chose the plan over a competing one from the Detroit City Council for a 10-year lease.

But the decision ends a 14-month power struggle between the state and city over Gov. Rick Snyder's (R) offer to take over the operation, policing and maintenance of the park, which will save the city — the largest ever to file for municipal bankruptcy — $6 million a year.

Michigan Department of Natural Resources Director Keith Creagh said the department was eager to collaborate with the City Council and Mayor's Office on the plan, which currently allows for two, 15-year renewals.

"We'll continue to work with the City Council and the city over time to perfect the lease," he said. "By no stretch of the imagination do we feel this is set in stone as we continue to learn more information."

Michele Hodges, president of the Belle Isle Conservancy, said both the state and city will be able to make amendments to the plan but working together will be crucial.

"This is an opportunity for all of us to be part of something good, very good, and we must unite around it," she said. (DETROIT NEWS, MLIVE.COM, STATE NET)

BUDGETS IN BRIEF: The city of Fulton in upstate NEW YORK has officially requested assistance from the state's Financial Restructuring Board, which was created by Gov. Andrew Cuomo (D) in September. If the board agrees to take on the city, which has suffered the loss of two major employers in the past decade, a Nestle candy plant and a Bird's Eye Food operation, it will be eligible for, among other things, a grant of up to $5 million (ALBANY TIMES UNION). • MISSOURI lawmakers said last week they agree with Gov. Jay Nixon (D) that the state's tax break border war with KANSAS has to end (see "NIXON CALLS FOR END TO BUSINESS BORDER WAR" in Governors). But they also said they need to have a broader legislative discussion about tax incentives and competition with all neighboring states — not just Kansas (COLUMBIA MISSOURIAN, STATE NET).

- Compiled by KOREY CLARK

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