The latest North Carolina transportation news came as no surprise. All too familiarly, our leaders have planned and promised more highway projects than current revenue sources can finance.
The latest estimate of the gap, however, was astounding. For projects already underway – that is to say, which should be launched at the start of the State’s 2024-2033 plan – the gap between projected revenues and expected road expenses is around $ 7 billion, according to the latest update from the North Carolina Department of Transportation. And if the list is expanded to include all the road projects initially planned, the funding gap rises to $ 13 billion.
I’ve written many times about the flaws in our current highway financing system, which relies too much on per gallon taxes in a world of improving gas mileage and a growing fleet of electric vehicles. As a recent report from the John Locke Foundation explains, North Carolina needs to find the most economical way to charge motorists based on actual usage, not gas consumed. This means adopting a combination of tolls for new road capacity and replacing the gasoline tax with mileage-based user charges.
Don’t like these options? Believe me, I understand. But the alternatives to finance our roads are worse: higher gasoline taxes, larger federal deficits, and cross-subsidies from general taxes that sever the link between use and revenue. I’d rather charge people based on how often they drive the road network rather than skewing the market by increasing revenues, sales, or fuel taxes.
But while heads of state have naturally reacted to the latest DOT report by debating these revenue options, there is no practical way to close a $ 13 billion funding gap. To be frank, some of the road projects on the drawing board won’t be completed by 2033.
There is no political will to increase taxes or fees by the amount required to fund all projects. And because of the DOT’s past errors and communication problems, neither lawmakers nor average voters have enough confidence in it to implement the plan as intended.
Even in our increasingly connected world, highways remain the main arteries for commuting and commerce. In the early stages of the expansion of automobility in the United States, spanning much of the 20th century, the cost of building and maintaining the road network was clawed back many times over in economic and social benefits.
Many new projects are also likely to be profitable, but there is no doubt that investing in highways, like investing in anything else, is subject to diminishing returns. There will be other uses of these dollars – like improving the electricity grid and expanding broadband access – that may well yield more benefits.
Again, I’m not one to deny the need for a new income mix. If the state takes no action, North Carolina’s transportation revenues will decline over time on an inflation-adjusted per-mile basis. This is not the exaggeration of a politician. It’s just basic math. Some productivity gains may be possible to make up the difference, but not enough. And we should stop diverting revenue to transit and intercity rail projects that move far too few people at far too high a cost. Even if we eliminate these campaign elements and spend all the money on the roads, it will not be enough to meet the needs.
Yes, if North Carolinians want more and better roads to meet the needs of our growing population and economy, we will have to be prepared to pay a sufficient price for them. Yet I seriously doubt that most of us will be willing to pay taxes or fees high enough to close a $ 13 billion funding gap.
Policy makers must therefore tackle it from both ends. They should adopt the combination of user fees and tolls suggested by the Locke report. They should also come up with a long list of projects that DOT will agree to postpone beyond 2033. Realism is required here.
John Hood is a member of the board of directors of the John Locke Foundation and author of the new novel Mountain Folk, a fantastic historical set during the American Revolution.