South Carolina Infrastructure Failures and Solutions The Immediate Need for New, Recurring Transportation Funding January 2016
Katie Busbee Government Affairs Manager
South Carolina Infrastructure Failures and Solutions The Immediate Need for New, Recurring Transportation Funding By Katie Busbee Government Affairs Manager
Why your Chamber of Commerce Cares about Transportation Funding, and Why You Should Too
H
aving safe, well-maintained, and efficient infrastructure is essential to our state’s growing economy. Maintaining roads and bridges, and appropriating sufficient revenue to keep them in a safe and working condition, is a core function of government.
Sadly, our highly congested and failing infrastructure is eating into this advantage. If companies cannot get their goods to market efficiently, they will relocate to another state, taking with them jobs and economic growth.
Our competitive advantage is slipping, and the condition of our road system is adding a significant cost to our residents, and our most valued companies. A study in late 2014 showed that congestion and poor It’s an exciting time for South Carolina as our econoroad condimy is growing and bringing with it people who want tions cost the to start-up, settle, and grow their businesses here. Rankdriver Cost Per Driver average South Carolina benefits from having a top five nation- Gasoline Tax Additional cost per driver in the South Carolina has in the Greenal deep-water port, which will soon begin expansion Greenville-Spartanburg metro area the third-lowest gasoline tax ville-Spartanto allow more imports and exports to move through because of poor roads. States.Metro burg our state. With our spirit of entrepreneurship, and in the United Petroleum Source: TRIP an Inst. averthe expansion of the Port of Charleston, our infra-Source: AmericanArea age of $1,248 structure system must be able to support high voleach year.1 umes of goods being transported across our state in a timely, efficient, and safe manner. Sonoco CEO Jack Sanders said the condition of our roads costs his company an additional $5 million each Good infrastructure is vital to the Upstate, as we are year in maintenance and additional gasoline costs to uniquely positioned along the I-85 corridor at a midpoint between Atlanta, Georgia and Charlotte, North 1. TRIP, “South Carolina By the Numbers,” accessed January Carolina. This gives the Upstate a highly competitive 20, 2016, http://www.tripnet.org/docs/SC_Transportation_by_ advantage in attracting companies to settle here. the_Numbers_TRIP_Report_Jan_2015.pdf
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$1,248
In the 29 years since the gas tax was increased, vehicle miles traveled have increased by more than 43 percent and are expected to increase another 25 percent by 2030.
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South Carolina Infrastructure Failures and Solutions
90,242 State Highway Lane Miles South Carolina maintains the fourth-highest lane-miles of state roads in the country. Source: U.S. DOT
our state for further expansion.2
avoid some state roads. Michelin North America Chairman and President Pete Selleck said in November 2014 that our roads were a “disgrace” and without improvement, Michelin may look outside
The South Carolina General Assembly must appropriate long-term, reoccurring transportation funding to keep South Carolina and the Upstate economically viable. Without new, reoccurring funding, our roads will continue to decline, and with it, our quality of life. Here are a few facts about South Carolina’s roads and ways we fund them:
FACT: South Carolina has more roads to maintain than most other states, and those roads are crumbling
North Carolina, and Virginia.3 63 percent of our roads are state owned, which means it is the state’s responsibility to maintain them. The other 37 percent are locally owned and maintained by counties or municipalities. Compared to the national average of 19 percent of all public roadways being state owned, and 81 percent locally, South Carolina is maintaining nearly three times as many roads as other states. Here’s a breakdown of the 41,444 miles that our state maintains and their condition: • 851 are interstate miles, which are in the best condition, with 69 percent being good, 23 percent fair, and 8 percent poor. • 9,475 are primary miles (U.S. and S.C. routes), and approximately 3 percent are in good condition, 40 percent are fair, and 47 percent are poor. • 31,118 are secondary roads, and 11 percent are in good condition, 36 percent are fair, and 53 percent are poor.4 In addition to our roadways, approximately 1,600 of South Carolina’s 8,400 bridges are substandard.5 Not only does South Carolina have a large system to maintain, but years of ignoring our maintenance problems have left them in poor condition.
South Carolina has the fourth largest state-maintained highway system in the nation behind Texas, 2. Jeff Wilkinson, “Sonoco CEO Sanders calls for gas tax increase to fix poor SC roads,” The State, April 21, 2015, http:// www.thestate.com/news/local/article19183431.html
FACT: South Carolina is attempting to maintain this extensive road system with the lowest per-mile road funding in the nation A few facts about the gas tax... Our gas tax: • is 16.75 cents, • has not been raised since 1987, • and is not indexed with inflation. The only way to increase revenues from the tax is to use the roads more. The benefit of using a gas tax in a tourism-heavy state
47 percent of our primary routes and 53 percent of our secondary roads are rated “poor.”
3. “South Carolina’s State Highway System,” accessed January 21, 2016, http://www.sctrucking.org/files/Components_of_SC_ Highway_System.pdf 4. Ibid. 5. “2014 the State of SCDOT,” January 2015, http://www.dot. state.sc.us/inside/pdfs/StateofSCDOT2015.pdf
South Carolina Infrastructure Failures and Solutions
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such as ours is that approximately one-third of the gas tax is paid for by out-of-state drivers. This is, essentially, a tax break for South Carolinians. Despite South Carolina having the fourth largest transportation network, and relying primarily on the gas tax for funding, our state’s gas tax is the third lowest in the nation.6 Because the gas tax was neither indexed for inflation nor increased in 29 years, the S.C. DOT estimates a $29 billion funding shortfall over the next 20 years simply to bring our roads up to good condition, with an annual shortfall of 1.5 billion.7 South Carolina receives 71 percent of its state funding from motor fuel and 29 percent of its funding from other sources. The national average of highway funding sources for a DOT is 35 percent motor fuel and 65 percent other funds.8 Meaning, we rely heavily on motor fuel, or the gasoline tax, for funding, and our revenue sources are less diversified than most other states. For example, of our neighboring states, South Carolina is the only one that does not allocate the entire car sales tax to transportation needs. While our gas tax is stuck in the 1980’s, car technology is not. With the advent of hybrid, electric, and gas friendly cars, people are driving more miles and filling up at the pump less. That means there is more wear and tear on our roads that isn’t being paid for through the gas tax. Our state needs to consider a long-term formula where we are not dependent on the gas tax, but for 6. “Gasoline Tax,” American Petroleum Institute, accessed January 20, 2016, http://www.api.org/oil-and-natural-gas-overview/industry-economics/fuel-taxes/gasoline-tax 7. “2014 the State of the SCDOT,” January 2015. 8. “South Carolina Alliance to Fix our Roads,” accessed Jan. 21,2016, http://www.sctransportation.com/highway-facts.html
$135,000
increase
71% 0% increase $61,100
171 100
16.75¢
16.75¢
increase
135% increase $3.75
121%
Federal Funding
LITTLE KNOWN FACT: If a person drives 15,000 miles a year and gets 20 miles per gallon, they pay $126 in S.C. motor fuel user fees each year. This is enough to resurface 7 feet of one lane on the average secondary road.
The Federal government does provide funding to states to maintain their state roads, but federal funding can only be used for specific purposes. Only half of South Carolina’s state roads are eligible for federal Source: SCFOR funds, and states are required to match the federal funds — usually at a ration of 80 percent federal to 20 percent state. This means our state pays the entire cost and is reimbursed 80 percent by the U.S. DOT. Federal assistance, including the state match, stands at approximately $1 billion a year.9
In December 2015, Congress reauthorized highway funding for the next 5 years by passing a $300 billion transportation bill. This keeps South Carolina’s federal funding at approximately the same level. While federal funds help, our state cannot depend on the federal government for significant funding to improve our infrastructure system.
FACT:
$1.59
South Carolina’s Gas User Fee Has Not Increased Since 1987
the forseeable future, it is the best way for our state to fund road maintenance and construction.
Our neighbors are addressing their transportation problems by increasing revenues, and they are using South Carolina as an example of what not to do Georgia
1987 2015
Gas User Fee
1987 2015
1987 2015
1987 2015
USDOT Const. Index
Median Home Price
Gallon of Milk
In March of 2015, Georgia’s General Assembly passed a $900 million transportation bill that placed 9. “2014 the State of the SCDOT,” January 2015.
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South Carolina Infrastructure Failures and Solutions
its gas tax at 26 cents for regular fuel and 29 cents for diesel. It also levied taxes on electric cars, heavy trucks, and hotel stays.10
North Carolina Also in the spring of 2015, North Carolina passed
legislation to stabilize its 37 cent gas tax which was in danger of bottoming out due to decreasing gas prices. The bill reduces the tax to 34 cents over the next two years but is 6.4 cents higher than it would have been if not stabilized. The bill raises $266 million at the start of the new fiscal year, and $181 million annually for the next three years after that.11 The Fayetteville Observer, a North Carolina newspaper, recently published an editorial urging North Carolina’s legislature to learn from South Carolina’s transportation mistakes. The paper wrote: “. . . if you ever duck across the state line to fill up on South Carolina’s much-cheaper gas (averaging 20 cents a gallon less this week), you know that drivers there are getting what they pay for – crumbling roads that make most of our roads look downright healthy. There’s a good lesson there for us, one our lawmakers need to heed.”12 Gov. Pat McCrory, R-N.C., has proposed a $1.37 billion bond package that would fund 203 road projects in 57 counties.
Our Current Transportation Plans Governor Haley’s Plan Governor Haley unveiled her Transportation plan at her 2015 State of the State address. Her plan raises the gas tax by 10 cents over the next three years, and cuts the state income tax by two percent over the next 10 years. This plan would raise about $380 million. Her plan reforms the DOT by having the Governor appoint DOT commissioners. 10. Kathleen Foody, “Ga. Lawmakers pass $900 million transportation funding bill,” Washington Times, April 1, 2015, http://www.washingtontimes.com/news/2015/apr/1/ga-speaker-says-transportation-funding-bill-close-/?page=all 11. Bruce Siceloff, “Legislature drops NC gas tax by 1.5 cents, starting Wednesday,” The News & Observer, March 31, 2015, http://www.newsobserver.com/news/politics-government/ state-politics/article17030660.html 12. Editorial, “Do SC’s rickety roads lead to NC’s future?,“ Fayetteville Observer, November 11, 2015, accessed November 11, 2015, http://www.newsobserver.com/opinion/editorials/ article44295198.html
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In her 2016 Executive Budget, the Governor proposed using nearGasoline Tax Rank ly $300 million in South Carolina has revenue for road the third-lowest gasoline tax projects, $49 milin the United States. lion of which is her Source: American Petroleum Inst. phased-in gas tax increase. Her budget also includes her large phased-in income tax cut which many legislators of both parties oppose.
The House Plan The House passed a transportation bill that levied a six percent excise tax on fuel (essentially a 10 cent increase), raised automobile sales taxes from $300 to $500 allocating it to roads, and cut the state income tax by $48 per household (the idea being this is the amount the average family would spend with the increased fuel tax). The House plan also gives roads that are less than one mile segments back to counties and reforms the DOT by allowing the Governor to appoint them. This plan raises approximately $420 million with gas at $2 a gallon.
The Senate Plan The Senate Finance Committee amended the House bill last spring but is currently working a new plan that is a compromise with Senate members, the Governor’s plan, and the House. This new plan is expected to be released in late January. Currently, the amended House bill raises the gas tax by 12 cents, raises car sales tax from $300 to $600, levies fees on hybrid and electric cars, and raises driver’s license fees. As is, the bill raises approximately $800 million. The new Senate plan is expected to have a tax cut and DOT reform.
LITTLE KNOWN FACT: Each penny of gas tax in our state raises about $34 million. One-third of our gas tax is paid by visitors to our state. Source: S.C. DOT
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South Carolina Infrastructure Failures and Solutions
DOT Reform: The Sticking Point This section is subject to change at any time since the debate is ongoing. Reforming the DOT could be the biggest sticking point that stalls an infrastructure package in 2016.In 2006, the Legislative Audit Council issued a scathing report on DOT operations that resulted in a sweeping reform package passed in 2007. That reform package included: •
term limits for commissioners,
•
selection of the Secretary of Transportation by the Governor instead of the Commission,
•
prioritization requirement to objectively rank and select projects for state and federal programs,
•
among many other reforms.
The provision allowing the Governor to appoint the Secretary was given a sunset, though the General Assembly has extended that sunset. (That extension is currently being challenged in court under separation of powers grounds.) Which gets us to today. The board is currently made up of eight commissioners, one elected by lawmakers from each Congressional District, and one selected by the Governor. The current reform proposal allows the Governor to appoint all of the commissioners, which would make it similar to other high-profile state boards such as Santee Cooper. The sticking point is where these commissioners represent. The Senate has proposed a plan requesting the board be expanded so there is a commissioner from each of the 10 state Council of Government districts. Others are insisting the commissioners should represent areas of equal population, not geography, as the Council of Government system would entail. The 10 council of government areas are not even close to proportional in population. Of the 4.8 million residents in our state, 1.2 million live in the Appalachian council area, or 25 percent of the state’s population in one of the 10 areas. The idea of where the commissioners live has bedeviled the Senate’s reform plans for nearly a decade. The Upstate is lucky to have Woody Willard as our commissioner from the Fourth Congressional District. Commissioner Willard is extremely responsive to our needs and is a great ambassador for the DOT. The Chamber has not taken an official position on what the DOT commission should look like, however,
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we strongly believe that any plan must preserve the prioritization ranking system for projects.
What’s most
likely to pass?
Governor Haley, in her 2016 State of the State Address, renewed her call on lawmakers to approve a transportation funding package.
LITTLE KNOWN FACT: Seven states raised gas taxes or fees in 2015 and 15 states have raised gas taxes or fees since 2013. Source: The Greenville News
The Chamber believes that any legislation will have to have three components: • A gas tax raise and possibly other fees, • DOT reform, • and a tax cut. Governor Haley added a fourth component in her address, saying she would not sign any legislation that was a net increase in taxes.
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South Carolina Infrastructure Failures and Solutions
THE CHAMBER’S POSITION
he Greenville Chamber and Upstate Chamber Coalition support the General Assembly in passing new, recurring dollars to go to repairing and expanding our infrastructure system. In the past several decades, South Carolina has tried to address our infrastructure problems by allocating surpluses and one-time money. This makes it hard for our DOT to line up projects and hire workers when they don’t have a steady, dependable stream of revenue which delays projects when they do finally get funding. The Chamber recognizes that there are many ways to come up with long-term funding. While the Chamber supports raising South Carolina’s gas tax since one third of it is paid for by out-ofstate drivers, we also support the General Assembly’s efforts to diversify revenue sources by raising the car sales tax and allocating it all to transportation, levying fees on hybrid and electric cars, raising driver license fees, and other funding avenues. The Chamber’s top priority is to secure significant, long-term funding. We will work with lawmakers and support lawmakers as they seek to find the best revenue sources. As a proponent of best business practices, the Chamber advocates for sound fiscal management with any business or government agency. The Chamber supports reasonable DOT reforms that keep commissioners and the DOT secretary accountable to a prioritized list of projects. While the Chamber has not taken a position on a tax cut, we realize that some kind of tax cut is a political reality to pass a transportation bill. The Chamber recognizes that voting for a tax increase is never a popular vote for our legislators, and that there are vocal opponents against raising revenues to improve our roads. But the right vote is not always the easy vote. We urge our legislators to work together on finding a longterm solution to our state’s infrastructure needs. We genuinely believe our state’s ability to be competitive for future economic development will be significantly hindered if sustainable funding for roads and bridges is not achieved.
• SECURE SIGNIFICANT, SUSTAINABLE, AND RECURRING NEW REVENUE FOR ROADS • INCREASE THE GAS TAX • DIVERSIFY THE REVENUE SOURCES • REFORM THE DOT • MAINTAIN A NON-POLITICAL PRIORITY LIST FOR CONSTRUCTION PROJECTS
Jason Zacher Vice President of Business Advocacy jzacher@greenvillechamber.org 864.239.3718
Katie Busbee Government Affairs Manager kbusbee@greenvillechamber.org 864.239.3748
24 Cleveland Street Greenville, SC 29601
greenvillechamber.org upstatechamber.org
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