Future Financing Options to Meet Highway and Transit Needs (2006)

Below is the uncorrected machine-read text of this chapter, intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text of each book. Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.

NCHRP 20-24(49) – Future Financing Options to Meet Highway and Transit Needs D-1 Appendix D State and Local Highway Funding Analysis This appendix presents an evaluation of current funding sources at the state and local level for highway needs by state. Revenue data by state was obtained from tables SF-1 and LGF-1 from FHWA’s 2004 Highway Statistics. It also includes recent information from the American Petroleum Institute on gasoline tax rates at the state and local levels. „ State Highway Funding The main sources of revenue for highway investments at the state level are motor fuel taxes and motor vehicle taxes and fees, or, as defined in the report, indirect user fees. In 2004, highway funding from indirect user fees accounted for 74 percent of the total state highway funds, and has fluctuated between 73 and 80 percent over the last 25 years, as shown in Figure D.1. Figure D.2 provides a closer look at state highway funding sources, excluding motor fuel tax and vehicle tax revenues. These funding sources account for about one-quarter of the state highway funding, and each account for 4 percent to 9 percent of the state highway funding. Of the four funding sources shown here (i.e., toll, general fund, specialized taxes, and miscellaneous), specialized taxes are the ones that have increased significantly in terms of funding share over the last 25 years. Specialized taxes accounted for 1.4 percent of the state highway funding in 1978, increasing to 5.6 percent by 2004. Figure D.3 shows the funding share that indirect user fees accounted for in FY 2004 by state. The data shows that in 14 states, revenues from motor fuel taxes and motor vehicle taxes and fees account for over 90 percent of the highway funding. In only six states (Alaska, Delaware, Georgia, Massachusetts, New Jersey, and Oklahoma), do these reve- nue sources account for less than half of the highway funding. In these six states, most revenues for highways came from general fund allocations, and in the case of Delaware and New Jersey, from tolls. In Nebraska and Arizona, specialized taxes were reported to account for 27 and 40 percent, respectively. Alaska, Georgia, North Carolina, and South Dakota reported revenues from miscellaneous sources accounting for more than 10 percent of the total highway funding.

NCHRP 20-24(49) – Future Financing Options to Meet Highway and Transit Needs D-2 Figure D.1 State Funding Sources Fiscal Years 1978-2004 0 10 20 30 40 50 60 70 80 90 100 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 Year Percent MFT and Vehicle Taxes General Fund Special Taxes Miscellaneous Tolls Source: Highway Statistics, Table HF-10. Figure D.2 Highway – State Funding Sources (Except MFT and Vehicle Taxes) Fiscal Years 1978-2004 0 2 4 6 8 10 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 Year Percent Source: Highway Statistics, Table SF-1. General Fund Special Taxes Miscellaneous Tolls

NCHRP 20-24(49) – Future Financing Options to Meet Highway and Transit Needs D-3 Figure D.3 State Highway Funding Fiscal Year 2004 0 10 20 30 40 50 60 70 80 90 100 GA NJ OK MA VA IA KY PA CO SD MN NH WV ME NC TX ND RI MO CA WY OH NV SC IN MT State Percent MFT Vehicle Taxes Source: FHWA, 2004 Highway Statistics, Table SF-1. DC AK DE NY HI VT MD AZ IL NM MI FL CT OR KS NE UT AL LA ID WA TN MS AR WI „ Local Government Highway Funding At the local government level, general fund and property taxes account for most of the highway funding. In 2003, highway funding from general fund and property taxes accounted for about two-thirds of the total highway funds (Figure D.4). The share of these revenue sources have declined over the last 25 years, due to increases in the funding share from specialized taxes. Specialized taxes accounted for 2.8 percent of the local highway funding in 1978, increasing to 11.4 percent by 2003.

NCHRP 20-24(49) – Future Financing Options to Meet Highway and Transit Needs D-4 Figure D.4 Highway – Local Funding Sources Fiscal Years 1978-2003 0 10 20 30 40 50 60 1978 1983 1988 1993 1998 2003 Year Percent MFT and Vehicle Taxes Special Taxes Property Taxes Miscellaneous General Fund Tolls Source: Highway Statistics, Table LGF-1. Figure D.5 shows the funding shares of property taxes,1 general fund, and indirect user fees in FY 20032 by state. Indirect user fees account for more than half of the highway funding in three states (i.e., Indiana, Nevada, and New Hampshire). In 23 states, general funds account for over 50 percent of the revenues allocated by local governments for highway investments. General fund allocations account for 97 percent of the highway revenues in New Jersey. 1 Property taxes are shown separately from other specialized taxes for two reasons: 1) property taxes account for a significant share of highway revenues at the local level; and 2) Table LGF-1 report property taxes separate from other taxes, which allows for more detailed analysis of this type of specialized tax. 2 Highway Statistic data from local governments lags behind by one year compared to Federal and state data.

NCHRP 20-24(49) – Future Financing Options to Meet Highway and Transit Needs D-5 The data shows that property tax revenues accounted for more than 50 percent of the highway revenues in eight states, including Vermont, where all revenues come from property taxes (except for a negligible allocation from the general fund). A few states (Arkansas, Georgia, Louisiana, and Missouri) reported significant revenues from specialized taxes. In California, about 38 percent of the local revenue for highway came from miscellaneous sources. Figure D.5 Local Highway Funding Fiscal Year 2003 State Percent MFT and Vehicle Taxes General Fund Property Taxes Source: 2004 Highway Statistics, Table LGF-1. 0 10 20 30 40 50 60 70 80 90 100 MA AR ND CA ME MN OK SC MD DE LA WA GA NC MS SD TX AL AK MT RI KY VA HI NH VT IA MO CO NM OH AZ WV MI NJ WI IL NY PA ID OR NE KS CT UT TN WY FL IN NV

NCHRP 20-24(49) – Future Financing Options to Meet Highway and Transit Needs D-6 „ Gasoline Tax Rates Figure D.6 shows the state motor gasoline tax rates as of July 2006 as estimated by the American Petroleum Institute.3 All states have an excise tax rate, which varies from 34 cents per gallon in Washington to 4 cents per gallon in Florida. In addition to the excise tax rate, some states add other gasoline-related taxes, including sales taxes on gasoline, variable rates based on wholesale price, taxes on oil and petroleum businesses, or tax rate adjustments to account for inflation. The tax rates in Figure D.6 also include average motor fuel tax rates for fuel taxes collected at the local level (it should be noted that not all of these fuel tax revenues are dedicated to transportation). New York has the highest gasoline tax rate (41.7 cents per gallon), whereas Alaska has the lowest (8.0 cents per gallon). Figure D.6 Gasoline Tax Rates State plus Local, as of October 2006 0 5 10 15 20 25 30 35 40 45 50 NY CT CA WA WI IL NV PA FL HI RI MI NC ME NE OH MT WV IN ID KS OR UT SD MA MD DE ND CO IA MN AR TN GA AL DC LA TX VT NH VA AZ MS KY NM MO OK SC NJ WY AK State Cents per Gallon Excise MFT Additional MFT Source: American Petroleum Institute. 3 American Petroleum Institute, Current Fuel Taxes (July 2006). Available at http://api-ec.api.org/ frontpage.cfm.

NCHRP 20-24(49) – Future Financing Options to Meet Highway and Transit Needs D-7 An interesting case of multiple forms of levying taxes on motor fuels is the New York gasoline tax rate, which is comprised of various taxes, including the state excise gasoline tax of 8.0 cents per gallon, the Petroleum Business Tax of 15.9 cents per gallon, a spill tax of 0.3 cents per gallon, and a petroleum-testing fee of 0.05 cents per gallon. In addition, it also includes a tax rate of 17.4 cents per gallon, which is the “cents-per-gallon” equivalent of the average sales tax on gasoline. The New York sales tax on gasoline includes a 4 percent state sales tax, and a 3.25 percent to 5.75 percent county sales tax, for a combined weighted average sales tax of 8 percent. Recent legislation capped the state sales tax por- tion at 8.0 cent per gallon, effective June 1, 2006. Two cities and 14 counties also decided to cap the local sales taxes as well. The sales tax portion of the motor fuel tax rate in New York is not dedicated to transportation.