Friday, April 7, 2017

California Tackles its Transportation Infrastructure Debt

The Los Angeles Times reported this morning that the California Legislature has passed a bill which would raise fuel taxes and vehicle fees to fund transportation, mainly road repairs.  The bill, SB 1 (Beall), is likely to be signed by Governor Brown, who campaigned strongly for its passage.

The bill raises revenue by:
  • Increasing the per gallon gasoline excise tax by $0.12, with inflation adjustment, on top of a floating base, which is currently about $0.28 per gallon, for a total of $0.40 per gallon, starting November 2017.
  • Increasing the per gallon diesel excise tax by $0.20, with inflation adjustment, on top of the $0.16 per gallon charged currently, for a total of $0.36 per gallon, starting November 2017.
  • Imposing a new annual "transportation improvement fee" on vehicle registrations, ranging from $25 to $175, with inflation adjustment, depending on the market value of the vehicle, with a higher fee for more expensive vehicles, starting in 2018.
  • A new $100 annual vehicle registration fee for zero emission vehicles, with inflation adjustment, starting in model year 2020.
  • Removing a requirement in state law to annually adjust the gasoline excise tax for revenue neutrality, starting in July 2019.
  • Increasing the sales tax rate on diesel by 4%, on top of the existing rate of 1.75%, for a total of 5.75%

The bill when fully in effect is estimated to raise $5.2 billion per year.  The money would be spent primarily on road repairs, both to state highways and local roads, with lesser amounts going to public transportation, active transportation and other priorities.  Local governments would gain more flexibility in how the money is spent if their pavement condition is above a specified level.

There are other notable provisions.  The cabinet-level State Transportation Agency is directed to revise the Highway Design Manual to incorporate complete streets designs by 2018. The California Air Resources Board will be temporarily prohibited from requiring commercial vehicles to be retrofitted to reduce emissions.  

Overall, most of the bill seems like a positive step.  The state's roads are in bad shape and by failing to maintain them, we are incurring an infrastructure debt.  We enjoy artificially low taxes in the short run, but pile up larger and larger costs in the long run.  Preventative road maintenance is much more cost effective than rebuilding infrastructure that is severely degraded.  What we've been doing is like never taking your car in for an oil change, waiting for the engine to fail prematurely and then replacing the engine. Given the seismic risks in our state, having structurally deficient bridges is not a morally justifiable course of action.  Additionally, by failing to appropriately price road maintenance, we are lulled into the sense that we can afford road expansions which we actually cannot afford, which just increases long term maintenance costs even more.  The small amounts of funding for transit and active transportation are welcome as well.

California's gas tax rates have not been raised since the early 1990s.  By raising them, the buying power of the taxes should recover from a quarter century of inflation and be better able to address the maintenance backlog which the bill estimates at $137 billion over the next decade.  The automatic inflation adjustments are positive.  Since this bill required a 2/3 vote for passage and tax hikes can be unpopular, politicians understandably want to avoid having to take another vote like this for a long time.

On the other hand, the bill does have some negatives.  The zero emission vehicle fee is probably necessary in the long run, but in the short run it will undercut the state's environmental goals at a time when these vehicles are finally starting to get affordable and are still not widely used.  The restrictions on pollution controls for commercial vehicles are clearly a giveaway to the trucking industry that will come at the expense of the health of freeway-adjacent communities, which often have larger percentages of poor people and people of color.  The LA Times reported that a couple of legislators had to have some pork thrown at their districts to buy their votes, further proof that the 2/3 vote threshold for taxes is a terrible, terrible idea.

Still, on balance, the bill represents progress.  We are starting to take responsibility for our infrastructure debt.  In doing so, hopefully we will better understand the value of urbanization patterns that are inherently more efficient.  The more we sprawl out with low-density development, the more roads we have to maintain.  That ain't cheap, for taxpayers or for the environment.

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