By: David Steves
Eugene Register-Guard
July 16, 2008
Link to original article
SALEM - Oregon’s top transportation economist doesn’t yet have the spreadsheets to prove it, but he sees more evidence daily that motorists are curbing their fuel consumption.
“When I pull into the parking structure, one out of every four or five parking stalls is empty,” said David Kavanaugh, chief transportation economist for the Oregon Department of Transportation.
Thinning parking lots, growing ranks of transit and bike commuters, and the flight from gas-guzzling SUVs to high-efficiency hybrids all underscore consumer reaction to $4-a-gallon-plus gas prices.
But if the fuel savings is good for the environment, it’s hardly the best of news for state and local agencies that rely on gas tax revenue.
For every gallon of gas that Oregon drivers avoid buying, state and local transportation agencies forgo 24 cents in state fuel taxes for road and bridge work, and the federal government forgoes its 18.4-cents-per-gallon fuel tax. Also, many cities have their own gas taxes. Eugene’s is 5 cents a gallon. Springfield’s is 3 cents.
Next month, Kavanaugh expects to finalize his first update to state gas-tax revenue projections this year. He’ll be reviewing a period in which gas prices jumped $1 a gallon since March. That forecast could indicate that gas-tax revenues aren’t keeping up with projections - which would mean there’s not enough money coming in to pay for all the bridge and road work in the pipeline.
The Oregon Department of Transportation’s current fuel-tax revenue outlook, which dates to January, calls for annual growth of about 1.5 percent to 2 percent.
But in April, the state recorded a seasonally adjusted 141.5 million gallons of motor fuel sold, down 2.4 percent from April 2007. And in May, the latest month for which numbers are available, the state recorded a seasonally adjusted 143.5 million gallons of motor fuel sold, down 1.3 percent from May 2007.
Whether or not that downturn has continued into the summer is not yet clear. But transportation and public-works professionals are bracing for fuel consumption to drop enough that gax-tax revenues take a noticeable tumble.
“We haven’t seen revenues change yet, but as every month goes by, it’s likely that we will see it,” said Eric Jones, spokesman for the city of Eugene’s public works department. The city relies on state and city gas taxes for about $10 million for road maintenance and improvements annually.
Statewide, the gas tax produces about $400 million a year for state and local road, highway and bridge projects.
Last year saw a reduction in driving in the state. In 2005 and 2006, Oregon’s “vehicle miles traveled” grew by 1.6 percent and 1.3 percent, respectively, according to ODOT. Then in 2007 - as gas prices were creeping up but before they exploded in 2008 - vehicle miles traveled declined by 0.5 percent.
Lower-than-expected revenue would be a double-whammy for road projects in Oregon, which are being squeezed by high petroleum costs in another way, ODOT spokesman Dave Thompson said.
“The reason is not because the gas tax doesn’t bring in enough, but because our costs are going up,” Thompson said.
Specifically, he points to the cost of fuel for construction companies’ heavy equipment that provides the muscle behind Oregon’s road-work operations. In addition, the rising price of petroleum-based asphalt is causing projects’ costs to outpace projections.
Along with inflation for other materials, such as steel, these costs are being passed along by private construction companies to ODOT, as is permitted by “escalator clauses” built into their contracts.
These rising costs are causing state transportation projects to escalate by an estimated $170 million, so far, in excess of the dollars that state planners expected to have available for 2007-09. To make ends meet, ODOT probably will have to identify a handful of big projects - which typically range from $40 million to $100 million apiece - to delay until the next two-year spending cycle, Thompson said.
He and other transportation experts say the rise in petroleum costs plus restraint in gas consumption underscore a problem that for years has loomed over the state’s transportation infrastructure:
Gas tax revenues don’t provide enough cash to keep up with maintenance and improvement costs.
“Many people would say the transportation funding system is in crisis even before these recent price increases,” said Robert Bertini, director of the Portland-based Oregon Transportation Research and Education Consortium.
Since 1993, Oregon’s gas tax has stood at 24 cents a gallon. Between then and 2006, gas tax revenues increased 3 percent - even though the number of vehicle miles traveled is up by 19 percent, according to ODOT.
In the same 13-year span, ODOT costs have risen more dramatically in several categories, including for excavation work (134 percent), gasoline (99 percent), structural concrete (97 percent) and reinforcing steel (65 percent).
These long-term trends have prompted state leaders since the mid-1990s to explore such alternatives to the gas tax as toll ways and onboard technology to measure taxable vehicle miles traveled. Political resistance, costs and technology challenges have kept such ideas from moving.
State Rep. Terry Beyer, a Springfield Democrat and chairwoman of the House Transportation Committee, said the latest gas consumption and costs trends are likely to force policymakers to pursue alternatives to the gas tax.
“It’s happening faster than anyone anticipated,” she said. “We’re really going to have to start looking for an alternate way to fund our highways because this is not going to be a reliable source for too far out.”
