A Plan for Oregon's Transportation

Yesterday, the House of Representatives Democrat Caucus released a draft plan to maintain and modernize Oregon’s transportation infrastructure over the next decade.  The draft plan represents a scaled down and amended version of governor Kulongoski’s transportation plan that was to be funded by $500 million in higher taxes and fees. This draft plan is the result of a bipartisan and bicameral work group that has been deliberating for several months. I want to emphasize that this is a draft plan that has not been adopted by, or agreed to, by all members of the work group. It has not been adopted by either political party.

The draft plan would raise $300 million annually from increased fuel and weight per mile taxes, increased title and registration fees, and a license plate replacement fee. The six cent per gallon (25 percent) increase in fuel and weight per mile taxes would generate $163.8 million. The $16 (60 percent) increase in vehicle registration fees would provide an additional $88 million. A $23 (46 percent) increase in vehicle title fees would create another $34.5 million in revenue. Finally, a $12 (240 percent) increase in license plate replacement fees would add $16 million in tax revenue.

The plan provides that the six cent gas tax increase would not take effect until the sooner of either the occurrence of two consecutive quarters of positive state employment growth, or January 1, 2011. It would allow the City of Portland to impose a vehicle registration fee based on vehicle miles travelled. The plan calls for a four year moratorium on any increase in local fuel taxes or other registration fees. After four years it provides more populous counties the ability to increase registration fees with approval of the Transportation Commission. Finally, it requires voter approval of future increases in local fuel taxes.

$273 million would be dedicated to modernize, maintain, preserve, and improve safety on our road system. The money would be divided 50 percent to the state ($136.5 million), 30 percent to the counties ($81.9 million) and 20 percent to the cities ($54.6 million). The five counties in Senate District 28 would receive a little more than $11 million from the funding package for their road work. Cities within our district would receive a little more than $1 million to maintain their roads.

$24 million would be committed to “Flexible Funds” for multi-modal transportation. The final $3 million would be dedicated to rest area improvements. A portion of the state highway money would include provisions for debt service on an additional $800 to $900 million bond for large highway congestion relief projects throughout Oregon. The first bonds would be scheduled for sale in 2012 resulting in debt service payment starting in 2013. The total annual debt service on that proposed bonding increases to about $68 million by 2018 and the debt would not be paid off until 2032. The entire amount to be repaid cannot accurately be calculated because the bonds would be sold “as needed” and the interest rates would be set by market price at the time.

The proponents estimate that the $300 million package will sustain an average of 4,600 Oregon jobs each year during the first five years of implementation. This calculation is based on a formula that predicts 14 jobs per one million dollars of highway expenditure. These jobs include direct employment resulting from road building, indirect jobs in industries that support road building, and induced jobs that result from the benefit of increased consumer spending. A job is defined as full time employment for one person for a full year.

Oregon receives about $350 million each year from the federal government for the highway program. This year the American Recovery and Reinvestment Act (ARRA) provides for spending $27.5 billion for building highway, bridge, and other surface transportation improvements.  Enhanced passenger rail, freight rail and port infrastructure development is also included. Oregon’s share of that additional federal money is about $334 million. This ARRA money has a “use it or lose it” provision wherein states must obligate half of the money by June 29, 2009, and the rest by March 2, 2010, or it will be withdrawn and redistributed to other states. The objective is to provide funding for “shovel ready” projects to stimulate the economy by creating jobs.

The ARRA also establishes a competitive grant program that will provide funding for even more highway and bridge projects. It is expected that the turn around time on these grants will be very short due to the current economic situation. It is further expected that the grants will carry provisions requiring them to be put to use within a short timeframe.

The need for highway transportation improvements in Oregon is great. The need for job creation in Oregon is even greater. It would appear that all three of these state and federal highway funding proposals are scheduled to be implemented during the same time frame. The number of jobs that could be potentially created is significant.

Several important policy questions must be considered:

1.) Do Oregonians believe that increased spending on transportation infrastructure is the best investment of state resources?

2.) Do the Department of Transportation, counties, and cities have the capacity to put all those funds to use within the required time frame?

 3.) Are Oregonians willing to pay an additional $300 million per year in taxes and fees to fund the transportation projects that create the needed jobs?

4.) Are Oregonians willing to obligate the next generation with more debt to pay for current transportation infrastructure development?

5.) Will Oregonians refer any fuel tax increase to the ballot and shoot it down in flames as Oregon voters did in response to the last attempted fuel tax increase in 1999?

Your legislators will be voting on some form of a transportation package within the next six weeks. I would very much appreciate your thoughts on this important issue.

Best regards,

Doug