Gas tax money failing to materialize
By HANNAH HOFFMAN
Of the News-Register
A 6-cent gas tax increase taking effect Jan. 1 was supposed to be one of the driving forces in a nearly $1 billion transportation package enacted by the 2009 Legislature - something then-Gov. Ted Kulongoski touted as a "landmark achievement."
Coupled with a major hike in Oregon's vehicle registration fees, historically among the lowest in the nation, it was supposed to produce an additional $300 million per calendar year. And that was supposed to fund a statewide roadbuilding program with the first phase of the Newberg-Dundee Bypass serving as its $257 million centerpiece.
But the recession led people to buy and register fewer costly new cars, do everything in their power to wring better mileage out of existing and replacement rigs and reduce their road miles whenever possible.
As a result, the state will probably net less than $170 million extra in 2011, not much more than half what it was hoping. And that could put projects in jeopardy.
The feds are facing the same problem with respect to their gas tax take. Facing persistently high fuel prices during trying economic times, motorists are switching to more fuel-efficient cars, adopting more fuel-efficient driving habits and avoiding road trips entirely whenever possible.
That's cutting into federal gas tax revenue. And when they have less money to work with, they have less to pass down to units of state and local government.
Cities and counties are feeling the pinch just a much. They depend on pass-through and less is getting passed through on both counts.
In all, the figures suggest the state is expecting the combination of forces to depress gas and diesel sales as much as 20 percent. That's what it would take to wipe out a 25 percent price hike.
That kind of falloff can have a telling impact on a large project like the bypass.
The original intent was to fund the 3.5-mile first phase with $192 million from state government, $45 million from the federal government and $20 million from local governments, with the locals using their share of the 6-cent gas tax hike to meet their obligation.
However, the feds only came through with $15 million, and Oregon's new 30-cent gas tax is actually producing less this year than its 24-cent gas tax produced last year. That's a $50 million swing right there, without even taking the state's dimming revenue prospects into account.
The state Highway Fund rose $170 million in 2010, going from $936 million to $1.106 billion, on the strength of the registration fee hike. However, projections showed the fee hike producing almost $235 million, so it fell about $65 million short.
Starting in 2011, the state was expecting about $65 million more on the strength of the gas tax hike. It was projecting a cost to the average motorist at $114 for the registration fee increase, or 78 percent, and $32 for the gas tax hike, or 22 percent.
But with a disappointing summer driving season in the books, the state is now projecting a slight decrease rather than a substantial increase, leaving it another $65 million short. And local governments can expect similar results on their end.
In fact, given rapidly rising fuel-efficiency standards and growing popularity for hybrids and electrics, the gas tax figures to play a diminishing role even when the economy begins to recover, according to State Economist Tom Potiowsky.
The Oregon Department of Revenue anticipates gas tax revenue remaining so low, for the foreseeable future, that funding for some of the projects identified by the 2009 Legislature is in jeopardy, according to spokesman Lou Torres.
Oregon's 24-cent gas tax produced $399 million in 2009 and $406 million in 2010. But its 30-cent gas tax is only expected to produce about $400 million this year, Torres said.
That's being mirrored at the county and city level.
In fiscal 2007-08, Yamhill County received $4.1 million from the State Highway Fund. It received $3.7 million in 2008-09, $4 million in 2009-10 and $4.7 million in 2010-11, thanks to the package of tax and fee increases.
Public Works Director John Phelan projected state revenue of $5 million for 2011-12 year, the first to fully benefit from the gas tax boost. But he told the News-Register last month that he's facing a shortfall that could run $750,000. And that's before accounting for a projected annual contribution of up to $700,000 a year to the bypass.
New revenue from the 6-cent gas tax hike is also failing to materialize for local cities, at least four of whom are also being asked to commit matching money to the bypass project.
Dave Haugeberg, who chairs the bypass advisory committee, told the News-Register last week that the plan was to have local governments tap the new source, leaving their regular funding intact. But in practice, an analysis suggests, the new source is only producing enough to keep them even.
The bypass isn't the only project feeling the pinch, of course. It just has the highest profile, because it accounts for about 20 percent of the overall package.
In Portland, the Sellwood Bridge desperately needs replacing. And the package allocated $30 million to that.
However, Multnomah and Clackamas counties were supposed to hike their local vehicle registration fees to raise match money, and a voter rebellion blocked the Clackamas County increase. Then an impasse in Congress blocked $40 million proponents were expecting from the federal government.
Backers haven't given up hope, but prospects have dimmed. And the developing state shortfall certainly won't help.
Torres said the state is facing the same combination of factors with other projects too. Local funding hasn't come through as promised, federal funding hasn't come through as promised and state funding isn't coming through as promised.
He said some projects may have to be cut from the roster entirely. Even under a best-case scenario, the state will not be in a position to fully fund them all, he said.
Torres said the picture isn't entirely bleak.
He said one partially offsetting development is a significant decline in construction costs. Now that the building bubble has burst, contractors are really sharpening their pencils, he said. They want to keep their crews working.
But it's true, he said, that the much ballyhooed 6-cent gas tax hike is largely replacing old money rather than generating much new money as expected.