• Bill raises taxes on gasoline and motor vehicle sales.
• Enacts a roughly $360 million tax hike next year.
• Allows Infrastructure Bank to fund more projects, not fewer.
• Gives Infrastructure Bank $50 million more in annual funding.
• Does nothing to alter the Bank’s emphasis on new construction.
• Maintains legislature’s influence over DOT Commission.
• Imposes ineffectual moratorium on new road construction.
• Makes devolution of roads back to counties optional, thus pointless.
[This analysis has been updated to reflect minor modifications made before the House passed the bill on April 15.]
H.3579 is the roads plan originally put forward by the Ad Hoc House Infrastructure Committee chaired by Rep. Gary Simrill (R-York). The bill has since been amended by the full House Ways and Means Committee. Many of the provisions of the new bill are essentially the same as those of the ad hoc committee plan. Unfortunately, however, the changes imposed by the Ways and Means committee are overwhelmingly for the worse.
The bill’s provisions include:
- Allowing the governor to appoint the eight Department of Transportation (DOT) commissioners, with the approval of the legislatively controlled Joint Transportation Review Committee (JTRC) and in turn allowing the commission to appoint the DOT secretary. By retaining the commission and JTRC approval of its members this provision fails to increase accountability at DOT.
- Prohibiting construction of new roads before July 1, 2020, but with exceptions that render this provision meaningless. The majority of these exceptions were added by the Ways and Means Committee. Exceptions to the prohibition on new construction include: expansion of existing roadways, projects for which preliminary engineering and design began before January 1 of 2016, large interstate projects for which matching funds are available, any project contained in a metropolitan planning organizations transportation improvement plan before January 1 of 2016, and new facilities designed to be toll roads. Almost any new project would meet one of those conditions.
- Expanding the State Transportation Infrastructure Bank (STIB) board from 7 to 13 members. The 13 members would be made up of the seven DOT commissioners who represent a transportation district, three members appointed by the House Speaker, and three members appointed by the Senate President Pro Tem.
- Lowering the minimum cost for a project to qualify for STIB funding from $100 million to $25 million, thereby increasing the number of unneeded new construction projects the STIB can fund.
- Forcing the STIB to use DOT’s official list of infrastructure priorities, but allowing the General Assembly to override these priorities with a joint resolution – thus partly defeating the point, which ought to be to take road funding decision-making out of the hands of lawmakers.
- Beginning a three-stage process of transferring up to 19,000 miles of roads from state to county control. The department would on three separate dates transfer a third of the roads it has selected for devolution in each county back to county control. Counties could opt out of this transfer, effectively hamstringing this portion of the bill.
- Providing an initial grant of $1 million for road maintenance to each county that begins participating in state road devolution in 2016.
- Increasing the amount of C-funds (transportation funds given to counties from a portion of gas tax revenue) to counties that participate in road devolution. By 2020 the proceeds from an additional 3.34 cents per gallon would be dedicated to the C fund to be distributed to participating counties based on the current C fund distribution formula. Leftover C fund revenues would go to the state Highway Fund.
- Mandating that certain municipal officials (a mayor, council member, and employee) be represented on county transportation committees and C fund advisory committees. County legislative delegations could, however, continue to request the DOT administer a county’s C funds.
- Removing a stipulation that 25 percent of C funds received by a county be expended on the state highway system.
- Requiring the DOT annually transfer $25 million from the state highway fund to the country transportation fund. These funds would be distributed evenly between all counties and could only be used on state owned roads.
- Lowering the gas tax to 10 cents, but then creating a new 6 percent excise tax on fuel based on the wholesale price of fuel. The Department of Revenue (DOR) will annually determine the wholesale price of fuel based on the wholesale price from the most recent September 30 to September 30 12 month period. Once the wholesale price is determined, DOR will convert the 6 percent tax into a cent-per-gallon figure and impose the new tax in the same manner as the current gas tax. According to Rep. Simrill, during a meeting of the House Infrastructure Committee, the net effect of this change at $2 a gallon would be about a 4 cents per gallon increase when compared to the current tax. As the price of fuel increased, the size of the tax would only grow larger.
- Raising the automobile sales tax cap from $300 to $500. Simultaneous with this increase, all revenues from vehicle sales tax would be divided between the General Fund and the State Highway Fund. The General Fund would receive the first $50 million in revenues from this tax and the State Highway Fund would receive all the remaining revenues. Under current law, 50 percent of the revenues from this tax are dedicated to the Highway Fund, while the remainder are divided between the General Fund and the Education Improvement Act (EIA) fund.
- Mandating another $50 million transfer from non-tax sources in the General Fund to the STIB – another provision added by the Ways and Means Committee. This is a doubling down on a policy first enacted in Act 98 of 2013, which mandated the DOT annually transfer $50 million from non-tax sources to the STIB. This provision will guarantee the STIB has at least $100 million in funding every year with which to create up to $1 billion in new debt for the purposes of road expansions.
- Indexing state income tax brackets so that, beginning in 2017, the 7 percent top marginal income tax rate is imposed on income over $16,350. Originally a standalone bill by Ways and Means chairman Brian White, this is the final provision added by the Ways and Means Committee. The estimated savings for the average taxpayer from this minuscule tax cut amounts to $48 over the course of a year.
The least objectionable provisions in this legislation fall short of true reform. The governor should have authority over the DOT, but this should come from the appointment of one secretary who sets policy for the entire agency. Allowing the governor to appoint a commission, especially one that must be approved by the legislatively controlled JTRC, does little or nothing to establish clear lines of accountability.
Likewise, the state should devolve some of the roads it controls to county control. But allowing counties to reject these roads makes the provision all but meaningless. Making the STIB board follow some form of priorities is superior to the current system (though true reform would involve abolishing the STIB). But even here priority reform is watered down by allowing the legislature to override the road project priorities whenever lawmakers see fit.
And as weak as the few provisions are that attempt to reform the current system, the other provisions of the bill are far worse. There is no justification for any gas or motor vehicle sales tax increase in the absence of structural reform to our infrastructure authorities. And the minuscule tax cut offered by the bill falls far short of offsetting the multiple tax hikes imposed by the same legislation. Nor is there any excuse to give more money to the STIB which uses the money it has to create new debt and finance unneeded new road construction. South Carolina’s transportation governance system is broken: more money won’t fix it. Citizens shouldn’t be deprived of more of their money to finance increasing levels of waste.
South Carolina roads can be fixed without tax increases, but lawmakers will have to deliver real structural reforms not a mix of tax increases and empty gestures.
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