Think tank: Gas tax not necessary

Originally published in the Daily Record

MPPI in the News Alexander Pyles | Daily Record Business Writer Mar 18, 2013

ANNAPOLIS — Maryland could alleviate its infamous traffic problems without enacting a package of tax increases backed by Gov. Martin O’Malley and leaders of the General Assembly, according to a new report by a public policy think tank.

O’Malley’s plan would increase the state’s gas tax (untouched since 1992), increase transit fares and allow both to rise with inflation, in large part to pay for mass transit projects such as the Red Line in Baltimore and Purple Line in suburban Washington, D.C., which total about $4 billion.

But in an 18-page report drafted in response to calls from Democratic leaders to raise the gas tax to pay for transportation construction and maintenance, the Maryland Public Policy Institute states a performance-based evaluation of potential transportation projects and creative leveraging of existing state money could yield greater benefits.

“Time is money, and Maryland’s economy is needlessly constrained as commuters waste time in bumper-to-bumper traffic,” said Christopher B. Summers, the institute’s president. “This report reimagines Maryland’s transportation network with an emphasis on delivering cost-effective, safe and speedy mobility while protecting commuters from regressive and unproductive tax increases.”

The report, drafted by Ronald D. Utt, a former senior research fellow at The Heritage Foundation, and Wendell Cox, principal of St. Louis-based public policy consultant Demographia, notes that just 8.8 percent of Maryland commuters use mass transit, making the cost-to-use ratio unfavorable.

But, despite light use compared to other modes of transportation — 73 percent of Marylanders drive to work alone and 10.5 percent carpool — the state pays for mass transit projects because, as in most states, transportation spending is based on a “transportation choice” model, which says taxpayers should expect to subsidize every mode of transportation available to them when they walk out their front door, regardless of cost.

That model is problematic, according to the study, because some modes are not as cost efficient as others. To address that, the report suggests using a cost-effectiveness study of proposed transportation projects, with final development blind to transportation mode.

“They come up with lists of priority projects, but a lot of the projects are built on political influences,” Utt said in an interview Friday. There’s a difference between selecting projects through “scientific analysis” and “political analysis.”

“A lot of these mass transit projects, in terms of what they provide, are very expensive,” Utt said. “And a lot of people aren’t located in a convenient way to use transit. For most people, it’s just not a cost-effective formula.”

Utt said Maryland should consider creating telecommuting policies or some kind of incentive for working from home, taking people off the roads and easing congestion through subtraction, rather than expensive capital projects.

Public-private partnerships could also be an answer, Utt said, using long-term lease agreements with businesses to leverage private dollars for major capital improvements. O’Malley and other transportation advocates in Maryland have already identified the partnerships as one way to help pay for construction of mass transit and roads. An administration-backed bill creating special procurement rules for such deals has been passed by the House of Delegates and is awaiting action in the Senate.

Business groups, which favor increasing taxes to alleviate congestion through new highways and mass transit lines, could also kick in some extra cash.

Business and labor leaders, many of whom rallied in Annapolis on Friday in advance of a House Ways and Means Committee hearing on O’Malley’s bill, argue that increased mass transit would make the existing system more robust, thereby increasing ridership. The Maryland Public Policy Institute’s report states, then, that businesses should be allowed to subsidize development of such projects by voting within a particular region to pay higher taxes.

Utt said the increase could be very small — just enough to supplement the cost of transit systems that businesses desire. Virginia has a similar law, he said, that has been used to pay for transportation projects in Williamsburg and Loudoun County.

Including the clear benefit to some business and labor groups — such as those that would repave roads or lay rail lines — Utt said it was obvious that transportation is closely tied to commercial success.

“Traffic congestion is the biggest obstacle to economic health,” Utt said.

Business leaders in Maryland echo that sentiment. But even groups that are ordinarily tax-averse now say transportation problems are too great to fix without statewide tax increases.

“We’re quite honestly reaching the end of the line,” said Donald C. Fry, president and CEO of the Greater Baltimore Committee. “A lack of attention to Maryland’s transportation infrastructure shows.”

The last gas tax hike was 21 years ago, and no new construction projects are on Maryland’s radar past the already-stalled Red Line, Purple Line and Corridor Cities Transitway (a proposed connection between Clarksburg and Gaithersburg). The state’s Transportation Trust Fund will only have enough money to maintain existing roads and highways by mid-2017.

The lack of attention is demonstrated by traffic congestion, Fry said, which accounts for gas tax advocates’’ estimate that the average Baltimore commuter loses $1,781 a year on roads. It’s worse for Washington-area drivers, who waste $2,195 a year.

Beverly Pannee, vice president of RJM Engineering in Ellicott City, said congestion was a major factor when RJM decided where to locate. Long commute times have a significant negative impact on employee productivity, she said.

Meanwhile, construction trades are still trying to recover from job losses suffered during the recession. James A. Russ, president of the Maryland Transportation Builders and Materials Association, said some of the companies he represents have laid off 50 percent of their employees. New money for transportation projects could alleviate some of that unemployment, beefing up job recovery in the state.

“Nothing is more important as it relates to keeping business going,” said Jim Dinegar, president of the Greater Washington Board of Trade.

The Maryland Public Policy Institute’s report does not disagree. But Utt said there are other ways the problem could be alleviated.

“Before we start spending more money, we ought to wholly pursue potentially lucrative non-tax sources,” he said.