Copyright © 2015 Albuquerque Journal
As New Mexico’s highways deteriorate, the need for repairs, expansion and reconstruction is growing at a dramatic rate. One national nonprofit research group recently reported that the state needs $730 million in road work immediately.
What’s not growing is the funding the state has earmarked for addressing those needs.
In fact, the $381.7 million the state’s road fund received last year was $5 million less than the year before and $18 million less than in 2007.
And nearly half of that money goes toward paying off debt for previous road projects and the Rail Runner Express commuter train.
The largest source of money is gasoline tax revenues, which have remained flat at about $150 million a year over the past 10 years.
First, the recession cut into the amount of miles driven. And, now, improved vehicle fuel efficiency is curbing the amount of gas motorists purchase.
“Historically, the state road fund grew at about a 3 percent rate until the 2007 recession,” Transportation Secretary Tom Church said. “To date, we are still below 2007 levels.” In 2007, the state road fund received revenue of $399 million.
The gas tax in New Mexico is 17 cents a gallon, a rate set in 1996.
DOT estimates that inflation has eroded the buying power of the state road fund by more than 10 percent since 2005, the Legislative Finance Committee reported this year.
Adding to the crunch is the fact that the road fund paid $146.2 million in debt service in 2014, further diminishing the state’s ability to pay for roadway projects.
“When the effects of debt service are accounted for, the purchasing power of the state road fund has decreased 32 percent since 1999,” the LFC wrote.
In addition to the gasoline tax, other major sources include a tax on diesel fuel, a weight-distance tax paid by large trucks and vehicle registration fees.
The state received a total of $841.6 million in transportation funding in 2014 from a variety of sources, including federal matching funds that totalled $373 million last year.
Vehicles more efficient
Key reasons for flat fuel tax revenue include the ever-greater fuel efficiency of vehicles and reluctance to raise taxes, said Greg Rowangould, a University of New Mexico professor of civil engineering.
Vehicle fuel efficiency has improved steadily under federal rules called the Corporate Average Fuel Economy, or CAFE, program. The rules require U.S. cars and light trucks to average 35.5 miles per gallon by 2016, rising to 54.4 mpg by 2025.
“Even if we have the same level of driving every year, there is going to be less revenue because the cars are more efficient,” Rowangould said.
Meanwhile, state fuel tax levels have remained constant for years.
New Mexico last raised the gasoline tax in 1993, from 16 cents a gallon to 22 cents a gallon. But it was reduced in 1996 to the current rate of 17 cents a gallon.
Most neighboring states’ taxes are slightly higher: Texas’ is 20 cents, Arizona’s is 18 cents and Colorado’s is 22 cents. Oklahoma’s is lower at 16 cents.
New Mexico’s tax on diesel last increased in 2003, from 18 cents a gallon to the current rate of 21 cents a gallon.
Questions about how best to fund road projects also dog lawmakers seeking a special legislative session to approve the annual infrastructure bond package.
The ongoing discussion about a compromise bond package “reflects the weakness of our maintenance moneys for highways,” said Sen. John Arthur Smith, D-Deming.
“I don’t want to get into a situation where you pit education against roads,” he said. “You can’t just keep ignoring the roads either for a long time.”
State leaders and policy experts agree that New Mexico needs to increase funding to maintain New Mexico’s roads and bridges, though opinions differ on how best to do so.
“They are going to have to do something to raise revenue,” Rowangould said. “They don’t have an option of doing nothing.”
State leaders have proposed several alternatives for boosting road funding, ranging from an increase in fuel taxes to using bond funding backed by severance tax revenue from oil and gas production.
Church said he wants the state to shift motor vehicle excise tax revenue, or taxes on the sale of cars and trucks, from the general fund to the state road fund. The move would provide an additional $140 million a year for road projects.
Smith, chairman of the Senate Finance Committee, sponsored a bill this year that would have raised the excise tax on both gasoline and diesel by 10 cents a gallon – an increase identical to one passed by Wyoming in 2013.
This year, Utah, Georgia and Iowa have approved state gas tax increases of varying amounts. Utah’s gas tax will increase to 29.5 cents a gallon on Jan. 1.
Smith’s bill would have raised an additional $141 million a year, the LFC estimated.
Smith said he had hoped Gov. Susana Martinez would support an increase in fuel taxes, but Martinez has remained opposed to tax hikes. Lacking her support, Smith did not seek support for the measure.
“I didn’t have anybody sign onto that bill, because it’s political poison to talk about a gasoline tax,” Smith said. “But we’re running out of ways to take care of our roads and bridges, and local municipal transportation systems.”
Rep. Roberto “Bobby” Gonzales, D-Taos, proposed a 5-cent gas tax increase that failed in a 6-5 vote in the House Transportation and Public Works Committee, with Republicans voting against the bill and Democrats voting in support.
A Martinez spokesman confirmed her opposition to a gas tax increase as harmful to New Mexico families and businesses. The state should use existing funding sources to pay for needed road improvements, spokesman Michael Lonergan said in a written statement.
In her State of the State address in January, Martinez proposed allocating $180 million over three years from the infrastructure bond package to pay for major highway projects.
House Republicans, with support from Martinez, this year added $45 million for road improvements to the bond package in the $264 million capital outlay bill.
The Senate version of the capital improvement bill also included $45 million for road projects, but the money would have come from the state’s cash reserves.
Senate Democrats balked at paying for large-scale road projects with severance tax bonds and the 60-day session ended without passage of the capital outlay bill, which typically pays for projects such as senior centers, museums and university buildings.
It marked the first time since 2011 that lawmakers failed to approved a capital outlay bill.
Rep. Jason Harper, R-Rio Rancho, chairman of the House Ways and Means Committee, said House members sought the $45 million in bond funding to pay for improvements to two-lane U.S. 82 in Eddy and Lea counties, which is heavily used by oil field traffic.
Transportation officials have identified as its highest priority widening an 86-mile stretch of U.S. 82 to four lanes.
“That corridor is crucial to the (oil) industry that is giving us the severance tax dollars,” Harper said. “By putting this big block of dollars toward that project, we can leverage federal dollars. We’re able to make these dollars go farther.”
Church said New Mexico could get a one-to-one match in federal funds for the project, doubling the state’s investment.
Harper called the gasoline tax sound policy because it puts the expense of roads on people who use them. But a gas tax increase would require a process for building public support, he said.
“Policywise, it is a good tax, but it hits people hard in the pocketbook,” he said.
“If we decide that’s the way we want to go, there needs to be a big campaign with the business community and the voters.”
Lawmakers are negotiating a compromise intended to allow passage of the capital improvement bill during a special session. Smith said a compromise would likely include a mix of severance tax bonds and cash reserves to pay for road projects.
“That enables us to live and fight another session over responsible highway and street funding in the state,” he said.