Md. Transportation Commission Likely To Recommend Gas Tax, Fee Increases

Increasing the gas tax by 15 cents over the next three years, a 50 percent hike in vehicle registration costs, and boosting the titling tax to 6.5 percent are likely recommendations that the Commission on Maryland Transportation Funding will make in their report to the General Assembly and Gov. Martin O’Malley next month.The changes that are likely to be included in the report will help raise roughly $870 million in new funds annually to help pay for state, county and municipal roads and transit.

But any new revenues must come with the firm assurance that they will only be used for transportation, and not be used to balance the budget in other areas, the commission will recommend.

The detailed revenue recommendations, which members of the commission tentatively hammered out on Tuesday afternoon, are the final piece of their report. The commission was formed by legislation to evaluate and recommend new ways for the state to fund its transportation needs. They will finalize everything in the coming weeks.

“I think this is a really balanced and reasonable approach,” said Gus Bauman, chairman of the commission. “It gives the governor and the General Assembly something to start debating.”

Scores of potential revenue sources

Staff members from the Maryland Department of Transportation put together revenue estimates from scores of different potential sources, ranging from gas tax increases to property tax hikes. Commission members then discussed the amount of money they hoped to raise, and which revenue sources were the most appropriate.

The detailed preliminary recommendation includes:

A total 15-cent gas tax increase, phased in over three years. At the end of the phase-in, the increase would bring in $491 million annually.

A 50 percent increase in vehicle registration fees, which would raise $165 million a year.

Increasing the titling tax rate from 6 to 6.5 percent. This would earn $69 million a year.

Doubling the fee for emissions testing from $14 to $28. This would raise $22 million a year.

Increasing miscellaneous MVA fees, which would bring in $34 million annually.

Increasing MTA fares and ending funding of free rides out of the transportation trust fund. This would earn $25 million a year.

Indexing gas tax increases to inflation after three years, so the new funds keep pace with the economy.

The target amount of funds to raise, roughly $870 million, comes from estimates of transportation needs and funds lost. Most of the money, about $520 million a year, is what is needed to address immediate needs for state transportation. The remaining $350 million is to raise the money that used to be given county and municipal governments for their transportation needs. Dwindling revenues have caused the state to severely slash the assistance it gives to county and municipal government roads.

Committee members also chose to limit the revenue sources for transportation needs to transportation-related expenses. While increasing sales and property taxes for transportation uses were included on the list of potential revenues, committee members said that they are less fair ways to raise money. Bauman agreed, noting that sales taxes and property taxes are also used for many other state needs – including debt service.

“If we link the funding to transportation, we stand a chance in building up the peoples’ trust,” Bauman said.

Counties and municipalities

In past years, the state shared about 30% of its transportation money with counties and municipalities. A total of about $350 million of these highway user revenues were split between them annually.

Dwindling state revenues and growing needs has sliced that percentage and swiped funds from the local governments. Currently, the state only gives local governments10% of its funds for local transportation projects. Additionally, in trying to balance the state’s budget, money is often “borrowed” from these local funds. It is seldom, if ever, paid back.

Senate Majority Leader Robert Garagiola said that the commission should definitely work to restore the funds that local governments depended on. After all, he pointed out, people drive on local roads as much as they do state roads. Nobody differentiates between them.

“My recommendation is that we have language to phase in a funding change that will get us back to the 70/30 split we used to have,” he said.

The recommended phase-in would likely be over five years, commission members said.

What next?
Commission members took no votes on Tuesday. Bauman said he was looking for consensus to include in the commission’s final report, which is due on Nov. 1.
The commission will meet again in two weeks to make final decisions. Bauman said that while commission members fundamentally seemed to agree on the funding mechanisms discussed on Tuesday, there is still a possibility that the recommendation might change.

“In the end, we all knew this day was going to come. We have to make some hard recommendations,” Bauman said.

Regardless of the revenue recommendations, Bauman said that the commission’s top recommendation stands firm: putting the “trust” back in the transportation trust fund by guaranteeing all the money that goes there is spent on transportation needs.

At a Transportation Symposium at Morgan State University Tuesday, former Montgomery County Executive Doug Duncan, who now chairs the Suburban Maryland Transportation Alliance, said the needed tax hikes are “where leadership has to come in.”

“When you need tax increases in the state of Maryland, you need the governor behind it,” Duncan said.

But a new survey presented at the Morgan State symposium also found that Marylanders favored fee increases over a gas tax hike to fund transportation. – Megan Poinski

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—Len Lazarick contributed to this story.