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February 22, 2017 10:30 AM, EST
Southwestern States Considering Local Option Bills to Raise Money for Infrastructure
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Frustrated over growing transportation needs that aren’t being filled with state dollars, legislators in Arizona and New Mexico are sponsoring bills that would allow cities and counties to vote to tax themselves to pay for infrastructure improvements.

Arizona’s auditor general reported in 2015 that the state was facing a $62.7 billion transportation funding shortfall over the next 20 years. New Mexico’s current shortfall is $1.3 billion, according to its Department of Transportation.

However, the states’ Republican governors, Doug Ducey of Arizona and Susana Martinez of New Mexico, are anti-tax hardliners, which threatens the bills’ chances of passage. 

“There are a lot of local jurisdictions that are tired of waiting for the state to do something for infrastructure, kind of like the states are tired of waiting for the federal government to do something,” said Tony Bradley, president of the Arizona Trucking Association. “They want to have the option to have their future in their hands. The roads drop off dramatically outside Maricopa County [metropolitan Phoenix] which has a half cent sales tax to fund roads.”

Senate Transportation Committee chairman Bob Worsley, who sponsored Arizona’s local option bill, has also proposed taxing electric and hybrid vehicles along with users of compressed natural gas and liquefied natural gas while also raising license fees.

Kevin Adam of the Rural Transportation Advocacy Council called Worsley’s bill “a step in the right direction.”

Bradley added, “For the past four years, when I have a conversation about the gas tax, it usually stops with, ‘We’ve got to do something about those electric vehicles. They don’t pay anything for our roads.’ Until we can get past that, people don’t want to have the conversation about a gas tax increase.”

Arizona hasn’t raised fuel taxes since 1991, New Mexico since 1993.

In addition to its local option bill, New Mexico legislators are considering: SB 95, authored by Transportation Committee Chairman Clemente Sanchez, which would raise the taxes on diesel a nickel to 26 cents per gallon and on gas a dime to 27 cents per gallon; and SB 131, co-authored by Senate Finance Committee Chairman John Arthur Smith and House Transportation Committee Chairman Roberto Gonzales, that would split the revenue from a 10 cents per gallon fuel tax increase between infrastructure needs and the state’s badly depleted reserve fund until the latter has recovered or five years, whichever comes first.

“Our situation in New Mexico is very, very bad because we haven’t given our DOT a revenue increase in so long and because of the decline of oil and gas prices,” Gonzales told Transport Topics. “I have seen gas prices change 13 cents in a week and nobody says a word so there’s room to make adjustments to the tax. Hopefully we can convince the governor to work with us on one or two pieces of legislation.”

Johnny Johnson, managing director of the New Mexico Trucking Association said that NMDOT’s $1.3 billion funding shortfall — $1.5 billion worth of identified projects compared to $200 million in revenue — is the biggest he has seen during his five decades working in transportation in the state.

“We’re in deep trouble,” said Johnson, whose group supports another Gonzales bill that would transfer the 3% tax on motor vehicle purchases, worth about $150 million a year, back from the general fund. “No one wants a tax increase, but we understand that at the end of the day, you’re going to have to pay the piper. Our caveat this year is that the money has to go to transportation. If they want a tax increase without a lockbox, we’re not going to be able to support it.”

NMDOT spokeswoman Emilee Cantrell noted that the department’s budget has grown by between 0.5% and 1.5% annually for the last decade while the cost of highway construction has risen about 5% a year.

“We’re looking for any kind of revenue stream that would support transportation infrastructure,” said Mike Beck, executive director of the Associated Contractors of New Mexico. “We see states all around us, even red states with Republican governors, seeing the need to increase revenues. The national average is 31 cents for gasoline and we’re at 18 cents. The governor has been very firm in her stance of no tax increases. But if the public is willing to support it, it’s hard to understand how that would be a problem for her.”

That’s also how Arizona stakeholders hope Ducey and anti-tax legislators will handle Worsley’s local option and alternative vehicle bill. They have better odds of being approved by the Legislature since they’re not double-assigned unlike new House Transportation Committee chairman Noel Campbell’s fuel tax hike, which sailed through his panel only to be spiked by the House Finance Committee.

“I would think the medium-sized counties in the 150,000-400,000 range would vote for the local option,” Adam said. “There’s obviously an anti-tax sentiment in Arizona and not just among legislators, but if they have confidence that the funding will be used appropriately, they would support a tax increase for infrastructure.”

But would Ducey?

There’s an argument to be made that this is just authorizing the counties to implement their own tax, but I haven’t heard Ducey address that,” Bradley said.