February 3, 2009

Zero Transportation Debt Capacity Highlights Need for Reforms

Posted at 4:49 PM by Stephen Jackson

Unless new revenue sources are found, North Carolina has tapped its transportation debt capacity until fiscal year 2011-2012 according to the 2009 Debt Affordability Study released February 1 by State Treasurer Janet Cowell.

Declining revenues and obligations to cover the so-called ‘gap funding’ for the Turnpike Authority are cited in the report as the two major reasons for the bleak outlook. The report concluded that new revenues of $245 million would be needed in 2010-2011 to enable any debt issue – a 9% revenue increase of the projected revenues for that year.

Tollroads are lauded by supporters as a cheap infrastructure option. It would appear, however, that the need to fund the ‘gap’ between toll revenues and Turnpike Authority debt obligations is already crowding out the ability to fund other major and urgently required projects, such as the Yadkin River Bridge on I-85, or to kickstart major light and commuter rail projects serving urban areas. That the Gaston Garden Parkway, a Turnpike Authority toll road attractive only to developers and real estate speculators, will get funded at the expense of more urgent major capital projects once again underscores the need to re-visit the project selection and prioritization process in North Carolina.

Based on present state policy, the federal stimulus package will do little to assist the building of projects such as the Yadkin River Bridge. The $800 million for roads (give or take depending on how the Senate bill looks) will be allocated through the Highway Trust Fund according to the equity formula. This will split up the money and may fund minor projects of questionable importance. The $90 million or so for public transportation and other modes (bike, pedestrian, ports etc) is dwarfed by the capital requirements in these areas.

Unless the legislature acts to allocate the money specifically to major and urgent projects, the Secretary’s hands will be tied.

The 2009 Debt Affordability Study also highlighted the need for the legislature to seriously consider transportation tax and fee reforms in this session. The economic downturn is hitting transportation revenues hard at a time when major investment in bridges, maintenance and public transportation are required. Based on input from NCDOT, the Study’s revenue forecasts through fiscal year 2013 are down over 7% compared to the estimates made one year ago in the ‘08 Study.

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