Road repair bill would raise transportation taxes, fees

California motorists will each be paying an extra $900 over the next five years for road maintenance if Senate Bill 16 is approved by the Legislature and signed by Gov. Jerry Brown. But that $18.4 billion increase in transportation taxes and fees would only make a dent in the state’s projected $138 billion shortfall over the next 10 years to maintain local roads, state highways and bridges.

The bill’s author, Sen. Jim Beall, D-San Jose, has made SB16 an urgency measure, which would put it in effect immediately rather than taking effect in January. Urgency bills require two-thirds approval by the Legislature, which means SB16 will need a few Republican votes to pass each house. The bill has passed two Senate committees without any Republican support so far.

Mix of taxes and fees

The bill would spread out how the revenue is collected by:

• Raising the 30-cent-per-gallon gasoline excise tax by 10 cents and raising the 13-cent tax on diesel by 12 cents per gallon. Those taxes are in addition to the federal 18.4-cent-per-gallon gas tax (24.4 cents for diesel).
• An increase in the vehicle license fee of 0.65 percent of the vehicle’s value to 1 percent of the value.
• A vehicle registration fee increase of $43 per vehicle to $78 per vehicle and adding a new $100 fee for zero-emission vehicles.

The taxes and fees are projected to raise $3.5 billion in the first year, gradually increasing to $3.9 billion in the fifth year. Five percent of the revenue would be set aside for counties that pass local transportation sales and use taxes, but which have not previously passed such taxes.

Justification for the increases

Beall told the Senate Governance and Finance Committee on May 6 that there’s an urgent need for more road funding because the longer repairs are put off, the greater the cost to fix them:

“The state transportation system is critical to California’s economic well being and enables us to move goods, people and ideas around the state. All of us who drive share the responsibility to maintain our roads. We use the roads, we wear them down.

“We must properly maintain them, because it’s cheaper than rebuilding a ruined freeway or a ruined street. California now faces a $59 billion backlog in state highways that will grow in absence of a solution. There is a sense of urgency and this is necessary.

“My bill, SB16, creates a much-needed, temporary funding plan to address the maintenance backlog of our aging system. My bill is based on four principles. First it establishes an equitable financing strategy. Everyone contributes their fair share for using our roads. This includes returning the [truck] weight fees from the general fund to road maintenance.

“Second, my bill includes protections to ensure that funding goes only to road maintenance. Third, it establishes efficiencies to Caltrans to ensure projects are completed on time and on budget. Finally, my bill provides funding at the state, county and city level to address road maintenance needs at all levels.

“SB16 will save the state money in the future and alleviate the need to raise even higher tax revenues in future years. We have a long way to go. But I think most everyone can agree on the needs. Let’s come together and address the issue now, instead of letting the problem grow and expecting someone else to resolve the issue later.”

Jennifer Whiting, representing the League of California Cities and the California State Association of Counties, echoed Beall’s comments.

“SB16’s combination of ensuring that existing transportation revenues fund transportation projects, and its targeted tax and fee increases, strike the right policy and fiscal balance needed to address this momentous challenge.

“In addition to the $59 billion shortfall for the state system, the local streets and road system is facing a $79 billion shortfall over the next 10 years. We don’t know that there’s a single solution to the entire problem. However, it’s very clear that we have to act now.

“A five-year delay in additional investment in the system will cost California taxpayers $11 billion. That’s just the act of inaction will cost us $11 billion over the next five years. The local system is critical to goods movement, farm-to-market needs and regional travel. SB16 is a critical component of fixing the system.”

Jose Mejio, representing the California State Council of Laborers, said increased road repair funding “would boost this economy with job creation in a domino effect for all of the various components that have to fit to be able to build infrastructure in California.” Beall said his bill will create 171,000 jobs.

Argument against the bill

Only one person testified against the bill: David Wolfe, representing the Howard Jarvis Taxpayers Association. He acknowledged that gas tax revenue has not been increasing at the rate it has in the past due to an increase in more fuel-efficient vehicles:

“And that problem is going to continue to get worse in the years to come, and it needs to be addressed. But it’s not addressed by doubling down on a tax and increasing a tax that’s very inequitable. It’s just not the way to do it. California has the second highest gas tax in the nation behind Pennsylvania. A discussion needs to be had with how our roads are funded.

“We have a $110 billion general fund budget. We have a $2 billion surplus right now. And we need to think about … spending more dedicated revenue on transportation projects. It worked 50 years ago with [Gov.] Pat Brown. And there’s no reason why, especially with more general fund revenue, it can’t work in that same way today.”

Only one committee member, Sen. John Moorlach, R-Orange, voted against the bill. He noted that California has many funding needs:

“We have a transportation problem. We have an unfunded pension plan problem. We have an unfunded retiree medical problem. We’ve got an unrestricted net deficit in this state of a $117 billion problem. So we’re just looking at one-quarter of our big problems.

“It seems to me it’s got to come all the way from the top in how we deal with all four of these segments. We can’t just say we’re going to raise taxes for all four of them.”

Moorlach also challenged the bill’s job creation claim. “That [increased funding] comes out of taxpayer pockets,” he said. “It seems like zero sum game. You’re spending a billion dollars here, but you’re taking it from somewhere else. At the end of the day there might be jobs lost as well.”

Only one committee member voted against the bill when it was considered by the Senate Transportation and Housing Committee on April 28: Sen. Ted Gaines, R-Eldorado Hills.

“I really feel with an improving economy, and even a recent report of $4 billion in additional revenue coming into our state treasury, why aren’t we spending tax revenue that’s already coming into the treasury and prioritize that infrastructure in California?” he said. “We’ve been able to do it historically. We’ve obviously fallen behind.”

If SB16 passes the Legislature it will likely be signed by Brown. In his 2015 inaugural address the governor discussed the need to have “the roads, highways and bridges in good enough shape to get people and commerce to where they need to go. … Each year, we fall further and further behind, and we must do something about it.”

The bill will next be considered by the Senate Appropriations Committee.