Raising motor fuel taxes is not the only means of funding Iowa’s critical transportation needs, but the alternatives – bonding, tolling and sales taxes, for example – come with their own shortcomings, the state’s transportation chief told lawmakers Monday.
Department of Transportation Director Paul Trombino III didn’t rule out pursuing some combination of motor fuel taxes and alternative funding sources.
“There is a sense that the motor fuel tax won’t work forever, but it will work for a period of time,” he told the Senate Transportation Committee Monday.
However, he cautioned against borrowing or bonding to fund transportation projects.
“Borrowing doesn’t fit the state of Iowa. It never has,” Trombino said. Iowa has been a “pay-as-you-go” state.
States that rely on borrowing to meet transportation system costs “are facing some significant consequences because of that.”
“Any time you intermingle the word finance with transportation projects, I think you are taking a cost, a long-term cost,” he said. “That can be very counter-productive.”
Tolls are sometimes advocated as a way to capture revenue from through traffic, However Trombino warned Iowa’s grid system of roads that allow fluid north-south, east-west movement would make it easy for motorists to avoid the toll ways.
“You would have to create such a high price for the toll that it wouldn’t necessarily make revenue,” he said.
There is talk at the state and federal levels about raising sales taxes to pay for transportation. Trombino estimated it would take a 1.1 percent increase in the state 6-cents-per-dollar sales tax to raise the $440 million generated by the state motor fuel tax.
If lawmakers went that route, it would trigger an additional increase of three-eighths of a cent. That increase, dedicated to conservation spending, was approved by voters to take effect the next time the Legislature votes to raise the sales tax.
Another option is to charge motorists on a miles-traveled basis. In addition to the administrative challenge of that approach, it doesn’t capture revenue from out-of-state motorists, Trombino said.
In the end, he said, rather than rely on any one funding source, “the more diversified the funding we have in transportation long-term is a significant benefit.”
“Long-term it’s not one thing that replaces (fuel taxes and excise fees), but a multitude of things,” he said.
It was his second appearance before the committee since the Legislature convened Jan. 14. He’s scheduled to make an encore appearance before the House Transportation Committee next week.