Wednesday, November 26, 2008

Crisis in Transportation, Part Three

In Part Two, we described Oregon Governor Ted Kulongoski’s aggressive infrastructure bill to create jobs, stimulate the state’s economy and generate long-run returns for Oregon. So what about Maryland?

No one argues that Maryland’s transportation needs are immense. And according to MDOT Secretary John Porcari, the $400 million increase approved in the 2007 special session is only now yielding $265 million, just barely enough to keep up with system preservation needs. Put aside the obvious need for specific projects like the state’s three proposed transit lines and the BRAC projects in Bethesda, Aberdeen and Fort Meade. There are four reasons why Maryland’s political leaders must heed the example of Oregon and start putting more money into transportation now.

1. The need for matching funds
Many large projects that rely on federal financing require matching funds from state government. That is especially true of Baltimore’s Red Line and the Washington suburbs’ Purple Line and Corridor Cities Transitway. Unless Maryland demonstrates an ability to raise sufficient funds to pay its share of these projects, federal money will flow elsewhere.

2. Costs will go up in the future
At present, we are deferring $1.1 billion in new transportation projects and face the possibility of delaying $2.5 billion more. It is inevitable that delayed projects will see higher construction costs if they are started years in the future. That will be especially true if petroleum costs rise again and ripple through into construction materials. And recessions are good times to build construction projects because contractors are hungry for work and will restrain their margins just to keep their key personnel employed.

3. Economic competitiveness
The Tax Foundation’s determination that Maryland’s business tax climate has deteriorated from 24th to 45th among U.S. states in one year is a threat to the state’s reputation. If in addition the state is perceived as unable to finance its transportation infrastructure, it will risk being perceived as a radioactive place for locating jobs.

4. Job creation and the next elections
Governor O’Malley has done his best to deal with a difficult budget situation. But if the economy is still in rough shape in 2010, that may be insufficient to mollify voters. What voters want in tough times is to create jobs – especially high-paying jobs. The construction industry creates and supports many high-wage jobs such as estimators, engineers, architects, planners and superintendents. And on state transportation projects, the building trades workforce is protected by Maryland’s prevailing wage law, ensuring adequate pay and benefits. The short-term ripple effects of job creation will combine with long-run returns on improved infrastructure to benefit the state’s economy immensely. And the Governor will enjoy support from both business and labor if he proposes such a plan.

But what about the tax increase necessary to support it? Voters recently demonstrated their unhappiness with tax hikes by voting for slots and the Ficker amendment while opposing a telephone tax in Prince George’s County. But transportation taxes differ in two ways:

1. If they are truly dedicated to transportation, voters may support them. If they are used to finance “general spending,” voters will be skeptical.

2. Recent declines in gas prices mean that voters will not be hit in their pocketbooks by a gas tax hike. According to Gasbuddy, the average gas price in Maryland has fallen from over $4.00 last summer to less than $2.00 now.

Oregon Governor Kulongoski’s two-cent gas hike would amount to less than one-percent of the recent reduction in gas prices if implemented in the Free State. If the gas tax cannot be raised and/or indexed now, when can it ever be increased?

Maryland has a transportation crisis. So does Oregon. Oregon’s leadership has a plan to deal with it. We need one too.

Update: The Baltimore Sun details the total lack of leadership in Howard County on this issue.