North Carolina has the second-largest state-maintained highway system in the nation. To maintain the system, user-related funds such as motor fuel taxes and state motor vehicle license and registration fees are used to pay for roads. But all that might change soon.
The General Assembly approved a significant new law in the final hours of the 2007 session (Session Law 2007-428; Senate Bill 1513), which allows counties to pay for public streets, highways, and bridges. The bill will significantly change the way transportation needs are met and paid for in our state. It gives counties eminent-domain powers and allows them to use their revenue for construction, reconstruction, improvement, and maintenance of roads in the state highway system. But just like during the Jim Black era, the bill passed into law with little debate and little oversight. The final version of a complicated bill was presented to the Assembly in the final hours of the session. Yet, with virtually no one noticing, the responsibility for building roads in North Carolina shifted from the state to the counties.
North Carolina’s Department of Transportation has a long history of problems, from bid-rigging scandals to flawed paving of a long stretch of Interstate 40 that required repaving within two years, from delays over I-485 around Charlotte to refusal to release a $3.5 million report commissioned to study department inefficiencies and waste, and of course, the $277,000 ferry that was never used. In short, DOT has a long record of producing controversies and little in the way of maintaining and building roads. Unmet transportation needs are expected to cost $65 billion over the next 20 years.
Beginning in 1908, with the invention of the automobile, wealthier urban counties built roads by assessing a county road tax. In 1915, the State Highway Commission was established, and in 1921 the state assumed fiscal responsibility for roads by issuing bonds to be paid from a new gasoline tax. Soon after, North Carolina became known as the Good Roads State. In 1931, following the Depression, local governments faced bankruptcy. The Assembly, in an effort to centralize state government, assumed control of the roads and has held control of construction and maintenance for all these years with funding still coming from gasoline and use taxes.
If the money currently going to the DOT were re-directed to the counties to build and maintain roads, we might see a better system. But what will most likely happen is that DOT will continue to receive just as much state funding and yet still be riddled with inefficiencies and wasteful spending while counties will raise taxes for additional revenue to take care of transportation needs that DOT will not and has not done. Where will the counties get the money to build roads?
Counties get their revenue from a portion of sales tax, various fees, and primarily from property taxes. During debate surrounding the local tax referendum held Nov. 6 in 27 counties, claims were made that the counties do not have revenue to meet their current needs. If they assume part of the responsibility for roads, they will claim that they must raise taxes to pay for roads. Unless the tax structure is revamped, the burden will fall primarily on property owners, the same folks who are paying for school construction costs.
Is the state merely shifting its responsibility to the counties? When the state agreed to take back the counties’ share of the Medicaid burden this year, it enacted a swap whereby the counties wouldn’t have to pay for Medicaid but they also would have to relinquish one-half cent in sales tax back to the state. There was no effort to make Medicaid more cost-effective and efficient, just a shift in who pays for it. If the counties want more money for school construction, or now, for roads, the state authorized them to raise taxes, either with additional sales tax or a land transfer tax.
The decision to allow counties to pay for roads is worthy of public discussion and legislative debate with a full disclosure of where the revenue will come from. Full discussion of what role the counties are going to play in transportation should come after a full discussion of how to most effectively address the transportation needs facing our state, including how to clean up DOT. Simply pushing the responsibility to the counties and expecting taxpayers to pick up the tab is not the prudent path to good roads in North Carolina.
Becki Gray is director of the State Policy Resource Center.