Coloradans will get what we pay for with transportation ballot measures
By: Abbey Pizel, Natural Resources Policy Analyst
The 2018 election is a road trip, one where voters have to decide between two routes for addressing Colorado’s transportation funding woes. One of them, Proposition 109, is a worn-out shortcut riddled with pot holes. The other, Proposition 110, is the only way to get us where we need to go.
Make no mistake, our state’s traffic problems are a big deal. The Colorado Department of Transportation (CDOT) estimates there are roughly $9 billion in backlogged projects statewide. In fact, one of the few things both political parties tend to agree on is that we need to make investments in transportation.
While Prop. 110 uses a fiscally responsible funding mechanism to make a big dent in the problem, Prop. 109 is a poorly written plan that would create fiscal problems for decades to come.
The need for change is clear
Colorado’s current, primary source of revenue for our transportation system is the gas tax. In 1991, the year Colorado raised the gas tax to 22 cents per gallon, the average price of gasoline was $1.14. In 2017, the average price of gasoline was $2.47. And the gas tax? Still 22 cents.
Not only has Colorado’s gas tax stayed flat for more than a quarter of a century, it’s also one of the lowest rates in the country, ranking 40th out of 50 states.
The gas tax might not have changed, but plenty of other things have. Because of inflation and other factors, the cost of building roads and bridges (measured by the Construction Cost Index) have outpaced revenue. One dollar’s worth of construction in 1991 was only worth 32 cents in 2015, meaning the state’s buying power has fallen significantly.
Also, thanks to improvements in technology, vehicles are much more fuel efficient than they were even just a decade ago. That means Coloradans are now paying less for every mile of wear and tear we put on our roads.
What does all this mean for our transportation funding? Even though the number of vehicle miles traveled has increased by more than 81 percent and the state’s population has grown by over 63 percent from 1991-2016, CDOT’s budget has only increased by 31.4 percent. Occasionally, the economy experiences the kind of growth that allows legislators to make deposits in the transportation fund (Highway Users Trust Fund, or HUTF) from the general fund (see figure 1 below). The years when those transfers don’t occur typically line up with bad or mediocre economic times, when resources for funding other state priorities are scarcer.
Figure 1
Clearly the gas tax, even when supplemented by occasional General Fund investments, has become ineffective at funding transportation needs as the state grows.
Transportation at a crossroads: Prop 109 or Prop 110?
Prop 109 requires CDOT to borrow of up to $3.5 billion for 20 years ($5.2 billion in total repayment). The bond revenue must be used exclusively for road and bridge expansion, construction, maintenance, and repair on the 66 projects identified in the measure. The proposed measure requires that bond repayment be paid from existing state revenue, specifically prohibiting the use of new taxes or new fees to pay the debt obligations.
Prop 110 allows CDOT to borrow up to $6.0 billion and pays for the bonds through an increase in the state sales and use tax rate from 2.9 percent to 3.52 percent starting in January 2019 and ending in January 2039. The measure also creates a citizen oversight commission that must annually report how the bond proceeds have been used and allocates the new revenue as follows: 45 percent for bond repayment and State Highway Fund; 15 percent for a Multimodal Transportation Options Fund and 40 percent for municipal and county transportation projects (meaning local governments will decide how to spend that portion of the money).
Proposition 109 and Proposition 110 both propose issuing Transportation Revenue Anticipation Notes—a type of bond, commonly referred to as TRANs—and using these bonds to make some of the much-needed upgrades to Colorado’s aging and outdated transportation infrastructure. But that’s where the similarities end.
Prop 109 mortgages the General Fund
While Colorado’s General Fund has not been the primary source of revenue for transportation (see above), it is the source of the funding for K-12 education, higher education, health care, senior services, and other critical public investments.
Colorado’s strong economy has generated hundreds of millions in new revenue in recent years, but the good times won’t last forever. Because Prop 109 uses the money collected from income and sales taxes at their current rates, when the next recession comes, lawmakers will be required to cut funding for ongoing state priorities in order for Colorado to pay for the bonds. That’s because when lawmakers are writing the budget, paying back the bonds will have to come first before other priorities are considered. The risks of non-payment are simply too high a risk for the state.
In many ways, Prop 109 is worse than doing nothing at all. Because Colorado’s economy relies so heavily on General Fund investments in health care and higher education to provide a stabilizing factor during economic downturns, cuts to those critical priorities will be especially painful when the next recession hits.
Additionally, Prop 109 assumes that roads are the only and best answer to addressing the state’s transportation needs. It prohibits the use of the bond proceeds for anything other than roads—and a specific set of roads at that. Regardless of whatever changes in the next 20 years, the only transportation projects that can be supported are the ones identified in 2018. That means projects to construct or improve alternate forms of transportation (like public transit, bikes, and pedestrian walkways) will languish.
Prop 110 is a responsible approach
There’s an old adage that’s especially true when it comes to tax and fiscal policy: you can’t get something for nothing. Without a new revenue source, or a permanently booming economy, transportation projects will always come at the expense of other priorities.
That means prudent investments for new transportation projects require new, sustainable, and dependable sources of revenue. When considering the source of the new revenue needed to fund transportation projects, without sacrificing other areas of the budget, two consumption taxes were considered: an increase in the state sales tax and an increase in the gas tax.
Although Colorado has historically relied on gas taxes, a sales tax is considered a better option in 2018 for two reasons. One, as discussed above, the gas tax is applied per-gallon of gas purchased and collections have not kept pace with needs. Second, because gas expenses are an unavoidable necessity in Colorado, it’s often a bigger part of budgets for people with low incomes than it is for wealthier people. That makes the gas tax more regressive than a general sales tax. The more regressive a tax is, the harder it will hit working families’ budgets.
The choice is stark
A new source of revenue provides a way to finance Colorado’s transportation needs without taking from existing activities supported by the General Fund. If voters approve the tax increase, Colorado would ensure our commitment to a 21st century transportation system by charging an additional 6 cents for every $100 purchase of goods including by visitors to Colorado. It’s fiscally responsible.
Prop 109 sacrifices K-12 education, higher education, health care, senior services, and even good water and air quality. All of these are equally important to building the thriving communities we all enjoy.
Let’s all choose the right road going forward.
