Industrial projects overwhelm state’s transportation funding

MONTGOMERY – Alabama’s transportation department doesn’t have enough gasoline tax revenue in any single fiscal year to keep up with regular highway work and fund mega-industrial projects.

The Alabama Department of Transportation promised $55 million in state roadwork to ThyssenKrupp, the new German steel manufacturer that will locate in Mobile and Washington counties.

Add another $15 million the DOT has promised to help attract a railroad boxcar plant to Colbert County and you’re talking 11 percent of the DOT’s $655.6 million worth of contracts that were let in 2006.

Of course, industrial costs will be spread over several fiscal years, so the immediate financial impact of funding industrial work isn’t in one year, said DOT chief engineer Don Vaughn.

Since it appears that state and local economic incentive ducks are in a row to seal the boxcar deal, an announcement may be made within weeks, although Gov. Bob Riley’s office won’t comment.

Vaughn said the roadwork includes adding an interchange to Alabama 20 and reconfiguring local roads.

The boxcar proposal, called Project Tiger, is the largest known industrial prize since Alabama landed ThyssenKrupp in May.

The bottom line is that the state appears to not have enough money to build new roads while maintaining existing ones in a timely fashion.

“We’re not generating enough money,’’ Vaughn said.

“We’re becoming a maintenance operation now. And maintaining the system we’re trying to build, it curtails our activity to add capacity to our system unless something is done to generate new revenue.’’

The state pays for roads to support industry in two ways: an annual $12 million, with interest, fund that has too many projects chasing too few dollars, and the regular DOT road budget of about $650 million a year that comes from gasoline and diesel fuel taxes. There are also federal funds available, but it takes state funds to get them.

The Alabama Industrial Access Road and Bridge Corp. fund has $633,000 remaining this fiscal year but there are $10.4 million in outstanding requests.

“This is for small industrial development projects, but when you get a (ThyssenKrupp) or Mercedes, that (money) has to come from outside,’’ Vaughn said.

Don Arkle, the DOT’s assistant chief engineer, said the state is committed to new industry, so the choice isn’t between funding existing roads or industrial projects.

The challenge is to juggle projects to fit within existing budgets that are largely determined by how much gasoline motorists buy, he said.

“Our revenue is flat; gasoline is down and diesel is up slightly,’’ Vaughn added.

Vaughn said other factors influencing the juggling in the five-year road plan include weather disasters, accidents, cost overruns, contracting disputes, lawsuits and ambitious projects.

The five-year highway plan now includes only three years’ worth of roadwork but Vaughn couldn’t say which projects ultimately will be readjusted except that “they’re all over the state.’’

Juggling projects depends on need versus wants, safety and the potential for economic growth, he said. “We adjust our program to provide transportation programs and incentives to industry to come into the state,’’ he said.

Alabama’s roads are funded with a 5-cent per gallon gasoline tax that produces more money only if motorists buy more fuel. Partly because of higher gas prices, motorists are choosing smaller vehicles for better mileage and driving less, which means the gasoline tax fund can actually shrink.

Since the gasoline tax’s inception in 1992, the amount collected has grown by about 14 percent, not enough to overcome the effect of inflation in road material prices and wages.

Inflation has eroded the purchasing power of the entire 18-cent-per-gallon fuel tax by $103 million, according to the Public Affairs Research Council.

The road-building industry tried to index gasoline taxes to keep pace with eroded purchasing power with legislation in the just-completed session that would have increased taxes about 1 cent per gallon a year for five years.

The Legislature refused to pass the bill, sponsored by Rep. Mac Gipson, R-Prattville. Gipson said he’ll keep trying, but he’s planning on leaving the Legislature in three years and there may not be a gas tax champion when he’s gone.

The Alabama Road Builders Association claims there are fewer road contract lettings each year, and statistics prove it, but the dollar amount of each project increases.

“The magic trick is somebody is going to have to have the political courage to say this is a crisis that is heading down the track and hitting us in the face,’’ said Road Builders Association Executive Director Billy Norrell.

“If (we have) more (ThyssenKrupps) and Kia subsidiaries and Hyundais, we have to raise revenues,’’ he said. “It’s not popular, but we have to do it.’’

The shortages have not gone unnoticed.

“The governor is painfully aware of it and is looking at some public/private partnerships and toll roads,’’ Vaughn said. “The bottom line is, we cannot continue to meet needs under the current situation.’’

Glenn Richey, a professor of management at the University of Alabama, said the obvious solution is additional funding.

He said he prefers a user-pay system, which is what gasoline taxes are. But taxes are political decisions.

“The question is whether (residents) want to pay more for industry,’’ Richey said. “In the long term, will this improve the state overall?’’

Richey said with the ThyssenKrupp $3.7 billion plant announcement for Mobile County and with up to 10,000 new federal and military jobs coming to the Huntsville area, Alabama is at a crossroads in deciding how to pay for its infrastructure needs.

“We’re at a point we don’t have a choice,’’ Richey said. “People in Montgomery are going to have to decide where the investment comes from.’’

Dana Beyerle can be reached at (334) 264-6605 or dtb12345@aol.com.