North Carolina drivers pay one of the nation’s highest gasoline taxes to take care of roads and bridges – and their tax money also takes care of developers, utilities, outdoor advertisers and other business people who pay little or nothing for services that cost the state Department of Transportation millions of dollars each year.
DOT officials are recommending new fees that would scale back this taxpayer subsidy and shift the burden to businesses. They may face resistance from the 19-member Board of Transportation, which includes developers and real estate executives whose businesses make use of these services.
In some cases, DOT now collects modest fees to recover a fraction of what it spends on office reviews and field inspections to regulate billboards, issue business and subdivision driveway permits, and oversee the movement of oversize and overweight trucks.
But developers pay nothing for the DOT engineers who evaluate project plans, approve plats and walk the streets of each new subdivision four times before adding them to the state-maintained road system. Nor do builders and utilities pay DOT to monitor their 10,000 encroachments – the installation of pipes and cables and other work – along state roads each year.
Local governments cover the cost of comparable services by collecting fees that can add up to thousands of dollars for a single subdivision. DOT draws instead on gas taxes and motor vehicle fees.
Officials promise final numbers this week, but preliminary figures suggest that these services could be costing DOT $7 million a year or more.
The taxpayer subsidies are coming to light as DOT responds to a mandate from the General Assembly to cut the use of tax dollars for these services. This week, the state Board of Transportation will consider recommendations for new or increased fees set high enough to recoup these costs.
A few DOT board members were wide-eyed at an Oct. 1 meeting when Mike Holder, DOT’s chief engineer, recommended the new fees.
Ned Curran, CEO of the Bissell Cos. in Ballantyne and chairman of the transportation board, noted that such fees would affect a lot of development in fast-growing Charlotte. He said it would also help address the region’s growing transportation problems.
The Charlotte Area Transit System’s long-range 2030 plan faces a $5 billion shortfall, and the state has adopted a controversial toll lane plan to widen Interstate 77 in the Lake Norman area.
“We clearly get that we can’t be as reliant on a declining revenue source like the gas tax,” Curran said. “I think it is appropriate that we’re trying to look at lots of different areas to raise more revenues.”
But some developers say there could be negative consequences. Such changes could slow the momentum of the recovering housing market, said Bill Saint, CEO of Classica Homes and board chairman for the Home Builders Association of Charlotte.
“The bottom line to any of those fees is always that, (even) if you think you’re passing it on to a home builder, clearly it gets boiled into the home price,” he said. “It gets passed on to the homeowners.”
A need for revenue
North Carolina’s motor fuels tax, 36.75 cents per gallon, is the highest in the Southeast and higher than the gas taxes in all but nine other states. But gas tax collections are waning here and across the country as drivers switch to more fuel-efficient cars.
Gov. Pat McCrory said in September that he will recommend new revenue sources to the 2015 General Assembly – possibly in conjunction with a gas-tax cut – to address transportation needs expected to cost between $94 billion and $123 billion by 2040.
At DOT’s suggestion, the legislature’s 2014 budget law included a mandate for recommendations on new fees to cover the cost of services – and on other ways to cut costs or even generate extra revenue from private sponsors and marketers.
Curran said the transportation board won’t enact the fees, but will make recommendations to the legislature.
The most expensive areas for no-fee services are related to subdivision development and encroachments on state highway rights of way. DOT officials said last week they were still calculating their expenditures, but preliminary figures suggest that taxpayers may be covering $2 million to $5 million in department costs.
Gas taxes also subsidize the work of engineers who regulate the movement of tens of thousands of trucks that are longer, wider, taller or heavier than state standards. Permits are required, and in most cases the fees are nominal.
DOT issues about 2,500 permits a year for “superloads” between 150,000 and 1 million pounds. This cargo includes industrial machines, power generators, bridge girders, beer vats and nuclear vessels – sometimes heavy enough to damage roads and bridges.
DOT has recommended fee increases that could generate nearly $1.9 million more in yearly revenues from oversize and overweight trucks. The proposed fees would increase a permit from $12 to $17 for each dimension – height, width, length, weight – over state standards. A superload surcharge would increase from $3 to $4 per 1,000 pounds.
DOT engineers put in plenty of work in 2011 when the fuselage of an Airbus jetliner – from the historic USAirways Flight 1549, which made its final landing in New York’s Hudson River – rolled slowly from New Jersey to a museum in Charlotte.
Kevin Lacy, DOT’s chief traffic engineer, couldn’t find a copy of the permit but said that if the weight was less than 132,000 pounds, the jetliner fuselage fee would have been $48. Under the recommended fee increase, this would go to $68.
‘Huge money’ in billboards
Outdoor advertisers might feel a bigger bite as well. They pay $60 each year to renew their billboard permits – a fee DOT proposes to double for the nearly 8,000 billboards statewide.
A separate $200 permit, good for a year, is required for approval to cut down trees, shrubs and tall grass that block what outdoor advertisers call the “viewshed” for each billboard. DOT aims to triple that fee to $600.
Paul Hickman, president of the N.C. Outdoor Advertising Association, worries about the fees for his trade group members. As a Raleigh-based manager for Fairway Outdoor Advertising, Hickman himself handles 800 billboards in 30 counties.
He figures that, on average, he’ll need vegetation removal permits for half of his billboards each year. If that rate held up statewide, the total new cost to North Carolina’s billboard industry would be as much as $2 million a year.
“The industry certainly respects reasonable and fair permit fees,” Hickman said. “We definitely don’t think the department should be out of pocket. But it shouldn’t be a profit center, either.”
When Holder recommended new fees at the board’s Oct. 1 meeting, he said the taxpayer subsidies amounted to “several million dollars” and promised to bring more precise numbers back to the board this week. He said Thursday that the numbers were in flux, and that some of his October recommendations might be revised. “This is still a work in progress. It’s an exchange. It’s a collaboration.”
Phasing fees in
Rob Weintraub of Cary, an independent land development manager, acknowledged that developers are accustomed to paying fees to local governments. But he said they get a prompt response.
“If a developer submits plans to a town, they get comments back pretty fast,” Weintraub said. “When I’ve submitted a traffic impact analysis to DOT, it falls into a black hole.”
Curran said DOT officials should consider fees that would guarantee expedited service. He has commiserated with fellow developers on the transportation board about the proposed fee changes. Still, he noted: “Every other jurisdiction charges us fees for the development process, so why shouldn’t (DOT)?”
He said he wants to keep new fees low, and to introduce them gradually. “We’ll need an acclimation period, to maybe phase them in.”