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Road Fix—or Bait and Switch?

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Road Fix—or Bait and Switch?

California’s road planners want to double a reviled car tax. January 3, 2014
Economy, finance, and budgets
Politics and law
California

California’s transportation infrastructure is in lousy condition. In 2011, an independent oversight agency appointed by the governor and state legislature reported that 58 percent of state-maintained roads need rehabilitation, 20 percent of state bridges need maintenance or major repair, and 6 percent of bridges should be replaced entirely. In a $142 billion state budget, only about $7.6 billion goes for infrastructure work, yet the California Transportation Commission puts the total cost of maintenance alone at $341 billion over the next decade. Where will the money come from to keep the Golden State’s roads and bridges from falling apart? If Will Kempton gets his way, it will come from an increase in the state’s vehicle-license fee—a deeply unpopular annual charge known to most as the “car tax.”

Kempton is an old hand in California transportation policy circles. He ran California’s Department of Transportation (Caltrans) from 2004 until 2009, during Arnold Schwarzenegger’s governorship, and then served with the state’s embattled high-speed rail authority under Governor Jerry Brown. A longtime advocate of higher taxes for public works, Kempton is currently executive director of Transportation California, a nonprofit calling for passage of the California Road Repairs Act of 2014. The proposed law, which could go before voters in November, would amend the state’s constitution to phase in a 1 percent “surcharge” on the vehicle license fee over four years, boosting the car tax to 1.65 percent of a vehicle’s market value by January 2018. The new money—as much as $3 billion annually, backers claim—would be dedicated exclusively to road repairs, upkeep, and expansion.

But Californians have heard this claim before. The car tax—currently at 0.65 percent of a vehicle’s market value, making it already one of the nation’s highest such levies— has never paid for infrastructure expenses or upkeep, though that has always been part of its putative purpose. As with much else in California’s Byzantine state budget, the car tax has more to do with bureaucracy and favored legislative programs than with anything else. In 2012, for instance, the car tax raised just over $515 million. Most of the money went to the Department of Motor Vehicles. About $173 million went to local governments, while the Franchise Tax Board, the controller’s office, and sundry state agencies divvied up the rest. Notice where the money didn’t go: roads.

Kempton and the new measure’s other proponents promise that things will be different this time, and they make the usual promises about accountability and transparency. They’re serious, they say, about safeguarding the new revenue from legislators’ pet projects. The proposed constitutional amendment includes language that would void any effort to “encumber, bond against, covenant, securitize, commit as security, or otherwise bind, restrict, or limit the use of the revenues deposited into the California Road Repairs Fund.” But two recent initiatives—Proposition 1A in 2006 and Proposition 22 in 2010—passed with similar promises, to no avail.

There can be no doubt that a remedy for California’s disastrous infrastructure problem is urgently needed. The question is whether hiking the car tax is the best option. Legislators have spurned public-private partnerships (P3s), for example, limiting such ventures to small pilot projects. But the state’s nonpartisan Legislative Analyst’s Office (LAO) last year concluded that taxpayers could save hundreds of millions of dollars on infrastructure if the state used such partnerships more effectively. “Based on our review of existing research, we believe that P3 procurement—if done correctly—has merit and may be the best procurement option for some of the state’s infrastructure projects,” the office wrote.

Kempton’s proposal comes just as the LAO is predicting budget surpluses for the next several years—$5.6 billion starting in mid-2015, assuming the revenue models hold up. In truth, nothing guarantees that new car-tax revenues would be spent on road repairs rather than on, say, high-speed rail, any more than Proposition 30—the “temporary” sales- and income-tax hike that California voters approved in November 2012—ensures that new revenues for public education won’t wind up in the woefully underfunded California State Teachers’ Retirement System instead of in classrooms. Before asking motorists for more of their hard-earned money, planners and lawmakers should make better use of the dollars they already have.

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