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Government Regulation
Transportation Policy

Highways and transportation facilities are some of the most visible programs that state and local governments operate. But they are not without controversy. Some believe that North Carolina has invested too much money in highways and not enough in mass transit.

At the local level, bus systems receive significant operating subsidies, yet continue to attract only a small minority of commuters. Current projects such as outer loop highways and the Global TransPark in Kinston have sparked a broader debate about the proper scope and amount of state transportation spending and the value of past infrastructure investments.

Reforming the scandal-plagued Department of Transportation also must be a priority.

Trends in Transportation Spending in North Carolina

North Carolina taxpayers pay for state highways through taxes on motor fuels and vehicles. Expenditures from the state's highway funds have grown significantly in nominal dollars over the past 20 years, to $2.4 billion in FY 2004-05, and North Carolina currently levies the 6th-highest tax rate on motor fuels in the nation, up from 11th in 2004. But that's not the whole story.

Adjusted for inflation and the numbers of vehicle miles traveled, highway expenditures actually decreased over the past two decades. Per-capita state and local spending on transportation grew at a slower rate than spending on education, health care, and overall government spending.

A study for the John Locke Foundation by the University of North Carolina at Charlotte's David Hartgen found that North Carolina's highway system, ranked 5th in the country in 1989 for quality and efficiency, had fallen to 36th by 2003, next to the bottom among Southeast states (see chart, "Overall Road Quality and Efficiency Ranking"). Only three states had a higher share of congested urban interstates — California (82 percent), Maryland (82 percent), and Minnesota (77 percent) — than did North Carolina (75 percent). The state also ranked 42nd in the condition of urban interstates, 44th in rural interstate condition, and 45th in the condition of rural primary roads.

The Governor and the General Assembly have ignored the dismal condition of North Carolina roads. Since 2002 they have diverted about $1 billion from the Highway Trust Fund (HTF) to the General Fund. The HTF obtains 99 percent of its funds from drivers and is supposed to be used for building roads.

Given the rapid deterioration of North Carolina's road system, there is no good reason to continue forcing drivers to drive on inadequate roads while their gasoline tax funds and other tax funds are used to subsidize other government spending.

The Transit Distraction

According to a recent Locke Foundation transportation study by Professor Hartgen, the ten largest transit systems in the state cost $127 million. This amount is expected to exceed $200 million by 2010. All that spending impacts only about one-quarter of one percent (0.28) of the travel in these areas, however.

What is worse, the promised reductions in congestion and air pollution do not exist. In other words, if all ten public transit systems stopped operation tomorrow, congestion and air pollution in these cities would increase, on average, by only one-quarter of one percent.

Building rail systems in Charlotte, the Triangle and the Triad is not likely to have the promised results. As projects in other states show, mass transit is almost invariably a wasteful attempt to entice or coerce commuters out of their personal vehicles and into buses or trains.

The percentage of commuters willing to use buses or trains is far below 10 percent in most communities, and it is likely to stay that way regardless of expenditures on transit — unless, of course, transit advocates are successful in using Smart Growth policies to force families to live in densely packed neighborhoods.

Those kind of policies should be resisted on philosophical grounds — they rob families of their chance at the American Dream of homeownership — as well as on practical grounds. Highways are, to put it simply, a more useful transportation technology that allows maximum consumer choice and convenience. They are also far less expensive to build and operate per passenger mile, which is the relevant comparison given transit's minuscule share of daily trips.

More promising tools for relieving traffic congestion and pollution include new computer technologies and the use of "congestion pricing" on limited-access highways to charge variable tolls depending on the time of day and amount of congestion. North Carolina should also pursue public/private partnerships to build new highways and high-occupancy-toll (HOT) lanes on existing highways using electronic, "no toll booth" collection technology.

One endeavor the state should abandon immediately is the Global TransPark, which has yet to attract any significant interest on the part of manufacturers, as was originally intended. Projected to bring tens of thousands of new jobs to North Carolina by the late 1990s, it has resulted in little, if any, net job creation.

Similarly, the state should explore the sale of the state ports as well as the North Carolina Railroad (which is technically a private firm, but one now wholly owned by taxpayers). These capital assets are relatively unproductive for taxpayers, and they should be made liquid for investment in higher-priority needs such as debt reduction or highway improvements.

Recommendations

1. State officials should work to improve the efficiency and quality of North Carolina's highway system.

   New technologies and tollways should be used to relieve congestion and promote economic development.

2. The state should end all subsidies for the Global TransPark. Furthermore, the state should issue a request for proposals for the sale of the state ports at Wilmington and Morehead City and the state-owned North Carolina Railroad.
3. The Department of Transportation should be retooled to perform its job better.

   Reforms should include downsizing the Board of Transportation and making it an advisory panel only, merging highway divisions and eliminating bureaucracy, using competitive contracting for design and planning functions, and giving a portion of gas taxes collected directly to local governments for local needs.

4. State lawmakers should end the diversion of highway user fees to non-highway uses. All revenues from motor fuels and auto-sales taxes should be dedicated to road construction and maintenance. Together with reductions in low-priority paving, administrative savings, and the use of public and private tollways, dedicating gas and car taxes only to their appropriate uses would yield $470 million a year in additional highway spending. That would eliminate the gap between legitimate needs and expected revenues over eight years according to an analysis conducted for the John Locke Foundation in 2000.

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