Policy Position

Capital and Infrastructure

in Budget, Taxation, and the Economy

Introduction

State property and roads are the most tangible symbols of government. When roads are in disrepair and buildings are dilapidated, citizens wonder what their money buys. Capital projects, such as roads and facilities, are also the main source of state debt.  The needs of the state must be balanced with the ability to repay debt used to finance capital and infrastructure projects.

The Strategic Transportation Investments formula provides needed clarity on road projects. It replaced much of the political wrangling that had marked transportation planning in the past with a data-driven approach. Improvements still could be made to count the total cost and congestion savings for each project, but the formula already has proven a model for other states. Efficient spending is critical because raising the revenue to pay for roads will remain a challenge as fuel efficiency continues to improve and gas tax revenue declines.

Capital needs at community colleges, state parks, National Guard facilities, and elsewhere around the state will receive funding from the $2 billion Connect NC bond package voters approved in 2016. Some of this money will go to the $4 billion in overdue repairs and renovations to existing buildings. In addition, legislators have designated unused debt capacity for repairs, renovations, and new construction with a Capital and Infrastructure Fund. During the renovation process, government can reduce the amount of space it occupies and dispose of unused land and facilities.

In 2018, the legislature approved up to $3 billion in new Build NC debt for road construction. Because it pledges transportation funds without seeking voter approval, this is a more expensive way to borrow than a general obligation bond like the Connect NC bonds. Land, facilities, and roads are only as valuable as the activity they make possible. Without productive activity, they are simply liabilities in need of maintenance.

Key Facts

  • North Carolina state government dedicates 90 percent of its $3.7 billion annual transportation spending to construction and maintenance of more than 80,000 miles of roads and more than 13,500 bridges. Local governments add another $800 million to transportation spending.
  • Better prioritization of projects could allow North Carolina to meet its highway needs without additional taxes, according to a 2013 study by transportation experts at the Hartgen Group and the Reason Foundation.
  • Voters do not want to spend more on transportation. A March 2016 poll from High Point University found 63 percent of respondents opposed toll roads, 72 percent opposed increasing the gas tax, and 87 percent opposed taxing motorists per vehicle-mile traveled.
  • State debt capacity is capped at 4 percent of General Fund revenue and 6 percent of transportation revenue. The Capital and Infrastructure Fund will direct unused debt capacity to repairs, renovations, and new construction.
  • State government has $25.6 billion in facilities with a backlog of roughly $4 billion in repairs because of past neglect. A general rule of thumb suggests setting aside 2.5 percent of a property’s value for maintenance and renovation.

Recommendations

  1. Consolidate state-owned facilities. Sell what is not needed, and improve what is left.
  2. Improve the Strategic Transportation Investments formula to include total cost, not just state cost, and anticipated congestion improvements.
  3. Ensure capital projects are funded from excess debt capacity, not new debt.

Data

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