In the budget analysis for the Maryland Department of Transportation’s State Highway Administration, the Department of Legislative Services (DLS) discusses the Administration’s proposal for providing additional local aid through the 6% sales tax on gasoline and offers alternatives to the distribution of local aid for transportation.
The Governor’s transportation plan would continue to provide Highway User Revenues (HUR) to local jurisdictions using the current distribution and create a new “Local Transportation Infrastructure Aid Account” for the distribution of the new revenue generated through the 6% sales tax. When the sales tax is fully phased-in, local jurisdictions would receive 20% of this new revenue distributed using the existing HUR formula of registration and road miles.
DLS raised the following issues with respect to the Administration’s proposal for local transportation funding:
- a redundant local aid program has been created;
- counties and municipalities receive the majority of the funding, not Baltimore City as in current program; and,
- any revenue shared with local jurisdictions reduces the amount of revenue to the State.
DLS recommended the following:
DLS recommends that the department discuss with the committees the Administration’s proposal for local aid. DLS also recommends that during the General Assembly’s deliberations on the Administration bill that instead of creating a whole new mechanism to distribute local aid that the existing HUR program be used to achieve any policy objectives.
In the Department’s response to this recommendation it indicated that the new local aid account clearly identified the priorities for the new funding. However, the Department would “be pleased to work with the committees on alternatives to distribute funding through existing programs if that is the intent of the Maryland General Assembly.”
As indicated, DLS also discussed alternatives the budget committees may wish to consider for the distribution and use of local aid for transportation. These alternatives included:
- Creating a general fund aid program using the corporate income tax and the rental car sales tax;
- Maintaining the existing structure;
- Providing operating and capital grants (operating grants – smaller HUR grant giving Baltimore City a larger share for its unique funding arrangement, restoring municipalities to their historic level since they do not have the same taxing authority, and providing counties an appropriate funding level to be determined; Capital grant – local jurisdictions would submit requests for local capital projects); and,
- Creating a revolving loan fund or state infrastructure bank
DLS recommended that the Department discuss the various local aid options presented, in particular, the revolving loan concept.
The Department indicated the following in its response:
There is a strong argument to retain the connection between state and local transportation and the way it is funded. The existing local aid structure has many benefits and, if possible, those should be retained as a means to provide a basic level of transportation funding to counties and municipalities.
With respect to operating and capital grants:
MDOT would support modest increases in operating and capital grants as a way to reserve funding to match local jurisdiction support when applying for discretionary loans from the federal government.
Further, the Department stated that:
Before establishing a revolving loan program or infrastructure bank, MDOT recommends seeking input from local governments and the private sector on what they would need to see in a program.
