Gas tax will rise again if NJ Legislature gets its wish to extend an expiring fund

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A bill to reauthorize the expiring state Transportation Trust Fund is already racing toward a finish line after months of wondering about when a plan to continue funding for infrastructure projects would emerge.

According to the legislation, which was introduced in both chambers of the New Jersey Legislature on March 4, the gas tax would increase by almost 10 cents in the next five years — about 2 cents each year — and there would also be a new annual fee for zero-emission vehicles, starting at $250 in year one and increasing by $10 each year after that. This fee, which is in addition to the current registration fees, would apply to annual vehicle registrations of plug-in electric vehicles and hydrogen fuel cell vehicles, not hybrids.

It would reauthorize the TTF, which is used as a funding source for some state infrastructure projects, for five years through fiscal year 2029 and increase the existing aggregate bonding capacity to $15.6 billion, up from around $12 billion.

The bill, which moved through the Assembly transportation committee Thursday and is sponsored by its new chairman, Clinton Calabrese, D-Cliffside Park, was approved 7-4 along party lines.

Robert Clifton, R-Matawan, said he found out about the bill's introduction from a lobbyist who called him during the week and that the last-minute notice was among the reasons for his no vote.

"I need to know how this bill will benefit my district ... and see what value we got from the last reauthorization," Clifton said, reflecting a sentiment expressed by Republican peers in both chambers.

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Calabrese summed up the view of some of the Democrats that this bill addresses "infrastructure, jobs for the economy — I'm a yes vote."

The state Senate version is scheduled to go before the budget committee Monday; that version is sponsored by budget committee Chairman Paul Sarlo, D-Wood-Ridge, and Senate President Nicholas Scutari, D-Linden.

Industry groups suggest amendments

The Assembly committee heard from a number of speakers representing the construction industry, environmentalists, local government and auto retailers.

"The plan that's being proposed is balanced, it's affordable, it's fair, and it's very straightforward. The other benefit of this is it's a user fee; it's a direct linkage between people using the facilities and fees being charged," said Tom Bracken, president and CEO of the New Jersey Chamber of Commerce. "The TTF renewal and our infrastructure touches every citizen in the state of New Jersey."

Some speakers recommended amendments, including several people representing environmental groups, though none were made by legislators during Thursday's session.

Eve Gabel-Frank, a consultant with Gabel Associates, which advises on environmental and transportation planning, said the $250-plus fee on zero-emission vehicles would be "punitive," making it the highest in the country, and should be brought down to $75.

Though the purchase of battery electric vehicles has grown sharply in the last five years — going from 11,670 in New Jersey in 2018 to 98,097 through the first half of 2023, according to the state Department of Environmental Protection — some worried that the fee could dissuade people from purchasing EVs.

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"We have to recognize that how much and how the fee is actually assessed may have a significant effect on the showroom," said Jim Appleton, president of the New Jersey Coalition of Automotive Retailers, who noted that people purchasing a new vehicle have to pay four years of registration fees up front.

Eric DeGesero, executive vice president of the Fuel Merchants Association of New Jersey, said the gas tax should be increased 6.2 cents and the revenue fuel cap to $2.55 billion, up from the $2 billion cap proposed in the bill, in order to keep up with inflation since the last TTF reauthorization in 2016.

"The concern here is that we are starving the program, not reauthorizing," DeGesero said, adding that his proposal "isn’t putting another penny into the TTF, it is keeping it adjusted for inflation so that we are still getting the same dollar value that the Legislature and executive felt in 2016 was the appropriate amount and we still have the appropriate safeguards in place regarding how we bond."

GOP calls for more transparency

With Diane Gutierrez-Scaccetti by Murphy’s side as his new chief of staff and outgoing commissioner of the Transportation Department, rumors circulated after the November election that reauthorizing the TTF would be a priority to get done during lame-duck, but that didn’t happen, nor was it mentioned in Murphy’s budget speech last month.

State Sen. Douglas Steinhardt, R-Warren, abstained from voting on the proposed capital spending plan at last month’s Capital Budget Commission meeting because there were no known details on the status of the TTF reauthorization at that time.

He was joined in his abstention by one peer, Assemblywoman Nancy Munoz, R-Union, but the other nine commission members voted in favor of the capital budget and it was approved.

“If this commission votes on a capital plan today, we will be saying it’s OK for the executive branch to not even share a proposal for TTF reauthorization,” Steinhardt said. “We’ll be saying it’s OK not to share any of the underlying information about how much of the existing TTF tax revenues are spoken for or how much more additional revenues are needed.”

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Republican state Sens. Anthony Bucco and Declan O’Scanlon sent a letter to Murphy in January calling for a collaborative effort to renew the fund, with questions about financial models and whether the debt defeasance fund could be used to pay down some of the TTF's debt. They never received a response.

If the bill is passed as is, the majority of the money raised through the gas taxes would go toward paying off old debt, with more than 70% going toward the currently scheduled debt service in fiscal years 2025-27. By diverting money from the debt defeasance fund and paying down debt, it could free up TTF revenue for "pay-as-you-go" projects, for example.

Notably, revenues generated from the proposed electric vehicle registration fee would not go toward debt service. The proposed fees on zero-emission vehicles are estimated to generate $30 million annually, according to the state Treasury Department, and would instead go to the pay-as-you-go projects, unless they become constitutionally dedicated to go toward debt service.

Vehicle miles traveled left out of bill

The bill still left some hoping there would be more forward-looking policy changes.

“It’s not bad given the state’s track record on getting TTF done,” said Zoe Baldwin, the New Jersey director for the Regional Plan Association, referring to decades when there was no gas tax increase despite mounting debt and the TTF’s expiration in 2016 that forced capital work to stop for four months while a deal to renew it was worked out between then-Gov. Chris Christie and the Legislature. “There was some hope that it would be a little bit more of a transition-like plan that would lay the basic groundwork for the transition away from the reliance on the gas tax.”

The debate about how to transition transportation trust funds away from gas and petroleum taxes, or supplement them, is a conversation being had in states across the country and at the federal government as the rise of zero-emission vehicles is starting to chip away at trust fund revenues.

The draft renewal plan in New Jersey does include a new fee for electric vehicle registration, but it does not identify a way to make sure the drivers of those vehicles are paying into the state trust fund for the miles they travel, contributing to the need for state road improvements.

Some states around the country are using new methods of charging fees for electric vehicles, including installing tracking systems in them to identify how many miles are traveled per year and charging drivers based on that; some are taxing electricity use from charging electric vehicle batteries. These are referred to as vehicle miles traveled (VMT) or mileage-based user fees (MBUF).

The New Jersey Transportation Department participated in a pilot program in 2022 with the Eastern Transportation Coalition to test a device to track vehicle miles traveled, but there has been no update on the takeaways from that pilot or what can be gleaned from the data it collected.

Transportation spokesman Stephen Schapiro said the agency is working with the coalition to launch a three-month second phase to continue studying a mileage-based program this spring. The first phase gathered mileage information from drivers of all passenger vehicles; the second phase will gather data only from electric vehicles and hybrids, Schapiro said.

A challenge for New Jersey with a user-based fee system is finding a way to cash in on the many out-of-state vehicles that travel through on the myriad highway corridors. Unlike the gas tax, cashing in on those vehicles’ miles traveled through New Jersey would be difficult, because most of the VMT programs, as designed, would go to the states where those vehicles are registered, not where the miles were traveled.

John Wisniewski, a former Assembly transportation committee chairman who is now a managing member of the law firm Wisniewski & Associates, said there is still time to come up with a plan to phase in a VMT model to support the TTF.

"The infrastructure for a VMT almost totally exists at this point in time because the state of New Jersey not only has E-Zpass readers on the toll roads, they installed E-Zpass readers on non-toll roads as a means of measuring traffic flow," Wisniewski said.

He also said a closer look needs to be given to how the TTF dollars are allocated.

"We need to be spending more of our transportation capital on increasing mass transportation options so that we can make New Jersey a more travelable state for our citizens, for our employees, for our visitors," Wisniewski said. "The focus of the planning needs to be about mass transit opportunities as opposed to private vehicle opportunities."

This article originally appeared on NorthJersey.com: Gas tax could be on the rise again. What you need to know