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Charleston Business

Potholes Ahead

Sep 21, 2018 01:02PM ● By Emily Stevenson
By Mark David Witte
MBA Professor of Economics, College of Charleston

I may have ruined your weekend plans. I know that you were looking forward to analyzing the 657 projects that are included in the South Carolina Department of Transportation’s 10-year plan. Sadly, I just finished my analysis and I’m going to spoil the ending: those road projects aren’t going to happen.

To be clear, this isn’t the fault of the Department of Transportation. For many years, the South Carolina general assembly has not been willing to fully fund transportation infrastructure. And it’s not completely their fault, either. Many road projects use a combination of federal, state, city, and municipality money. That’s a lot of bureaucratic layers to manage. And even if you find the money, there are environmental concerns, engineering setbacks, and private citizens that may delay or permanently halt any construction. Frankly, it’s a wonder that any new road is built.

In 2017, the South Carolina general assembly passed a major Roads Bill. According to the SCDOT website, the Roads Bill gives the department “the opportunity to make gradual but real and significant strides toward bringing the highway system back from three decades of neglect.” If you ask any contractor, they’ll tell you that maintenance is less expensive than repairs. South Carolina has not been paying its maintenance bills on our transportation infrastructure and now the repairs are due. And those repairs will not be cheap.

Of the 657 projects detailed in the 10-Year plan, only 95 have been started. That seems pretty good until a closer examination reveals that almost 40 percent of those projects began before the funding was approved in 2017. The infrastructure was so bad that it could not wait for the funding to be fully approved.

What about the other 562 projects? Approximately 85 more projects are scheduled to start over the next eight years. That leaves us with more than 470 projects, or nearly 70 percent of the total projects, with no planned date to start. Officially, these projects are “TBD”—to be determined. If I was a betting man, then I’d relabel these projects “TBD”—to be DELETED.

The reality is that because our roadway infrastructure has been underfunded for many years, it will be very difficult politically to raise enough money for the TBD projects. The Roads Bill includes a two-cent increase in the gasoline tax every year for six years. Wisely, the revenue from the increased gasoline tax must go to transportation infrastructure. As we are blessed to have tourists traveling to or through South Carolina, a healthy proportion of our gasoline taxes is paid by these tourists. This makes intuitive sense; the tourists and our own motorists use the roads and, consequently, are responsible for paying to maintain and improve them. And yet, this small increase in the gasoline tax was initially vetoed by the governor before the General Assembly overrode that veto.

There’s another chunk of taxable revenue that both Georgia and North Carolina use to fund their highway infrastructure. In South Carolina, the sales tax on a car, motorcycle, aircraft, or boat is five percent with a maximum tax of $500. Yes, you read that right. If you purchase a $10,000 used Kia, you will pay the same $500 sales tax as someone purchasing $300 million Boeing Dreamliner, a $500,000 yacht, or a $100,000 Mercedes. Effectively, inexpensive, used cars are subsidizing South Carolina’s transportation infrastructure for every luxury car on the road. Georgia charges a seven percent sales tax on automobiles, while North Carolina charges three percent. There’s no maximum in either state.

You can make an economic argument that setting a maximum is sensible given that luxury taxes can occasionally be more painful to the workers making luxury goods than the prospective buyers. But a sales tax isn’t a luxury tax, and cars are not a luxury good when public transportation options are limited. If everyone needs a car then the only question is how much the automaker earns relative to the State of South Carolina. Personally, I’ll cry no tears if someone is unable to afford a BMW X4 and must settle for the BMW X3 and a five percent sales tax without the maximum tax. After all, the roads will be smoother, and they won’t need that fancy suspension anyway.

The reality is that those 470 TBD projects will not fund themselves unless we’re willing to commit to increased funding for those roads. And the current condition of our roads will not permit us another three decades of neglect.