Governor Martin O’Malley’s comprehensive transportation funding bill, HB 1515, passed the Senate on Friday, March 29 by vote of 27-20.
A consensus proposal by the Governor, Senate President Mike Miller and House Speaker Michael Busch that was strongly supported by the Greater Baltimore Committee, this is the first comprehensive legislation passed by the General Assembly in two decades that would generate the magnitude of increased revenue needed to resolve Maryland’s crisis in funding transportation infrastructure.
The legislation is estimated to generate up to $3.4 billion in new revenue to the state’s transportation fund over the next five years. It will allow the state to begin addressing the massive backlog of transportation projects that are planned but not funded for construction.
It will also make the transportation fund more sustainable over the long term and eliminate the revenue stagnation that has hampered the Maryland Department of Transportation’s ability to keep up with rising construction costs.
Key elements of this legislation include:
Sales tax. A 1 percent sales tax will be imposed on the retail price of gas beginning July 1, 2013. The sales tax will increase to 2 percent on January 1, 2015 and to 3 percent on July 1, 2015 and beyond. The sales tax will be based on the average retail price for regular unleaded gas over the previous 12 months. The state’s 23.5 cents-per-gallon excise tax will remain in place.
If federal Internet sales tax legislation is passed, 4 percent of total sales tax revenues from Internet sales will go to the state Transportation Trust Fund. If federal legislation is not enacted by December 1, 2015, the sales tax on gas will increase to 4 percent in January 2016 and 5 percent in July 2016.
Lockbox. The bill’s lockbox provision requires lawmakers to pass a piece of legislation in order to transfer any proceeds from the transportation fund to the general fund. Any transfer legislation must originally be approved by both House and Senate budget committees by three-fifths majorities.
Transferred funds may be used for “defense or relief purposes” only if a major catastrophe occurs and the governor declares a state of emergency. Even then, a transfer cannot occur if it would jeopardize the rating of MDOT bonds. Any transferred funds must begin to be repaid to the TTF in the next fiscal year and must be fully repaid within five years.
Transit fares. Beginning in fiscal 2015, the legislation requires that many Maryland Transit Administration fares be increased every two years by the same percentage as the Consumer Price Index. Commuter bus and commuter rail service fares must be increased in 2015 and every five years as indexed to the CPI.
Vehicle surcharge. The state’s motor vehicle registration surcharge will increase from $13.50 to $17. The revenue from the additional surcharge will go to the Maryland Emergency Medical System Operations Fund for purposes including purchase of communications equipment and hiring additional State Police pilots.
Watershed Implementation Plan. The bill requires the governor to include annual budget appropriations to the State Highway Administration for use in complying with runoff control requirements in the state’s Watershed Improvement Plan, beginning with $45 million in FY 2015 and increasing incrementally to $100 million in 2019.
The lockbox provision contained in this legislation has received considerable criticism. The GBC has been a strong advocate for restoring trust in the Transportation Trust Fund through an effective “lockbox” provision. For years, including this year, the GBC has supported and advocated for a constitutional amendment to protect transportation funds to ensure they are used specifically for transportation purposes.
The GBC supports the passage of SB 829 and urges the House of Delegates to approve this constitutional protection of the Transportation Trust Fund.