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Covid-19 impact on transportation funding

Started by MaxConcrete, April 09, 2020, 06:22:41 PM

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MaxConcrete

This is the first report I've seen on the subject.

https://www.wfaa.com/article/news/health/coronavirus/coronavirus-impact-on-highway-construction/287-15fccd31-da3f-4de2-84a8-2902c3e1af34

In Houston, driving is also down around 50%. Of course this impacts fuel tax and toll revenue. TxDOT funding also is heavily dependent on sales tax and the petroleum severance tax. The severance tax is going to be drastically lower, and it's unclear if TxDOT can still get it's regular sales tax stipend if the total revenue drops below a defined threshold.

So if there is no federal support to restore lost revenue, there will be delays to planned projects. Depending on the length of the revenue outage, we could see casualties in the transportation plan.
www.DFWFreeways.com
www.HoustonFreeways.com


sprjus4

Assuming this topic is open to impacts countrywide rather than exclusively Texas, this thread would be better fit in "General Highway Talk".

Either way, a similar impact has been reported for North Carolina, up to $200 million less revenue by July than projected.

As coronavirus keeps people home, North Carolina gas and sales tax revenues plummet
QuoteWith businesses closed and people staying home, North Carolinians are driving less, depriving the state of tens of millions of dollars in fuel taxes used to build and maintain roads.
The N.C. Department of Transportation will lose more than a third of its expected revenue over the next three months because of the coronavirus outbreak, according to Bobby Lewis, the department's chief operating officer. Lewis told the Board of Transportation on Thursday that NCDOT will receive up to $200 million less in revenue than it had counted on by July 1.

Most of that money will come in the form of lost gas taxes, which account for about 54% of NCDOT's state revenue. Also hurt by COVID-19 and the resulting downturn in the economy is the highway use tax, a tax on car sales that makes up another 21% of NCDOT's state revenue. (The third big source is fees, mostly collected by the Division of Motor Vehicles.)

Now the unforeseen blow is coming from lower revenue.

"We're in uncharted territory and waters now,"  Lewis told board members Thursday. "We anticipate major impacts to our revenue sources, especially in the gas tax and the highway use tax, which is going to make our cash situation even more challenging."

Falling tax revenue is going to be a problem for all local governments and state agencies in North Carolina, as residents hunker down and stop spending money. Sales taxes on retail, restaurants and hotel rooms are all taking a hit, as is the state's income tax as businesses lay off hundreds of thousands of workers.

"From a public finance perspective we are looking at very dreary times,"  said Whitney Afonso, a professor in the School of Government at UNC Chapel Hill.

Afonso says government budget officers have been asking her how they should prepare for the coming fiscal year.

"I tell them, "˜Like we're going to be in a recession,'"  she said. "Because we're going to be in a recession, and it's not just sales taxes."

Lewis said it's too soon to say where NCDOT will cut expenses. He said the department doesn't want to stop work on construction projects that are already underway but that it is evaluating all future projects to determine which ones can and should be delayed. The department also receives money from the federal government and bond sales, which will help keep current projects going.

"˜MAJOR ECONOMIC CONTRACTION' AHEAD

The reduction in traffic is clear to anyone who has ventured out recently or visited a gas station. Gas prices in North Carolina averaged $1.80 on Thursday, about 76 cents less than a year ago, according to AAA Carolinas. Overproduction by Russia and Saudi Arabia partly explains the decline, but the big factor is a sharp drop in demand, AAA says.

"Because of social distancing and the stay-at-home order, we are continuing to see even less traffic on the roadways,"  spokeswoman Tiffany Wright said in a written statement. "These factors will ultimately drive down demand, increase gasoline supply and continue to lower pump prices for the foreseeable future."

With the coronavirus outbreak still growing in North Carolina and country, the length and depth of the economic fallout is still unknown. Lewis said NCDOT currently expects its tax revenues will be down through the summer and into next fall and will be 7% to 11% lower in the coming fiscal year, which begins July 1.

But that forecast is likely to change, Lewis said.

"The only thing we really know right now is that there is agreement with all economists that this is going to be a major economic contraction,"  he said.

Rothman

States are already considering stimulus packages, if not the Feds.
Please note: All comments here represent my own personal opinion and do not reflect the official position(s) of NYSDOT.

deathtopumpkins

Reportedly the next federal stimulus package would include financial support for states and municipalities. I imagine states all over the country are facing similar issues.
Disclaimer: All posts represent my personal opinions and not those of my employer.

Clinched Highways | Counties Visited

hbelkins

There are two factors in play here. One is the reduction in gasoline sales due to curtailed driving. The other is the price reduction due to the Saudi-Russian oil price war (which, personally, I hope they keep up for eternity). The latter can be offset by state legislatures establishing higher "floors" under which gas taxes cannot fall. Kentucky shored up its floor a couple of years ago.

The downside of all this is that low prices make it easier for legislatures to pass outright tax increases now that gas prices are so low. They aren't going to stay this low forever, and higher fuel prices will hamper economic recovery efforts once business gets back to normal. At least Kentucky aborted its legislative session before the proposed gas tax increase had been passed, although the legislature is coming back next week for "veto days" to consider overriding gubernatorial vetoes, and can still pass legislation during that time. If they do pass a gas tax increase in the last days of the session before sine die adjournment is constitutionally mandated on April 15, our governor will probably go along with it. Kentucky's legislature is now a GOP majority, but it's full of RINOs who seem to love raising taxes and forgetting why they were elected.


Government would be tolerable if not for politicians and bureaucrats.

hotdogPi

Quote from: hbelkins on April 10, 2020, 11:29:49 AM
Kentucky's legislature is now a GOP majority, but it's full of RINOs who seem to love raising taxes and forgetting why they were elected.

Having moderates in both parties is better than everyone being hyperpartisan. (For those not aware, Kentucky also has several moderate Democrats, and they seem to be the remains of when the South was entirely Democratic. They're fading quickly, though.)
Clinched, minus I-93 (I'm missing a few miles and my file is incorrect)

Traveled, plus US 13, 44, and 50, and several state routes

I will be in Burlington VT for the eclipse.

froggie

HB:  can't (re)build the economy if you don't have adequate transportation infrastructure.  Can't fix that infrastructure if you don't have the revenue.  Don't have the revenue if you don't have an adequate tax level.

If you don't want high gas taxes, that's your prerogative.  But don't complain that KYTC isn't doing squat for the roads in your area if that's your viewpoint.

I would argue that times of low gas prices are EXACTLY when gas tax increases should be implemented.  With the caveat that those taxes actually go to transportation and not to other purposes.  I know some states do raid their transportation budgets, but I would suspect that even if that wasn't the case, there would still be a lot of unmet transportation need.  This nation and every state in it does a HORRIBLE job of funding transportation.


Chris

Quote from: hbelkins on April 10, 2020, 11:29:49 AMThe other is the price reduction due to the Saudi-Russian oil price war (which, personally, I hope they keep up for eternity).

The Saudi-Russian price war will have one major loser and that is the United States oil industry. While currently voluminous, most of the U.S. oil production is not profitable due to the higher cost of extraction. I've read it needs to be in the $ 60-65 per barrel range to be profitable. With the U.S. oil industry potentially in ruins, I suppose this will have a significant negative effect on the state revenues of major oil producing states like Texas. This in turn jeopardises funding for highways.

oscar

Quote from: Chris on April 13, 2020, 09:29:21 AM
Quote from: hbelkins on April 10, 2020, 11:29:49 AMThe other is the price reduction due to the Saudi-Russian oil price war (which, personally, I hope they keep up for eternity).

The Saudi-Russian price war will have one major loser and that is the United States oil industry. While currently voluminous, most of the U.S. oil production is not profitable due to the higher cost of extraction. I've read it needs to be in the $ 60-65 per barrel range to be profitable. With the U.S. oil industry potentially in ruins, I suppose this will have a significant negative effect on the state revenues of major oil producing states like Texas. This in turn jeopardises funding for highways.

And also Alaska, whose state government (and transportation budget) is already in deep shape due to declining oil revenues.

ISTM that the White House's recent rooting against an oil price war may be intended as a favor to red-state governments.
my Hot Springs and Highways pages, with links to my roads sites:
http://www.alaskaroads.com/home.html

hbelkins

Saw today where OPEC and Russia have reached an agreement to cut production. I wonder how long low demand will keep prices down?

Quote from: froggie on April 13, 2020, 09:14:14 AM
HB:  can't (re)build the economy if you don't have adequate transportation infrastructure.  Can't fix that infrastructure if you don't have the revenue.  Don't have the revenue if you don't have an adequate tax level.

If you don't want high gas taxes, that's your prerogative.  But don't complain that KYTC isn't doing squat for the roads in your area if that's your viewpoint.

I would argue that times of low gas prices are EXACTLY when gas tax increases should be implemented.  With the caveat that those taxes actually go to transportation and not to other purposes.  I know some states do raid their transportation budgets, but I would suspect that even if that wasn't the case, there would still be a lot of unmet transportation need.  This nation and every state in it does a HORRIBLE job of funding transportation.



Kentucky did something unusual given the virus hysteria. Instead of passing a biennial budget, the legislature only approved an annual budget and will revisit the budget for the second year of the biennium next January when the General Assembly goes back into session. The legislature has to adjourn sine die by April 15, so they're coming back tomorrow and Wednesday to consider overriding any line-item vetoes in the budget. This year's budget did, as I understand it, raid the Road Fund for General Fund revenues.

There was a push for the legislature to just approve a budget and any virus-related emergency bills, and depart.

My complaint about road project funding in general is that it's wrongly prioritized. There's more emphasis on giving to the "haves" (see the DDIs that are being built along I-75 in northern Kentucky) than to the "have-nots" (improving connections between county seats and to the freeway system in the rural areas.) We're spending money on areas that already have good roads instead of improving roads that are bad.

I have ideas on how to reduce and reallocate spending, but no one's interested in hearing them. Plus, there are too many entrenched interests (asphalt companies, construction companies, engineering consulting firms, labor unions, etc.) trying to get their own pieces of the pie who aren't concerned with the fact that these are tax dollars.


Government would be tolerable if not for politicians and bureaucrats.

bwana39

We have to hope that we have public works spending to get people back to work after this is all over.  Another hope is that we can treat this period as a pause of our economy not a reset.
Let's build what we need as economically as possible.

rte66man

Quote from: Chris on April 13, 2020, 09:29:21 AM
Quote from: hbelkins on April 10, 2020, 11:29:49 AMThe other is the price reduction due to the Saudi-Russian oil price war (which, personally, I hope they keep up for eternity).

The Saudi-Russian price war will have one major loser and that is the United States oil industry. While currently voluminous, most of the U.S. oil production is not profitable due to the higher cost of extraction. I've read it needs to be in the $ 60-65 per barrel range to be profitable.

The Eagle Ford shale play in south Texas could be break even at about $40/bbl. Not sure about the other large shale plays.
When you come to a fork in the road... TAKE IT.

                                                               -Yogi Berra

US71

Quote from: bwana39 on April 13, 2020, 01:38:26 PM
We have to hope that we have public works spending to get people back to work after this is all over.  Another hope is that we can treat this period as a pause of our economy not a reset.

Theoretically, according to some pundits, this is a pause give how strong things were before everything came crashing down.  I'm hoping it's a pause, but I am not economically savvy enough to make any predictions.

Still, "While there's life, there's hope"
Like Alice I Try To Believe Three Impossible Things Before Breakfast

Bobby5280

#13
The problem is this thing is more than just a "pause." The scenario is more like someone trying to hold his breath for a long time. After enough minutes without any oxygen hypoxia starts to set in, then permanent brain damage and finally death.

The billing cycle isn't stopping for a lot of people whose paychecks are now gone. The billing cycle hasn't quit for businesses who no longer have customers coming through the doors. Debt is quickly adding up for the ones most financially vulnerable. If this shut-down persists long enough some businesses are not going to re-open. The federal government is trying to help with its stimulus program. But at the most that's only going to buy some people and some businesses a month of breathing space.

I'm a big movie fan and like watching movies in good quality commercial theaters. But I'm afraid movie-going in my town could be finished as a consequence of this pandemic. AMC Theaters was already teetering on the brink of bankruptcy before this crisis. In their buyout of Carmike Cinemas they wound up with control of the one good theater we have in Lawton. The Patriot Cinemas theater has one of the biggest IMAX screens in the region and over 550 seats in the auditorium. The other first run theater we have is a tiny 12 plex almost 20 years old built inside Central Mall, an outdated 70's era mall. JCPenney is in pretty bad financial shape. This ongoing crisis is making matters even worse for JCPenney. Central Mall lost Sears years ago and that space is still empty. The mall has a bunch of other smaller vacancies. If JCPenney closes that will leave Dillard's as the only anchor tenant. I don't think that's going to be enough to hold that mall together.

So many Americans have stretched their financial necks out to the snapping point. Consumer debt levels were hitting all kinds of new highs prior to the pandemic. Student loan debt has been through the roof. Housing prices have been way into bubble territory in highly populated areas around the nation. These people had no "wiggle room" in case some bad things happened. They were literally gambling on a trouble free future by stretching themselves so thin.

70% of the American economy is driven by consumer spending. If there are too many broke or jobless consumers we won't have much of a recovery.

I'm hoping that the American economy can quickly recover. But I don't think the recovery is going to be anywhere near as fast as the downfall. And it could take a couple years or more for us to get back to where we were in early February before the crash happened.

jemacedo9

Quote from: Bobby5280 on April 14, 2020, 10:08:23 PM
So many Americans have stretched their financial necks out to the snapping point. Consumer debt levels were hitting all kinds of new highs prior to the pandemic. Student loan debt has been through the roof. Housing prices have been way into bubble territory in highly populated areas around the nation. These people had no "wiggle room" in case some bad things happened. They were literally gambling on a trouble free future by stretching themselves so thin.


THIS.  And not just people, but businesses.  The adage of "have six months of expenses saved in a savings account" is proving to be the major difference now.  And to be fair, some circumstances didn't allow them so have six months of savings set aside. But in other cases, some people and businesses lived beyond their means.

Bobby5280

It's the whole "keeping up with the Joneses" mentality. The trouble is too many Americans were only putting up the appearance of keeping up with the Joneses. Put those visual displays of affluence on the credit card. Debt-driven buying helped push up prices of so many things (housing, college tuition, automobiles, clothing, health care, etc). I have a feeling more businesses than just the oil industry will be forced to slash prices. There may be a hell of a lot of people ending up "under water" with their mortgages, owing more than what the home is worth.

hbelkins

Kentucky has canceled its May and June bid lettings, and has also delayed a number of resurfacing projects for which contracts have been awarded but work has not yet started. I found out late Friday, and am not sure if some sort of formal announcement will be forthcoming from Frankfort this week or not.


Government would be tolerable if not for politicians and bureaucrats.

Rothman

That's really odd.  Insofar as I'm aware, NYSDOT hasn't delayed lettings.
Please note: All comments here represent my own personal opinion and do not reflect the official position(s) of NYSDOT.

MikieTimT

There's going to be some fairly major population shifts occur because of this as many people realize how much they can accomplish with technology as opposed to physical presence. It won't make sense to many to pay higher rents/mortgages in areas that are going to be dramatically hollowed out of amenities as a result of this pandemic. Folks will do some re-evaluation of their living arrangements and start looking at cheaper/less dense locales, especially those with cheaper/faster fiber availability. That will necessitate some re-evaluation of transportation expenditures.

Bobby5280

I think the whole "New Urbanism" thing was quickly turning into a crock of $#!+ just in terms of the runaway price inflation of housing and other living costs. Homelessness has been exploding in the highest priced and most densely populated areas (New York City, San Francisco, Los Angeles). The people working in the bottom rungs of the economy (restaurant workers, retail stock people, etc) often are not paid enough to survive. NYC is home to a growing population of working homeless. They have jobs, but live in shelters and don't have enough money to escape their hell and leave for a more affordable region.

The SARS-CoV-2 pandemic could end up being a "great equalizer" in multiple ways. The pandemic seems likely to blast an artillery shell hole in the current housing price bubble. If the pandemic manages to get really bad and kill a lot more Americans it will put a lot of empty real estate onto the market that will just sit there unsold. A bunch of people could flee big city properties, leaving them unable to sell without taking a giant loss.

"Demand destruction" has already been wreaking havoc on the commodities markets, oil in particular. The supply chain of meat and produce is greatly threatened with disruption and price volatility. If basic essential things like food and fuel can have their pricing gashed it only stands to reason a bunch of other things farther up the ladder could get gashed too.



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