Tags: Chris Christie | gasoline | tax | New Jersery

Christie Faces Need for Gas Tax With NJ Roads Fund Empty

Friday, 10 October 2014 02:29 PM

Republican Governor Chris Christie, who’s opposed raising New Jersey’s gasoline tax even as the roadwork fund runs dry, put a Democrat in charge of state transportation spending and says he’s open to all options for replenishing the pool.

That’s emboldening proponents of raising the tax, the second-lowest in the U.S., as fuel prices sink to a 21-month low. Christie pledged in 2011 to use more cash and less debt for highway and bridge repairs. Instead, as state revenue came up short of forecasts, he put no money into the transportation fund for three years and borrowed $1 billion more than promised to keep it alive.

New Jersey would gain $50 million from each cent of a tax increase, according to Assembly Speaker Vincent Prieto. The Secaucus Democrat, with Assemblyman John Wisniewski, chairman of the transportation committee, began hearings last month on possible solutions. The next meeting is scheduled for Oct. 14.

“There is a high degree of urgency attached to resolving this in the next few months,” said Martin Robins, a professor emeritus at the Alan M. Voorhees Transportation Center at Rutgers University in New Brunswick. “Good policy would have been to recognize there was a revenue deficiency in the Transportation Trust Fund and it needed to be addressed in 2010.”

‘Tax, Toll’

The main roadwork fund for the traffic-vexed state will be unable to borrow further by June 30, a year earlier than projected in 2011. All the money it gets from taxes and tolls goes to pay off bonds, leaving nothing to repair frayed infrastructure. The revenue shortfalls have also led Christie to cut pension payments, delay property tax rebates and pledge national tobacco-settlement proceeds to investors in exchange for almost $92 million.

An increase in the 10.5-cent-per-gallon gas tax could sting Wisniewski and Sweeney if they seek to run for governor in 2016, as well as Christie, should he try for the presidency. Christie said Oct. 1 in a CNN interview that he’s still considering whether to run for the White House and will make his announcement after the first of the year.

“The easy answer is you call it anything other than a tax, toll -- whatever other word you can find,” said Julian Zelizer, a Princeton University history and public affairs professor.

Voters Balk

Though a majority of New Jersey voters oppose raising gas taxes, support has climbed this year. Thirty-eight percent favor an increase, up seven percentage points from April, according to a Rutgers-Eagleton poll released today. Given a choice to raise the tax, apply the sales levy to fuel purchases or borrow, 17 percent picked the first option. More than half said none of the above.

Christie on Sept. 18 appointed Democrat Jamie Fox as transportation commissioner, a job he held in Governor Jim McGreevey’s administration.

Asked whether options could include raising the gas tax, the governor refused to elaborate.

“Is there something about ‘Everything’s on the table’ that’s confusing to you?” the governor said. “Everything is on the table.”

Kevin Roberts and Michael Drewniak, spokesmen for Christie, didn’t reply to e-mail messages seeking further comment.

Borrowing Spree

The transportation fund, created in 1984 and initially a 100 percent “pay-as-you-go” account supported by the gasoline tax and toll revenue, has borrowed for most projects since 1993. Democratic and Republican governors alike said that in the most densely populated U.S. state, the repair of roads and bridges was a priority even if cash wasn’t on hand.

As a result, the fund is more than $14 billion in debt. Payments on those bonds amount to $1.2 billion this fiscal year. That’s about as much as the fund collects from levies on gasoline and petroleum and a portion of the sales tax.

“New Jersey is hastily nearing the point where it will spend more money on transportation debt annually than it will spend on actual projects,” Wisniewski, of Sayreville, said in a statement. “New Jersey will either have to suspend much-needed projects or borrow beyond capacity to pay the mounting debt. Neither is acceptable.”

Debt Demand

Even as the fund’s cash dwindles, the additional yield bondholders require to buy the Transportation Trust Fund bonds hasn’t increased because of demand for tax-exempt debt. Investors have added cash to U.S. muni mutual funds for 12 straight weeks, the longest stretch since October 2012, Lipper US Fund Flows data show.

Trust fund bonds maturing June 2042 traded Oct. 7 with an average yield of 3.89 percent, data compiled by Bloomberg show. That’s 2 percentage points more than top-rated munis of similar maturity, the same yield gap as at the start of 2014.

Moody’s Investors Service rates the bonds A2, sixth highest. Standard & Poor’s and Fitch Ratings grade the credit one step lower at A-.

Christie, after blasting predecessors for miring the state in debt, promised in 2011 to increase the cash portion of transportation spending until it was more than $600 million in fiscal 2016, about 37 percent of the total. Borrowing, he said, would decrease by almost half. No cash was spent for fiscal 2013 through 2015, according to the nonpartisan Office of Legislative Services.

Tunnel Money

Including 2012, Christie put $66 million into the fund, compared with his pledge of $1.2 billion, according to the office. Over the same period, he borrowed $4.7 billion, more than a $3.8 billion goal.

Next fiscal year, the fund can borrow a maximum $620 million, former transportation Commissioner James Simpson told the Senate budget committee in May. After 2016, it also won’t have the $3.1 billion it’s been collecting from the New Jersey Turnpike Authority and the Port Authority of New York and New Jersey -- money that Christie diverted from the Hudson River commuter-rail tunnel project called Access to the Region’s Core that he killed in 2010.

Canceling that $12.4 billion tunnel -- which at the time was set to be the nation’s biggest public-works project, doubling commuter capacity from New Jersey to Manhattan -- also allowed Christie to avoid raising the gasoline tax, said Robins, the Rutgers professor who was the original project director for Access to the Region’s Core.

High Taxes

Christie has said raising the levy would hinder the economy and burden a population that already pays the nation’s highest property taxes. Those bills averaged $7,988 in 2013, about $400 more than when the governor took office in 2010, according to state data.

In 2011, Christie introduced a five-year, $8 billion plan for the transportation fund. He created a capital program of $1.6 billion a year to pay for projects from road surfacing to the $1 billion repair of the Pulaski Skyway bridge.

“We are continuing to put New Jersey on the path towards fiscal health and proposing a sensible and responsible plan that prioritizes vital transportation projects, while limiting the already-heavy debt burden carried by the taxpayers of our state,” Christie said at the time.

New Jersey has endured a record eight credit downgrades since Christie took office, which rating companies said were prompted by one-time budget fixes, benefit costs and missed revenue targets.

‘Political Gridlock’

Transportation funding is “an increasing concern, particularly in a state that’s having problems structurally balancing its budget, and what I view as political gridlock between the Republican governor with presidential ambitions and a majority Democratic legislature,” said Howard Cure, head of muni research at New York-based Evercore Wealth Management LLC, which oversees $5.2 billion. “I just don’t see any time soon what the compromise is going to be.”

New Jersey drivers paid an average $3.08 per gallon of regular gasoline yesterday, according to AAA figures, compared with $3.25 nationwide. The average New Jersey price has fallen 20 cents in a month as crude-oil prices plummeted, reaching $85.77 a barrel yesterday, the lowest since December 2012.

“It’s certainly welcome that overall gas prices are going down,” said Senator Raymond Lesniak, an Elizabeth Democrat. “It will help pave the way for a very necessary increase in the gas tax that I’ve been sponsoring to ensure that our roadways are safe.”

Second Lowest

Lesniak has proposed raising the levy 15 cents per gallon over three years. His bill, which he said would cost the average motorist $100 more a year at maximum, hasn’t moved beyond committee.

New Jersey’s gasoline tax is higher only than those of Alaska and Georgia, tied at 8 cents, according to the Energy Information Administration. It contributes about $500 million annually to the transportation fund.

In recent weeks, Senate President Steve Sweeney, a Democrat from West Deptford, has called on Christie to fix the fund. He’s said raising the tax is one option, though he hasn’t committed support for that move or proposed alternatives.

Other options include increasing the tax on companies for the sale of petroleum products in the state, and applying the sales tax to gasoline, Prieto said.

“This administration has done nothing to solve this problem,” Sweeney said during an Aug. 26 tour of Roselle’s 103- year-old Gordon Street Bridge. “This state is out of time.”

© Copyright 2019 Bloomberg News. All rights reserved.

1Like our page
Republican Governor Chris Christie, who's opposed raising New Jersey's gasoline tax even as the roadwork fund runs dry, put a Democrat in charge of state transportation spending and says he's open to all options for replenishing the pool.
Chris Christie, gasoline, tax, New Jersery
Friday, 10 October 2014 02:29 PM
Newsmax Media, Inc.

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

© Newsmax Media, Inc.
All Rights Reserved