BIZMOLOGY — Cash-strapped states are looking for ways to pay for transportation infrastructure projects and many are considering the unpopular move to increase taxes on gas.
Wyoming and California recently approved increases to their state gas taxes. Wyoming’s jump from 14 cents to 24 cents a gallon will start in the middle of summer vacation season in July. Also that month California motorists will pay 3.5 cents more per gallon at the pump. Maryland as well is considering an increase to help fund highway construction and mass transit projects. Under the bill, motorists would pay about 14 to 20 cents more for a gallon of gas by mid-2016. That would yield $4.4 billion for the state’s transportation fund.
Fourteen other states are considering or recently have passed similar increases to the gas tax to help fund transportation and infrastructure projects. The nation’s aging and neglected infrastructure is a major issue. The condition of America’s infrastructure in six sectors — drinking water, wastewater, solid waste, roads, bridges, and rail — recently received an overall grade of D+ from the American Society of Civil Engineers (ASCE). It’s a slight improvement from a D given four years ago. ASCE estimates $3.6 trillion in total infrastructure investments will be needed by 2020. However, governments are struggling to find proper funding for projects.
Although the gas tax hikes will help fund some long-overdue projects, many experts argue that more money is needed to fix the giant infrastructure backlog. Also, many argue that as people drive more fuel-efficient vehicles or consume less gas, the tax will not yield enough to keep up with infrastructure costs. Other industries such as gas stations are bemoaning any hikes to the gas tax as it might alter consumer driving habits and cut into their profits.
Commercial and heavy construction contractors are eagerly awaiting new funding for infrastructure projects. Federal funding of heavy construction projects, in particular highway and other transportation infrastructure, accounts for a significant portion of industry revenues.
According to our First Research industry data, the US government is the single largest purchaser of outsourced services, such as engineering and construction services for infrastructure work. Long-term government contracts can present attractive opportunities for contractors. However, cost-cutting at the government level has lightened the flow of funding to such projects. By boosting the gas tax, some of those projects may soon see the light of day.