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The Honolulu Advertiser
Posted on: Wednesday, April 10, 2002

Falling highway fund slows maintenance work

By Mike Leidemann
Advertiser Transportation Writer

A declining highway fund has forced state officials to delay some routine road maintenance and contemplate the need to raise gasoline taxes.

Roadwork has periodically slowed traffic on Kalaniana'ole Highway at 'Ainakoa Street this year. Transportation experts say road maintenance delayed by a lack of money will cost drivers much more down the line.

Richard Ambo • The Honolulu Advertiser

The year-end reserve in the fund — the primary source of money for upkeep of state roads — fell from $253.5 million in 1997 to $168.2 million last year. The fund reached a low point of $133 million in 2000 before bouncing back last year with help from interest income and maintenance savings, officials said.

Much of the decline was caused by the state diverting nearly $100 million to its general fund to help offset budget shortfalls elsewhere. Another problem has been rapidly growing debt caused by the state moving from general obligation bonds to those that have to be backed by the resources of individual departments, usually at a higher rate.

To counteract the decline, the state has lengthened its regular maintenance schedule on most roads from 10 to 13 years, said Transportation Director Brian Minaai.

Transportation industry officials say the change hasn't had much effect on roadways yet, but will be noticed more in coming years by drivers, who almost certainly will pay more for the deferred maintenance.

"We haven't been able to repair everything as frequently as we'd like," Minaai said. "If you don't fix it now, it's going to cost more later."

Officials agree that a fuel tax increase may have to be considered sometime in the future to reinvigorate the fund.

Honolulu residents already pay almost 55 cents tax on each gallon of gas, but only 16 cents of that goes to the state highway fund; the rest is in federal, county and sales taxes.

Even so, the state share of the fuel tax generated a little more than $68 million for the highway fund in fiscal year 2000, making it by far the biggest source of roadway repair money. Other sources of highway fund money include federal grants ($21.7 million), rental motor and tour vehicle surcharges ($34.5 million), vehicle weight taxes ($17.2 million) and vehicle registration fees ($2 million).

Gov. Ben Cayetano has said about $22.5 million received in settlement of a 4-year-long price-fixing lawsuit against Hawai'i's oil industry should go to the highway fund to delay future fuel tax increases.

J. Taualii directs traffic around roadwork on Kamehameha Highway at Kahana Bay. As lawmakers shift highway fund money to other purposes, less remains for road maintenance.

Richard Ambo • The Honolulu Advertiser

The state also wants to add the $6 million left from the $15 million antitrust settlement in 1999 with Tesoro Hawaii Corp., its parent company and BHP Hawaii Inc.

Fuel tax collections in Hawai'i have not grown significantly in recent years, in part because cars have become more fuel-efficient, said Lowell Kalapa, president of the nonprofit Tax Foundation of Hawai'i.

"Of course, no one is going to talk about it in an election year, but it's inevitable that they'll have to have a substantial gas tax increase, between 3 and 5 cents per gallon, very soon, probably next year," Kalapa said. "You look across the landscape today and see we're headed for a brick wall financially. The highway fund is stretched thin. There's no other alternative but raising taxes."

Kalapa and others say the decline in the highway fund demonstrates why state officials should not be raiding special-purpose funds to meet obligations elsewhere.

In the next fiscal year, the state administration is proposing to take about $125 million from 45 special and revolving funds, which are set up to operate specific services and often receive revenue from users of those services.

The highway fund, which receives the bulk of its money from state fuel taxes, is not among those scheduled to be tapped next year. Officials say it is nearing a point where a further drop would hurt the department's credit rating. However, the fund continues to serve as an $11 million-a-year "pass through," by which a special tax on rental cars goes to the general fund.

"Long term, everybody should be worried about this," said Gareth Sakakida, managing director of the Hawai'i Transportation Association, which has more than 350 member companies in the state. "If you keep deferring maintenance, ultimately the roads are going to deteriorate to the point of being dangerous. You just hope DOT has the expertise and funds to not let that happen."

The American Automobile Association of Hawai'i says there have been few complaints about road conditions in recent years.

"Just wait a few years, though," AAA spokesman Jeff Spring said. "When the roads start falling apart a little bit, there's going to be a howl of outrage."

Spring said highway funds nationwide are a frequent target of lawmakers trying to balance their budgets.

"It's a known trick on the federal level," he said. "Now state lawmakers are just copying their bigger brothers and trying the same thing. They see a pot of money they think can be used for other things. Our position is simple: If you raise money from motorists and transportation, you've got to give it back to them. You can't start giving it away to other people."

Spring and others warn that delaying maintenance can have disastrous financial consequences.

"The timing of road maintenance and rehabilitation is critical," according to a report last month from The Road Information Program, a construction industry group. "Repairing a road in poor condition is approximately four times more costly than repairing a road in fair condition."

The state Transportation Department has managed to keep highway maintenance expenditures unchanged since 1988, at an average of about $80 million. "There are some things, like broken guard rails, that we haven't been able to fix, but we're trying to stay within our means," Minaai said.

He said his department had been able to offset the transfer of $99 million to the general fund in part through an increase in federal money. "We are lucky that our congressional delegation is sympathetic to our needs and able to get us some additional funds," he said.

But Kalapa says federal money cannot be taken at face value.

"They're using the federal funds to mask the situation," he said. "After you shred things out, they are counting federal funds that have to be matched to be garnered. And there's less and less money in the highway fund to match them."

On top of everything, the Bush administration recently proposed cutting federal highway money to the states by 27 percent, which could cost Hawai'i some $32 million a year through the decade.

"That would be a tremendous amount of new highway projects and maintenance that we wouldn't be able to fund," Minaai said. "It's one more thing we need to deal with."

Reach Mike Leidemann at 525-5460.