Nestande Suggests Utility Status for State Roads to Raise Needed Funds

California Transportation Commission Chairman Bruce Nestande said Friday that it is “time to talk about” setting up the state highway system as a public utility, fed by periodic boosts in the gasoline tax similar to telephone and electrical rate increases.

Nestande, emphasizing that the proposal is “strictly in the exploratory phase,” said he has asked for preliminary analysis of a plan that would allow an independent panel--such as the Public Utilities Commission--to raise the gas tax, sales tax on gasoline or other road-related taxes when existing tax dollars cannot pay for highway construction and improvements.

“Let the revenue be adjusted as the need for it increases,” Nestande suggested in testimony before the Senate Transportation Committee, meeting in Irvine in the first of three hearings on the state’s transportation-financing dilemma.

The proposal, which Nestande conceded would require a constitutional amendment and a “major overhaul” of the tax code, would for the first time take authority for such tax increases out of the hands of the state Legislature.

“I’m not getting on the bandwagon with this yet, but the thing you conclude if you’re trying to resolve this issue is the present method is not satisfactory, that’s all there is to it,” said Nestande, an Orange County supervisor and former state assemblyman. He added: “We’re simply not moving people, we’re not moving our goods and our commerce in an expeditious manner, and even with present projections for adding to the system, it’s going to get worse. The issue has got to be faced and dealt with.”

Nestande said the idea of establishing the highway system as a public utility “would begin to put on some kind of firmer revenue track the availability of funds for transportation purposes.”

Committee Chairman John F. Foran compared the proposal to his own legislation earlier this year that would have indexed the gasoline tax, permitting automatic tax hikes tied to increases in the costs of road and highway improvements. “We explored (that) this year and won neither legislative nor Administration support,” said Foran, a San Francisco Democrat.

Legislative Analyst William G. Hamm said he believes that indexing or a similar revenue-raising plan will be needed soon.

“A fixed, non-ad valorem charge simply is not up to the task of protecting the state’s massive investment in transportation facilities over time,” Hamm said. “It must be raised periodically so that revenues from this user charge keep pace with the cost of providing transportation services.”

The utility concept was one of several proposals suggested to deal with what Foran termed a “massive shortfall” in the money needed to finance highway improvements over the next several years. Caltrans estimates that the state highway account will fall about $300 million short of funding projects already programmed through 1990.

Moreover, those estimates do not take into account the actual improvement needs on the state’s roads and highways. Heinz Heckeroth, chief deputy Caltrans director, said that maintaining the state’s present financing of road programs will lead to an 80% increase in highway miles classified as “poor” over the next several years.

Poorer Service Predicted

“Even at substantially increased funding levels, we cannot expect to maintain current levels of service on all parts of the state highway system. Under this scenario, lane miles of poor level of service will still increase by 30%,” Heckeroth testified.

Caltrans also estimates that there are up to $640 million a year in safety and rehabilitation improvements needed for which there is no money.

Part of the problem, a number of officials testified Friday, is that federal funds must go directly to improvements on interstate highways--found in only a small portion of California counties--and state law requires that the state provide matching funds to attract federal funds whenever they are available.

Thus, many of the state’s resources are paying for road improvements that are of relatively low priority, they said.

Orange County officials are proposing a constitutional amendment that would capture the entire 6% sales tax on gasoline--part of which they said is now diverted to the state general fund--and require that it be spent on transportation improvements.

The plan, presently being drafted by a consultant in Sacramento, would raise an estimated $1 billion a year for road improvements, of which Orange County would receive about $80 million--or double the amount of money that went to state highways in the county last year.

Such a proposal would be the equivalent of a six- to seven-cent increase in the gasoline tax, county officials said.

“Those of us in government need to show that we are doing the best job possible with the revenues we have now before we go to the voters with a tax increase,” said James Roosevelt, chairman of the Orange County Transportation Commission.