Could Ohio pause new construction? Gas tax revenue lags as drivers stay home in pandemic
Ohio could hit the brakes on major new road construction because of lower state gas tax collections – yet another effect of the continuing COVID-19 pandemic.
Ohio Department of Transportation Director Jack Marchbanks recommended in his budget proposal that the state stop taking applications for major new projects in the state's next biennial budget because of lagging gas-tax receipts.
Projects already underway would continue under ODOT’s two-year, $6.5 billion budget proposal.
That puts Ohio in much the same bind that it was in two years ago, when state lawmakers and Gov. Mike DeWine haggled over increasing Ohio’s fuel tax to help jump-start new road construction as revenue from bonds issued against revenue on the turnpike ran dry.
Pandemic delayed road projects
The increase was expected to generate $550 million a year in additional funds for the state and another $300 million for cities, counties and townships. In 2019, the state funded about $400 million in new construction to expand highway capacity as part of a four-year, $1.1 billion plan for major projects.
But plummeting traffic volumes during the COVID-19 pandemic meant fewer people were buying fuel, Marchbanks pointed out in an October proposal to the state’s Office of Management and Budget.
Traffic cratered by nearly 50% in the early days of the pandemic last spring, and it finished the year down by about 15.5%.
Slower traffic volumes mean ODOT is projecting a revenue reduction of about $174 million in the 2022 fiscal year, which begins July 1, and $159 million in the 2023 fiscal year.
Last year, it missed revenue projections by $154 million and had to delay the start of new phases on two projects: work on Interstate 70 on the south end of Downtown Columbus and the latest stage in the Millcreek Expressway project on I-74/75 in Cincinnati.
“This budget provides for a modest amount of funding for additional improvements of the existing highway network,” Marchbanks wrote. “The funding will be used to continue work on projects that have already started moving forward, however, new expansion project applications are not being considered at this time.”
Proposal isn't final
An ODOT spokeswoman said the department’s proposal is not final and that DeWine’s office could make changes before proposing a two-year spending plan to the Ohio General Assembly this year.
“This budget will still have to go through the legislative process,” said Erica Hawkins, ODOT communications director.
New expansion projects – the kind of construction that adds lanes or reconfigures interchanges to add highway capacity – typically take the brunt of cuts when ODOT is short of funding because the department prioritizes maintenance of the existing highway system, she said.
Those projects run through ODOT’s Transportation Review Advisory Council to receive funding in an annual application process. Hawkins said that is "on pause" now, as it was before the fuel tax increase.
While Hawkins said the increase has given the state about $100 million it otherwise wouldn’t have had available, that is a fraction of what it projected based on pre-pandemic traffic. That funding could be used for early stages on some projects, such as right-of-way acquisition.
ODOT also has projects in the pipeline if an expected windfall in federal highway construction funding comes to Ohio, Hawkins said. State officials are unsure how much additional funding Ohio might receive from the federal government.
“We’re going to be watching what happens. We’re going to be watching the revenue,” Hawkins said. “If they start to increase quicker than our projection, that’s an opportunity for us to go back to the TRAC and say hey, we’re going to be able to fund another round.”