Plan Falls Short, Some Officials Say
Governor Rejects Calls for Higher Gas Tax Than Proposed

By John Wagner
Washington Post Staff Writer
Tuesday, September 25, 2007

Local political and business leaders from Maryland's Washington suburbs said yesterday that Gov. Martin O'Malley's proposal to spend nearly $400 million a year more on transportation priorities was a good first step but that it would not be enough to address growing gridlock in the region.

Under the plan, the state would start pegging its gasoline tax to rising construction costs, a move expected to add 0.7 to 0.8 cents a gallon a year at the pump. But O'Malley balked at calls from several business groups, and from Montgomery County Executive Isiah Leggett (D), for a much larger immediate increase in the gas tax, the largest source of funding of transportation projects.

With bustling Interstate 270 as a backdrop, O'Malley (D) said his plan would "get Maryland back on the path of progress" after a strained transportation trust fund prevented state officials this year from adding projects to its long-range plan.

"We have been living on the investments our parents and grandparents made," O'Malley said at the formal announcement of his plan staged at a Gaithersburg park-and-ride lot.

Much of the funding in O'Malley's plan -- about $250 million a year, officials said -- would be used to keep pace with the growing maintenance needs of the state's transportation system, although some would be available for new projects, the details of which were not spelled out yesterday.

The new funding would come from a variety of sources, including an increase from 5 percent to 6 percent in the titling tax on vehicles and half the revenue generated by a proposed increase in the corporate income tax from 7 to 8 percent.

The other half of that revenue would go toward mitigating college tuition increases and upgrading higher education facilities, investments O'Malley called "intellectual infrastructure."

Proposals from others to increase the gas tax have ranged as high as adding 12 cents to the 23.5 cents-a-gallon tax, which would generate $400 million more annually for transportation projects.

Leggett, who congratulated O'Malley when he took his turn at the lectern, said in an interview that he considered the governor's $392 million-a-year proposal "a good start." Asked whether he continues to support an increase in the gas tax, Leggett said, "I think in time we will need to go back and look at that."

Georgette W. Godwin, president and chief executive officer of the Montgomery Chamber of Commerce, was more direct, saying O'Malley's plan did not include enough money for new projects to ease congestion.

"We need increased capacity," Godwin said at the event. "That's what commerce needs."

O'Malley suggested yesterday that his move to forgo a significant increase in the gas tax was related to other steps he is proposing to close a $1.7 billion shortfall in the state's general fund.

Yesterday's news conference was the fourth installment in a series the governor is using to detail his plans to close the shortfall while raising new revenue for the transportation fund, a separate account. O'Malley wants lawmakers to consider his plan, which includes several other tax increases, in a special session to be held by early November.

O'Malley said his gas tax proposal reflects "our best estimate of where we can find consensus." House Speaker Michael E. Busch (D-Anne Arundel) is among the lawmakers who have reservations about it, and a poll commissioned by a liberal advocacy group this year found it one of the least popular levies.

A transition committee on transportation set up by O'Malley after his election last year recommended a gas tax increase, and the governor publicly floated the idea in May without specifying the scope of a possible increase.

At the time, Transportation Secretary John D. Porcari said an annual infusion of $400 million to $600 million would be needed to keep up with the state's needs during the next two decades, including a proposed light-rail line connecting Bethesda and New Carrollton and light-rail or bus service along part of the I-270 corridor.

Last year, about $3.4 billion in revenue flowed into Maryland's transportation trust fund from all sources, including about $700 million from the federal government. Transportation officials say annual growth in funding is not matching inflation, which is particularly acute in the construction industry.

Maryland's gas tax was last raised in 1992. The titling tax, which also goes into the transportation fund, was last raised in 1978.

A gas tax increase has been endorsed by the Greater Washington Board of Trade and the Greater Baltimore Committee, prominent regional business groups. Yesterday, the Washington-based group urged O'Malley and lawmakers to raise the plan to $600 million.

"We encourage Maryland leaders to address the state's transportation needs in a comprehensive and complete manner," said James C. Dinegar, the Washington board's president and chief executive officer.

The governor's plan to raise the titling tax was criticized by the Maryland Automobile Dealers Association, which said in a statement that the increase would "negatively impact the automobile industry which is currently experiencing one of our worst markets in the past 10 years."

O'Malley's plan also calls for retaining about $100 million a year in the transportation trust that by law now flows to the general fund. Over the years, lawmakers have written such diversions into the law to fund a variety of programs, including environmental initiatives. An O'Malley spokesman said most of those programs would be funded with other revenue.

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