$2.5 Billion Hit to Md. Transportation Forecast

Slumping Gas, Car Sales Drying Up Tax Revenue, Analysts Say

Washington Post Staff Writer
Wednesday, November 19, 2008; Page B01

Maryland could be forced to rein in transportation projects by an additional $2.5 billion in coming years, legislative analysts said yesterday, citing a sharp drop-off in tax collections on car sales and gas purchases that has also hamstrung Virginia and other states.

The pessimistic forecast comes just two months after Maryland officials pared more than $1 billion from what had been a six-year, $10.5 billion program in a response to earlier signs that the taxes that pay for road and transit projects are sagging just as declines in housing-related revenue previously undercut government services.

In response to the estimate, Maryland Transportation Secretary John D. Porcari said he believes that vehicle sales could recover more quickly than forecast by the legislative analysts, requiring fewer delays and cancellations of transportation projects. He said that any short-term changes in the transportation plan, which is updated annually, will be announced in the next few weeks.

Lawmakers and transportation officials said the region's largest transportation project, the $2.4 billion Intercounty Connector, would probably not be affected because of a separate financing arrangement that largely insulates the planned 18.8-mile toll road in Montgomery and Prince George's counties from fluctuations in the transportation trust fund.

But lawmakers said they would not be surprised to see delays in future years in the proposed Purple Line transit link between Bethesda and New Carrollton and the north-south Corridor Cities Transitway project in the I-270 corridor. The state is studying both as potential light-rail lines or busways.

"I think everyone should be concerned until we see some turning of the economy, some upswing," said Sen. Edward E. DeGrange Sr. (D-Anne Arundel), chairman of a budget panel that oversees transportation spending. "You can't do things based on a wish list. It takes money to make them happen."

Collections of the vehicle titling tax in Maryland -- the equivalent of a sales tax on cars -- were down 17.8 percent from July to October compared with the same period a year ago, according to transportation officials. Revenue from the gas tax was down 6.6 percent from July to September compared with that period.

The slumping economy has undercut a wide array of taxes in both Maryland and Virginia, extending well beyond the housing and transportation sectors. During a briefing in Roanoke yesterday, Virginia lawmakers were told of downturns in collections related to the restaurant industry, retailers and hotels.

Virginia's transportation revenue is expected to decrease by more than $2 billion in the next six years, down from $10.1 billion, forcing significant cuts in projects, jobs and services.

Vehicle sales tax revenue in Virginia is expected to decline by 15.7 percent this year, according to projections last month presented to the Commonwealth Transportation Board. Gas tax collections are down 5.2 percent from what was forecast this year, and license fees are below forecasts.

"Cars sales are poor, and people aren't driving," said Warren Descheneaux, chief fiscal analyst for the Maryland legislature. "This is going on everywhere."

The forecast Descheneaux presented to legislators yesterday assumes that Maryland will collect about $1 billion less than expected in titling taxes in the next six years. Gas taxes and other revenue sources that benefit transportation are also expected to be more sluggish than predicted. Maryland's ability to sell bonds for transportation projects is likely to be reduced by $1.2 billion, according to the forecast.

Porcari said in an interview that his department will review the legislative forecast, which is not binding on transportation officials, but that he does not think the numbers will be as dire as predicted.

Porcari said slumping vehicle sales have recovered more quickly after past recessions than legislative forecasts suggest. "It would be extremely unusual for it to continue through six years," he said.

Porcari also said that Maryland and other states could be helped by an economic stimulus bill in Congress that includes money for state transportation projects.

If the forecast by legislative analysts bears out, some lawmakers predict a significant reduction in new projects. Maryland's capital transportation budget is also used to pay for preserving the existing road and transit systems.

"I think we're going to get to the point where, if it hasn't been started, it may not get built," said Del. Murray D. Levy (D-Charles), vice chairman of a House panel that oversees transportation spending. "It's like one dollar out of three has gone out the door. That's not a trim around the edges. You have to whack projects."

Rick Abbruzzese, spokesman for Gov. Martin O'Malley, said the governor remains committed to the Purple Line and Corridor Cities Transitway. "How quickly we can move forward may be a product of how quickly the economy turns around," he said.

Almost everyone in Annapolis ruled out an increase in taxes that fund transportation, including the 23.5-cent gas tax. O'Malley floated raising the tax last year but backed away from the idea.

"I don't think people want us to be doing that right now," said House Majority Leader Kumar P. Barve (D-Montgomery).

Instead, lawmakers raised other taxes that benefit transportation projects, including the titling tax, during a special legislative session last fall.

Staff writer Eric Weiss contributed to this report.

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