Raising Taxes and Traditional Project Delivery

In 1979 California ushered in the anti-tax era in politics with passage of Proposition 13.  The nationwide anti-tax movement has stressed governments everywhere, and one consequence has been deferred maintenance and underinvestment in our infrastructure at the local, state, and national levels.  This is one of the reasons behind the growth of public private partnerships.  Governments have been looking for ways to have private investors fund infrastructure because they haven't had the money. 

PPP has been sold as a preferrable way to deliver infrastructure "because private development is more efficient and innovative."   But as demonstrated by the AOC's study for the Long Beach Courthouse, the metrics to prove this proposition are not very solid.  At the present time, hype, fashion, and lack of funds, more than hard metrics, is what dictates which project delivery system is selected.

Today, federal taxes are lower as a percent of GDP than at anytime since 1950 .  States, have similarly depressed tax revenues relative to their needs.  There is evidence, however, that additional revenues may be coming.  At the beginning of this year, the House of Representatives signed off on a tax rate increase for the wealthiest Americans.  And here is an article in the Wall Street Journal how state governors are starting to warm up to tax talk to fund infrastructure construction (quotation slightly condensed):

Republican governor Tom Corbett of Pennsylvania unveiled a plan Tuesday to generate nearly $5.4 billion in new revenue over five years by lifting a cap on gas taxes paid by wholesale gasoline dealers.

 Michigan's Republican Gov. Rick Snyder, who said infrastructure spending is a legislative priority for 2013, last month proposed raising both the gas tax and registration fees.

Democratic Gov. Deval Patrick of Massachussets wants to add $1.02 billion a year for transportation funding over the next decade. Last month, he proposed: raising gas tax, tolls and fees for vehicles that pollute more.

Virginia's Republican Gov. Bob McDonnell proposed scrapping the gas tax and increasing the sales tax to fund infrastructure needs

Two weeks ago, Wisconsin Republican Gov. Scott Walker's transportation-funding commission recommended raising the state's gas tax by five cents and creating a mileage-based registration fee for drivers. 

Remember that in 2003 the California electorate recalled Governor Gray Davis, in part because he had raised taxes on vehicle license fees.  Times they are a changing. 

As tax revenues increase with the improving economy and increased rates, states may have more flexibility in selecting which project delivery method they should adopt.  They will still be looking for solid metrics to decide which delivery method is best.