Another NJ Gas Tax Increase Starts Today.   How Much Revenue Will Be Generated and Where Will That Money Go?

It has been almost two years since then governor Chris Christie increased New Jersey’s gas tax by nearly 23 cents per gallon in an effort to refill the Transportation Trust Fund (TTF) which finances road, bridge and mass transit projects throughout the state. The controversial deal allowed the governor to end his freeze on construction projects. Today the state’s gas tax was automatically increased another 4.3 cents, because the revenue from that 2016 tax increase did not meet projections, therefore construction projects could not go on as needed.

The tax just didn’t have the economic impact proponents said that it would. Even if the $2 billion projected revenue was unrealistic, as many suggest, there was a decline in fuel consumption that would have kept it from meeting even more modest goals. According to an analysis by AAA, after the 2016 tax increase, drivers bought less fuel in NJ. The group also found that gas consumption rose in Pennsylvania and Delaware during the same period. Gas stations near the Delaware border, where the price of gas is now less than NJ, watched as cars passed by, no longer making that once automatic stop to fill the tank  before crossing into another state.

Throw in more fuel efficient cars and the increase in purchase of electric models, and the pump has panned out to be the place to fill the TTF piggy bank after all.

The lower than expected sales contributed to the tax revenue missing the $2 billion projection by nearly $43 million in the 2016 fiscal year and more than $125 million in 2017. In 2018, it will miss projected revenues again. Because of the way that 2016 legislation was written, the automatic 4.3 cent increase per gallon kicked in today to help pay for the state’s $2 billion in transportation projects, some of which are urgently needed.

Taking a look at just one part of the crumbling infrastructure—the state’s bridges—shows the dire need to get projects underway. The American Road and Transportation Builders Association’s (ARTBA) 2017 bridge report shows 8.8 percent of the state’s bridges are “structurally deficient.” That’s 596 bridges (down from 609 a year earlier). The money generated from this gas tax increase will try to address some of those issues.

In June, an agreement was reached on the state’s part of the financing for one of the biggest of those bridge projects—the new Portal Bridge in Kearny will receive $600 million in bonds from the TTF to be repaid over a 30-year term. The Portal Bridge is part of the Gateway Project that includes two new Hudson River tunnels.

The gas tax helped increase funding for smaller, local bridge projects. The Local Bridges, Future Needs program just awarded $47.3 million in grants for county bridges. It was the largest amount of money given toward bridge grants ever, according to the NJ Department of Transportation. The gas tax increase allowed the grants to nearly double, from the $25 million in prior years. Each of New Jersey’s 21 counties will receive at least $1 million through the grants. Money will be used for railing recoating, realignment, and replacement. The biggest award went to Monmouth County, getting $6 million to go toward four bridge reconstruction projects. Union County was granted $2.2 million to replace four bridges, as well.

While revenue from the tax is being used on expansion and new projects, there is debate about the fairness of how the funds are distributed. In South Jersey, for example, complaints site fewer projects in the area. Others have been disappointed that the types of projects receiving the funds do not benefit state contractors, but instead lend themselves to bids from very large, sometimes foreign-owned, companies.

Questions still remain.  Will this new increase further reduce consumption, negatively impacting projects?  Will it be enough to keep the TTF fully funded?

By Chris Colabella and Kara Yorio