May 15, 2020

MDOT bracing for lower gas revenues

MDOT bracing for lower gas revenues

Road projects are continuing, but state transportation leaders are bracing for what will likely be a hard summer, thanks to decreased gas revenues brought about by the coronavirus. 

The Mississippi Department of Transportation (MDOT) is expecting gas revenues to drop for the months of April and May, as a result of decreased travel related to the COVID-19 outbreak and its associated lockdowns. 

“March was down, but that was the beginning of the outbreak,” said Central District Transportation Commissioner Willie Simmons. “Until we get April and May’s numbers, we won’t know how bad we have been hurt.”

MDOT won’t know April’s collections until June and May’s collections until July.

Because of that lag time, Simmons said it’s too early to tell how much revenues from those months will be down.

However, he has spoken to several gasoline distributors, who say fuel sales are down as much as 70 percent.

“It is very concerning,” he said. “When our money drops to a level where we are losing 30 to 60 percent of our revenues, we have a serious problem.” 

Even with the grim outlook, Simmons said current road projects are continuing. The state is also continuing to bid new projects and award contracts.

“We have put some contracts out over the last two or three months and we are accepting bids and going forward,” he said.” We have not made the decision to delay any operations in place.” 

Simmons said several projects being let are for emergency repairs related to recent flooding and tornadoes. Other projects are designed to improve public safety. 

“We have some things we can’t afford not to do,” he said.   

Locally, contractors are working on several state-sponsored projects, including the mill and overlay of Old Agency Road from I-55 to the roundabout, the mill and overlay of the I-220 off-ramp onto I-55, and the mill and overlay of the I-55 frontage road from County Line Road to the Natchez Trace Parkway. 

Simmons said those projects should not be impacted by a decrease in revenues, in part, because the state must maintain enough cash on hand to pay for projects once they are awarded. 

“Right now, we’re OK, but this is early May. In early June, when you’re talking to me, we may have a whole different story.” 

State transportation agencies across the country are facing similar challenges. 

Transportation programs in Washington state projecting “losses of up to $100 million a month” as a result of the pandemic, according to the News Tribune in Tacoma. 

Meanwhile, the USA Today reported that the states of Ohio, Missouri and North Carolina had put projects on hold as a result of decreased gas tax revenues.

Gas taxes, which are levied on each gallon of gas sold, are a major contributor to state road programs. Mississippi’s gas tax accounts for 36.7 percent of MDOT’s annual budget. 

Mississippi charges 18.4 cents per gallon of gas, one of the lowest taxes in the nation. 

While just over a third of Mississippi’s road monies come from gas levies, more than half of Washington’s and North Carolina’s road funds come via the pump, while more than 40 percent of Missouri’s and Ohio’s transportation dollars come from the source. 

The dip in these revenues comes on top of what was already strained budgets for many state road agencies, including Mississippi’s. 

MDOT has an annual budget of more than $1 billion. Those funds, though, fall well short of the amount the agency needs simply to maintain existing infrastructure. 

A 2015 study from the Mississippi Economic showed the state needed an additional $4.86 billion dollars to address “current and existing road and bridge needs,” and recommended lawmakers increase annual funding to MDOT by $375 million.

In 2018, lawmakers increased state road funding significantly, with the passage of the Mississippi Modernization Act and the Alyce G. Clarke Mississippi Lottery Law. 

Combined, the legislation will mean an additional $200 million a year for road and bridge funding. 

Under the lottery law, for its first 10 years, the first $80 million made each year on the lottery would go toward roads and bridges. 

Provisions of the Modernization Act state that a portion of sales tax dollars collected from Internet and out-of-state sales would go to state, county and city programs, while bond monies would be set aside for emergencies. 

Even with those funding mechanisms in place, the state falls about $100 million a year short in needed revenues. 

Simmons, though, said now is not the time to ask for a gas tax increase, especially with so many Mississippians currently out of work. However, he does believe that MDOT will have to turn to the legislature to help plug budget shortfalls. 

In mid-April, more than 215,000 residents in the Magnolia State were out of work as a result of COVID-19, according to NBC News. 

“We’re just kind of holding off on that push for this particular time,” he said. “Let us get help from the legislature this year and let’s talk next year about how we generate sustaining dollars to take care of the infrastructure in our state.” 


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