KC roads could just get bumpier. Eco-friendly cars are chipping away at street repair funds

Takeaways:

• State motor fuel tax revenue has dropped by 27% in Missouri and Kansas since 2002 because of increasing fuel efficiency of cars, giving states less money for street repairs.
• States are experimenting with different ways of collecting taxes from fuel-efficient cars and electric vehicles, such as a road-usage charges and extra registration fees.
• Kansas City is gaining more lane miles of roads and highways, funded by the federal government. That makes it more expensive for the city to repair roads and potholes.

The signs of springtime are among us: The smell of new flowers, the sight of children playing at the park and the sound of metal scraping against asphalt as cars kerplunk into potholes.

It’s a perpetual complaint in Kansas City , particularly this time of year, as we emerge from street-destroying winter weather.

But for all of the racket these potholes cause every spring — and all the money that City Hall dumps into street resurfacing every year — Kansas City’s streets may only become more of a problem in the future.

The increasing fuel efficiency of cars, while great news for our carbon emissions, cuts into gas tax revenue and makes it harder to pay for road work.

Kansas and Missouri can’t shake their pothole problem. And now fuel-efficient cars — and the slow, steady invasion of electric vehicles —  makes the problem more daunting.

Stagnating gas tax revenue

Funding for road work comes from a variety of sources, but a significant chunk comes from gas taxes. For every gallon of gas they buy, Missourians pay 24.5 cents to the Missouri Department of Transportation and 18.3 cents to the federal government. Kansans pay 24 cents on the gallon to the state.

Missouri’s gas tax, plus user fees, makes up $2 billion of MODOT’s $4 billion budget . The other half comes from the federal government, along with about $185 million from general state revenues.

From there, a small portion of the funding goes to local governments like Kansas City or Wyandotte County, and most of the rest pays for interstates, state highways and bridges.

Motor fuel tax revenue has held steady for about two decades, hovering around $750 million every year in Missouri. Kansas makes around $450 million every year from its gas tax.

But the problem is that, when adjusting for inflation, revenue went down by 27% between 2002 and 2022 in both states.

Despite having more drivers and more roads, Kansas and Missouri have less money to pay for street repairs than they did two decades ago.

A handful of factors drive the trend.

For one, the gas tax is a fixed rate per gallon (as opposed to a percentage of sales). That stays the same whether you’re paying $2 a gallon at the pump or $5. The Missouri gas tax stayed the same for 25 years until it went up in 2021.

Think about if you needed to pay today’s rent or grocery prices with a salary that hadn’t increased since 1999.

Meanwhile, Kansas and Missouri roads saw a steady increase in traffic — and more wear and tear on the pavement.

The problem with greener vehicles

At the same time as gas tax rates have stagnated, automotive engineers have squeezed more and more miles out of a gallon of gas. In 2002, the average car got about 30 miles per gallon , compared to roughly 40 miles per gallon in 2019.

That’s tampered demand for gasoline despite rising numbers of drivers on the road, said Rick Mattoon, vice president and regional executive of the Chicago Federal Reserve’s Detroit branch.

Meanwhile, the rise of electric vehicles that don’t require their drivers to pay taxes has put transportation and public works departments funding road work on shrinking budgets.

Mattoon, along with policy advisor Kristin Dziczek and research assistant Emma LaGuardia, studied the effect of greener cars on street repair funding. They found that by 2030, the average driver will only pay 1.4 cents per mile in gas taxes. In 1994, they paid 3.2 cents per mile.

Several states, including Missouri, have raised their gas taxes in recent years to compensate for the decline. Others have indexed their rates to inflation or to the cost of construction materials. But that doesn’t quite solve the problem.

“This is a way to just catch up,” Mattoon said. “I don’t think many states have actually tried to calibrate it to what an optimal budget would be.”

Federal, state and local governments have pushed to replace internal combustion engines with electric motors that don’t result in as much greenhouse gas production . That will mean that fewer drivers buy gas. But EVs wear down streets at least as quickly.

Different states are experimenting with ways to get back lost gas tax money in other ways.

Most states also charge fees on electric vehicles and fuel-efficient cars that can compensate the state for the lost motor fuel tax revenue. But charge too much, and the state discourages taxpayers from replacing their gas engines with hybrids and EVs.

“There’s not a really good way to equalize this,” Dziczek said, “if one set of vehicles is being taxed on their fuel, while the other set is just being taxed for existence.”

Some states, like Oregon, have created a “road-usage charge” for fuel efficient cars and EVs, where the state charges drivers a tax rate per mile. If you drive less, you pay less.

Kansas is experimenting with that kind of program , although the Kansas Department of Transportation won’t be able to actually collect any money until the program is approved by the Legislature.

The system has the benefit of charging drivers according to how much they’re wearing down the roads. But Dziczek said that, like the gas tax, it places a higher burden on rural drivers, who might have no choice but to drive 40 miles to the nearest grocery store.

More and more expensive roads

Finding new ways to address drops in revenue won’t fix the other half of the problem: streets and highways are demanding more and more money every year.

That’s partly temporary, Mattoon said. State transportation departments deal with a  maintenance backlog.

“There was a long period of time in which there wasn’t enough revenue to do proper maintenance on highways,” he said. “So some of that is catch-up in terms of recognizing that road conditions have deteriorated in a lot of places.”

On a local level, federal transportation spending is causing local and state expenses to increase.

Much of the federal transportation money — using the federal gas tax revenue — goes toward creating new lane miles of highways, but it doesn’t pay for upkeep.

Kansas City Councilmember Eric Bunch, who represents downtown and midtown, has grown frustrated that this is creating financial problems for the city.

“We keep adding these things to state and local transportation systems that we can’t often maintain,” he said. “It has created a pretty troubling financial burden for state and local governments.”

Kansas City receives a small cut of state and federal motor gas taxes. Instead, the city relies on local tax dollars for road work.

So fixing the motor fuel tax problem won’t do much for Kansas City, which pays to repair potholes on municipal roads.

The silver lining is that Kansas City’s street resurfacing fund isn’t decreasing like the federal and state gas tax funds.

But until Kansas City makes a fundamental change to its transportation systems, Bunch said, the city’s roads will continue to become more and more of a drain on the budget.

“We’ve increased the budget for street maintenance since (2019) by more than double,” he said. “Now we’ve set an expectation going forward for how we’re going to continue to keep up … but we’re still not digging completely out of the hole.”

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