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Paving the way for Powell Bill changes 

by League Director of Research and Policy Analysis Chris Nida

It is rare for a state lawmaker’s name to be connected to legislation that he or she championed more than 60 years after its passage. That should give some sense of the significance of the bill pushed by Sen. Junius K. Powell in 1951.

That legislation established a program in which a portion of the state’s gasoline tax would be returned to municipalities to assist with the maintenance of city streets. Officially referred to by the NC Department of Transportation as the State Street-Aid Program, even today it is still more commonly known as the Powell Bill.

In North Carolina, only two entities have significant road maintenance responsibilities. The State of North Carolina has responsibility for more than 80,000 miles worth of interstates, state and U.S. routes, and other secondary roads. It is one of the largest state-maintained transportation networks in the country.

Municipalities are the other group with major streets responsibility. Across the state, cities, towns and villages maintain more than 22,500 miles worth of roads, in addition to sometimes working with the NCDOT on state roads that travel through municipal borders.

Despite both the state and municipalities sharing transportation responsibilities, the gas tax is a state tax, and there is no comparable tax on the local level. This is likely why legislators saw fit back in 1951 to go along with Sen. Powell’s plan of sharing a portion of the motor fuels tax with cities.

At that time, the program sent more than $4.5 million to 386 municipalities. Over time, as the number of municipalities and the miles of city streets in North Carolina increased, the League and its members worked to increase the amount of gas tax shared with cities as well. In Fiscal Year 2015-16, nearly $147.8 million will be spread among 507 municipalities.

That total, however, is not based on gas tax sales. Changes made in the budget passed during the most recent legislative session mean that Powell Bill funds are no longer tied to gas tax revenues and are instead simply a direct appropriation from the State.

On the one hand, this means that Powell Bill revenues are no longer subject to fluctuations in gasoline consumption and the rate of the gas tax itself. This should provide more certainty in future years. On the other hand, municipalities will need to continue to make the case to legislators about the Powell Bill’s importance and why this appropriation should continue to be made.

The 2015 budget made an additional change to the Powell Bill statutes. Cities have long been able to use Powell Bill funds for a variety of streets-related purposes, including resurfacing, maintenance, repairs, construction, reconstruction, or widening of local streets. NCDOT issues detailed guidance as to what Powell Bill funds may and may not be used for.

The 2015 budget changed the Powell Bill language to state that the funds shall be expended "primarily for the resurfacing of streets within the corporate limits of the municipality," but goes on to say that the previously listed uses of Powell Bill funds are still permitted.

NCDOT issued a report detailing cities’ usage of Powell Bill funds in FY14-15. It showed that the largest percentage of funds – 42.6 percent – was spent in the category of paving and resurfacing. The second-highest category, at 25.3 percent of expenditures, was maintenance. Several activities are allowed under the maintenance category, but one of them is patching, sealing or crack filling – which many may view as resurfacing. If the paving and resurfacing and maintenance categories are combined, they alone account for more than two-thirds of Powell Bill expenditures.

Other expenditures are made on essential elements of building and maintaining a safe, drivable transportation network. They include traffic control, engineering, snow and ice removal, and bridge construction and repair. Some cities around the state have invested in bikeways and greenways as parts of their transportation networks, but these investments by and large have not been funded with Powell Bill money. Together, Bikeways and Greenways categories accounted for just 0.03 percent of Powell Bill spending statewide.

Powell Bill flexibility is important for cities. Larger cities that can access the bond market may choose to finance expected expenses – including resurfacing – and reserve Powell Bill funds for operational costs. Smaller towns who receive less Powell Bill money may find that it is not enough for a resurfacing project, and may either save Powell Bill money over time or use the money for other expenses while finding other ways to fund major projects. Powell Bill flexibility allows cities to use the money in the most appropriate way possible locally to save taxpayers money. That’s important because local taxpayers are already contributing significantly to their local streets. In FY13-14, cities reported non-Powell Bill spending on streets and highways of $433.4 million statewide. That would mean that Powell Bill funds represent roughly a quarter of what cities currently spend on streets. Any change in Powell Bill funds would likely result in more of the burden falling on property tax payers.

Cities and towns appreciate the state’s longtime commitment to ensuring that this doesn’t happen. On behalf of all cities, we look forward to continuing the partnership started by Junius Powell for another half-century and more.