On October 27, the Senate Finance Critical Transportation Infrastructure Funding Modernization subcommittee chaired by Senator Tom Davis (R-Beaufort) met to hear testimony from the automotive industry and electric cooperatives.

Amy Tinsley, Executive Director of the SC Automotive Council (a council within the SC Manufacturers Alliance), provided the subcommittee with a thorough overview of the automotive industry’s role in South Carolina’s economy. She noted that since 2019, nationwide sales of vehicles have declined due to COVID and the semiconductor shortage. The impacts of this shortage will likely continue through 2022 and into 2023.

When it comes to electric vehicles, Tinsley said that delivery modes would be among the first to adopt along with drivers in urban areas. However, this will be something that comes into play over time.

Leighton Yates, Director of State Affairs for the Alliance for Automotive Innovation, told the subcommittee that while the majority of light-duty vehicles sold in the United States are powered by gasoline/diesel, the auto industry plans to invest $330 billion in vehicle electrification by 2023, with 130 models in the market by 2026.

Yates said the industry’s transition to electricity will be an evolution, not a revolution. However, by 2030, we should expect fewer internal combustion engines and more electric vehicles on the market – and on the roads.

Mike Couick, President & CEO of the Electric Cooperatives of South Carolina (ECSC), called the shift to electric one of the biggest challenges of his career.

“We have got to get it right,” said Couick. “This is not just the electrification of transportation; it is the electrification of the economy.”

Couick provided a thorough overview of necessary infrastructure scenarios and urged the subcommittee to allow flexibility in rate structures and focus on a cost-causation approach. Otherwise, there could be inequities in who is paying to power these electric vehicles.

While there was no discussion of transportation-specific financial impacts during Wednesday’s meeting, the testimony offered a glimpse into the magnitude of changes that come with a transition to alternative vehicles.

The subcommittee is expected to meet again, possibly in December.

Governor Henry McMaster called for the expansion of Interstate 73 (I-73) this week, specifically by investing $300 million to build six miles from I-95 to Highway 501.

This project would be funded through a combination of South Carolina’s share of American Rescue Plan (ARP) dollars and one-time money from the state’s projected $1 billion budget surplus for the fiscal year 2022.

“If we seize this moment by thinking big, being bold, and making transformative investments, I believe we can change South Carolina’s future for the better,” said Governor McMaster. “I can think of nothing more transformative than the state committing the first $300 million to kickstart this critical project. It is my hope that this commitment will serve as a catalyst for our local government partners to finalize their investment plans and will strengthen the position of our congressional delegation as they work to secure federal funding, so that we can finally make I-73 a reality.”

The announcement was made Monday during a press conference at the Myrtle Beach Chamber of Commerce. 

Governor McMaster was joined by Secretary of Transportation Christy Hall, Director of the SC Parks, Recreation & Tourism, Duane Parrish, legislators, and local government officials.

“If you think about the connection to the new port in Dillon, all of those elements come together to create a true multimodal movement of goods and people in this area. I echo the Governor’s call to invest in this very important project. We are ready to move forward with phase 1 of this project with an initial investment of $300 million to build the segment from I-95 to US 501,” said Secretary Hall.

Based on the ARP formulas, South Carolina has approximately $453 million in estimated revenue losses from the pandemic (with $156 million directly attributed to SCDOT). These monies have the most flexibility and can be used to fund road projects, among other things.

You will recall that last month Governor McMaster announced a plan to use $360 million in ARP funds to accelerate the widening of I-26 from Columbia to Charleston.

Legislators continue to deliberate the allocation of ARP funds in respective subcommittees in the House and Senate.

The increased transportation funding provided by the South Carolina legislature’s passage of the 2017 Roads Bill (Act 40) has allowed South Carolina to move forward with numerous projects to improve safety and accelerate road and bridge repairs. But the state still faces challenges maintaining its aging system and reliably accommodating growing passenger and freight traffic to serve the needs of the state’s growing economy, according to a new report released today by TRIP, a Washington, DC, based national transportation research nonprofit.

The TRIP report, “Moving South Carolina Forward: Providing a Modern, Sustainable Transportation System in the Palmetto State,” examines the condition, use, safety and efficiency of South Carolina’s surface transportation system, the impact of Act 40, the importance of reauthorization of the federal surface transportation program and the challenges South Carolina faces to accommodate future transportation growth and sustain adequate funding.

With South Carolina’s population expected to increase to approximately 6.4 million people by 2040, and vehicle travel growing at the fifth highest rate in the nation from 2014 to 2019, the TRIP report finds that congestion is worsening, costing South Carolina drivers a total of $2.1 billion each year in the form of lost time and wasted fuel – as much as of $1,165 per driver in some urban areas. South Carolina drivers lose as many as 56 hours and waste up to 22 gallons of fuel annually as a result of congestion. A full list of the most congested Interstate segments in the state is included in the report. Due to the COVID-19 pandemic, vehicle travel in South Carolina dropped by as much as 37 percent in April 2020 (as compared to vehicle travel during the same month the previous year) but rebounded to four percent above June 2019 volume in June 2021.

The efficiency and condition of South Carolina’s transportation system, particularly its highways, is critical to the health of the state’s economy. Annually, 465 million tons of freight are shipped to, from or through South Carolina, an amount that is anticipated to grow by 65 percent by 2040. Accommodating the significant increase expected in the movement of truck freight in South Carolina will be further challenged by the significant number of freight routes in the state that are constrained because they have inadequate load carrying capacity to accommodate large trucks. The TRIP report includes a list of the worst highway freight bottlenecks in South Carolina. Regions with congested or poorly maintained roads may see businesses relocate to areas with a smoother, more efficient and more modern transportation system.

Since 2018, SCDOT has been able to start approximately 4,000 miles of paving projects statewide, partly due to the additional funding provided by Act 40.  According to the TRIP report, 18 percent of South Carolina’s major locally and state-maintained roads are in poor condition and 25 percent are in mediocre condition. Eighteen percent of major roads in the state are in fair condition and the remaining 39 percent are in good condition.

Eight percent of South Carolina’s locally and state-maintained bridges are rated poor/structurally deficient. A bridge is deemed poor/structurally deficient if there is significant deterioration of the bridge deck, supports or other major components. Bridges that are poor/structurally deficient may be posted for lower weight limits or closed if their condition warrants such action. Since 2018, SCDOT has begun repairs on 211 of the 465 state-maintained bridges that were in poor condition or restricted to carrying lighter weight vehicles and prioritized by SCDOT for repair.  Based on current funding, SCDOT anticipates that the number of state-maintained bridges that are either in poor condition or restricted to carrying lighter weight vehicles will increase by 81 percent by 2040, from 548 to 994.

Traffic crashes in South Carolina claimed the lives of 5,018 people from 2015 to 2019. South Carolina’s overall traffic fatality rate of 1.73 fatalities per 100 million vehicle miles of travel in 2019 is the highest in the U.S. The fatality rate on South Carolina’s non-Interstate rural roads in 2019 was also the highest rate in the country and approximately three-and-a-half times higher than all other roads in the state (3.46 per 100 million vehicle miles of travel vs. 0.98).  The SCDOT has initiated a rural roads safety program targeting 1,957 miles of rural roads, which represents approximately five percent of the state’s rural roads, but account for approximately 30 percent of the state’s rural fatal and serious traffic crashes. Since passage of Act 40, safety improvements have been initiated on 635 miles of the 1,000 miles of rural roads to be addressed under the state’s current 10-year plan. These improvements include the addition of rumble strips, guardrails, raised pavement markers, paved shoulders and wider clear zones.

Governor Henry McMaster announced September 2 that he believes the legislature should use $360 million in American Rescue Plan (ARP) funding to expedite widening I-26 – specifically, closing the gap between Columbia and Charleston.

Governor McMaster was joined by Secretary of Transportation Christy Hall and representatives from the SC business community to make the announcement.

Photo Source: SCDOT

This segment of interstate remains a high priority of the agency because of the heavy congestion, delay, and accidents on a routine basis.

“With this bold plan proposed by the Governor, this one-time funding boost will accelerate this project forward by at least six years,” said Secretary Hall.

Chairman of the SC Manufacturers Alliance, April Allen, who is employed by Continental, expressed support for improvements to I-26. “To maintain and growing our business to meet the demand of our customers, we must have the ability to move our raw materials, our finished products, both domestically and internationally…that’s why today’s announcement of this investment to improve this section of I-26 is so very important,” said Allen.

Shawn Godwin, President & CEO of Palmetto Corp., currently serves as the Chairman of the SC Trucking Association. He expressed the importance of modernizing I-26 to serve the supply chain and move freight and people safely and efficiently. Godwin noted that trucks move about 75% of all cargo from the SC Port and 94% of all manufactured goods in the state.

“Our elected officials have recently dedicated funding for the deepening of South Carolina’s shipping highway, the Charleston Harbor, now we urge them to do the same for I-26,” said Godwin. He went on to encourage legislators to follow Governor McMaster’s lead to “improve the critical lifeline that is I-26.”

South Carolina has estimated approximately $453 million in revenue loss due to the pandemic, which includes $156 million attributed to SCDOT losses. Legislators continue their discussions of how the funds should be allocated. Governor McMaster plans to release his complete list of recommendations soon.

This week the US Senate approved the Infrastructure Investment and Jobs Act (IIJA) which provides record levels of investment in federal highway, bridge, and public transportation programs. 

The bill passed by a vote of 69-30. Nineteen Republicans, including SC Senator Lindsey Graham, joined with all Democratic senators supporting the legislation.  

The IIJA includes a 5-year reauthorization of surface transportation programs, providing $370 billion for states to invest in road, bridge, and surface programs. The package also includes $86 billion in supplemental resources for these programs.

Click to see the increases each year.

In addition, the plan includes significant increases in funding for hard infrastructure improvements for airports, ports, water, rail, and energy infrastructure.

The legislation also includes key permitting reforms like “One Federal Decision” to eliminate duplicative bureaucratic reviews, reduce timelines, and ultimately put taxpayer dollars to work faster.

The bill now heads to the House for consideration. 

With federal surface transportation funding expiring on September 30, Congress must pass a surface transportation reauthorization plan to fund the nation’s roads and bridges. Short-term extensions are costly to taxpayers and bring uncertainty to state transportation programs and businesses alike.

South Carolina continues to grow. Despite population increases, the number of vehicles on the road, and vehicle miles traveled, funding for transportation infrastructure does not inherently benefit from this growth. In fact, revenues may become more volatile in the future with continued improvements in fuel economy, inflation, and the anticipated growth of the electric vehicle market.

So how will South Carolina adapt and fund a growing state economy in the future? A special Senate Finance Subcommittee initiated that discussion this week.

The Critical Transportation Infrastructure Funding Modernization Subcommittee held their first meeting Tuesday to hear from Secretary of Transportation Christy Hall. The Subcommittee is chaired by Senator Tom Davis (R-Beaufort) and includes Senators Larry Grooms (R-Berkeley), Kevin Johnson (D-Clarendon), John Scott (D-Richland), and Ross Turner (R-Greenville).

Chairman Davis said that the government is often criticized for not looking forward and only acting on issues when there is an immediate need. However, the purpose of this subcommittee is to be proactive and begin to look at the impacts that a changing economy and consumer preferences will have on the future of transportation funding in South Carolina – specifically when it comes to alternative and electric vehicles.

Secretary Hall provided Subcommittee members with a thorough overview of SCDOT’s finances and priorities. Thanks to Act 40 and the increase and diversification of revenue streams, the state is now in a good position to determine investment priorities and not be overly reliant on federal funds (and the strings attached to them). Having diverse revenue streams was also crucial in helping the agency weather the pandemic.

Secretary Hall pointed out that some revenues have performed better than others. Collections of the infrastructure maintenance fee ($500 car tax), alternative vehicle fees, and registration fees have been higher than estimates. However, gas taxes have not met revenue forecasts for the past couple of years.

The Changing Nature of the Gas Tax

Historically, “gas taxes” are based on the assumption that a vehicle’s fuel consumption offsets the wear and tear on the road. It has long been considered the ultimate user fee – equitable, efficient, easy to administer, and impossible to evade. The more you drive, the more you pay. However, several factors contribute to the diminishing buying power of the gas tax: inflation, continuous improvements in fuel economy, and the push for alternative and electric vehicles.

Several states have opted to address the inflation factor by indexing their user fees/taxes on fuel. For example, if South Carolina’s fuel tax (which is still among the lowest in the southeast) kept up with the rate of inflation and population growth, it would bring in $6.7 million more per penny than it generates now.

What is the Fair Share for Alternative Vehicles?

It is a little more challenging to tackle fees on alternative vehicles to ensure that drivers are paying their fair share to use the roads. South Carolina recognized this in 2017 and was among the first southeast states to impose a fee on alternative vehicles ($60 for hybrids/$120 for electric). However, because these fees are assessed biennially, South Carolina has the lowest fee compared to sister states.

Just to put things in perspective, if South Carolina’s electric vehicle fees were calculated on a basis to determine actual gas usage equivalent, fees would need to be around $250 annually.

Estimated Funding Gaps
South Carolina is unprepared to financially deal with the immediate demands associated with rapid population growth, subsequent housing, and continued economic development in the state.

In order to address needs associated with congestion, bridges, routine maintenance, and potential increases in federal match requirements, the SCDOT needs an additional $200 – $240 million annually.

These gap numbers align with the funding needs included in the menu of options given to the legislature in 2017 during the Act 40 debate. In addition, these gaps are contingent on the SCDOT maintaining the same level of discretion/flexibility with federal dollars.

The subcommittee will work to schedule meetings through the summer and fall to continue to discuss potential policy changes associated with the growth of the electric vehicle market in the future. SCFOR will continue to follow.

SCFOR applauds the creation of this subcommittee as it demonstrates foresight and a long-term commitment to infrastructure. If there is anything that we learned from 2017, South Carolina cannot afford to wait. We need to be proactive about infrastructure – and this subcommittee is timely because there are many factors to consider regarding the impacts of the electric vehicle market on South Carolina. We appreciate the Senators’ willingness to initiate the conversation early. 

July 1, 2021 marks year 5 of SC’s phased-in investment to help #fixscroads. These revenues are funding over 5,000 miles of road improvements across the state. There is much work to be done, but #progress is being made.