RALEIGH – With gas prices averaging more than $3.50 a gallon this spring, a bill in the North Carolina House seeks to give relief to drivers by limiting the gasoline tax.

 But such a move would cut revenue for highway construction, meaning Fayetteville’s Outer Loop could face more delays.

 North Carolina capped the gas tax in 2006, and that was one reason work on the loop slowed, a state transportation official said.

Lawmakers canceled the limit on gas taxes in 2009, setting instead a minimum tax of 29.9 cents per gallon. The boost in revenue revived highway funds; six miles of Outer Loop construction is just getting under way, two years late.

Since Jan. 1, gas prices have risen about 50 cents, and they are projected to continue climbing into summer. State lawmakers are considering House Bill 399, which would reinstate the cap on fuel taxes to soften the price increases for consumers. Advocates point to how neighboring states have lower gas taxes, which makes North Carolina less competitive.

“North Carolina must be more responsible with the gas taxes it collects, and we must be more competitive so businesses along our state’s border do not lose business,” said a statement from Rep. Michael C. Stone of Sanford, a Republican who is a prime sponsor of the bill.

The tax cap from 2006 to 2009 saved drivers about $540 million over three years, according to the Transportation Department.

“There’s a lot of people that are concerned with rising gas prices, and this bill is an attempt, in my opinion, to start the discussion about what we want to do with this gas tax,” said Rep. Ric Killian of Charlotte, another prime sponsor.

The motor fuels tax, which applies to gasoline and diesel, is currently 32.5 cents per gallon. The state adjusts the tax every six months based on wholesale prices. The tax is expected to rise about 2 cents on July 1, unless the bill becomes law.

A 2-cent increase would cost the average driver about $15 more a year, said Greer Beaty, a spokeswoman for the transportation department. The estimate assumes 15,000 miles of travel in a car that averages 20 miles per gallon.

North Carolina’s fuel tax collects $1.6 billion to $1.7 billion a year. Besides building highways, the transportation department uses the money to repave and repair roads, fill potholes and clear snow. A portion of the money goes to cities and towns to help them pay for street maintenance.

The tax cap would prevent the state from collecting an average of $97 million more per year over the next 10 years, according to DOT estimates.

Fayetteville City Manager Dale Iman and a lobbyist for the state’s mayors said the proposal will hurt municipalities in the long run.

“If the gas tax cap bill is passed, the city of Fayetteville will have to make more difficult decisions in order to keep our roads in good shape,” Iman said. “It’s unfortunate that the gas tax is being capped at a time when the city of Fayetteville has invested significant money into road resurfacing projects.”

The city would have to cut other parts of its budget to pay for the street work, Iman said.

The DOT made 10 years of roadwork plans based on the premise that the tax would rise as specified by the 2009 gasoline tax law.

A cap would cost Fayetteville and other Cumberland County communities a total of $680,000 in road maintenance money, known as Powell bill funds, under that plan, the DOT estimates.

Including Powell bill funds and other state spending that relies on the fuel tax, the DOT predicts that a tax cap would reduce roadwork money available by $14.5 million over the next 10 years in Cumberland County. Maintenance of 342.6 miles of roads in the county would be put off.

A $58.7 billion bypass around Greenville would be delayed, and multi-million-dollar projects in other cities would be on the bubble, too.

Statewide, the cap would reduce the money the DOT is expected to receive by $967.7 million. That would affect 18,467 miles of roads that the department plans to resurface.

Drivers would have to get along without widened roads and put up with unfixed potholes, said Julie White, a lobbyist for the N.C. Metropolitan Mayors Coalition.

White would like the cap to be around 34 to 35 cents, instead of the 32.5 cents proposed by Killian.

Killian’s gas tax cap could delay completion of 7.5 miles of the Outer Loop, said Mark Foster, the Transportation Department’s chief financial officer. That section of I-295 will run from the All American Freeway to Ramsey Street, where it will connect with the previously built portion to carry traffic to I-95.

The state had been poised to put the section of I-295, estimated at $270 million, out for bid in late 2008. Then it ran out of money.

“We had to delay all projects,” Foster said.

The cash shortage was caused by the recession cutting state revenue in general, as well as the gas tax cap, he said.

“That $500 million would have gone a long way to smoothing the delivery of those projects,” he said.

The federal economic stimulus program of 2009 revived 1.5 miles of the I-295 project that summer. The bridges are being built and the roadbed graded, but not paved.

The rest has had to wait until this year. The state this month awarded a bid for some of the project, and more is to go to bid over the summer. None of the work includes paving.

The state typically allows construction projects that are under way to continue, Foster said. But work that hasn’t been started, including the paving of I-295, would be subject to postponement if there isn’t enough money for it.

Killian, the tax cap sponsor, said I-295 and other road projects should be able to draw on other money at the transportation department.

In all, Killian said, the department takes in $4 billion from various fuel and motor-vehicle-related taxes, and only $3 billion is spent on roads. The rest, he said, goes to other things – nonroad transportation projects, such as rail.

Killian cited as examples DOT tax revenue used to supplement general government spending ($70 million per year), run the N.C. Highway Patrol ($200 million) and teach drivers education in public schools ($40 million to $50 million).

“We have to minimize that so we can maintain the system that we have and build out the projects like your loop,” Killian said.

Stone, the other lawmaker, said the federal government should step up to fund the majority of I-295 in the interest of Fort Bragg security and military readiness.

“It is irresponsible of the federal government to place 40,815 people in the area and not provide funding for safe roads. It is the least the federal government can do to make our military families’ lives easier when they are back from serving in combat,” his statement said.

 By Paul Woolverton

Staff writer

Published: 06:49 AM, Sun Mar 27, 2011