South Dakotans willing to pay more for better roads

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Farm Forum

Mike Vehle said he wanted to hear answers to the state’s road funding problems.

It wasn’t good enough, the Republican state senator from Mitchell said, for people who spoke at the state Legislature’s Interim Committee on Highway Needs and Financing public hearing on July 2 at the Ramada Convention Center in Aberdeen, to talk about the problems without offering solutions.

Many solutions were offered at the meeting.

The problem is well-known. There’s not enough money to take care of roads in the state or its counties and townships. The solution is more money, and people who spoke at the meeting said they wouldn’t have any problem paying more for the state to take better care of roads.

Four of the 15 members of the subcommittee were at the July 2 meeting, the fourth of seven that will be held statewide. Vehle said it’s still too early to know what to expect from state lawmakers. Some type of compromise, most likely, he said. Maybe that will mean a boost in the state fuel tax, which was suggested by several and no one at the meeting spoke against the idea.

South Dakota’s fuel tax is now 22 cents per gallon. The last time it was raised, by five cents, was in 1999, said Paul Symens, who farms near Amherst. A former state lawmaker, he’s now a Marshall County Commissioner.

At the time, Brown County Commissioner Duane Sutton was a freshman state legislator. The idea of raising the state fuel tax was more palatable in 1999, given gas prices at the time, he said.

Plenty of people at the meeting backed the idea. Like Hecla-area farmer Mike Elsen. And Anita Lowery, Groton’s city finance officer. And Greg Vavra, of the Brookings-based South Dakota Local Transportation Assistance Program, an agency that helps counties address transportation needs. And Dick Howard, of the South Dakota Association of Towns and Townships also backed an increase.

The gas tax is a simple user tax, and the people who drive the roads the most wind up paying the most, Symens said.

“I’m not a bit worried about paying gas taxes when I use the roads,” Symens said.

Sutton said the Legislature has to free up revenue-creating options for local governments. While opting out of state-imposed caps on the amount counties and school districts can increase property taxes from one year to the next is allowed, it’s not a viable option in Brown County, he said. All attempts to opt-out in Brown County have failed badly, he said.

“What we need you guys to do is legislate more local options for us, and let commissioners take the heat,” he said.

Increasing the gas tax wasn’t the only option broached. Sutton suggested increasing the state sales tax by half a percent to better cover transportation costs. The money would be split among the state, counties, cities and townships, he said.

Taking restrictions off the wheel tax and raising license plate fees so they’re in line with neighboring states were discussed. So was a fee on crops, similar to checkoff fees charged on the sale of livestock, that could be used for roads.

Counties have an option of imposing a tax of $4 per wheel, at a maximum of four wheels per vehicle, to cover transportation costs.

Mike Jung, an Aberdeen contractor, said all of the ideas should be used because trying to raise the full amount in a single way will fail.

Using a part of the state contractor’s excise tax to help pay for infrastructure improvements around new facilities was suggested by Randy Schuring, of Andover, vice president of the South Dakota Dairy Producers. Those new businesses lead to increased wear and tear on roads, he said.

The 2 percent excise tax is paid by contractors on construction and building improvement projects.

Howard said the 3 percent vehicle excise tax, paid in lieu of sales tax when cars and trucks are purchased, could be raised to 4 percent, the same rate as the state sales tax. That would raise about $25 million a year, he said.

Rasing the state fuel tax by a cent would bring in $6 million a year, Howard said. Increasing the state sales tax by a half cent would generate an estimated $80 million to $90 million a year, Sutton said.

On top of the state fuel tax, the federal government charges tax of 18.4 cents per gallon for gasoline and 22.4 cents per gallon of diesel fuel. For every 18 cents, South Dakota gets about 36 cents in transportation money in return from the federal Highway Trust Fund, Vehle said. That’s a great return, but it’s in peril.

The fund, Vehle said, is set to go broke next month. Legally, that can’t be allowed to happen, he said. So Congress will find some money for the fund, he said, but not enough to do all the necessary work.

“If you got it, a road brought it. Not much is parachuted in,” Vehle said, referring to how items get to South Dakota. “And if you produced it, a road moved it.”

Bryan Hisel, executive director of the Mitchell Area Development Corp., echoed those comments. Good roads are vital to the state’s business community, he said.

“Roads don’t just cost, they pay. And they pay in a big way,” he said. “If you want a great economy, let’s make sure we have superior, not just good roads.”

According to the U.S. Department of Transportation, freight demands of all modes of transportation will increase by 75 percent by 2035. The demand for trucking will increase by 77 percent by 2035.

Bridges were also a hot topic at the meeting. There’s not nearly enough money in the state’s bridge fund to do all of the work required. Vavra said the state got $7.9 million in federal money for its bridge fund this year. Of that, $2 million has to be spent on inspections, leaving $5.9 million to be split among South Dakota’s 66 counties. The waiting list is so long, he said, counties are spending their own money to replace bridges.

That’s happening in Brown County, said Dirk Rogers, highway superintendent. The county will spend roughly $2 million to replace a bridge about a mile and a half west of Hecla on County Road 5, he said. If it waited to tap into the bridge fund, the work wouldn’t be done until 2025, he said. But the bridge is important to local farmers and ranchers. And when they have to travel farther, he said, it adds to their costs.

Symens said four bridges are waiting to be replaced with bridge fund money in Marshall County with expected construction dates from 2021 through 2025. Four other bridges along Crow Creek are closed and more are in bad shape, he said.

Be it roads or bridges, those at the meeting noted recurring problems in making repairs and upgrades — the state’s property tax cap on local governments imposed in the early 1990’s, flooding and increasing costs of materials needed to build.

Local governments like counties can increase the amount collected in property taxes annually by growth plus the rate of inflations or 3 percent, whichever is less.

Vavra helped Brown County assess some of its roads last year. The county needs $4.9 million more a year just for road maintenance, he said. Without that work, roads will need to be reconstructed, which costs five times as much, he said.

Lowery said Groton spends $1.5 million a year on streets, a total that taxes the city. And Groton benefits from having a business sector, while some smaller towns don’t, she said.

For as vital as they are, she said, “Streets just don’t generate revenue.”

Vehle said last week at the S.D. Governor’s Ag Summit in Deadwood that $55 billion of stuff taken in and out of South Dakota on roads.

Rail and water concerns

Moving products by rail takes it off the roads, which is extremely important in South Dakota, Vehle said at the Ag Summit. As production of crops and demands for products escalates, rail service is a significant concern between the states of North Dakota, South Dakota, Minnesota and Pacific Northwest export terminals.

After the severe winter of 2013/14 and the sizeable harvest of 2013, the Soy Transportation Coalition has provided an analysis of rail investment in rural America.

Mike Steenhoek, executive director of the Soy Transportation Coalition, said at the Ag Summit the group seeks to identify the gaps between future rail investments and the needs of rural America. Various incentives are needed to determine how the investment gap can be addressed.

The demand from cars to haul crude oil and coal has gone from 11,000 carloads in 2009 to 400,000 carloads in 2013.

In a Soy Transportation Coalition funded study, the needs of interior waterways were addressed. The lock and dam system need significant improvements.

Improvements have been made to the Panama Canal, and the total grain and oilseeds passing through it will increase 30 percent by 2020/2021, Steenhoek said. Each vessel will accommodate up to 13,000 additional metric tons (448,642 bushels). This will provide an additional value to farmers of $6 to 7 million, which will provide a savings of 35 cents per bushel. The study indicates this will increase the amount of grains funneled to the Gulf of Mexico which will have an impact on rail rates.

Farm Forum Writer Connie Sieh Groop contributed to this story.

South Dakota Then Now

Number of farms: 67,100 (1950) 31,800(2010)

Average Farm Size: 669 acres (1950) 1,374 acres (2010)

Volume (bushels): 152 million (1940) 920 million (2011)

Percent living in rural areas: 81.1% (1930) 43.3% (2010)

Percent consumed on farm: 3.34% 1950) 0.07% (2010)

No. of hog farms: 36,963 (1954) 1,042 (2007)

Avg No. of hogs per farm: 47 (1954) 4,307 (2007)

Avg. Tractor Weight: 6,042 lbs. (1950) 12,260 lbs. (2011)

Railroad miles: 4,276 (1920) 1,741 (2009)

Info from Soy Transportation Coalition