Tennessee governor says new funding needed for road projects, rules out fuel tax increases

Staff Photo by Robin Rudd / Traffic moves through the junction of Interstate 24 West, left, and Interstate 75 North in August 2021 after completion of the first phase of a $132.6 million project on the notorious "split" outside Chattanooga.

NASHVILLE -- Five years after Tennessee lawmakers approved then-Gov. Bill Haslam's recommended gas and diesel tax increases for highway transportation projects and maintenance, his successor, Bill Lee, says more money is needed if the state is to meet its future road and bridge needs.

But Lee, a Republican who won re-election earlier this month, says he isn't interested in increasing fuel levies to fill gaps going forward. Nor does he want to issue debt to deal with it. Instead, the governor and Tennessee Department of Transportation Commissioner Butch Eley are on the hunt for other solutions to address funding.

"We have a very strong budget in this state, and I commit to you that we will diligently work -- tirelessly work -- to figure out a way to invest in our roads and bridges in this state without raising your taxes and without going into debt," Lee told cheering supporters during his Nov. 8 election-night victory speech.

Lee said the needs are real and expected to grow. Tennessee will require an estimated $26 billion in investments to address traffic congestion issues by 2040, according to a study done last year by the Tennessee Advisory Commission on Intergovernmental Relations, a state government think tank. That's most of the $34 billion in projected total needs, according to the group.

So what options does that leave for Lee?

Neither Lee nor Eley are saying right now other than Eley recommending to Lee during his department's Nov. 9 budget hearing that the state triple the annual fee paid by owners of electric vehicles from the current $100 to $300.

The state's relatively low number of electric vehicle owners is expected to grow substantially in coming years as vehicle manufacturers gear up to produce electric cars and trucks on a massive scale. Volkswagen Chattanooga is producing its electric ID.4 cars as is Nissan in Smyrna and GM in Spring Hill. And Ford Motor Co. is building a $5.6 billion electric vehicle and battery plant in West Tennessee.


Talk is surfacing in political circles that Lee or possibly others may seek to press the introduction of limited road by converting some or all designated high occupancy vehicle (HOV) lanes into "hot lanes," or high-occupancy toll lanes on some congested interstates in major cities, perhaps through a state government-private sector partnership.

Some states, including New York and New Jersey, have used toll roads for decades. More recently, a number of other states, including Georgia, have jumped in to convert HOV lanes into toll lanes, offering varying pricing based on demand.

Eley, who is also Lee's deputy governor, was a co-founder and former co-owner of the private for-profit management company Infrastructure Corporation of America, which was later sold.

He estimated it will take some $2 billion annually to address congestion projects. The state currently spends just $500 million a year on new construction. In the meantime, inflation is soaring while new gas or diesel-fueled vehicles are getting many more miles per gallon.

Major projects are taking longer to complete, about 15 years from conception to finish, Eley said. Even though his department has a 20% vacancy rate, he said he plans on not filling a number of positions to devote the money to projects.

In the budget approved by state lawmakers last spring, state revenues, mostly fuel taxes and vehicle registration fees, amounted to $942.9 million in state dollars.

Lee also injected $717 million in additional funds for transportation using surplus state sales tax revenues from the general fund, which pays for most other government functions, to boost TDOT funding, which along with federal dollars, is $3.28 billion in the current budget that ends June 30, 2023.

Eley has recommended a budget of $2.68 billion, a $602 million drop. The state is expected to see $1.3 billion over a five-year period under President Joe Biden's Infrastructure Investment and Jobs Act. But Eley said that translates to about $65 million a year for each of TDOT's four regions.

Asked last week about the possibility of using a private vendor to run or partner with the state on toll lanes, Lee said as he wrapped budget hearings that he's asked TDOT for options.

"We're not to that point yet. But we do need to invest in our roads and our bridges," Lee said.

Eley said during his budget hearing that, absent major action, motorists in Tennessee are looking at commuting times increasing by 60% during the next 18 years. Drivers could see the time it takes to go between the state's biggest cities increase by an hour.

Haslam's 2017 IMPROVE Act sought to address a number of issues related to needed projects. Among other things, Haslam's original ask sought to index fuel taxes to the Consumer Price Index every two years. His fellow Republicans refused.

Still, the project has funded a number of huge projects, including the effort to address problems at the interchange of Interstate 24 and Interstate 75 outside Chattanooga.

House Transportation Committee Chairman Dan Howell, R-Ocoee, and Senate Transportation and Safety Committee Chairwoman Becky Duncan Massey, R-Knoxville, said in phone interviews Tuesday and Wednesday that a number of states, among them Georgia, have successfully implemented high-occupancy toll lanes in congested areas.

"It allows car and truck drivers the option of staying in a standard lane or moving into a less-crowded, specifically designated lane," Howell said. "The vehicles use specialized transponders to track their activity. Fees charged per mile vary based on how many drivers are making use of the lanes.

"It's clear that we can't continue to do business as usual," Howell said. He noted no one is talking about increasing fuel taxes. Haslam's actions increased Tennessee's gas-per-gallon tax by six cents to 26 cents and diesel by 10 cents to 27 cents. It was the first increase since 1989.

Howell said with new roads or lanes and bridges needed while maintaining repairs or improvements on existing infrastructure, Tennessee has to broaden the revenue stream in a state where the population is booming. He said he favors the plan to increase electric vehicle fees.

Increasing fuel taxes "would not make any sense ... because it's a dying funding stream because of the way the industry's going," Howell said. The gas tax is already down by about 2% this year, he added.

As for converting HOV lanes into toll lanes, Howell said, "I can't speak for my committee, but the people I talk to on my committee are open to the idea. Of course, the devil is in the details, as you know. And it depends on who gets the revenue, who shares the revenue. Will it be a revenue sharing? Will it be a situation where public-private partnership provides funding to help Tennessee build it?

"There's just a lot of moving parts that we haven't finalized yet," he said.

"But here's the thing," he added, "at least 16 other states, Georgia included and I think Texas, have found ways to enter into public-private partnerships, and it's working in those areas."

Howell clarified "we're not talking about mandatory tolls here. These would be option only. If you want to save 30 minutes getting from Murfreesboro to Nashville. Pay a buck or $1.50, whatever it is. They've been doing that in Georgia now I think five, six years. When it opened first year, that road going south into the heart of Atlanta, according to officials in Atlanta that I've talked with, it generated $40 million, that one stretch of road."

Contact Andy Sher at asher@timesfreepress.com. Follow him on Twitter @AndySher1.