The third meeting of the Interim Joint Committee on Transportation was held on<Day> Tuesday, October 2, 2001, at 10:00 AM, in Room 149 of the Capitol Annex. Senator Virgil Moore and Representative Hubert Collins co-chaired the meeting, and the secretary called the roll.
Present were:
Members: Senator Virgil Moore, Co-Chair and Representative Hubert Collins, Co-Chair; Senators Charlie Borders, Paul Herron Jr, Daniel Kelly, Robert Leeper, Daniel Mongiardo, Albert Robinson, Richard Sanders Jr, and Ed Worley; Representatives Eddie Ballard, Larry Belcher, John Bowling, Ira Branham, Howard Cornett, Barbara White Colter, Mike Denham, Keith Hall, Jodie Haydon, Jimmie Lee, Paul Marcotte, Charles Miller, Marie Rader, William Scott, John Vincent, and Mike Weaver.
Guests Appearing Before the Committee: Cliff Linkes, Deputy Secretary, Jim Roberts, Deputy Commissioner, and Hollie Spade, Kentucky Transportation Cabinet; John Cooper, Jim Otten, Kentucky Director, Wesley Craig, Kentucky Ohio Chapter of the American Concrete Pavement Association; Ed O’Daniel, Bill Usher, and Sonja Sanders, Kentucky Motor Transport Association.
LRC Staff: Kathy Kackley, John Snyder, and Linda Hughes.
Representative Lee moved to approve the minutes of the Committee’s September 4, 2001 meeting, as submitted. Senator Herron seconded the motion, which passed by voice vote.
First on the Committee’s agenda was the Transportation Cabinet’s 2002 legislative package. Deputy Secretary Linkes and Deputy Commissioner Roberts presented the information. Mr. Roberts said, as the result of the state’s projected budget shortfall, the Cabinet does not anticipated initiating any new programs and presented only three major legislative issues. Those issues were the project management system of pre-financing biennial construction projects, a primary seatbelt initiative, and the acquisition of property for highway projects.
Mr. Roberts said, during the 2000 Regular Session, it was necessary to suspend several provisions in the appropriations bill. That language, authorizing pre-financing of construction, was contained in HB 502 (KRS 45.242 and KRS 45.244). He said similar pre-financing provisions would be included in the Cabinet’s 2002 Regular Session budget language. He noted that once the Cabinet proceeded with this type of financing it is difficult to turn back.
Mr. Roberts said the Cabinet appreciated the House Transportation Committee’s support for last session’s primary seatbelt legislation, and Representative Jodie Haydon for sponsoring the measure. Mr. Roberts said that the Cabinet intends to do a better job convincing the General Assembly of the measure’s benefits. He said the primary seatbelt law is the least expensive and most effective way of reducing fatalities and injuries on Kentucky’s highways, and that the saving of lives has been proven effective in the 14 states that have enacted a primary seatbelt law.
Mr. Roberts said a timely acquisition of property could speed up a highway project’s completion. The state’s inability to take possession of property has resulted in the delaying of crucial projects, statewide. He said a project may have 100 parcels of property to be acquired and the delay of one property acquisition can significantly delay the entire project. Mr. Roberts said that this session, the Cabinet is taking a different approach in the acquisition of property. The Cabinet is currently researching a “quick take provision” method of acquisition, similar to the provisions enforced in West Virginia. Several committee members voiced their concerns with the Cabinet only contacting constituents once prior to condemnation.
Mr. Roberts said that there would not be federal mandates, deficient administrative regulations, or executive orders in the Transportation Cabinet’s legislative package. He said one of the reasons is because the Transportation Committee has always provided the Cabinet with the statutory tools it needed to operate.
Chairman Collins asked if there would be any money appropriated for the primary seatbelt issue. Mr. Roberts said there would be a small amount of federal money for incentive grants, around one million dollars. Chairman Collins asked what was the percentage of Kentucky’s seatbelt usage. Mr. Roberts said it was approximately 58-60 percent, while the states that have primary seatbelt laws percentage rates are around 75-80 percent.
Senator Robinson said that he believed the property acquisition process was used as a tool for unfair treatment. He asked Mr. Roberts if the Cabinet would face any constitutional problems using the quick take method of acquisition. Mr. Roberts said he did not anticipate any constitutional problems, only a few statutory problems.
Representative Lee stated that he would like to meet with Cabinet officials to discuss the AVIS verses the KAVIS system. He said he did not want to see the state fall behind in updating its AVIS program and felt it was wrong not to include money in the budget to continue forward with the KAVIS program. Mr. Roberts said that he would arrange a meeting with Representative Lee, and the Cabinet’s budget, program, and technical staffs.
Representative Ballard asked how many lives a primary seatbelt law would save. Representative Haydon stated increasing Kentucky’s seatbelt usage rate 16-17 percent would save 70 to 80 lives, annually.
Chairman Collins spoke of constituents’ complaints regarding a primary seatbelt law. He noted that during the 2000 Session there was tremendous opposition and that it would have been impossible to pass the measure. He also said that the situation where the primary seatbelt law was being enforced by the State Police “Click It or Ticket” Program, even though a primary seatbelt law had not been passed, generated additional opposition.
Representative Mongiardo said that, being a head and neck surgeon, he used to be in surgery three and four times a week dealing with facial trauma from automobile accidents, but since Kentucky’s seatbelt law was enacted, he is only in surgery once a month for the same type of accident. He said that not only have lives been saved, there are fewer traumas, which helps control health care costs.
Representative Haydon commented that he too had heard objections to the enforcement of a primary seatbelt law after the 2000 Session, but, he believed there was a renewed interest in security since September 11, 2001, and hopefully and new interest in law enforcement.
Representative Bowling mentioned a $22 million highway project on I-64 in Jefferson County that was finished 14 weeks early and the contractor received a $5 million reward fee for the early completion. He questioned the Cabinet’s incentive policy. Mr. Linkes said that the Cabinet considers public benefit when incentives are offered. He said that had the Cabinet taken the usual renovation means of closing one lane at a time, the project would have continued from April until November with long backups every day during those months. Mr. Linkes continued that by offering a big enough incentive the contractor works overtime to complete the project. Representative Colter questioned whether or not the $5 million incentive could not have been put to better use, such as the much-needed road projects in Clay, Laurel, and Leslie Counties.
The next item on the Committee’s agenda was a presentation by the Kentucky Ohio Chapter of the American Concrete Pavement Association. Mr. Otten gave a fiscal analysis of using concrete in lieu of asphalt for highway construction. The analogy contained various agency and public costs, pavement design, salvage expectancy, as well as truck fuel economy.
Mr. Otten showed that over the construction period and a forty-year maintenance period, a one-mile, four-lane highway would cost the Transportation Cabinet $300,000 less if it used concrete instead of asphalt. He pointed out that the initial costs were higher in the usage of concrete, but its overall maintenance was lower. As salvage potential, that same stretch of highway, after its forty-year usage, would yield $400,000 for the concrete versus $500,000 for asphalt. As for truck fuel economy, Mr. Otten purported that trucks use less fuel while operating on concrete. He quoted a forty-year user savings of $693,546. In closing, Mr. Otten said that currently, asphalt’s highway life expectancy is fifteen years, whereas concrete’s life expectancy is thirty plus years. Senator Moore asked Mr. Otten if there was a difference in the time needed for construction between concrete and asphalt. Mr. Otten replied no and noted technology exists for rapid setting concrete that makes it comparable to asphalt.
Senator Moore inquired if during repair and maintenance work concrete is ever laid over asphalt. Mr. Otten replied yes.
Senator Kelly questioned Mr. Otten’s construction costs for concrete versus asphalt – especially in light of Kentucky’s unique geographic location and frequent “freeze-thaw” cycles. Mr. Otten said that costs he had presented were based upon numbers the Kentucky Transportation Cabinet would use to calculate construction costs.
Senator Kelly asked about the concrete industry’s ability to be competitive with the asphalt industry when bidding on highway projects. Mr. Otten said many contractors set up a concrete plant on-site when working on a major highway project which makes their industry extremely competitive.
Senator Kelly inquired that if Kentucky should by statute require a greater percentage of highway projects be completed with concrete would that limit the number of Kentucky asphalt contractors who could switch over to concrete. He also asked if that would require work to be done by more out-of-state contractors. Mr. Cooper replied that many Kentucky contractors currently work in both asphalt and concrete. Mr. Otten added that contractors could readily obtain the equipment necessary to switch from asphalt to concrete, but he admitted the equipment would be expensive to purchase.
Representative Marcotte commented that the use of concrete in highway projects is important but that Mr. Otten’s cost figures on the fuel economy savings between asphalt and concrete were confusing.
At this time Senator Moore assumed chairmanship of the Committee.
Next, the Kentucky Motor Transport Association (KMTA) presented a follow-up on truck taxation issues. Mr. Ed O’Daniel said that Kentucky ranks fifth in the nation for having the highest tax burden on trucks over 60,000 pounds. He said that Kentucky is the only state that has a sales and use tax on the purchase of trucks and the only state in the region, with the exception of Tennessee, that has a sales tax on truck parts. On a chart entitled, Annual State and Federal Taxes and Fees, as of January 2001, prepared by KMTA, Mr. O’Daniel showed that Kentucky was the only state that taxed or charged a fee on trucks in every possible category. He noted that taxation and the fee charges have a large impact on where a trucking firm headquarters, invests its capital, and ultimately provides jobs.
Depicting information from two charts prepared by KMTA, the first entitled Annual Sales Tax Per Truck and Estimated Gross Revenue for 2001, Mr. O’Daniel noted the following state information – Missouri receives $5,241 billion in truck taxation but generates a $3.7 billion trucking industry; Illinois receives $6,401 billion in truck taxation with a $7.1 billion industry; Indiana receives $5,702 billion in truck taxation and a $6.1 billion truck industry; Ohio receives $4,576 billion in taxation while generating a $8.5 billion industry; West Virginia receives $6,167 billion in taxation and has a $.33 billion industry; Virginia receives $6,675 billion in taxation and has a $3.1 billion industry; and Tennessee receives $4,855 billion in taxation and has a $20.1 billion industry; while Kentucky receives $8,056 billion in truck taxation and generates only a $1.6 billion industry. The second chart was entitled Highest and Lowest Annual Taxes Per Truck. Information depict from this chart showed the five states levying the highest taxes on trucks over 60,000 pounds were Oregon with a $9,921 billion taxation, New York with a $9,341 billion taxation, Arizona with a $8,856 billion taxation, Massachusetts with a $8,060 billion taxation, and Kentucky with a $8,056 billion taxation. The states levying the lowest taxes on trucks over 60,000 pounds were Georgia with a $3,781 billion taxation, New Jersey with a $3,543 billion taxation, Louisiana with a $3,484 billion taxation, and Oklahoma with a $3,054 billion taxation.
Mr. O’Daniel said that in the early 1980’s Kentucky, along with other states enacted weight distance taxes, which did not prove successful, due to the development of the International Fuel Tax Agreement (IFTA). He said that, one-by-one these states repealed their weight distance taxes and shifted to a tax that could be fairly and competitively collected using IFTA. Mr. O’Daniel said that currently, no state east of the Mississippi River has the antiquated weight distance tax, except for Kentucky and New York. He said that the states that have repealed their weight distance tax were happier because it eliminated the collection and audit inefficiencies, and that the trucking industry was happier because they no longer were required to keep the immensely detailed records associated with that tax.
Mr. O’Daniel stated that the KMTA hopes that Kentucky will join the other 44 states by repealing its weight distance tax in favor of a more modernized system, using IFTA. He said that KMTA does not propose eliminating the $75 million generated by the tax, but rather proposes a more sensible modern system of taxation. Two suggestions were to increase the diesel fuel by three cents, thus raising it to equal the price of gasoline and by increasing registration fees for trucks over 60,000 pounds by 126 percent.
Mr. O’Daniel introduced Ms. Sonja Sanders, Executive Director of the Kentucky Motor Transport Association, and employee of a large trucking company that had recently moved its headquarters from Madisonville, Kentucky to Jacksonville, Florida. Ms. Sanders said that the trucking firm moved to Florida after operating 65 years in Kentucky, uprooting some 600 employees. One of the reasons for the move, Ms. Sanders said was Kentucky’s taxation on its trucking industry. Mr. Bill Usher, owner of a trucking company in Kentucky, commented that Kentucky’s sales tax law forces him to purchase his trucks out-of-state.
Representative Ballard commented that not only did Madisonville lose the trucking firm’s revenue when it relocated to Florida, but other jobs were lost as a result of their move, such as fast food and retail businesses dependent upon those 600 individuals. And, he noted, that many of those uprooted individuals had been very active in the community. He said that the trucking firm’s decision to leave Madisonville had a rippling effect throughout the community and surrounding communities.
Representative Hall commented he owned several large trucks and understood personally the tax burden placed upon Kentucky’s truckers. He said he fully supported KMTA’s efforts to bring about tax reform for the trucking industry. Representative Hall also said he wanted to pursue urging the Transportation Cabinet to allow large trucks to be registered on a local or regional basis rather than the current system, which requires registration to be completed in Frankfort.
Senator Mongiardo said he empathized with the trucking industry but that he felt that the state needed comprehensive tax reform rather than piece-meal reform for individual industries.
Senator Mongiardo asked the KMTA representatives if factors other than taxation, such as proximity or manufacturing played a roll in trucking firms relocating to other states. Ms. Sanders replied yes there are often other factors that play a role in a decision to relocate.
Senator Mongiardo expressed concern that Kentucky would lose revenues if it increased the cost of diesel fuel by three cents. Mr. O’Daniel noted that a three cent increase would make Kentucky’s gas tax comparable to the rate levied by Tennessee but still less than the other surrounding states.
Senator Mongiardo asked Mr. O’Daniel about figures he had cited relating to increases in employment in Louisville versus Southern Indiana. Senator Mongiardo wanted to know if the figures reflected all employment or only employment in the trucking industry. Mr. O’Daniel replied only the trucking industry.
Representative Cornett echoed Senator Mongiardo’s comments relating to the need for comprehensive tax reform. He also voiced concerns on how KMTA’s proposals would affect small local trucking companies.
Senator Sanders cautioned the Committee that, according to the state’s statutes, only 52 percent of the additional three cents diesel fuel tax money discussed by Mr. O’Daniel would go to state, while the other 48 percent would be sent back to the local communities. He said he wanted the members to be aware that the state would not receive the full benefit of the three cents increase, without statutory changes.
Representative Bowling asked if anyone knew what was the state’s economic impact, due to a trucking firm leaving Kentucky. Chairman Moore stated that according to the information he received from the Economic Development Cabinet it was seven times the amount generated by the trucking industry.
Senators Kelly and Borders both thanked Chairman Moore for bringing this serious issue before the Committee. Senator Borders stated that Chairman Moore had preached this problem for several years and only now were other members beginning to understand its seriousness.
Senator Kelly stated that in truth, Kentucky only collects a portion of the taxes levied on trucks because parts are generally purchased out-of-state. Mr. O’Daniel agreed. Senator Kelly also noted that Kentucky was unlike Oregon and New York because both of those states have large active ports.
Senator Kelly commented that the General Assembly did not need to take the “all or none” approach to tax reform. He said he was confident the legislature could help one industry while maintaining an eye on the big picture. Senator Borders agreed with Senator Kelly that the legislature could offer relief in one area without getting into comprehensive tax reform.
Last on the Committee’s agenda was the review of two administrative regulations. They were 601 KAR 1:030 (Hearings Governing Motor Carriers) and 603 KAR 7:090 (Railroads). Ms. Hollie Spade, Kentucky Transportation Cabinet was on hand to answer committee members’ questions. Representative Barbara White Colter moved to approve the regulations, as submitted. Representative Cornette seconded the motion, which passed by voice vote.
With no further business before the Committee, the meeting adjourned at 12:10 p.m.