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Joint | February 24, 2015 | Committee Room | Joint Transportation Committee Meeting

Full MP3 Audio File

Speaker changes:Good morning we are finally going to call the meaning of transportation join ?? we are probably trying to put this meeting in half we re going ?? good to see everyone this morning like to acknowledged ?? from paging force we have mark ?? from Stanley county ?? Malcolm can you please stand and acknowledge from ?? Alexander so get started with meeting this morning our transportation in brand new options we going to hit persons today we are probably ?? today department of transport ?? for the member's of the committee thank you Speaker changes:good morning thank you members of the chair friends of the committee members of the committee ?? I'm from north Carolina department of transportation for the next 30 minutes i' m gonna so spend some time with the transportation reviews and giving recap on some information that you have herd and concentrate mainly on new ides here is quick outline that i gonna be talking bout this morning ?? and ten yer time frame and i expect why ten yer time frame is well also keep sup the fees structure that we how we reallocate north Carolina and we ?? i was asked to bout brief update bout the electric vehicles north Carolin ?? what are the states for we have doing in transportation revenues funding options her is the brief recap i want to share with you ?? won this comes from state revenue and the one that comes from federal revenues ?? in the federal funding over the last 2008 the federal tax has not been ?? in the 2008 so therefore since they transverse from where the ?? 905 and so you see there since 2008 ?? from the federal government we do want it is bout 20 % of our total expenditures ?? of north Carolina and the little ?? if you go back and couple the fact that ?? there is not by congress are always hopeful but in the meantime the meantime the ?? and started to look ?? revenue sides and i would like to share bout what happened in the country here is the quick snap shot that three sources of revenue that we talk place ?? but these re effecting columns that you see in there individual components that you make up those revenues and the motorize tx is not the motor field tax rte few consumptions ?? and the number of transactions n the highway used tax ?? those are key variables

Actually affected where those revenues have been and will be into the future. Where do we get our sources on the rate? We get those, we look at the US government. We put those up against global insight, which is a private company that does forecasts for a lot of different variables that are used in revenue forecasting and other forecast as well, and we also have to be cognizant of the changes that happen in the policy here in North Carolina in the General Assembly about gas tax rates. The DMV fees I have mentioned before, they're set in statute and the transactions we derived from historical regression analysis. We look at historical changes and we also look at the population growth, because those together are the ones that make the multiplier on which to apply against the rate. The highway use tax is a little bit more complicated because it's not just based on the rate but also it changes with vehicle prices, and what do I mean by that? If you go back in time about 10 years ago and you just look at the type of vehicles that were out on the road, those were your SUVs, your high end pickup trucks that were costing about $45,000, but that has changed because of some economic conditions that now we're a little bit more frugal about the amount of money that we buy or spend on a car, so that certainly affects the amount of revenue that's derived from the highway use tax, and on the federal side we rely on the Congressional Budget Office to kinda project what the revenues of the federal government are going to be into the future. this is a historical perspective that if you look at transportation, state transportation revenues over time going back to 2001, the color coding indicates the source of revenue. The blue down at the bottom is motor fuel taxes, the green in the middle is the DMV fees and the red is the highway use tax. You can see that over time this kinda goes up from one year to another. You can see that there was kind of big increase relatively speaking between 2006 and 2007 and that was mainly driven by the changes that occurred in the DMV fees that occurred in the 2005 session. Then you see a drop off that happened between 2007-2008 and more pronounced through 2009, and those were the impact from the economic changes that we had when the economy tanked. We gradually over the last seven years have started to rebuild those revenues in total to where by 2014-2015 if you were to draw a horizontal line it almost levels off with the amount of revenue that we had in 2007. So this is just a quick snapshot to say that sometimes transportation revenues are slightly predictable but they can change and they're very much tied into economic conditions. Now, the next slide is basically the same as what I'm showing here except that I have gone and put a line through the middle of them and reorganized them to kind of illustrate the amount of monies that get deposited into the highway fund and into the highway trust fund, so although there's been increases in transportation revenues during that time period, the two funds that we have for carrying out transportation functions have not increased equally. Sometimes the highway fund has been a benefactor of the increases and sometimes it has not, and you will see this a little bit more when I give you a snapshot into the 2 year time period as to what has changed. Before I go into that what I'd like to do is give you a conversation or a backdrop of the, one of the sources or the variables that we've had, and that's the variable gas tax that we have in North Carolina. It's been in place since the mid 1980s and what this charge is depicting is the crude oil prices over time and that is the line in red, and then you see a line in green and that is tied into the y-axis of the chart that basically shows that it's crude oil prices that we have no control over, those are driven by market prices and world economies, geopolitical influences, that our gas tax rate kinda really follows the changes in crude oil prices. It's not perfect and that is because the way the gas tax rate is calculated it's always in reaction to what crude oil prices were at one point in time. I took the liberty on this chart to not take the gas tax rate down to 0 and the reason why I didn't do that is that the gas tax rate in the formulas up there in the lower right hand part of the chart is that there is a minimum floor of 17.5 cents per gallon and that doesn't change. The variability occurs on the 7%

That is the one, that is what's illustrated in that green chart in there. This is one of those challenges that we have in trying to predict what crude oil prices are going to be. You have read in the newspaper how crude oil prices have changed over the last six, seven months and I'll illustrate that in the following chart. For my purposes and our purposes of forecasting motor fuel tax, we have to look at the crude oil prices. The questions that are lingering now is how low or at what price is crude oil going to stay the line, how long is it going to stay at that rate in terms of months and what is going the be the recovery, the slope of that over time. I think it's, most experts account the crude oil prices at the current rate of around $55-60 is unsustainable because of countries having their economies based on crude oil prices and let me show you what I mean by that. The line is blue is to represent the January 2015 time period and you see the line at the top, and that is what it was predicted that crude oil prices would be if we go back to 2014. Nobody really thought that crude oil prices would change, but it would be hovering at that $100 there. Well, if you move forward 12 months to January 2015, we know what happened over the last 12 months, but now you see what it's going to be doing over the next few years and I'll be the first one to admit that if I was to share with you what is the February 2015 forecast it would look slightly different than that. There's some level of unpredictability among the experts as to what crude oil prices will be doing, and crude oil prices has had a double effect. It's great for the consumer because we're all paying less when we go for gasoline, but it also has an impact on our motor fuel tax, right, as I've shown in the previous slide that it varies accordingly. This is a chart that I shared in House with the NCDOT financial planning committee that we meet on a monthly basis to kinda review what our financial situations are. I kinda depicted in terms of arrows what would be happening with each one of the variables that we look at, and you see there that on the motor fuel taxes it's a downward arrow, the volume of motor fuel taxes is slightly going up and you may wonder well, what is happening there. Why do you show not a flat rate or a declining fuel consumption? Well, what's happening is that as fuel prices at the pump have gone down there's gonna be a slight, every so slight increase in fuel consumption. We're talking about less than 1% on a yearly basis, but it's very different than what we were expecting 12 months ago. We were actually expecting a decrease of a couple percentage points. I've also included a column on the right hand side that says overall you can see each one of the changes of the other sources of revenue and the variables in there. On the highway use tax, you see that there's an uptick in the volume depicted by the second column, and that's basically to reflect that because we were not buying cars over the last few years, a lot of us are starting to think differently about that. That perhaps we feel more secure about the economy, fuel prices are lower and therefore we're taking those cars that are now approaching 8-9 years and actually replacing them for newer vehicles than that, and so that's driving that variable up. To put it in terms of numerical values, if you were to look at the changes that occurred over 2015, we were predicting a 7% decrease in 2016 and a 4% decrease in 2017 and those were mainly driven by the decrease in the motor fuel tax, right? If we move away from the 10 year time horizon to a 10 year time horizon, this is the same chart that I shared with you a few moments ago, but kind of giving you a depiction of what we expect to occur over the next 10 years. Why do we go out and do a 10 year time horizon for forecasting. Well, as most of you know, a lot of our transportation projects don't get accomplished within a state fiscal year or 2 year time period. There are some larger capital projects for building roads on new location, multi-lane facilities, they take 3-4 years to actually build once the contract is awarded, so we have to be mindful that we can be assured that we will have the necessary revenues in place to meet those financial commitments that we've offered ourselves for. Over time, we have kind of simplified the way we speak to the public

Off-guard transportation rouge forces we can live in terms of a contract of the faculty of the fees and you'll be free travel leaders want to forget there's a lot of different things and a big limitation group of workers in major computer when they were jubilant original intent of the Internet from: the(SPEAKER CHANGES) Rev. Franklin street from the old 14 percent of GNP fees for a slight improvement and for one thing she be over different reason for having been in factors over 25 different from the DMV feet in the public what we have some political decision (SPEAKER CHANGES) we have taken control of what the public to plead guilty all in Bolivia linchpins people develop worker on the viewable from each field including trampling on financially to 14 feet below the three-defunct website tenders beyond your help working on which to view the creation of which one of them was called in a letter mentioned that workers over 25 different from the GOP themes bluntly in each one of the travelers on one flight international kitchen opens onto the than in years and a bill that would otherwise have some things you can have a lot and for that moves from true legends intercepted frequent and you would have one on some systems to come to you and indication that the movie screens have a lot of some components to the detriment of travelers from planes to figure out what it used to be have been a window over into a concrete wall that no one field goal holes on your machine electronic chamber contract it would be treated most of an automobile were killed and more beloved Aegean list. And for that can be wonderful if one were making you feel a whole should have reached the calls will review called into action by keeping the user AAA of England college tuition and we're looking for one of the Internet for a couple of years, detailed leaders that call for the average user called to offer a vehicle and Libby the tree of researchers came over and said the cost of health and life Christian $1100 per year from public view Cuban people that work for them to report, in which all have been a transportation plan were inching your folder and landscaping and two weeks ago against all that they were built into it if you will get a vehicle ownership in terms of prescient from falling into insurance rating hovers in fuel and transportation systems until the percentage breakdowns and turned over which of the system from the entries we were telling the control of the more traditional than limiting factors we begin the call would have liked to do homework mortgage for the plenty of a cable to increase protections that for a 2% rate fell 23% before few players in 9% transportation system into the actually didn't look like a package that naturally speaking to about 56% of that football hall of union posters to call contract you're hitting percentage watching each 1% portion in the 13% of the huge dent in a letter sent to all in one category that the other states and the York in action and are working label the beavers if you do, let alone the percentage times (SPEAKER CHANGES) call you, and he called the future and lee dollars for all right of people and the war's factions in being the one in this is the first time that the uninsured is left shoulder of outlook for the Glendale in which cleared all of that make friends were there any questions you should file for the one you were a lot of other matters in the end of year when they were an interview yesterday were collected of the fictitious percentage Federal and state and if you believe me and let fly from TV would like to know all the entire all the line that the use of national statistics that you from a passion and then ends and they will look into a one-to late one evening in a lot of old and in all vendorism onefed........

Right to the next slide. When I was looking at doing the comparison to other states, this is what I did. And I apologize that in the presentation that was put on the website, there were some mistakes that got past us, and we were hoping to have this information updated through January of 2015, and we neglected to change the North Carolina motor fuel tax rate. So those numbers that are in red, those numbers that are in error on the website file, have now been corrected and those changes are highlighted in red and I will submit the corrected version. If you look at North Carolina, and you assume the 37.5 cent gas tax rate, and I have put the assumption which these calculations are based on in the lower right hand corner in terms of the fuel efficiency of the vehicle, the miles driven, which compare back to the AAA report, and what the vehicle price would be in trade-in and ownership for terms of calculating annual cost, you see that if you apply the motor fuel tax rate, 37.5 cents, the motor fuel tax rate for North Carolina is only, is $281.25. If you're curious as to what that amount is, once you include federal gas tax, it's close, it's the number that's on the website file, which is $419.25. If you go in and take the annual cost of drivers license, which is $4, the title fee, what we've done, the fee is $40 but since we assume a fiver year ownership basis, we spread that $40 over a five year time period, that's how we come up with $8. The annual vehicle registration fee is $28, there's some other ones that get tacked on depending on where you live in the state. The highway use tax is 3%, and it is, we do give credit for the trade in and you see what the cost is. All of those numbers, added up correctly, is $471, which you may say, well Burt, you showed in previous slides it was 640. Well, if you conclude the federal gas tax of 18.4 cents per gallon, and use the same basis, and then adjust it for that 6% that was in the previous slide in terms of other fees and civil penalty, the calculation comes up to $645. Which I felt kind of validated the work that the entry researchers did of quantifying it $640, or it's very close to it. Does that answer, sir, your question? And this is the comparison when we look at our neighboring state on each one of those fees. You see that the gas tax rate, and Virginia and some of our neighboring states there's differing range between gasoline and diesel. In North Carolina, we do not have that. And in Georgia, there's a surcharge of 4% that's on the sales tax basis. You see all the different fees on an annualized basis, and you see the comparative year-end annual cost of operating a vehicle of each one of the neighboring states. So that just kind of gives us a perspective as to how much are we paying, more or less, than some of our neighboring states. Let's move over a little bit about vehicle registration in North Carolina. We have approximately about 8.8 million vehicles that are registered. You see a break out between autos, trucks, trailers, and others, which are motorcycles, RV's, buses, etc. But I was asked to kind of look a little bit in terms of what we have in terms of electric and hybrid vehicles. At the end of 2014, we have about 2,000 registered electric vehicles in North Carolina, and about 40,000. If I was to go and look, take a snapshot as to how many we had back to 2009, I've computed the annual increase, and those are shown on the table. And you've seen the global insight predictions into the future, as well as the government projections into the future, that is the expected annual increase over time, between now and 2020. So, although there was a huge increase percentage-wise on an annual basis in the first few years, once those technologies were developed, they're going to taper off according to national projections. unfortunately we do not have any state projections, so I'll have to rely on national projections for how those are going to change in the future. Let me now move a little bit into the national arena, and then move back into the state arena. This is a chart that comes from the congressional budget office that talks about how much money has been spent both at the federal and state level on transportation, and that you see it has changed

Reached over time, however when you look at that same dollar amount and you adjust it for GDP, the gross domestic product, the [??] of the country it actually changes. This is a way of kind of equalizing those revenues in terms of inflation or how much importance are we giving to the amount of money that we're spending compared to the rest of the spending that we have. So it's decreased, what it's leading up to is that the growing need for transportation investment over time is, has declined. When we take a look at other states, this is a chart that I have used to kinda look at, what you see in there is all the different multitude of types of transportation revenues other states across the country are using. The high, the bigger the plot the more number of states there are that are using that, and you can see a multitude of them, the small little plot in there is indicative that there are very few states that are actually using that. When you compare that against North Carolina you can see that those are, the transportation fees that we have in North Carolina are highlighted in red, so there's a lot of fees out there that are not being used in our state that are being used by other states to fund transportation revenue. This goes without saying, states are seeking transportation funding finance. They're looking at traditional sources, less traditional sources, and I make a distinction between transportation revenue and what I call finance solution which is basically where you go out and borrow. The revenue is one that goes back over time and is recurring. On the, when you borrow money it may be a one time infusion depending on how that vehicle's structured. [SPEAKER CHANGES] I have a quick question just sort of as a point. The general fund that you mention on here, how many states use general funds to also aid in transportation revenues that you know of? [SPEAKER CHANGES] I don't have a specific number off the top of my head, but I can certainly get you that information because we do keep a database on that. [SPEAKER CHANGES] I'm just curious. [SPEAKER CHANGES] Representative Bumgardner. [SPEAKER CHANGES] On the chart you show the comparison of other states to our state. When you have South Carolina has [??] and Georgia for, then the fact that you, then you show revenues, are they from highway, different rate of [??], show your numbers so that that's not really the real picture of the comparison that's between the states. There's a lot of stuff that's not in that chart. [SPEAKER CHANGES] You are correct in the form of general funds. In some cases those are revenues that are collected through sales tax that are subject to the appropriation to be used for transportation and they were not included in there, but we can certainly include all sources. What we were trying to do is just compare the traditional driver and vehicle fees associated with operating a vehicle. [SPEAKER CHANGES] Any other questions. Representative [Blust?]. [SPEAKER CHANGES] To follow somewhat on Representative Bumgardner's question. I have a neighboring county in [??] county and I'm aware that in [??] states the counties deal with this in many states, including South Carolina, and they charge somewhere in probably property taxes and other taxes within the county, they charge people and use those funds for what we're doing. Is there any way to get a handle on by state, by county or by neighboring county where people drive across the line to get their gas because of this, because if they have to drive too far it's no money, but anyway that they're getting gas 20 cents cheaper 100 yards down the road. So the point being that in that chart proves that the sources within the state that may come actually to the county for them to use for building roads. Is there any way to get a handle on that so at least we can talk about comparison of apples to apples? [SPEAKER CHANGES] Yes, sir, and you're totally correct. Different states handle transportation funding in different ways. You certainly have mentioned one, that property taxes are used in other states, but then again the fiscal responsibility of the states varies as well, but we can get you that information, and we did do a study a couple years back that kinda also looked at

What is the impact of a gas tax differential between our neighboring states and how many people would drive across the line? We’ll be glad to provide that and look at updating it as well because we are mindful that, because of the price differential, we may be losing. Unfortunately, the analysis that we did back some time ago was predicated based on fuel price, the time and the distance that somebody would drive in order to get the cheaper gas price. The data is probably available if we were able to get the data from the retailers. If we could go in to a gas station or credit card company and figure out “Where is the billing zip code?”, then we could have a better number, but we don’t have access to that data. [SPEAKER CHANGES] Any other questions from the committee? [SPEAKER CHANGES] We left off here making the distinction between the traditional transportation revenue sources and the less traditional ones that states are looking at and the difference between revenue and financing of projects. This map is quickly to kind of give you an indication that between 2013 and 2014 last ??(letive?) sessions, where were bills actually introduced to ??(graze?) transportation revenue funding sources, and there was a multitude of that. This next map is actually where they were successful in passing each one of them. Rather than give you the details of each one of them I have put together a full-page summary that’s in your folder, on the website that details what happened in what year in which state, and also gives you a perspective of the amount of revenue in some cases that was collected on that. However, that has not stopped folks from looking at 2015. These states that are highlighted in red are basically states that are pursuing and actually have bills that have been introduced to raise transportation revenues. The majority of those states are in the form of gas taxes. I took the liberty of adding North Carolina in there since we have a bill that is under consideration right now that would look at changing the gas tax formula that we have, and this is where you get a little but into “should you include something or not?”, so I am just making a full disclosure as to what those are in there. As I mentioned before, there’s been a lot of studies both at the national level and the state level that have gone out to quantify the ways of raising transportation revenues; the federal ones you see at the top—the first two—are basically results from the multi-year reauthorization bills. I did not include a copy in your folder of those reports but we’ll be glad to follow up and provide them for you if you wish. The reports that are listed down at the bottom are the ones that have been done here in the state within the last ten years. We have had several of them: the twenty-first century commission; the McKenzie study that was done for the department; the twenty forty plan. And at the national level I would like to highlight this one: the ??(Ashta?) folks did a revenue options for Congress. I don’t intend for you to look at the fine detail of that font; a copy of that report has also been put in the folder for you to take a look at. But what I do what to share with you is that, if you look at the box in red, there’s five different lines in there, and those are to represent the different revenue sources that are available for federal funding. All those ones that are listed below are new ideas for how to get federal transportation revenues. And like I said, a copy of the report is in your folder that you can peruse and can actually read that table there, but it just here for illustrative purposes. In the twenty-first century commission, they basically had a goal to raise about a billion dollars per year over a ten year time horizon, and this is a listing of different transportation revenue options that they came up with. Some of them you are probably very familiar with; I am not going to try and go down that list for the sake of time unless you have a specific question. The McKenzie report—this is the final outcome of the report that they did, and what they went in and did is that they looked at all types of revenue options. Some of them may not be very, perhaps, correlated to transportation, but they did total recall or total study of everything in there: you can see that they include a vehicle property tax; a real estate property tax; they looked at tolling. The bar chart in there was indicating the amount of revenue that could be collected back in 2008 given a low, medium and high scenario type of option. This is just for illustrative purposes.

“[…]that the area absorbs, studying what type of transportation revenues could be used has been ongoing for some time. Most recently, the 20/40 plan that was produced by the department as part of a Federal requirement a couple years back also listed some additional ideas or updated the amount of revenue that could be collected if all of these different types of revenue sources would be implemented. The dollar amounts that are shown in there are basically between 2015 and 2040, so it’d be over a twenty-five year time horizon in there. And I can certainly get you the details that underline all of the different numbers that are shown up there. Which leads me to the last slide of the presentation, that there had been two studies that had been done in the last eighteen months. One was one that had been commissioned by the Department of Transportation for the folks out at ACU. They produced a report that looked at, “Do we have a transportation crisis in North Carolina? Should we think about changing how we fund transportation?” But what is maybe of interest to the community is they have several, I think fifty or sixty pages, that they scoured the entire country and looked at how are other states, how are other forms of governments—city and county—how are they doing or what are they doing to raise transportation revenue? Which is a wonderful source to go in there and look at it. Some of them may not be applicable at the state level. They have things like property taxes, they have things like impact fees, they have a multitude of ideas, but it’s a great resource that you have available and I have put a copy of that in your folder as well. And the last point that I want to make is one that the report that I mentioned earlier, that the North Carolina Chamber Commission agreed to do, and they talk about the benefits of infrastructure investment. They looked at the spending impacts, they did the annual driving expenses, which I reviewed with you a little while ago. What I found of interest in there is the last bullet—the criteria for ranking revenue options. In the past we have looked at does a revenue option make sense in terms of what is the yield that it could bring to the state, what is the annual cost to the average user, the ease of collection. We’ve also included other factors such as is it a revenue source that’s going to grow. And the best that we could do once we identified that criteria was qualify whether that was a good, bad, average, high, low—depending on when we did an option for it. What the researchers at NC State did was that they gave it a numerical value and ranked them numerically. And they chose five or six different sources or topics to look at: sustainability, growth into the future, social equality, a few others in there. And they weighted them and then they kind of folded them into what I call a radar chart. And so you see a scattergram that represents how each one of those revenue options, how do they weigh within each one of those criterias that we use to evaluate. And I think that was a fairly good way of representing whether Idea A might be better than Idea B or better than Idea D. So Mr. Chairman, those are all the thoughts that I have for the Committee this morning. [SPEAKER CHANGE] Thank you, Mr. [??]. Any questions from the Committee for Mr. [??] about his presentation? Yes sir, attention. [SPEAKER CHANGE] Thank you, Mr. Chairman. I just got a chart about electric vehicles and hybrid vehicles. Do you have the natural gas vehicle numbers? [SPEAKER CHANGE] I would have to go back, sir, and double check to see if we actually have that breakout within our DMV database. I know that was one thing that I had a struggle with when looking into the projections into the future, because there are some national numbers that have that. But if you allow me, I will go back and check on that for you. [SPEAKER CHANGE] Any other questions? Senator Rabon. [SPEAKER CHANGE] Thank you, Mr. Chairman. On the slide prior to this, you did come forward with some suggestions and thank you, I think that historically the department has done a little milk toast. They’ve come over here with a hand full of “gimme” and a mouth full of “much obliged” but never put anything out as the way to improve things. [SPEAKER CHANGE] I appreciate that, but on this slide you ask a question. And the first question is, do we have a crisis? I’d like an answer. [SPEAKER CHANGE] Who would like to answer that?

Anyone in the audience like to respond to them? SPEAKER CHANGES If no one here wants to, yes we do SPEAKER CHANGES Follow up Bill? SPEAKER CHANGES Yes we do have a crisis, that we're looking at a 30 billion dollar gap and up to 90 billion dollars to do what we need to do, that is a crisis. Now it's time for people in this room to step up, it's time for folk in the public to step up and let it be known to do what we need to do. Quit worrying about getting re-elected and fix the transportation problems of this state, and if your not willing to do it, lets put some folks in this committee that will. That's the way I see it passing. SPEAKER CHANGES Anything else Senator Rabin? SPEAKER CHANGES That's a wrap, but we do have a crisis. SPEAKER CHANGES Representative Bumgardner SPEAKER CHANGES Thank you Mr. Chairmen. I did want to have an answer to the questions on the screen and I appreciate Senator Rabin answering that. If the DOT could give us a short answer, just for our purposes right here, I'd be happy to hear it. SPEAKER CHANGES Mr. Lewis, do you want to respond to that? SPEAKER CHANGES I don't know if I'll be able to answer that, I do however want to call it a snow day. SPEAKER CHANGES We're gonna maybe tag team, if that's ok, the response here. SPEAKER CHANGES That's fine with me, you might a tag team on this one. SPEAKER CHANGES Let me address the questions that I posed on there about the recent study on the entry. Do we have a crisis? If you go back and look at the reports that we have had over time, they basically say that needs that we have today, whether they are meeting current capital needs, mobility, getting people to places, the amount of money that we need for maintaining the infrastructure that we currently have, the amount of money that we need to invest in other modes of transportation beyond highways. Is there a crisis there? Yes, it has been quantified over time. I think where we failed in that part is that some of the numbers that you hear about get lost. The whole concept of billions gets lost in that area, and that's my personal opinion on that. The part about the para-dime shift is we have, over time we have used a user based fee. You use a system you pay for it. Society has changed over time, and now there may be, that para-dime shift might need to be revisited, the way we collect revenues may need to be revisited and look at other ways or other non-traditional sources of revenue. What are the best options? They've laid out a multitude of that. What may have worked in one state may not work in our state. You have different forms of government and how they pay for transportation, it's different from one state to another. What are our next steps? Exactly what we are doing here, is basically making sure that everybody understands what it is that needs to be done and what are the orders of magnitude that are needed. SPEAKER CHANGES I can recognize Chairmen Torbett for the next question, but if you ask a question, be sure to turn your microphones on at the table, we noticed that some people weren't. SPEAKER CHANGES Thank you Mr. Chairmen. In the feeling of mutual aid and respect to Senator Rabin, I'd like to concur with his previous statement and just say that, do we have a crisis, well let me tell you what I hear. Can we help the movement of goods and services from point A to point B to increase the economic efficiency of our friends and business partners of state? Yes we can. Does it need to be addressed? Yes it does. Next vote for small and large business. Do we need to impact the day to day travel of every North Carolinian out there that currently rides around clogged roads and artery clog once you get off major highways and byways of a state that hasn't kept up with their transportation needs efficiently over the last decade? My answer is, yes we do. Do we need to make sure that the roads we are currently driving on are free of pot holes, and cracks, and splits, and bad painted lines you can't see in the middle of the night that can lead to confusion when drivers are on the road, to just better improve the quality and the output of what we do in transportation for every North Carolinian out there? My answer is yes we can and yes we do. We need to do something and I concur with Senator Rabin's comments. SPEAKER CHANGES Senator Gunn SPEAKER CHANGES I'll get my assistant to turn on my microphone. Just to add a little bit more to Chairmen Torbett's comments we cannot

Speaker1: Emphasize the very simple phrase transportation is business. As a developer and a commercial broker, I live ??finding transportation that is critical not only to an individual business, but also to open up a mass amount of additional, job creating industries in our state. I think we sometimes like to take a little flash picture and say?? this is so much further than ?? This goes to a long term economic strategy that involves transportation ?? [SPEAKER CHANGES] Thank you. Any other questions or comments? ?? Like to respond to any comments? Go ahead Mr. Lewis. [SPEAKER CHANGES] Bobby Lewis Chief of Staff MCTOD. I appreciate the opportunity to awnser the question " are we in a crisis?". I dont know if this will be an exact awnser. Most of you who have talked to me will probably say I never give you an exact awnser. The bottom line we have a departmental policy that we have to look at when we maintain and build roads. Certainly general assembly gas a policy of how we allocate the resources, so we can wrap up policy. From my eyes what we see when I look at highway know as many of you all know operations and maintenance of highway trust fund plus aid,is like a capital program. If you look at the two major things were faced with is: one, how do we handle the capacity challenges this great state is facing. We're the fourth ?? As everybody know. So that's population growth. Capacity challenges mean how do we move traffic? What we're trying to manage is peak load. Four to six hours a day, people are sitting in traffing and people don't like that, especially in our central part of North Carolina, which represents about twenty counties. But, then there's also how do we get the connectivity piece, which is still capital from here to yonder if you will. But, then we also, as you've heard many time before, we have a eighty thousand mile system just about, and how do we maintain that? I drive seventy miles each way everyday. Right now, I don't worry about the reliability of the network. What I do know is motor fuel is taxed. You know the definition of crisis is different with everybody, but we still want to be able able to get up and know that we can get to work free of potholes, as representative ?? said. And, free of congestion so that we can have a reliable time. But what we ffaceif motor fuel tax goes down as we predict is roughly six hundred in just motor fuels tax over the next two years. Again I didn't say it is a crisis. Its what we're willing to live with in North Carolina. Are er content with the way it is today or do we want to continue and still contain that. That's all my comments. [SPEAKER CHANGES] Well if there are no further questions. ?? [SPEAKER CHANGES] ?? Want to take of from what Chief of Staff Lewis says and ??. He mentioned traditionally if someone uses a service you pay for it. If someone drives to work their going to be driving fifteen thousand average miles on the highway. We know their car can use sixteen gallons or eight gallons to go a certain distance. They can get twenty miles a gallon or one mile a gallon. They get twenty miles to get the $280 figure. I'm not going to ?? A mile driven. There are going to be fee associated with licences and all things. Maybe that is the parsdime here. We go back to if you use a service you pay for it. Whether it unolves ?? We've talked about we'll just have to see about that. ??

EYQIIX [0:00:00.0] …Stabilize so these people, they don’t ??, we have to come up with three assignments. First we have to write ?? and we have three out that make that work. And we have bill ?? five, six, seven, eight year contracts or beyond and have an assurance they can fulfill the contract as far as paying people to do the work. So we can have ?? for six months. [SPEAKER CHANGES] That’s right. [SPEAKER CHANGES] That is just my speech second in the motion ?? all the concept that somebody ??. [SPEAKER CHANGES] Any other comments before we move on and try next presentation? If there aren’t any…Mr. Mike Holder. [SPEAKER CHANGES] Yes, sir. [SPEAKER CHANGES] The engineering and department of transportation, Chief Engineer would like the presentation. I would like to remind you one more time if you are speaking please ensure and turn your mic in front of you so we can record everything, we want everybody to record. [SPEAKER CHANGES] Mr. Chair and Co-Chairs and members of the committee I’m Mike Holder, I’m the Chief Engineer for NCDOT. My presentation today is a bit more and Mr. ?? and the fact that I’m bit talking about potentially about millions of dollars as opposed to billions but it actually will in someway going nicely with Co-Chairman hours comments about what you use to service you paid for because that is some of the things that we are gonna discuss over the next few minutes. Section 34.17 in the last year’s budget bill require the Board of Transportation the study fees privatization and sponsorship opportunities to reduce public funds use all the services provided by the department. We will require the report to the JLTS by December 1st and report; we did submit that report and today’s presentation will summarize the content of that report. The first item that I want to talk about is fees, the report that was submitted in December had a lot of information relative to fees, the first category that I wanna discuss is what I’m calling “Development Fees”, these are reviews, inspections, permits, and approvals that DOT grants to commercial entities who wish to connect to our state road system or when subdivision roads are proposed to be added to our highway system these include, can include the Traffic Impact Analysis which is one of developer approaches the department has an idea to develop property, if it’s a large subdivision or subdivision of a large regional shopping mall the department requires the developer to provide us a traffic impact analysis that goes through a exhaustive review of what the traffic impacts are gonna be from that development, we have a traffic generation is gonna be generated from that development, and what kind of mitigation they need to do to the highway system to mitigate the traffic generated. We also review commercial driveway permits which is when a subdivision breaks a new street connection and new business, makes a driveway connection to a highway system we review encroachments, encroachments or an agreement with utilities, developers, cable companies, and others, then for occupation in a lot of ways with their facilities. We review subdivision plans for technical details, and we do onsite inspections for subdivisions also. The information relative to the development fees ___??[03:53] table F1 of the report and I included it in the slide that just for information, I know this is a little difficult to see but it is the report, in the report for your reference. I’m gonna summarize in the next two slides some of the results that are included in that particular table. Commercial developments like I discussed a while ago conduct traffic impact analysis for DOT review. The traffic impact analysis predicts the impact the development will have on traffic and identifies road improvements the developer must provide to mitigate the traffic increase. Currently, DOT reviews these at no charge, we are proposing for discussion a new fee schedule based on projected average vehicle trips per day generated by the site. The fees could range from $250 to $4,000 depending on the traffic generation of the particular development. The commercial driveway permits will propose a fee schedule that is paid to or is calibrated… [0:05:00.4] [End of file…]

To the trips per day generated by the business or generated by the subdivision, or the, the development. They're tying it to the highway system. Fees could potentially range from $150 to $2000 and are intended to cover DOT's engineering review and administrative cost. The existing fee that we charge for driveway permits, which is what is in this category, is $50. This covers the driveway pipe inspection and not administrative and engineering review cost. That fee of $50 has not changed in the 31 years that I've worked here at DOT and I think it, I think it was the same for probably 20 years before that. Encroachments like we talked about are when utilities tell communications companies, gas companies, electrical companies, others, actually occupy a right of way for their facilities through an agreement. We're proposing discussion of a new fee schedule based on type of encroachment and in some cases the length along a right of way. These fees could range from $100 to $1000 depending on the, the type of the encroachment. For subdivision reviews, when a developer requests the department to add subdivision streets onto the state highway system, the department reviews the subdivision plans that the developer has prepared, and then when the roads are ready to be added to our system, we go out and conduct on site inspections of those roads. Currently there is no fee for this use to the developers. We're proposing discussion of a fee schedule based on linear feet of roadway, which could range from $150 to $5000 depending on length of subdivision street requested to be added to our system. On other fees, we currently do not charge a fee for residential driveways and pipe installation. These are for single family homes or the department actually, the property owner will buy the pipe and the department forces will go out and actually install the pipe. We're recommending no change there. We, we provide that service for free, and we propose continuing to do that. We think it's a good service to the taxpayer to continue that. For surplus right of way disposal is when a developer or individual comes in and asks to buy surplus right of way or asks for a control of access revision on our state system roads. For instance, a developer might want a break in control of access across from a ramp that is currently control of access. Currently, we negotiate with the developer, do an agreement, and we have an appraisal fee that is $3500. We're want to converse with you guys about a new administrative fee for that particular service of $1600 because currently we do not recover the cost of our research and right of way disposal of $1600. One of the things that we also do is offer technical courses to private sector individuals and companies. We're suggesting that we should increase fees to approximate the cost per student that it takes the department to put on those courses. We currently charge fees to private entities, but the fees are currently too low. We think we could recover about $90,000 annually if we charge the whole cost of that course. For selective vegetation removal, we want to increase the fee from $600 from $200 to cover the cost of review of the permanent application for selective vegetation removal. Selective vegetation removal is when an entity or an individual comes in and requests permission to go out on a DOT right of way and actually remove trees or brush to improve sight business to their business or to their land. We do regulate outdoor advertising. We propose a cost recovery method. We want to increase the new permanent fee to $240, which doubles it from the current 120, and we want to increase the annual renewal fee for outdoor advertising company permits to $120 from currently $60. Our oversize, overweight section of the mobility and safety unit charges for loads that exceed legal limits. This is critical since oversize, overweight loads, as we all know, take a disproportionate toll on our roadways. The program is currently revenue generating, but fees are low in comparison to other states. We propose discussing increasing oversize fees by $5 per dimension from our current fee of $12 to

So what our philosophy is is we want to raise enough revenue that offsets the cost of providing those services to the development community or to the entities that are coming to us for those services in an effort to use that $12 million, it's approximately what we would raise from these proposals, to do highway maintenance activities as opposed to providing that service right now for free. [SPEAKER CHANGES] Follow up, Senator Ford? [SPEAKER CHANGES] Thank you, sir. [SPEAKER CHANGES] We've got a couple of questions from Senator Rabin. [SPEAKER CHANGES] Thank you, Mr. Chairman. A couple of things quickly. First, following up and my question is very similar, at least hitched onto Senator Ford's, but it involves the signal. If we're discussing charging or recouping our costs and [??] those with developers towards the ongoing cost of keeping these signals functional, my question will be will the developer continue to pay that and my second question is how do they find ways to [??] the signals that we put up in the municipalities and I think at some point we're going to have to wean municipalities and counties from the care of the state and let them take care of themselves and we have a plan and are we doing anything currently to recoup or at least break even with our money and put that cost in the municipality. [SPEAKER CHANGES] First of all, relative to the developer signal, we do not require the developer to maintain the signal after it's installed. We accept it onto our system. If it's a signal that is currently within the subdivision or within the development that is currently not on our system, the developer keeps that maintenance until we actually take that roadway onto our system. So we don't assume maintenance for anything unless it's added to our state highway network. As far as municipalities, Senator Rabin, we have a lot of agreements across the state with the major municipalities and some medium sized towns and cities where they do maintenance on a tremendous number of our signals and we do that through agreement and we have certain maintenance criteria in the agreement that we sign with them that requires them to go out and do inspection on the signal once a year, to do refinements to it, to change timing of it and to do upgrades on it, and they do that currently at no cost to the department, so we do have that paradigm in place. [SPEAKER CHANGES] Representative Bumgardner. [SPEAKER CHANGES] Thank you, Mr. Chairman. I have a question for Mr. Holder. Do you know the average time it takes to get a crash report right now? [SPEAKER CHANGES] Representative Bumgardner, it's, I don't have that information off the top of my head. It probably depends on the expensiveness of the requests and how many records the traffic engineering staff has to go back and research, how many years is involved in the request. [SPEAKER CHANGES] Follow up, Mr. Chair. [SPEAKER CHANGES] Yes. [SPEAKER CHANGES] If you start charging for those records, you think that would cut down on the number you're doing because if it's free and anybody can request one, you're probably getting a lot of requests for them, but if you start charging that's going to drop. Maybe if you get more efficient at it, well, I don't know, maybe we're efficient at it already, but one thing you could, would possibly could say is hey, we're not gonna do these free cause it costs time and manpower to do it so we're going to charge for it but we're going to give it to you in a certain length of time. [SPEAKER CHANGES] Great question. I think with any of these fees or opportunities that I've discussed this morning there's an expectation that if we're charging for the fee or we're charging for the driveway permit or we're charging for the encroachment agreement that there would be a tight time parameter put on the delivery of that service. So we would look at tightening those metrics up and making sure that they're met, but I would say that the laws of supply and demand or economics would kick in relative to the accident reports and that the fee structure probably would ameliorate some of the demand for those particular reports if they had a cost attached to them.

It would not be in the department's best interest to privatize these programs as they are currently structured. Privatizing and converting to a revenue generating program they show a lot of promise and we recommend doing this The fee structure to be set to allow these programs to generate revenue above the cost to run them, and the private sector if it managed a program would actually market the program to seek out potential customers for these signs. This would maximize the revenues generated by the program and DOT would like to discuss with the legislature changes that will allow these programs to be revenue generating and there also is the management of them to private entities. The next slide shows other costs and cost recovery opportunities. Subdivision pipe inspections, when we add a state system road that has a bridge on it or a large pipe which is greater than 48 inches we have to go out and inspect that. We're proposing that the developer actually hire a professional engineer to do that inspection so the department doesn't have to do that anymore. That's a office cost avoidance opportunity. Many times signals have to be modified or have to be installed as a result of a development. We currently recover the actual cost of our review by agreement. We want to maintain that the same as the existing process and that nets the department, well, it's actually a revenue neutral proposal because it's about $5,000 per signal. The last thing is telecommunications leasing. Telecommunications revenue can be generated from a cell site and fiber optic lease licensing. The current demand for broadband due to smartphone technology has forced carriers to make plans to significantly upgrade their infrastructure. This infrastructure can be placed on NCDOT property and it can be aggressively marketed for that purpose. The Cell Tower Deployment Act, Section Law 2013, 185, House Bill 65 was enacted to facilitate the deployment of mobile broadband and other enhanced wireless communication services streamlining the process used by state agencies and local governments to approve the placement of wireless facilities in our jurisdictions. DOT would like a legislative modification that enables marketing, commercialization of the right of way, to capture a significantly greater value from the telecommunications market. This legislation could authorize the department to collect revenue for this use and retain 100% of that revenue within the department's budget. We do have examples from South Carolina and Georgia DOT where they have successful agreements with Verizon Wireless to place red box sized mini cells on existing signs, signal poles or other DOT real property. We have been in conversation with Verizon over the last several months and they have preliminarily identified hundreds of locations that they would target if this was rolled out that would provide approximately $1,200 per box to the department. The next two slides is a summary of fee recommendations with the details of the service, the existing fee, the requested fee or proposed fee, the financial benefit of actually doing the fee change and the estimated net annual revenue increase that would be as a result of that. Table two gives a summary of service fees that the department now provides and table F3 provides a summation of privatization and sponsorship opportunities. [SPEAKER CHANGES] Can I interrupt just a minute? [SPEAKER CHANGES] Sure. [SPEAKER CHANGES] We have a couple of questions from the committee. Representative Tine. [SPEAKER CHANGES] Thank you, Mr. Chairman. I wanted to talk a little bit about the encouraged fees, especially with regards to broadband infrastructure. You know, we still have a large part of the state in the east and in the west that we're still trying to figure out how to bring in broadband infrastructure and really it is an infrastructure just like transportation in that it provides access. It provides access to healthcare, to education, to broader markets, so to me we need to be figuring out ways to make it easier to put in broadband in those areas cause what they can't do is make a business case to go into some of these areas. The mountains have a lot of site issues in going through the bedrock, in the east we've got low population areas that they're trying to figure out how to get in there

So I'd be very concerned that we try to drive revenue by creating fees on one infrastructure to pay for another infrastructure. So is that, I just, you know, especially to the committee and to you all, that's one area that I'd be very reticent for us to go in. [SPEAKER CHANGES] Senator Ford. [SPEAKER CHANGES] Thank you, Mr. Chairman. I'm trying to get an understanding of the department's philosophy on how you're picking and choosing what services that you are providing for no fee and then those that you're gonna provide I think at a cost recovery and then those that you are trying to provide as a revenue generator and then it was kind of confusing to me when you talked about a recurrent fee structure. Can you just give me a summarization of whether or not the current fee structure, is the department providing the services at a loss, a break even or overall is it a revenue generator and as compared to what the department's proposed fee structure change would be. [SPEAKER CHANGES] Thank you, that's a great question. Currently for the development fees, those are the fee loss because our staff time to review the traffic impact analysis, to review the commercial driveway permits, to review the subdivision plans, to review, do the inspection of subdivision roads that are added to the system, we do all of that and no cost recovery, so we provide those services to the development community free. As far as the oversize, overweight permits that are issued by our traffic safety and mobility section, we do generate revenue out of those permits right now, but like I stated, our revenue is low compared to other states so that would be, it currently is a revenue generation. Relative to encroachments, we currently do not charge any fees or any kind of fee structure for review of the encroachments, for the inspection of the encroachments as they're installed or for installation of the encroachments themselves, so the right of way carries the encroaching facility with no charge. [SPEAKER CHANGES] Follow up, Mr. Speaker. [SPEAKER CHANGES] Yes, sir. [SPEAKER CHANGES] What I'd like to see from the department is a philosophy as to what you'd like to accomplish with this fee structure change, and Mr. Chairman I'd like to go back to whether the department's gonna do it as a break even or whether it's gonna be a revenue generator. I'd like to see some consistency. I'm seeing some inconsistency and I don't know how the department is picking and choosing what it wants to charge for one service provided and then not charge for another and that would help me understand going forward what the department's overall goals are as it relates to this proposal. [SPEAKER CHANGES] Yes, thank you, sir. We, our philosophy is one of cost neutrality as far as the services and the impact fees that we've, that our district offices supply. For those of oversize/overweight, we're looking at a philosophy of revenue enhancement because the superloads that are increasing in this state are damaging our roadway facilities and we wish to raise more money from those particular moves to be able to do repairs to those particular routes. As far as the telecommunications, we were approached by Verizon in an effort to identify right of way that they can occupy and the Verizon conversation also probably goes somewhat to Representative Tine's concern about lack of cell service in the far east and the west because these breadbox cell towers as they call them can be deployed and actually enhance the cell signal in a limited range, I think they're about 500-600 feet, 1,000 feet, so they can enhance their cell service and supplement many towers that they have across the state without having to build all the tower structure. So it's a, to answer your question, it's a definitive mix. We are looking to charge for services that we normally have not because now the situation is we charge for those services and we have to bill those services out of our existing highway fund allocation

$17 and for overweight probably the fee is $3 for every 1,000 pounds over 350,000 pounds and just want you to know that 350,000 pounds is what we consider a super load. We recommend increasing the fee by $1 making the new fee $4 for every 1,000 pounds over 350,000 pounds. We also would like the permission to apply these revenues collected to specific improvements on routes used by these super loads or these permitted loads. We also charge currently an individual fee of $100, or excuse me, we also want to increase the individual permit fee to $100 from $20 when those signals are involved for house movers cause we have several house movers that come in through the course of the year, acquire permits through our district offices, acquire those permits and in some cases there's no need for DOT forces to go out and assist that house move with signal, raising signals or taking down signs or repairing signs. In the cases when the house move does require those services we're requesting that we be allowed to charge the actual cost of our labor and equipment to do those services when that occurs. Crash analysis reports, we generate about 1,500 of those per year. We get a lot of requests in our Traffic, Engineering and Mobility Section from law firms, from the public, from citizen's groups, from individual citizens for crash data. We currently prepare those for free and many times they take a lot of staff time to prepare, so we are proposing to ask for $200 per report to prepare those. Moving on from fees to sponsorships and privatization, we currently have a successful pilot sponsor a highway program for litter pickup. Under this program, DOT enters into an agreement with a service provider. The sponsor pays for the sign and for litter removal along the segment up to 13 times per year. DOT's responsibility is to approve the signs and specify sign locations. This pilot program started in May 2011 for seven divisions and has been successful in helping us remove litter on several of our interstate sections. DOT is in the process of expanding this program to all 14 divisions. Based on the success of the pilot, consideration also includes expanding this program to include all interstate and primary roadways. We propose a similar sponsorship program for interchange, landscaping and mowing. An interchange maintenance service provider would market the program, enter into an agreement with sponsors and manufacture and install signs at the interchanges. Sponsorship revenues would be used to mow and maintain the landscape plantings at the interchange. In addition to mowing and landscape maintenance, the local business, they have an interest in enhancing the status of an interchange by funding the installation of additional landscape plannings to improve the aesthetics. Relative to rest area sponsorship, state and federal restrictions have meant attempts at commercialization efforts to rest areas have not been effective in the past, but we do have, have generated some ideas to generate some revenue from this particular source. We propose advertising rest area sponsorship opportunities. In this case, a sponsor would donate funds that would be used for highway purposes to support that operation of the rest area facility. In exchange signs of acknowledgement for the sponsor are erected on the highway and in the rest area subject to signage standards. Our logo ties program is currently very successful. We think you could make it more successful by possibly privatizing it. Just as a reminder, logo signs are the ones on the left, the blue ones that you see that are for the controlled access highways, they have the categories of gas, lodging, food, camping and attractions. Ties are tourist oriented destination signs, are the ones like the ones on the right. They're placed in rural areas at intersections and are for tourist attractions such as amusement parks or cultural centers. Both of these programs are currently revenue neutral. Right now a business pays $300 per sign per year to be on a logo sign and $200 per year to be on a

Like any product. [SPEAKER CHANGES] Here's a question. We've, I'm sorry, we've got two things going on and I know that the full Transportation Committee's expected to get here. So now we've got member, we're gonna cancel that meeting just for your information that meeting's been canceled so you know that. It's however you wanna finish your presentation. [SPEAKER CHANGES] Thank you. I appreciate your patience during this presentation. It's an important subject and one we look forward to working with the committee on furthering these particular concepts. Great questions, Senator Ford, great question and we look forward to working with each one of you on discussions relative to the results of the study and the information that's presented in it. Just a real quick comment summation wise, adding up the last table, F2 and F3, relative to the summary recommendations, you get about $12-13 million which is in some respects not a whole lot of money when you look at a, you know, $1 billion maintenance budget or a $4 billion overall budget for DOT, but these are important cost recovery or cost supplements to the Department as they, you know, they represent staff time, they represent services that we provide currently for free and that our intent is to recover those costs and not have to charge them against the maintenance funds that we get from the Highway Fund. [SPEAKER CHANGES] Chairman Torbett, you have a question? [SPEAKER CHANGES] Yes, just a closing comment on my behalf is that I understand the dollar stance that Mike just brought up and in the grand scheme of things it could be perceived as not a whole lot of money, but in this day in time $5 is a whole lot of money, so just wanted to pass that along. [SPEAKER CHANGES] Thanks. Well that concludes my presentation if there's no other questions. [SPEAKER CHANGES] Any other questions from the committee? Well, I'd like to thank all of you for being here today, braving the cold weather and the snow to be here. Thanks to staff for getting here early this morning and preparing for this and for those that spoke. Meeting is adjourned. [background chatter and sounds of people leaving] [blank audio]