'Connecting Idaho' road plan comes with tax hike

02/01/2006 — Legislators are tumbling to reality. Spend $1.9 billion on new roads, taxes go up.

Gov. Dirk Kempthorne convinced many lawmakers last year there was a free lunch on the feds. In one of the greatest sales pitches in Idaho history, he got conservative lawmakers to back our biggest debt ever, his Connecting Idaho road plan.

What most folks don't know is Kempthorne has a sequel for his successor in 2007: "Connecting Idaho II: The Taxman Cometh."

Lawmakers are starting to get it. Last week at one of six breakfasts hosted by the Associated General Contractors to lobby for first-year debt of $218 million, Rep. John Rusche, D-Lewiston, quizzed ITD Deputy Director Charles Rountree. What happens, he asked, when debt payments rise?

"As we pay out more for debt service, the amount of federal aid available for expansion and anticipated projects will be reduced," Rountree said.

Debt service will peak at $121 million and average $85 million annually for 23 years, according to a Citigroup estimate. Hence, spending for scores of projects not in Connecting Idaho will drop from $245 million this year to $163 million in 2011.

Transportation Board Chairman Chuck Winder, Kempthorne's top lieutenant on Connecting Idaho, told me he hopes the board will make a recommendation to the governor-elect by December on a package that could include higher fuel taxes and registration fees and new sources of revenue, including toll roads and taxes on car rentals.

"The board is going to be aggressive in going after additional funding," ITD board member Bruce Sweeney told lawmakers last week.

"We haven't done anything in 10 years."

Kempthorne, however, is ducking the tax question and focusing on securing $218 million in first-year debt.

He proposes borrowing $1.15 billion over five years, with the debt retired in 2029, at an estimated cost of $1.9 billion.

The board won't be ready to craft a tax-hike plan until after lawmakers leave, Winder said. Taxes last rose in 1996, by 4 cents to 25 cents a gallon, ranking 20th in the nation.

"They're just putting if off until they get their approval," said Rep. Leon Smith, R-Twin Falls, a former ITD Board chairman and critic of the size of Kempthorne's plan.

"If they came in with a 5-cent fuel tax increase, everyone would realize we have a serious infrastructure problem and (Connecting Idaho) would make the problem worse."

Smith wants to cut Kempthorne's $218 million request, but Kempthorne is deftly brushing off Smith and other detractors who lost the battle last year. He's working with road builders who organized the six lobbying sessions leading to the Feb. 9 budget committee meeting on the debt scheme.

Led by AGC, the construction industry was Kempthorne's key ally last year. They're back with partners from chambers of commerce, truckers, agriculture, mining, timber and the Idaho Association of Commerce and Industry.

Kempthorne's chief of staff, Brian Whitlock, was at one of last week's lobbying breakfasts. When I asked about a tax hike, he insisted there's no link. "There's a clear bifurcation. The needs will exist, with or without (Connecting Idaho)." Countering Smith's caution is an eagerness to start construction. There's talk of an emergency clause to allow bonds to be sold in April, rather than July. Sen. Patti Anne Lodge, R-Huston, asked Winder if there was anything she could do to help and offered to knock on doors to convince neighbors to sell right-of-way. "This is very, very important to the people of Canyon County," said Lodge.

Added Sen. John McGee, R-Caldwell, "I just implore you to quicken the pace."

Kempthorne aide Kent Kunz reminded lawmakers they could lift debt caps they imposed last year as part of a compromise.

Caps trimmed the plan from $3 billion. "If they want us to move faster and increase the cap, that's their prerogative," Whitlock said later.

Still, some lawmakers are cautious because they say they didn't get the full story last year, including the undisclosed need for a $30 million construction management contract.

The misrepresentation continues.

Winder told legislators last week the plan makes more sense than ever, citing interest rates between 3 percent and 4 percent. Citigroup, however, estimates interest rates at between 4 percent and 5 percent. The first year's debt is penciled at 4.34 percent, and average annual interest is projected at 4.93 percent over 23 years.

A few lawmakers are wary of boxing in future policy makers. "We're going to take a more cautious and more measured look at how quickly we need to move," said Rep. Maxine Bell, R-Jerome, co-chair of the budget committee. "We'll have a new governor next year. It would be wise to not go too far down this road and not let him have input."

The road's clear, folks, and numbers don't lie. After Kempthorne gets his bonds, we get a tax hike, no matter who succeeds him.