Worthan Newsletter19

February 12, 2015 The discussion on the future of the fuel tax began in earnest this week. Iowa’s fuel tax has been disc...

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February 12, 2015 The discussion on the future of the fuel tax began in earnest this week. Iowa’s fuel tax has been discussed at varying levels of sincerity every year that I have been in the Legislature. 2008 was the last time that there has been any legislation that increased funding for our transportation infrastructure. Negotiations that occurred over the 2007 and 2008 sessions resulted in a bill that increased registration fees on vehicles but did nothing with the fuel tax even though fuel taxes were an integral part of the overall discussion. In 2011 the Department of Transportation was directed by the Legislature to assess the needs of our primary and secondary road systems in the state and report back. Also included in this directive was a mandate to find $50 million in savings in the DOT’s current operations. With new management at the head of the department the savings were realized and the department reported that the state was falling behind on critical maintenance and construction at the rate of $210 million per year. The fuel tax has been the primary focus as a source for these critical needs since that report. The fuel tax in Iowa has not been changed since 1989 when the rates were set at 22.5 cents per gallon on diesel fuel, 20 cents on gasoline, and 19 cents on ethanol blended fuel. Remember, 1989 fuel prices were still under a dollar per gallon at the pump so the 20 cents per gallon represented a tax near 28% on the value of a gallon. If the Legislature had set the tax at 28% per cent of the value back in 1989 instead of 20 cents per gallon the tax revenue to the road fund would have steadily increased over the years to a high of nearly a dollar per gallon when gas prices hit their peak recently. Needless to say, we would not be having this discussion today if the tax had been set a 28% rather than 20 cents. I believe that the Legislature made the right decision when it stuck with cents per gallon rather than a percentage of value. While prices can vary drastically, the amount of fuel used is fairly stable and can be reliably predicted. This allows the DOT to plan their repairs and maintenance based on a dependable revenue stream. Under the percentage plan revenue would have dropped nearly 50% this year due to the drop in gas prices. Fluctuations of that magnitude would make it very difficult to plan and bid repair and construction projects. We must also consider that revenue per vehicle mile has declined since 1989. Autos were averaging around 20 miles per gallon in 1989, or roughly one cent of revenue to the road system per mile driven. The average semi-truck was under 5 MPG or 4.5 cents per mile on the 22.5 cent per gallon diesel tax. Today those numbers would be closer to 2/3 of a cent per mile for autos getting 30 MPG and 3.5 cents per mile for semis that are averaging 6.5 MPG. The bill currently under consideration would raise the fuel tax ten cents per gallon across the board. The new rates would be 29 cents per gallon on ethanol blends, 30 cents per gallon on gasoline, 29.5 cents per gallon on bio-diesel that is B11 or higher, and 32.5 cents per gallon on diesel fuel. This increase

would improve the revenue to the road fund by approximately $220 million that would be distributed through the road use tax formula; 47.5% to the state for primary roads and interstates, 24.5% to the counties for secondary roads, 8% to the counties for farm to market roads and 20% to municipalities. While $220 million will not solve all the problems, it will provide an important shot in the arm for the state, counties and cities. We are getting reports that the increase may be enough to allow a county to add one bridge replacement project every year. While no one likes to see their taxes increase; I believe the importance of maintaining and rebuilding our highway infrastructure outweighs the objections to an increased tax. The average consumer will spend less than $100 per year on the increased fuel tax. The debate will extend over the next couple of weeks and the outcome is not guaranteed. It will take a broad bi-partisan consensus to approve this bill and send it to the Governor.

Please join me at my upcoming legislative forums: February 21

March 21

Kings Pointe Regatta Grill

Kings Pointe Regatta Grill

10:00 a.m.

10:00 a.m.