State gas tax hike clears first legislative hurdle

Lawmaker terms proposal 'user fee increase'

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A three-member Senate Transportation subcommittee began a potentially bumpy political journey Wednesday in trying to guide a state gas tax increase to the governor’s desk.

No one spoke in opposition before the panel unanimously approved a measure that seeks to raise the state’s excise tax on motor vehicle fuels by five cents a gallon on Jan. 1, 2013, and another five cents a gallon on Jan. 1, 2014, and deposit the proceeds in a TIME-21 fund that would distribute the proceeds, with 60 percent going to state transportation needs, and 20 percent each to cities and counties for bridge, highway and other transportation repairs or upgrades. Senate Study Bill 3141 also would extend tax breaks for biodiesel and ethanol and study changing transportation trends to equitably pay future highway costs.

“This is a user fee increase,” said Sen. Tom Rielly, D-Oskaloosa, chairman of the Senate Transportation Committee. “Any time you talk about any fee increase, it’s a last resort and I am convinced that we are at that last resort.”

Backers noted that Iowa faces nearly $2 billion in transportation needs, with a projected shortfall of $220 million required each year to address the most critical deficiencies.

“This is about jobs. This is about putting 5,000 people back to work,” Rielly said. “This is about economic development, it’s about jobs and it’s about improving the safety of our roads.”

Sen. Tim Kapucian, R-Keystone, said it is becoming increasingly difficult to truck grain and other commodities to processing sites or shipping destinations due to deficient bridges or substandard roadways.

“The rural part of the state is dilapidated,” he said. “As much as I do not like a tax increase, I feel it’s imperative that we have to take a look at this at this time.”

Iowa currently gets about $1.2 billion in yearly transportation money through the state’s road-use tax fund, which annually takes in $470 million from various vehicle-related fees and $430 million from fuel taxes currently set at 21 cents a gallon on sales of unleaded gasoline, 19 cents per gallon for ethanol-blended fuels and 22.5 cents a gallon for diesel, according to DOT data. Iowa’s gas tax was last raised in 1989 and currently ranks in the bottom third among states nationally.

“We’ve got a multibillion-dollar problem and kicking the can down the road is no longer an option,” said Sen. Matt McCoy, D-Des Moines, who supported a fuel tax hike because it equitably assesses users who live inside Iowa and travelers passing through on state highways. “Right now it’s Iowans that are paying the brunt of it. These out-of-state users of our road system ought to be leaving their dimes and nickels behind in Iowa.”

Rielly said he would prefer not to raise the state gas tax, but he noted he has put considerable study into the issue and has not found a better option. If someone comes forward with a viable alternative, he said he would be open to consider it but he believes the Legislature needs to push ahead because road construction costs continue to increase and delays are costing Iowans more money via deferred maintenance and repairs to their vehicles caused by potholes and other highway-related issues.

“The expenses are far out exceeding the revenues that are coming in,” he said. “I’ve studied it for six years, this is the only thing that I know that can generate $220 million a year and cost the average Iowa driver about $65 a year (when fully implemented in 2014), and 20 percent of it is paid for by people outside the state of Iowa.”

Each penny of state gas tax generates about $22 million, he said.

Last fall members of the Governor’s Transportation 2020 Citizen Advisory Commission recommended new funding mechanisms for high-efficiency and hybrid vehicles and study whether all vehicles using public roadways pay their fair share. The panel also recommended an increase of between 8 and 10 cents per gallon to the state’s motor fuel tax.

Gov. Terry Branstad, who signed the last gas tax increase into law in 1989, instructed DOT Director Paul Trombino III to eliminate duplications, find efficiencies and identify administrative savings that would be the equivalent of 2 cents of fuel tax, or about $50 million. Trombino recently issued a report that identified $33 million in ongoing yearly savings and $17 million in one-time savings that could be phased in over several years.

The governor has said he expects Iowa will have enough extra transportation money to meet critical needs in the coming construction season without having to consider a boost in the state gas tax, but he conceded that “down the road” he expects a phased increase in the “highway user fee” likely will have to be considered to address the state’s projected $220 million yearly shortfall.

Rielly said Wednesday that he believed the governor would sign a phased gas tax increase that took effect in 2013 if the split-control Legislature succeeds in getting it to his desk this session.

Ryan Rhodes, an Iowa Tea Party leader, contacted state legislators urging them to pledge to oppose a gas tax increase proposal, while Muscatine-based Iowans for Tax Relief is encouraging its members to urge their local legislators to oppose a gas tax increase.

Comments: (515) 243-7220; rod.boshart@sourcemedia.net

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