Iowans driving more, buying new vehicles

DES MOINES — After months of concern that COVID-19 restrictions would negatively impact state transportation revenues, Iowa is reporting that increases in vehicle registrations and traffic volumes are bolstering the Road Use Tax Fund.

Distributions to various appropriations and road funds were nearly $36.7 million higher this April than in April 2020, the Department of Transportation reported this week.

Overall, year-to-year distributions are $26.1 million higher than last year.

The April numbers could be due to the timing of the Road Use Tax Funds distribution, according to Stuart Anderson, director of the DOT’s Transportation Development Division.

“It’s very possible we’ll see some reconciliation with the May numbers,” he said.

However, the only COVID-19 impact on the fund, he said, is reduced fuel tax revenue due to reduced travel.

While traffic volume in the state is now “close” to pre-pandemic levels, Anderson said, the department will continue to track traffic levels closely “to see if long-term changes in telework policies impact state (Road Use Tax Fund) revenues.”

In March 2020, the department’s 120 automatic traffic recorders showed the number of vehicles on streets, roads, highways and interstates had fallen by nearly 50 percent compared to the previous March.

That meant Iowans were buying less fuel and paying less in fuel taxes, which make up about 40 percent of the $1.7 billion Road Use Tax Fund.

The fund’s two other primary revenue sources are annual vehicle registration fees and the 5 percent fee for new vehicle registration paid when a new or used vehicle is purchased.

Growth in those areas is surpassing the lower fuel-tax revenue, Anderson said.

“While there was an initial drop in vehicle sales early in the pandemic, we’ve now seen vehicle sales increase above forecast levels, and vehicle prices are also increasing,” he said.

Both of those factors, he said, are driving road-use tax revenue above forecasts.

DOT data shows total vehicle registrations climbing by 17,561 to 4,549,289 from 2019 to 2020. That exceeded the increase of 14,189 from 2018 to 2019. Vehicle registration revenue increased $22.2 million to $675.2 million in 2020.

Money from the Road Use Tax Fund supports construction and maintenance of Iowa’s roadways. Nearly half — 47.4 percent — goes to primary roads of the state highway system; 24.5 percent goes to secondary roads; 20 percent goes to cities; and 8 percent goes to farm-to-market roads.

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