The End of the Road?

With the clock ticking toward the May 15 end of the 98th General Assembly, some Missourians feel the need for legislative action on the state’s fuel tax is more critical than ever.

Since 1996, the state’s motor fuel tax has remained at 17 cents per gallon for gasoline, diesel, kerosene and blended fuels. Pending legislation in the forms of House Bill 1168 and Senate Bill 540 could potentially raise the state tax to 19 cents per gallon starting Jan. 1, 2016, if approved by the General Assembly and Gov. Jay Nixon.

At first glance, a House of Representatives transportation committee on April 21 voted down a second House bill, HB 995, which likewise called for a 2-cent per gallon motor fuel tax increase.

“Republicans and Democrats voted against it,” said Rep. Lincoln Hough, a Republican representing eastern Springfield who serves on the committee. “We see it as being a potentially $70 million tax increase.”

Hough, who voted against the bill, cited the failure of the three-quarter-cent sales tax proposal in August as an indicator of how Missourians feel about increased taxation.

The private sector appears to be more receptive.

Mike Walker, chairman and CEO of Transland Inc., said he favors a fuel tax increase beyond the 2-cent figure to support maintenance and improvement of Missouri’s road system.

“It’s a good first step, but it doesn’t even come close to the level of funding we need to maintain an eroding infrastructure under the current proposal,” Walker said. “Those of us in the transportation industry are capable of bearing the burden of a good portion of a fuel tax increase.”

The Springfield-based trucking company spends about $10 million a year on fuel. Walker said a direct fuel tax to his and other transportation firms would keep expenses net neutral due to the national fuel surcharge that captures increases in their rate structure.

“It’s the only reasonable revenue source for our state’s highways,” Walker said. “The bigger issue as you look down the road is having it as the main revenue source isn’t going to work.”

Running on empty
Missouri Department of Transportation spokesman Bob Brendel said the fuel tax is a primary source of funding for MoDOT’s annual construction budget, along with driver’s and vehicle license fees and sales tax paid on motor vehicles. A 2-cent per gallon increase in 2016 would create $55 million in additional revenue for MoDOT and an additional $23 million appropriated to city and county transportation departments statewide.

“It’s not a solution to the problem long term, but would avoid the state losing federal funds in 2017,” Brendel said, adding the state must match federal funds in a 1-4 ratio in order to receive reimbursement of $167 million from the federal government in 2017.

He said the state can’t match the $400 million a year projected for 2018 and beyond, and it risks losing the money it does contribute to other states’ coffers. “It’s never happened to Missouri before, but it is likely to be the case in 2017,” Brendel said.

Missourians pay a federal fuel tax of 18.4 cents per gallon for gasoline and 24.4 cents per gallon for diesel, which go toward the U.S. Highway Trust Fund. When MoDOT builds a project, the state can request federal reimbursement from the trust fund. In fiscal 2012, for instance, Missouri received $1.17 for every dollar contributed to the fund, according to MoDOT’s Financial Snapshot from October.

In the current fiscal year, the department’s construction budget is $700 million, but it drops to $586 million in fiscal 2016 and $325 million in 2017.

Given that trend, the Missouri Highways and Transportation Commission has revised MoDOT’s fiscal 2017 budget to make improvements on only 8,000 miles of the state’s 34,000-mile road system.

“The rest of the system is going to receive limited routine maintenance, which means that the condition of the overall system is going to deteriorate,” Brendel said.

Hough said although Springfield recently has seen the benefit of highway improvement projects, such as the diverging diamonds along U.S. Highway 65 and Interstate 44, the city also would experience reduced upkeep.

“Glenstone, which I would call a main thoroughfare in Springfield, is going to see the bare minimum of maintenance,” Hough said. “We’re going to fix the potholes, but we’re not going to be making improvements.”

The Missouri Trucking Association has supported a fuel tax for about a decade, said President and CEO Tom Crawford.

“It’s the one system for taxation that is the lowest form of overhead,” Crawford said, giving the example of a dollar spent on infrastructure. “If you do the fuel tax, you’re looking at maybe 5 cents of overhead, and 95 cents of that dollar is going to the infrastructure needs.”

Common cents
With a 2-cent increase, Missouri would maintain the lowest state fuel tax of the surrounding states, except Oklahoma, and remain slightly below the current national average of 20.7 cents for gasoline and 19.1 cents for diesel, according to the Washington, D.C.-based American Petroleum Institute.

“Missouri’s current tax rate is ridiculously low,” Walker said of the fuel tax. “We could double our tax rate and still not be the highest in the nation.”

As written, SB 540 increases the tax by 6 cents incrementally up to 23 cents.

Blake Hurst, president of the Missouri Farm Bureau Federation and a farmer in northwestern Westboro, knows the need for road improvement. With seven to eight trucks on the road to markets in Missouri and Nebraska on a daily basis, his business depends on adequate highways.

“I think the highway department does a good job given their resources, but (the roads) are in need of improvement for safety, if for nothing else,” Hurst said. “We’re running with roads that were designed decades ago, and the farm machinery is much wider than it used to be.”

Walker said in addition to safety, his company’s concern for the infrastructure also is tied to traffic congestion in major urban areas, which results in productivity losses.

Hurst points to Iowa, where a 10-cent increase went into effect March 1, as an example of where the condition and width of pavement on secondary roads have been visibly improved by increased funding.

“Even with the increase, I don’t think that will be enough,” he said.

“We have to do this, but then we may have to do it again next year.”