Legislature(1999 - 2000)
01/20/2000 01:10 PM House TRA
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
HOUSE TRANSPORTATION STANDING COMMITTEE
January 20, 2000
1:10 p.m.
MEMBERS PRESENT
Representative Andrew Halcro, Chairman
Representative Beverly Masek
Representative Bill Hudson
Representative John Cowdery
Representative Allen Kemplen
Representative Albert Kookesh
Representative Vic Kohring
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
HOUSE BILL NO. 59
"An Act relating to the motor fuel tax; and providing for an
effective date."
- HEARD AND HELD
PREVIOUS ACTION
BILL: HB 59
SHORT TITLE: MOTOR FUEL TAX
Jrn-Date Jrn-Page Action
1/22/99 67 (H) READ THE FIRST TIME - REFERRAL(S)
1/22/99 67 (H) TRA, FIN
1/22/99 67 (H) 2 FISCAL NOTES (REV, DOT)
1/22/99 67 (H) GOVERNOR'S TRANSMITTAL LETTER
1/20/00 (H) TRA AT 1:00 PM CAPITOL 17
WITNESS REGISTER
DENNIS POSHARD, Legislative Liaison/Special Assistant
Office of the Commissioner
Department of Transportation & Public Facilities
3132 Channel Drive
Juneau, Alaska 99801-7898
POSITION STATEMENT: Presented HB 59.
KEVIN RITCHIE
Alaska Municipal League
217 2nd Street
Juneau, Alaska 99801
POSITION STATEMENT: Testified on HB 59.
FRANK DILLON, Executive Vice President
Alaska Trucking Association
3443 Minnesota Drive
Anchorage, Alaska 99501
POSITION STATEMENT: Testified on HB 59.
ROBYNN J. WILSON, Revenue Auditor
Income & Excise Audit Division
Department of Revenue
550 West 7th Avenue, Suite 500
Anchorage, Alaska 99501
POSITION STATEMENT: Answered questions regarding off-road refunds
and exemptions.
ACTION NARRATIVE
TAPE 00-2, SIDE A
Number 0001
CHAIRMAN ANDREW HALCRO called the House Transportation Standing
Committee meeting to order at 1:10 p.m. Members present at the
call to order were Representatives Halcro, Hudson, Kookesh and
Kohring. Representatives Cowdery, Kemplen and Masek arrived as the
meeting was in progress.
HB 59 - MOTOR FUEL TAX
CHAIRMAN HALCRO announced the first and only order of business as
House Bill 59, "An Act relating to the motor fuel tax; and
providing for an effective date."
Number 0059
DENNIS POSHARD, Legislative Liaison/Special Assistant, Office of
the Commissioner, Department of Transportation & Public Facilities
[DOT/PF], came before the committee to present the bill. He
explained HB 59 was one of a package of bills that was introduced
by the Governor last year as part of a long-range financial plan.
The bill takes a user-pays approach towards highway construction
and maintenance funding. It takes the current tax rate of 8 cents
per gallon and increases it to 17 cents per gallon. Alaska's
current rate of 8 cents per gallon is the lowest in the nation; it
hasn't increased since 1961. Mr. Poshard cited that tax rates per
gallon across the nation range from the lowest at 8 cents in Alaska
to the highest at 35.8 cents in Hawaii. If this tax increase
should pass, he said, Alaska would be 45th in the nation. He noted
that each increase per cent generates approximately $2.9 million.
MR. POSHARD further stated that the need for this bill stems from
the [federal] Transportation Equity Act for the 21st Century
[TEA-21]. When the Act was passed, the state's general fund match
requirement went up substantially - from around $190 to $200
million per year to around $350 to $400 million per year. The
state's match need went up as well - from around $25 to $30 million
to $50.6 [million]. This year, it should be around $48 to $49
million. The bill, therefore, is a way to raise revenues to pay
for the state's match, and to continue to construct adequate
transportation facilities. If there is anything left over in the
account the way the bill reads, the secondary use would be for
maintenance. The department has a sizable deferred maintenance
list and its general fund maintenance dollars have been cut
annually.
Number 0377
CHAIRMAN HALCRO stated he agrees to some extent with Mr. Poshard's
comment in relation to the tax being a user-pays [approach], but he
wonders how it could be justified to those who pay for the tax at
the pump when some of it would go to support the ferry system. In
that case, it's not really a user-pays [approach].
MR. POSHARD replied the Marine Highway System is part of the
state's capital budget every year. There is no question that this
money would - potentially - pay the state's match for those types
of projects. Furthermore, the Federal Highway Administration
recognizes the marine highway - the lifeline of transportation in
Southeast Alaska - as part of the National Highway System.
Number 0475
CHAIRMAN HALCRO asked Mr. Poshard whether he has looked at the fact
that Alaskans pay anywhere from 10 cents to 25 cents per gallon
more than other states.
MR. POSHARD replied he wouldn't want to elaborate on any theories
as to why that is true. He believes, however, that the Department
of Law is openly investigating that issue now.
Number 0566
KEVIN RITCHIE, Alaska Municipal League [AML], came before the
committee to testify. He stated the highest priority of the AML
and the Alaska Conference of Mayors is to assist the state in
developing a long-range fiscal plan that involves municipalities,
and part of that plan is a gas tax. The AML doesn't have a
position on how high the gas tax ought to be, but it does have a
position on how the proceeds of the tax should be used. According
to examples from around the nation, when the people know how the
revenues generated from a tax will be used and they approve of that
use, they are much more likely to approve a tax increase. He cited
an example in Sitka, whereby three-quarters of the people approved
a recent sales tax increase because they were told what the
revenues generated would be used for, and because it included a
sunset. In the case of the gas tax, Alaska is one of a few states
that doesn't share [the revenues from] the gas tax with its
municipalities, when 43.5 percent of the lane miles are municipal.
Mr. Ritchie further noted that, when a tax payer goes to a gas
pump, that tax payer is burning gas partly on municipal and state
roads. The public, however, considers the roads as one system.
Number 0775
REPRESENTATIVE JOHN COWDERY asked Mr. Ritchie what would be wrong
with each community putting a sales tax on gasoline to fit their
needs? That approach seems more equitable and democratic. The
recent initiative on capping the property tax gives him
"heartburn," for he has communities that don't have any property
tax or a tax base. He thinks it should be a local issue, which is
similar to his opinion on the gas tax.
MR. RITCHIE replied the AML hardly agrees on the issue of a tax
cap. The AML believes it is a local issue. Most of the
communities in the state have a tax cap or revenue cap already in
place. He cited Sitka has a six mill property tax cap by charter,
but they don't want other parts of the state to tell them how to
assess their system. In the case of a gas tax, very few states
have a gas tax that varies by municipality because in theory there
could be a variety of different tax systems all linked by the same
road. From a long-range standpoint, he suggested looking at a
uniform gas [tax].
Number 0905
REPRESENTATIVE BILL HUDSON asked whether there is any information
on the background of the gas tax, especially as it relates to each
municipality. He was wondering whether there is anything in
statute relating to this issue.
MR. POSHARD replied he doesn't have any background information with
him. He does know that the gas tax hasn't changed since 1961, but
he can't profess to know the background of when it was established.
Number 0954
REPRESENTATIVE HUDSON stated it would be very important to look at
the background in terms of why it is a uniform tax levied by the
state rather than by each community.
Number 0998
REPRESENTATIVE COWDERY noted not every community [in the state] has
a road system.
REPRESENTATIVE HUDSON replied they all have at least a mile of
road.
Number 1017
CHAIRMAN HALCRO asked Mr. Ritchie whether his earlier testimony
indicated that 43.5 percent of the gas tax should be shared with
local governments, since 43.5 percent of the lane miles are
municipal. He's not sure how Mr. Ritchie can take a position like
that when both state and federal dollars have to be figured for
local infrastructure. He cited the $18 million new overpass in his
legislative district benefits the Municipality of Anchorage, yet
his property taxes have not increased.
MR. RITCHIE replied it is just a factual basis to start from. The
AML and the Conference of Mayors looked at the overall concept of
revenue sharing, and a gas tax would be part of that. He cited it
started at $2,500 per mile and is now down to $250 per mile. This
gas tax, he said, would make a great deal of sense in creating a
new revenue sharing program rather than just pulling revenues out
of the general fund.
Number 1146
CHAIRMAN HALCRO stated part of his mill rate goes toward the
Anchorage Road Service Area. He asked Mr. Ritchie whether that is
consistent with communities throughout the state that have property
taxes.
MR. RITCHIE replied, "Yes." That is the only way roads are
maintained right now. In the past, the state indirectly shared
[revenues from] the gas tax through a small road revenue sharing
program. In essence, a little bit of state money now goes towards
maintaining state roads, which is why the AML feels that the public
would be more accepting of a gas tax that would maintain the entire
[road] system.
Number 1226
CHAIRMAN HALCRO referred to page 4, lines 1-4, of the bill, and
noted that the language gives DOT/PF the latitude to use the funds
from everything to surveys, administration and related matters. He
is concerned that the money from the gas tax might not go into
maintenance. He agrees that the people would accept an increase if
they specifically knew it would go towards maintaining state and
municipal roads.
MR. RITCHIE replied the AML would like to discuss that language.
He noted that there is a debate in the state about dedicating
funds, and the AML feels that the public has become more
sophisticated about their local and state governments. He further
noted that the tax measures that fail usually don't give the public
a sense of need.
Number 1335
CHAIRMAN HALCRO referred to page 3, lines 28-31, of the bill, and
noted that DOT/PF would first use the funds for matching
federal-aid highway money for planning, design and construction,
while road paving and deferred maintenance projects would be
secondary.
MR. RITCHIE replied, when the public views the gas tax, they
probably just imagine a good road to drive on, which includes
maintenance.
Number 1406
FRANK DILLON, Executive Vice President, Alaska Trucking
Association, testified via teleconference from Anchorage. The
trucking industry - conceptually - supports an increase in the gas
tax. However, the details in HB 59 - as drafted - are currently
unacceptable. First of all, matching federal funds are funds that
have been collected from motor fuel users. In Alaska, he cited
each tractor-trailer contributes about $6,400 a year to the state
and federal governments. All of the money that is sent to the
federal government comes back to the state several times over the
amount for a variety of reasons: the alignment of the state's
congressional delegation, the uniqueness of the state, and the
ability of the state to carry that argument forward through the
continued funding formulas. But, when talking about getting more
matching money by raising taxes, that also means raising local or
state taxes in order to match what somebody has already paid. It's
all tax money. The industry is not objecting to raising the fuel
tax; the industry is objecting to using it for matching federal
funds instead of using it for maintenance. He noted that the
Deferred Maintenance Task Force identified several hundred million
dollars worth of highway deficiencies that have immediate safety
implications, but there is no real way to address it with federal
funding because of the constraints and hoops placed on the funds
when they are given back to the state. In addition, he cannot say
that the industry would support a direct revenue sharing concept
that Mr. Ritchie put forward in his testimony; it seems that people
are already circling the money as if it was a done deal. He
reiterated that the industry is concerned about how the revenues
would be spent. The focus, he further reiterated, should be on
maintenance and repair work to enhance safety and longevity of an
existing roadway on an existing right-of-way.
Number 1605
CHAIRMAN HALCRO stated he hears complaints about general fund
dollars being available only for maintenance; federal highway funds
are for new roads, not to repair old ones. He wonders why the
state wouldn't want to seize an increase in the gas tax as an
opportunity to make maintenance the primary objective instead of as
an opportunity to match more federal funds to design and build more
roads.
MR. POSHARD replied HB 59 was drafted and conceived shortly after
TEA-21, and during a time when the legislature had committed to
cutting general fund dollars. The bill was seen, therefore, as a
mechanism to raise enough capital to match an extra $24 million, of
which, the legislature went ahead and appropriated in order not to
turn back federal dollars. The department is certainly willing to
sit down and discuss the issue of where the money should go; it is
a policy call.
MR. POSHARD further stated, in response to a concern expressed
earlier by Representative Hudson regarding a state versus local
tax, there are areas in the state that don't have a local
government to collect the gas tax, yet there are major highways
that run through them. He called it an equity issue. Furthermore,
there is some efficiency in having the Department of Revenue
collect the gas tax on a statewide basis rather than having the
department collect it from each individual gas station.
Number 1786
CHAIRMAN HALCRO asked Mr. Poshard whether the department would have
a problem with the bill being amended to limit the use of the funds
generated to maintenance between the rights-of-way or to ferries
and ferry terminals.
MR. POSHARD replied he doesn't want to commit the commissioner to
one thing or another; he would talk to him about it. He suspects
that the department would be willing to amend the language to
specifically say what the money would be used for.
Number 1821
CHAIRMAN HALCRO referred to page 4, lines 6-10, of the bill, and
noted that the language "if" versus "when" leaves the department
with a lot of latitude for projects by contract. He would like to
see the entire paragraph deleted, otherwise the department can make
an arbitrary decision on when to contract.
MR. POSHARD replied most of the language that Chairman Halcro is
referring to is in existing statute. The department chose not to
bother changing it when drafting the bill. He noted that the
department contracts out over 50 percent of its design work, and
that the design engineers are performing as project managers. He
further noted that, when TEA-21 passed, the workload for the
department nearly doubled, yet the department received only one PCN
[Position Control Number]. As a result, the department has chosen
to contract-out.
Number 1945
CHAIRMAN HALCRO stated, during the summer, when the overpass at
Minnesota and International Airport Roads was being constructed, he
drove by at 1:00 p.m. and counted seven orange DOT/PF pickup trucks
parked in a row, yet the project was being done by a private
contractor. It concerns him that seven department workers or more,
depending on how many were in each truck, were needed to "look over
the contractor's shoulder."
MR. POSHARD replied he can't comment on exactly what was occurring
that day; but from his experience there aren't routinely seven
project managers on-site. There are times when there might be the
project manager and the occasional inspector(s). He set forth that
it could have been a day when DOT/PF management was touring and
inspecting the project; after all, it was a pretty big project.
Number 2017
CHAIRMAN HALCRO referred to page 4, lines 21-22, of the bill, and
noted that the language identifies a refund due to specific users.
He asked Mr. Poshard to explain why a refund is given.
MR. POSHARD replied that according to his understanding there is a
refund given for non-highway usage. He cited ATVs [all terrain
vehicles] and snowmobiles as examples. There is no need to improve
the roads for those types of vehicles. A refund, therefore, is to
provide relief for those users.
Number 2069
REPRESENTATIVE HUDSON stated that the motor fuel tax is for
vehicles driven on the highways. It is not for stationary, diesel,
marine or aviation [engines]. Those users fall under a separate
regime.
CHAIRMAN HALCRO stated he understands that aircraft and watercraft
are not in this category, and asked whether or not ATVs and
snowmobiles would receive a lower price.
ROBYNN J. WILSON, Revenue Auditor, Income & Excise Audit Division,
Department of Revenue, came before the committee to answer Chairman
Halcro's question. She stated that most of the off-road refunds
apply to construction and mining equipment. She cited bulldozers
and generators as examples.
Number 2116
CHAIRMAN HALCRO asked Ms. Wilson how that is determined. For
example, what if he purchased gas for a piece of mining equipment
at the pump?
MS. WILSON replied the statute allows for the user to get a refund.
She explained that the user needs to file a claim for refund with
the Department of Revenue, provide documentation that the tax was
paid, and describe the type of equipment the fuel was used in. She
also noted that the vehicles in areas of the state that don't
require a license enjoy an off-road refund as well.
Number 2155
CHAIRMAN HALCRO asked Mr. Poshard whether that applies to
communities under a certain population or under a certain amount of
road miles.
MR. POSHARD replied he's not certain. It's a question for the
Division of Motor Vehicles [Department of Administration].
Number 2175
REPRESENTATIVE HUDSON asked Mr. Poshard where the [refund] from 6
cents [a gallon] to 13 cents [a gallon] came from.
MR. POSHARD replied that according to his recollection at the time
the bill was drafted the state was keeping 2 cents per gallon for
off-highway use doubling its keep to 4 cents, which is where that
figure came from.
REPRESENTATIVE HUDSON asked Mr. Poshard whether it's a correlation
of what the state was doing before.
MR. POSHARD replied yes, essentially.
REPRESENTATIVE HUDSON said, "6 to 8 and 13 to 17."
MR. POSHARD replied, "Correct."
Number 2225
CHAIRMAN HALCRO asked, How much does the state get back in fuel tax
refunds?
UNIDENTIFIED SPEAKER replied, from the audience, he doesn't have
that information with him; he will get it to him.
CHAIRMAN HALCRO said it doesn't seem very fair that some people are
exempt. His constituents may or may not ever have the need to use
the Marine Highway System, yet they are paying a tax to fund it. He
asked, Why shouldn't somebody who lives in a community without
roads not have to follow the same suit?
Number 2250
REPRESENTATIVE ALBERT KOOKESH asked, Why does somebody like him
have to pay the motor fuel tax, when he's never going to drive on
the roads in Anchorage or Fairbanks? It's the same correlation.
Number 2267
REPRESENTATIVE HUDSON stated it's important to recognize the state
transportation system in its entirety. Thousands of people get on
a ferry in Southeast Alaska and travel to Anchorage or Fairbanks.
It's important to remember that the Marine Highway System is part
of the blacktop; it just happens to move. The state should,
therefore, be looking at everybody who is expending gasoline and
driving on the roads when collecting taxes. He reiterated the
people who are getting on the ferries are driving vehicles, they
just happen to be on a shuttle to a highway. He doesn't want the
committee to get too bogged down on trying to isolate what the
monies can or cannot be used for.
Number 2310
CHAIRMAN HALCRO asked, If there are going to be exemptions, where
should they stop?
REPRESENTATIVE HUDSON replied exemptions are for those who are not
essentially using the highways. It's a correlational relationship
to the proportion of fuel being consumed.
REPRESENTATIVE KOOKESH said trying to piecemeal the Marine Highway
System only adds to the confusion. It should be looked at as a
statewide system rather than differentiating between users. He
said, "It's our system. It really belongs to all of us. And, if
I never drive on a[n] Anchorage or Fairbanks highway, it still
belongs to me and I have to pay my share."
Number 2360
MR. POSHARD noted that this issue is not only about where
individuals drive, as Mr. Dillon would testify to, it's about
moving goods efficiently. This issue, he said, is about having
trucks move efficiently from Anchorage to Fairbanks or from
Anchorage to Glennallen, which is a very important part of the
state's transportation system.
Number 2385
CHAIRMAN HALCRO stated he agrees 100 percent with Mr. Poshard's
comments, which explains his questions about exemptions - to ensure
that everybody shares fairly.
CHAIRMAN HALCRO closed the meeting to public testimony. He
announced that the bill would be held over. In the meantime, he
would engage in discussions with Mr. Poshard and the Department of
Transportation & Public Facilities to ensure that the maintenance
aspect is primary.
ADJOURNMENT
There being no further business before the committee, Chairman
Halcro adjourned the House Transportation Standing Committee
meeting at 1:55 p.m.
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