Legislature(2003 - 2004)
02/09/2004 01:50 PM House FIN
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* first hearing in first committee of referral
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HOUSE BILL NO. 156
An Act increasing the motor fuel tax and repealing the
special tax rates on blended fuels; and providing for
an effective date.
Co-Chair Harris MOVED to ADOPT committee substitute #23-
GH1118\V, Kurtz, 2/9/04, as the version of the bill before
the Committee. There being NO OBJECTION, it was adopted.
PETER ECKLUND, HOUSE FINANCE COMMITTEE STAFF, REPRESENTATIVE
BILL WILLIAMS, explained that version "V" resembles the
gasoline motor fuel tax portion of [House Bill 293], which
passed out of the House Finance Committee late last session.
Version V would increase the current motor fuel tax from
eight cents to twenty cents per gallon and would split the
increase of twelve cents between the municipality and the
State of Alaska. It would continue a current incentive in
state law for processing ethanol out of wood and fish waste
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and would extend the incentive to June 30, 2009.
Mr. Ecklund noted a couple differences between the version
that passed out. In the sales tax bill, there was a two-
cent home fuel tax, whereas the bill before the Committee
does not continue that provision. HB 156 removes the
exemption for the Alaska Railroad Corporation (ARRC) to pay
the motor fuel tax. The bulk of the fuel purchased by the
Railroad is for rail use and taxed at a rate of two cents
per gallon. Any fuel use for off-the-road purposes would be
taxed at two cents per gallon.
Co-Chair Harris asked how raising the tax from eight cents
per gallon to twenty cents per gallon would affect the
state's economy. Mr. Ecklund advised that if the state tax
rate was twenty-cents per gallon, there would only be ten
states paying less and Alaska would continue to be in the
bottom fifth.
Co-Chair Harris asked if it was the legislation's intent to
place the funds back into highway maintenance or to defer
current costs coming out of the General fund. Mr. Ecklund
noted the chart in member's packet indicating that $60
million per year is spent on highway maintenance and $50
million dollars per year from the Capital Budget to match
the federal highway dollars. The collection of a gas tax
could be used to offset those costs.
Co-Chair Harris pointed out that aviation tax on gasoline
was not increasing four to seven cents per gallon. Mr.
Ecklund acknowledged that it was not under the proposed
version of the legislation. Co-Chair Harris indicated a
"conflict of interest" regarding the aviation gasoline tax.
Co-Chair Harris asked if those driving longer distances
would be paying an "unfair" amount of money on tax. Mr.
Ecklund could not answer that question. Co-Chair Harris
reiterated expense concerns for those driving distances such
as the one between Mat-Su and Anchorage. Mr. Ecklund
commented that the Department might be able to supply
numbers regarding the number of people that travel those
distances.
Co-Chair Harris pointed out that under HB 156, the House
Finance Committee version, the Alaska Railroad would be
paying two cents per gallon for fuel. Mr. Ecklund advised
that currently, the Railroad is tax exempt. He understood
that they use approximately 5.5 - 6 million gallons fuel per
year. The two-cent per gallon rate would generate
approximately $120,000 dollars per year.
Representative Stoltze inquired if the exemption affected
ARRC's entire fleet of vehicles. Mr. Ecklund noted that in
the last version, any vehicle that the Railroad has would be
exempt, while under the proposed version, they would not be.
If there were vehicles on the road, they would be subject to
the full twenty-cent tax. He did not know the amount of
fuel used on the road.
In response to Representative Stoltze, Co-Chair Williams
pointed out that the national motor fuel tax average is
twenty-three cents per gallon.
Co-Chair Harris noted that Alaska currently pays per twenty-
six cents federal and State tax on gasoline with Hawaii
being the highest amount paid at fifty-three cents per
gallon. He reiterated that Alaska is the lowest and that HB
156 proposes a price of thirty-eight cents per gallon.
KEVIN RITCHIE, EXECUTIVE DIRECTOR, ALASKA MUNICIPAL LEAGUE,
JUNEAU, voiced support for the proposed legislation. He
stressed that it would create a "user pays" for maintaining
roads. What is proposed would be between the municipalities
and State government, making sense as some of the gas is
consumed on municipal roads. Sharing those costs would help
to guarantee that the roads are well maintained. Mr.
Ritchie maintained that it is a fair tax in that it is an
overall cent per gallon cost and cost and people in all
areas of the State would pay the same per gallon of gas.
Representative Stoltze asked if local governments had the
ability to tax. Mr. Ritchie replied that they do.
WENDY LINDSKOOG, (TESTIFIED VIA TELECONFERENCE), DIRECTOR,
EXTERNAL AFFAIRS, ALASKA RAILROAD CORPORATION (ARRC),
ANCHORAGE, introduced Bill O'Leary, Vice President, Alaska
Railroad, & Bill Hupprich, Associate General Legal Council,
Alaska Railroad, Inc. She responded to comments made by Mr.
Ecklund regarding the gasoline consumed for highway use.
The total per year amount is approximately 150,000 gallons
gasoline and 75,000 gallons diesel fuel. The Railroad
purchases gas and diesel fuel for the following uses:
· Highway use is approximately 1%
· Equipment use is approximately 1%
· Heating use is approximately 1%
· Locomotive use is approximately 98%
Ms. Lindskoog noted that for highway use, the Railroad
should be tax exempt, however, they have not received any
reimbursement for that fuel tax over the years. She noted
that there is no objection to paying for it. With regard to
legal issues regarding the locomotive fuel tax, Ms.
Lindskoog requested that Mr. Hupprich testify.
WILLIAM HUPPRICH, (TESTIFIED VIA TELECONFERENCE), ASSOCIATE
GENERAL LEGAL COUNCIL, ALASKA RAILROAD CORPORATION (ARRC),
ANCHORAGE, noted that the Railroad has the same objections
that they voiced last year on SB 112. A tax will most
likely violate the federal Alaska Railroad Transport Act
provision, which mandated that revenues generated by the
railroad shall be maintained and managed by the State for
railroad purposes only. He claimed that it would constitute
the federally mandated dedication of revenues that are
binding on the State and subject to the railroad transfer
and comparable to the quasi trust laws opposed to University
lands. The intent of Congress in requiring the dedication
of railroad revenues was to prevent any State or local
intent to erode the Court and transportation assets, a
continued assistance, which seems vital to federal interests
as well as to the State. The Transfer Act prevents the
Legislature from appropriating the Railroad's funds and
using them for non-railroad purposes. The 2% tax on the
locomotive fuel would primarily be used on highways,
airports and ports, which would be a violation of the
federal Transport Act.
Mr. Hupprich added that the 2% tax would most likely violate
the Federal Railroad Act from 1976. The bill before the
Committee proposes to take the Railroad's money and use it
for construction of airports, highways and port facilities
used by competitors, which would be unlawful discrimination
against the Railroad under that Act. He noted that those
are the two basic legal arguments that the Railroad
currently has on the tax.
Co-Chair Williams noted a letter in member's files from the
Department of Law dated May 2003. (Copy on File). He
referenced Page 4, regarding the Railroad being subject to a
motor fuel tax. Mr. Hupprich pointed out that specific
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reference was to one case in the 9 Circuit and did not
address the discrimination issue. If the tax passes, ARRC
expects to act on the discrimination issue. Under decisions
from other jurisdictions, the Court would find that
discriminatory against the Railroad.
Co-Chair Williams requested that the Railroad submit a
letter addressing those concerns. Mr. Hupprich pointed out
that on Page 2, there is a reference to the discrimination
in the Burlington Northern Railroad versus the Triplett
case.
Representative Croft advised that in that case, the Court
found discrimination on two grounds. He asked if the
Atchison case had been overruled by the Supreme Court.
Mr. Hupprich understood that it had not been overruled.
Representative Croft thought that it was applicable as we
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are in the 9 Circuit governing law. Mr. Hupprich advised
that it was applicable but that it does not address
discrimination based on the abuse of the funds that were
discussed in the Burlington Northern versus Triplett case.
Representative Croft asked if that had been dedicated to
repair and maintenance of roadbeds. Mr. Hupprich understood
that case only looked at the rate issue and if it was
discriminatory.
Representative Croft noted that he did not have the case at
hand but did have the summary from the Department of Law.
He referenced Page 2 & Page 3. In the Burlington case there
were two grounds for discrimination:
· Dedication of the funds to road maintenance,
and
· Higher than other rates
Representative Croft thought that Alaska would be governed
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by the 9 Circuit decision. The Legislature cannot dedicate
constitutionally and has been set at the lowest rate
available. He did not know if the Burlington Northern
Railroad decision would apply. Mr. Hupprich agreed that the
Legislature could not constitutionally dedicate those funds,
however, the Railroad understood that on a defacto basis,
all those funds are used to fund highway, airport and port
projects.
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Representative Croft commented that the 1 issue discussed
was separate from the 4-R issues because under the Transfer
Act, the Railroad assets cannot be taken. He asked if it
was interpreted that a tax could never be applied to the
Railroad. Mr. Hupprich said not entirely. The Transfer Act
indicates that revenue generated "shall" be retained and
managed by the Railroad for railroad related work. The
State could possibly tax the Railroad and use the money for
a railroad related purpose. That is the reason that they do
not have objection to paying a fuel tax for the on-road
vehicle fleet because the money ends up going into roads
that the Railroad receives "benefit" from. The tax on the
on-road vehicles is "okay" under the Transfer Act, as the
Railroad needs roads on occasion to drive its own vehicles.
He reiterated that the Railroad would not receive any
benefit from the locomotive tax and would be used to fund
the infrastructure for their competitors.
Mr. Hupprich explained that revenues generated by the
Railroad shall be retained and managed by the Railroad for
railroad related purposes. Representative Croft asked if
there was any case in law on that. Mr. Hupprich replied
that there is not and that it only applies to the Alaska
Railroad from the federal government transfer. He admitted
that it is a unique legal provision.
Representative Stoltze understood that no matter how
successful the Railroad is or becomes, the State could never
expect any return to the general fund. Mr. Hupprich advised
that the Railroad is not opposed to paying taxes for which
they receive some benefit. The federal Act attempts to
prevent taking money from the Railroad and use it for non-
Railroad purposes. The intent of the provision was to
preserve the important transportation asset for the State
and not have it subject to being dismantled periodically
when the State is running low on funds. He pointed out that
there is not unfair competition between the Alaska Truckers
and the Railroad.
Representative Croft asked if the Railroad would have any
objection to using some of the $120,000 dollars for
maintenance and operations of the Whittier Tunnel. Mr.
Hupprich responded that they would look at that specific
proposal as it is definitely a Railroad connection.
TAPE HFC 04 - 22, SIDE B
Co-Chair Williams stated that HB 156 would be HELD in
Committee for further consideration.
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