Legislature(2003 - 2004)
03/18/2003 01:37 PM House TRA
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 156-INCREASE MOTOR FUEL TAX CO-CHAIR MASEK announced that the first order of business would be 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." Number 0146 SARAH GILBERTSON, Policy and Program Coordinator, Alaska Municipal League (AML), provided the following testimony: As many of you know, AML represents 140 communities around the state of Alaska. For years, AML members have supported an increase, both in the motor vehicle fuel tax and the motor vehicle registration fees, so long as these fees are: 1) used to fund state and municipal highway road operation, maintenance, and improvements; and 2) shared on an equitable basis between local and state government based upon the proportion of local-versus state-maintained roads. Thus, if the gas tax is to increase from $.08 to $.20, which is the national average, AML members believe that: 1) these funds should be earmarked for road operation, maintenance, and improvements; and 2) local governments ought to receive a greater share of the revenues from such a tax. Currently, Alaska's local governments receive less that 5 percent of revenues from state gas tax, whereas local governments in other states such as Iowa and Illinois receive 65 percent and 59 percent, respectively. On an average, local governments across the country receive approximately 31 percent of revenues from state gas taxes. If Alaska's gas tax is to increase to the national average of $.20, at a minimum, 31 percent of these revenues from Alaska's gas tax should be distributed back to Alaska's local governments. At a maximum, Alaska's local governments should receive 43.5 percent of state gas tax revenues because 43.5 percent of all roads in Alaska are municipally maintained roads. AML members recognize that the governor wants to cut the budget. On one of these cuts - the 25 percent cut, which is equivalent to a $7.4 million cut in revenue sharing and safe communities funding - will have a significant impact on Alaska's local governments. Having said that, writing local governments into this bill to receive a greater percentage of the revenue from gas tax will offset that loss. At the same time, local government leaders who are very skilled and have experience in selling such increases in fees would be willing to work with the governor to sell this increase to the public in Alaska. Number 0339 CO-CHAIR HOLM expressed concern that certain municipalities such as the Fairbanks Northstar Borough do not have "road powers." He said that the only areas near Fairbanks that have road powers are the cities, such as City of North Pole and the City of Fairbanks. He questioned how this would be played out if most of the road maintenance was provided through service areas. MS. GILBERTSON said using the revenue-sharing formula or something similar to distribute funds to all communities in Alaska has been suggested. She said that hopefully all of Alaska's local governments and local communities could benefit from the increase. CO-CHAIR HOLM said although first-class boroughs and municipalities do have road-service powers and therefore could take money in and disseminate it, his concern is with the second-class boroughs and Bush areas that don't have road- service powers. MS. GILBERTSON said that AML would be willing to work to see if distribution throughout all of Alaska could occur so that no communities were left out. Number 0495 REPRESENTATIVE KOOKESH referred to Ms. Gilbertson's testimony indicating AML's support as long as "two things happen" and asked, "What happens if only one of these things happen?" MS. GILBERTSON said the two statements are directly from the AML policy statement, which is approved by all 140 AML members. She said she was not sure of the answer to Representative Kookesh's question, but the AML membership could discuss it further. REPRESENTATIVE KOOKESH wondered if AML would have to express opposition if only one instead of both requests were included. He also wondered if it was constitutional to earmark the vehicle fuel taxes for a specific purpose rather than to direct them to the general fund. Number 0596 REPRESENTATIVE KAPSNER said that a lot of rural communities such as Bethel and Unalaska, are part of AML. She said her concern with the increase in the motor fuel tax is that some communities pay more for gasoline than other communities, and a $.20 tax on top of a $5.00 gallon of gas is a lot to ask. She wondered if this point had been discussed by AML's membership. MS. GILBERTSON said the two statements had been approved by all 140 AML members and have been part of the policy statement for many years. She stated that although this point had not come up in debate, she would be happy to set up further discussion. Number 0673 REPRESENTATIVE FATE noted that the tax on aviation fuel, other than gasoline, is three and two-tenths cents a gallon. He questioned what effect this would have on the airline industry and how it would affect the cargo pattern at airports both in Anchorage and Fairbanks. Number 0714 ROBYNN J. WILSON, Motor Fuel Tax Program Manager, Tax Division, Department of Revenue, testified that to her knowledge, the bill did not contain an increase in the aviation tax. Number 0800 LARRY PERSILY, Deputy Commissioner, Office of the Commissioner, Department of Revenue, noted that the legislation has nothing to do with aviation or marine fuel; it pertains only to highway motor fuel. Number 0849 CO-CHAIR MASEK, after ascertaining that there was no further public testimony, closed HB 156 to public testimony and directed the committee to the proposed amendments for the bill. Number 0920 BARBARA COTTING, Staff to Representative Jim Holm, Alaska State Legislature, speaking as the committee aide, explained Amendment 1 as she said Dennis Poshard, of the Department of Transportation & Public Facilities (DOT&PF) had explained it to her. Currently, state vehicles have access to credit cards that can be used at specific companies. A contract with MasterCard is being worked on by DOT&PF so that persons driving state vehicles can go to various stations. The problem is that stations wouldn't know not to charge the tax and therefore, MasterCard has agreed to have different companies apply for the refund. Number 0971 GEORGE LEVASSEUER, Maintenance and Operations Manager, Southcentral District, Northern Region, Department of Transportation & Public Facilities, noted that he was the Acting State Maintenance Engineer, and testified that there would be a refund to government agencies, from MasterCard, for the tax assessed on any purchase of highway motor vehicle fuel. REPRESENTATIVE KOOKESH noted that Amendment 1 [proposed Section 5] reads: "For fuel sold to federal, state, and local government agencies". He asked if this also refers to local government. MR. LEVASSEUER stated that this would be the case if a government agency qualified for a tax exemption on fuel. CO-CHAIR MASEK referred to the remainder of the sentence mentioned by Representative Kookesh, in which it states "for official use". She pointed out that "official use" would need to be clarified before obtaining a tax credit. Number 1094 REPRESENTATIVE KOOKESH asked what the difference was in using a credit card rather than a purchase order. MR. LEVASSEUER replied that in DOT&PF, a purchase order is obtained through the supply section for purchases of a larger amount or quantity. For smaller, field-type purchases, to avoid overburdening the supply function, credit cards are used. REPRESENTATIVE KOOKESH said he was concerned with agencies other than DOT&PF and suggested that a provision for the use of purchase orders be included, if there was going to be an exemption. MR. PERSILY said that he believed purchase orders were already covered and that he doesn't think that government entities pay the tax. He explained that Amendment 1 was brought forward by the Department of Administration's Division of Finance in attempts to work on a new credit card for DOT&PF so that when a credit card purchase was made in the field, it would be "tax- off" so that the state wouldn't be charging tax to itself. He said this specifically deals with the problem of fuel purchases by credit card and applies not just to the state, but also to other governmental agencies so that credit card purchases by the school district or municipal government would also be tax- exempt. REPRESENTATIVE KAPSNER asked if this specifically had to be a government credit card or if it could be something like a school district credit card. MR. PERSILY replied that his understanding was that the State of Alaska would get the credit card through a commercial bank and it would be issued to departmental field personnel. The account would be a governmental account, to be used for official use. REPRESENTATIVE KOOKESH noted that the discussion pertained to federal, state, and local agencies and he wanted it on record that focusing on how DOT&PF does business is too narrow of a focus. MR. PERSILY replied that this originally began because the state, in moving to a new credit card system for DOT&PF, brought up the issue. He believed that Amendment 1 was drafted so that it would have a broader application, adding that it makes things easier on the agencies but also on the credit cards and the service stations. Number 1260 CO-CHAIR MASEK referred to Amendment 1, proposed Section 6, which says in part, "on a form prescribed by the department", noting that DOT&PF is not specified. MR. PERSILY clarified that "the department" refers to the Department of Revenue and its tax code. REPRESENTATIVE FATE asked how the checks and balances of accounting would be done, particularly by the federal government. He asked if each department turned in information regarding the amount of purchase to the Department of Revenue. MR. PERSILY said he believed it was done by the taxpayer. Number 1340 MS. WILSON provided background information, saying that federal, state, and local agencies have always been exempt on official use. If the agency initially pays tax by going to the gas station and not requesting an exemption, the government agency then applies to the department for a refund. There is a provision in statute for a user to get a refund if the use is exempt. She continued that a second scenario would be that a government agency could go to a gas station and claim, "We're a government agency and shouldn't have to pay tax"; in that case, the gas station has already paid for the tax but is not collecting the tax. There is a mechanism for the gas station to get the refund directly from the department. MS. WILSON continued that the difficulty with the credit card situation is that the government agency does not want to pay the tax, and the retailer, the gas station, has already paid the tax. The credit card company is in the middle, but to date, there has not been a mechanism for the credit card company to get a refund. This has presented difficulties because the government agencies or the gas stations would have to apply for refunds and there was unnecessary paperwork. MS. WILSON stated that this bill is an attempt to simplify that process so that the agencies can get their fuel and not pay tax and the gas stations will not be overburdened with having to apply for refunds. The credit card company would assimilate the "tax-off" purchases and send the refund claims to the department, which would then be paid directly. The government agency would not have to pay tax - which is the objective. REPRESENTATIVE FATE asked if the accounting for each department was done separately so that federal receipts were not mixed with receipts from DOT&PF, for example. MS. WILSON explained that any refund claimed by a government agency is accounted for separately. The refund claim is filed by that agency under its name, and the department then evaluates that claim. There is a requirement in statute for an attachment of invoices to show that the tax has been paid, and to avoid duplication. She said if Amendment 1 passed, the department would produce regulations specific to credit card companies in order to address the challenges regarding original invoices. She stated that she does not see a problem with keeping the accounting separate and making sure that there are no duplicate refunds. CO-CHAIR MASEK inquired as to whether the monies would be directed to the general fund or would be used as leverage for TEA-21 [Transportation Equity Act for the 21st Century] funding for highways from the federal government. Number 1562 MR. PERSILY replied that the estimate is that in a full fiscal year, the increase to $.20 per gallon would bring in about $41.6 million per year. He was not aware of a particular dedication of funds and referred the question to DOT&PF. Number 1608 REPRESENTATIVE KAPSNER asked if unincorporated communities would qualify. MR. PERSILY commented that if a community was unincorporated, then perhaps it was not a government. REPRESENTATIVE KAPSNER explained that there are communities that do operate as if a government. CO-CHAIR MASEK suggested that the bill for the increased motor fuel tax would only affect areas that have gas pumps at service stations. REPRESENTATIVE KAPSNER said that a lot of the communities that are unincorporated do have a gas station with a pump. Some of the communities have roads, not highways, and a gas station is used. MS. WILSON said this bill would not affect whether or not that entity would get an exemption. She said that it is a question of whether the credit card company can get the refund. Number 1727 REPRESENTATIVE KAPSNER asked if a friendly amendment could be added to Amendment 1 to include "unincorporated communities". MR. PERSILY expressed concern over not wanting to alter the way the communities are currently being treated. He said that without being sure if the communities are treated as off-road and off-tax, or treated as on-road and taxable, he wasn't sure of supporting an amendment that might cloud that issue. Number 1770 MR. LEVASSEUER said if the communities are currently exempt, that exemption would apply to the amendment as well, noting that this might complicate the issue. He added that the increase in the user fee is not to be used for ATVs [all-terrain vehicles], snow machines, boats, and motors - it is just a highway user-fee increase. REPRESENTATIVE KAPSNER said there are governmental agencies that have vehicles in communities or use the ice road and drive to Bethel, for example, and should qualify as well as the other local, federal, and state governments. MR. LEVASSEUER said that the Department of Revenue had indicated that with regard to usage that was not highway-related, an application could be made for a refund. Number 1867 CO-CHAIR HOLM moved to adopt Amendment 1 [text provided previously] as written. There being no objection, it was so ordered. Number 1882 REPRESENTATIVE KAPSNER offered Amendment 2, labeled 23- GH1118\A.1,Kurtz,3/10/03, which read: Page 1, line 9: Delete "and" Page 1, line 11: Delete "[; AND" Insert "; and" Page 1, line 12, following "(4)": Insert "the tax rate on motor fuel used in a motor vehicle only on roads that are not connected by land highway or the Alaska marine highway system to the main road system of the state, whether or not licensed to be operated on public ways, is eight cents a gallon [" Page 3, line 8: Delete "and" Page 3, line 10: Delete "[; AND" Insert "; and" Page 3, line 11, following "(4)": Insert "the tax rate on motor fuel used in a motor vehicle only on roads that are not connected by land highway or the Alaska marine highway system to the main road system of the state, whether or not licensed to be operated on public ways, is eight cents a gallon [" Number 1926 MR. LEVASSEUER responded that this was the first he had seen of Amendment 2. REPRESENTATIVE KAPSNER said she understood there to be a verbal understanding that the bill wouldn't affect communities off the road system; Amendment 2 just puts that language on the books. MR. LEVASSEUER asked if an area like Nome, where there are 130 or 140 miles of road, would be exempt and therefore remain at $.08, pointing out that the department pays for road upgrades in that area. CO-CHAIR MASEK noted that this would be statewide, as the state owns a lot of roads that are not in urban areas, and the result would have a pretty big negative impact on the bill. CO-CHAIR HOLM asked: If roads were built and maintained by state money, then wouldn't it make sense to pay the additional $.12? MR. LEVASSEUER said these roads are either built with federal funds and matched by state dollars, or built with state dollars. Number 2029 REPRESENTATIVE KOOKESH explained that the off-road system in Alaska is treated differently, and because Angoon is considered to be an off-road system, a person can drive on the roads in Angoon without having a valid state driver's license. Similarly, insurance is not a requirement. CO-CHAIR HOLM wondered whether, as a state policy, the road systems should be treated differently. He asked if the discussion was about money or about making policy changes. MR. LEVASSEUER said the department's policy and opinion would be that if any of the roads that were driven were built and maintained by federal or state funds, then the $.12 increase should apply. Number 2086 REPRESENTATIVE KAPSNER said this was a different sentiment than she had previously heard, which had indicated that the off-road communities and the non-state-highway communities would not be affected. She suggested that with the written language offered in Amendment 2, the department was expressing a different opinion. MR. LEVASSEUER responded that he had tried to be clear in the previous discussion that this wouldn't affect communities that use ATVs or four-wheelers to get around, or use boats to run the rivers. He added that if a community or an individual felt that inclusion was unfair, application could be made to the Department of Revenue for a refund. He emphasized that the intent was not to put the burden on someone who was running a four-wheeler between villages. Number 2125 MS. WILSON said that the provision for non-highway use refers to whether or not the motor vehicle is licensed to operate on public ways. The department has enforced that if the vehicle is required to be licensed to drive on the road, then the full amount of tax would be paid. If it's the sort of road where it's not required to be licensed, then there is a net $.02 that is paid. She clarified "net" because up until now it has been $.08 as the full rate, and the user could apply for a $.06 refund. She said she understood that this bill would not change that net amount. She gave the example that the net amount would not change for a truck in a remote area that didn't require a license in order to be driven on that road. Number 2202 REPRESENTATIVE KAPSNER withdrew Amendment 2, saying this answered her question. Number 2213 CO-CHAIR HOLM referred to the title of the bill, noting that it says "motor fuel tax". Because the bill does not refer to all motors, he wondered if specifying "vehicular motor fuel tax" would be more appropriate. CO-CHAIR MASEK said a possible clarification was in the bill, under Section 3, where it states: "(2) the motor fuel is not aviation fuel, or motor fuel used in or on watercraft; and (3) the internal combustion engine is not used in or in conjunction with a motor vehicle licensed to be operated on public ways." CO-CHAIR HOLM said he was more inclined to think there is a need for further specification of what the bill really does. Number 2293 MR. LEVASSEUER replied that there had been discussion of a "highway user fee increase" and also of this as a tax versus a fee. He explained that this centers basically on what the governor had said, which is more closely associating the "cost- causers," which are people who drive the state roads, to people who purchase the gasoline for the vehicles. The department is spending about $60 million per year to repair and maintain the highway system. With the $.08 tax, about $28 million per year is recovered. Mr. Levasseuer explained that in addition to [the state's] $60 million, an additional $50 million is spent in federal match. Therefore, $110 million comes out of the general fund for the highway program. The people who are driving the roads, the users of the roads, should pay the fee to take care of the roads. Thus this is a highway user fee increase. Between the $28 million that is now collected and the additional $41 million with the $.12 increase, the result would be $69 million. Number 2361 CO-CHAIR HOLM pointed out that a letter was received from AML referring to an increase in the "motor vehicle fuel tax." He asked if it would be more appropriate to call this a "motor vehicle fuel tax" rather than leaving it as "motor fuel tax." MR. LEVASSEUER added that "highway" might be added to be more specific. TAPE 03-11, SIDE B CO-CHAIR MASEK indicated that if there were a title change, there would need to be changes throughout the bill as well. For example, page 4, line 18, "(1) the tax on the motor fuel ...", might need to be changed to be consistent with a title change. Number 2362 MS. WILSON expressed concern over a title change because of the use throughout the chapter of the term "motor fuel." She said she was not sure if this might cause more confusion because "motor vehicle tax" is not currently included in statute. She said she would like to defer to people with more statutory experience. She referred to definitions in [AS 43.40.100] in which "motor fuel" is defined. She also pointed out that the off-road section is an exception under [AS 43.40.030]. CO-CHAIR HOLM said his question pertained to how motor fuel fits in with the tax scheme, with the discussion being whether motor fuel includes aircraft fuel, marine fuel, off-highway fuel, and road fuel. He wanted it on record that this refers to highway taxes, pertaining to properties that are built by and maintained by state funds. REPRESENTATIVE FATE said the clarification suggested by Co-Chair Holm was important and could be done either through further definition or through a new section with intent language. He said he would be comfortable with either choice. CO-CHAIR MASEK said she would like the bill drafter to come up with a committee substitute specifying that the bill pertains to highway motor vehicle fuel. Mr. LEVASSEUER, in response to Co-Chair Masek, confirmed that he would be willing to work towards implementing those changes. Number 2218 CO-CHAIR MASEK indicated HB 156 would be held in committee.
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