Legislature(1993 - 1994)
03/01/1994 03:33 PM Senate TRA
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* first hearing in first committee of referral
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= bill was previously heard/scheduled
SENATE TRANSPORTATION COMMITTEE
March 1, 1994
3:33 p.m.
MEMBERS PRESENT
Senator Bert Sharp, Chair
Senator Randy Phillips, Vice Chair
Senator Tim Kelly
Senator Jay Kerttula
Senator Georgianna Lincoln
MEMBERS ABSENT
All Members Present
COMMITTEE CALENDAR
SENATE BILL NO. 334
"An Act relating to the tax on transfers or consumption of motor
fuel, and to the proceeds from the tax; and providing for an
effective date."
PREVIOUS SENATE COMMITTEE ACTION
SB 334 - No previous senate committee action.
WITNESS REGISTER
Bruce A. Campbell, Commissioner
Department of Transportation & Public Facilities
3132 Channel Drive, Juneau, AK 99801-7898¶465-3901
POSITION STATEMENT: in favor of SB 334
Mead Treadwell, Deputy Commissioner
Department of Environmental Conservation
410 Willoughby Ave., Suite 105, Juneau, AK 99801-1795¶465-5050
POSITION STATEMENT: in favor of SB 334
Mark Hickey, Representative
Cambior Alaska, Inc.
211 4th Street, Juneau, AK 99801¶586-2263
POSITION STATEMENT: testified on SB 334
Resa Jerrel, Representative
National Federation of Independent Businesses
9159 Skywood, Juneau, AK 99801¶789-4278
POSITION STATEMENT: opposed to SB 334
Frank Dillon, Executive Director
Alaska Trucking Association
3443 Minnesota Dr., Anchorage, AK¶276-1145
POSITION STATEMENT: opposed to SB 334
Paul Dick
Division of Income & Excise Audit
Department of Revenue
P.O. Box 110420, Juneau, AK 99811-0420¶465-3691
POSITION STATEMENT: testified on SB 334
ACTION NARRATIVE
TAPE 94-7, SIDE A
Number 001
CHAIRMAN SHARP calls the Senate Transportation Committee meeting to
order at 3:33 p.m.
Number 010
CHAIRMAN SHARP brings up SB 334 (INCREASE MOTOR FUEL TAX) as the
only order of business before the committee today. The chairman
announces SB 334 will not be moved from committee today. The
chairman calls the commissioner of the Department of Transportation
to testify.
Number 030
BRUCE A. CAMPBELL, Commissioner, Department of Transportation &
Public Facilities (DOT) states SB 334 was introduced at the request
of the governor, and many persons in the administration had a part
or a hand in its' development. Alaska has not had a gas tax
increase since 1961, and Alaska is on the low-end of the fifty
states for the amount of gas tax. Gas taxes in the United States
range from a low in Alaska of eight cents per gallon, to a high of
twenty-eight cents per gallon in Connecticut. The average tax is
twenty cents per gallon. What the administration did was to figure
out what the amount of gas would have to be per gallon to support
DOT's operating and maintenance budget. The number the
administration came up with was about twenty-four cents per gallon.
The possibility of having a constitutional amendment in order to
establish a dedicated fund to have revenues from the tax go toward
DOT's operating and maintenance budget was discussed, but it was
decided that the money should be deposited in a special account in
the general fund, from which the legislature could appropriate for
highway and maintenance activities. In every situation in which
there has been what is referred to as a "pseudo-dedicated fund",
the legislature has honored it.
There is also one penny added to the price per gallon for
underground fuel tank rectification, which would flow to the
Department of Environmental Conservation (DEC). What SB 334 will
do is hopefully raise the gasoline tax up to a break-even point for
the highway operation and maintenance activity.
Number 080
CHAIRMAN SHARP asks what the total general funds maintenance costs
are state-wide.
COMMISSIONER CAMPBELL says it is approximately 110 to 115 million
dollars. For every eight cents per gallon of taxes, the state
gains about 26 to 28 million dollars. (Department of Revenue's
fiscal note states each penny per gallon tax yields 4,838,000
dollars in revenue, so a tax of 24 cents would yield 116,112,000
dollars.)
Number 107
CHAIRMAN SHARP asks if there are any questions. Chairman Sharp
asks how much money the one-cent tax for underground fuel storage
tanks would bring in.
The one-cent per gallon tax would bring in 4,838,000 dollars.
Number 112
SENATOR LINCOLN asks about the sunset date for the one-cent tax for
underground storage tanks.
CHAIRMAN SHARP suggests the committee ask that question of DEC.
The chairman calls a representative from DEC to come to the table.
Number 153
MEAD TREADWELL, Deputy Commissioner, Department of Environmental
Conservation says the administrations' proposal was to put on the
penny and make it perpetual, but in the committee substitute it
would sunset in two years. At this point, there is a backlog of
applications for upgrade and cleanup of 49 million dollars. At the
current rate of funding at 5.45 million dollars a year, it would
take a long time to get to all the applications. There is a
deadline coming up. We have already passed the deadline for
providing proof of financial responsibility in case of a spill.
For these reasons, DEC thinks the program should be continued for
more than two years.
Number 177
SENATOR LINCOLN asks why it is that it is rolled over from 24 cents
to 25 cents per gallon tax.
Number 182
CHAIRMAN SHARP notes that the committee substitute originated from
the Senate Transportation Committee, not from DEC.
Number 193
MR. TREADWELL says the governor's bill would put the penny on and
leave it on. Mr. Treadwell asks that if the legislature sunsets
the penny tax for underground fuel storage tanks, it at least
extend the sunset provision to more than the two years noted in the
committee substitute (cs). This program began in 1991 as a state
effort to help the many people with underground storage tanks
around the state to meet the federal requirements for upgrade and
clean-up. Mr. Treadwell reads statistics on the Underground
Petroleum Storage Tank Program from a paper submitted to the
committee by DEC. Federal mandates would force many operations to
shut down if DEC did not go through this process to help them.
Every other state in the union has set up some kind of a fund to
help fund the underground storage tank assistance programs. Most
of those states have done it through fuel tax assessments, as the
governor has proposed in SB 334.
Number 220
MR. TREADWELL says for the first several years of the underground
storage tank program, funds came out of the general fund; for the
last two years funding has come from the mitigation account. At
this point it is up to the state to find another source of funding
for the underground storage tank program.
Number 239
CHAIRMAN SHARP asks if funding the program from a one-cent fuel tax
would allow the state to meet the federal mandate.
MR. TREADWELL replies the tax would allow the state to meet the
federal mandate.
Number 251
CHAIRMAN SHARP asks what the federal deadline on applications is.
MR. TREADWELL responds there was a deadline of December 31, 1993
for proof of insurance or financial responsibility in the event of
a spill. There is a deadline of December 22, 1998 for tanks to be
up to standards. DEC's deadline for cleanup applications is June,
1994. There is legislation pending that would extend that date by
approximately six months.
Number 267
SENATOR KERTTULA asks if there is a lot of documented industrial
support for the one-cent tax for the underground storage tank
program.
MR. TREADWELL replies he cannot speak for the tank owners
themselves, but perhaps Mr. Hayden or Mr. Barnett could answer that
question. He can say that the Association of Underground Tank
Owners and Operators had a meeting in December in which there
seemed to be a fairly large consensus that a long-term funding
source was needed.
Number 279
SENATOR KERTTULA asks how much a penny tax would return on an
annual basis.
It would return 4,838,000 dollars per year.
Number 282
CHAIRMAN SHARP asks if there are any more questions. Hearing none,
he calls the next witness.
Number 285
MARK HICKEY, Representative of Cambior Alaska, Inc. states Cambior
Alaska, Inc. owns and operates the Valdez Creek Mine, which is a
large placer gold mine on the Denali Highway about seventy miles
east of Cantwell. The mine has been in operation under Cambior's
ownership since the mid to late 80's. There has been active mining
in the Valdez Creek area for a number of years before that. The
mine employs about 150 people and has an annual payroll of
approximately 11.5 million. Cambior is probably the largest single
private employer in the Matanuska-Susitna (Mat-Su) Borough.
Cambior Alaska has an arrangement with DOT, whereby Cambior pays
half of the cost of winter road maintenance on a principal highway
of the State of Alaska, and DOT pays the other half. This
arrangement was worked out with legislative help and the
department's help.
Number 304
MR. HICKEY states he does not have a company position to offer at
this time on the proposal as it relates to the highway tax, except
to say that the increase that does get passed, to the extent
possible, should go into road maintenance.
MR. HICKEY says he would like to draw the committee's attention to
one other impact that is of concern to Cambior, that is the
increase that will occur to the off-highway component of the tax.
Presently in state law, eight cents per gallon is paid for fuel
consumption, whether it is highway or off-highway use. For off-
highway usage, users can get a rebate of six cents. So in effect,
Cambior pays a two cent tax for off-highway use. Under SB 334,
that off-highway tax would rise to nineteen cents per gallon; the
rebate will not change. For Cambior, the annual cost increase
would, conservatively, be about 600,000 dollars per year. Cambior
uses between 3.5 to 4 million gallons of fuel. All of that is
subject to the off-highway tax. The tax increase contained in SB
334 would cause about a three percent increase in annual operating
cost for the Valdez Creek Mine. This is a significant cost
increase, particularly since the funds would go toward road
maintenance, and Cambior is already paying directly for half the
maintenance costs of a local highway.
One solution to this problem would be to increase the rebate for
off-highway use of fuel. Since the increase in tax is to fund road
maintenance, the impact should be primarily on the highway user.
Mr. Hickey thinks the committee will find that SB 334 will impact
industry and other mines similarly to the impact it will have on
Cambior.
Number 338
SENATOR KERTTULA asks if the Valdez Creek Mine is physically
located in the Mat-Su Borough.
MR. HICKEY responds that the mine pays borough property taxes, so
he believes the mine is within borough boundaries. The mine pays
about 200,000 dollars per year in property taxes.
Number 347
SENATOR LINCOLN asks if there is provision in the committee
substitute for SB 334 that changes the rebate.
CHAIRMAN SHARP responds there is no provision in the cs to change
the rebate for off-highway fuel use, but it is something the
committee probably should talk about at the next meeting. The
chairman suggests people review the current proposed cs and talk
about possible revisions at the next committee meeting. The
chairman calls the next witness.
Number 359
RESA JERREL, State Director, National Federation of Independent
Businesses (NFIB) says the state NFIB has 4,400 members, and
overwhelmingly opposes tax increases without first reducing the
state operating budget. She is, therefore, testifying in
opposition to SB 334. Ms. Jerrel suggests that the state get out
of competition with the private sector by privatizing services and
contracting out for more of the work it does. She reads from a
prepared statement submitted to the committee.
Number 370
CHAIRMAN SHARP thanks Ms. Jerrel for her testimony and calls the
next witness.
Number 374
FRANK DILLON, Executive Director, Alaska Trucking Association
states the association is categorically opposed to the 25 cent per
gallon fuel tax. Federal and state fees and taxes per tractor
trailer come to approximately 6,500 dollars. The competitive
nature of the trucking business in Alaska has virtually squeezed
most of the profit out of every operation. The association is
seeing a number of companies that are hanging on by their
fingernails right now, and we expect to see more consolidation and
mergers in the industry.
Mr. Dillon says that although the fuel tax would apply across the
board, the Alaska Trucking Association does not feel that the
amount is justified. The association also is hesitant about using
fuel taxes as a mechanism to fund the Underground Storage Tank
Program. Funding for that program could perhaps be better
addressed in another way.
Number 386
SENATOR KERTTULA asks Mr. Dillon how trucker's fees and taxes
compare to fees and taxes in other states.
MR. DILLON states that Alaska truckers are paying less than in most
other states. The Alaska Trucking Association is not arguing that
it is not necessary to perhaps increase the fuel taxes, and the
association supports a dedicated fund for maintenance. The
association believes the infrastructure problems with highways are
reaching a critical point. There should be absolutely no language
allowing DOT to do deferred maintenance; deferred maintenance is no
maintenance. If the state does not do the maintenance on the
highways that has to be done, it ends up costing a lot more later.
The state is now at the point where, if it does not seriously
address the maintenance problems, we will be in big trouble.
Number 399
SENATOR KELLY asks what the federal tax rate per gallon on fuel is.
The federal tax rate on motor fuel is 18.4 cents per gallon.
Number 404
SENATOR KERTTULA states the trucking industry should have a good
look at what kind of an increase it could support, since taxes are
so low in Alaska.
Number 428
MR. DILLON says the Alaska Trucking Association does advocate an
increase in the motor fuel tax and has worked with DOT on this
subject. The association felt that a 100% increase in taxes to 16
cents per gallon would be a reasonable step forward, but that was
connected to the dedicated funding for maintenance.
SENATOR KERTTULA says pseudo-dedicated funds set up without a
constitutional amendment are handled pretty good. Book-keeping
dedications work pretty good; the legislature takes money from
those dedications and applies it towards the allocation for which
it was intended. Even though the legislature is not
constitutionally required to do this, they do it because their
constituents are looking over their shoulder.
Number 440
SENATOR KELLY asks what the impact 2 cents a gallon will have on
the municipalities.
Number 443
SENATOR KERTTULA argues that the money cannot be reallocated at the
point of collection, it will have to be reallocated from the amount
of roads or by some other system. A person fills their tank in one
area, and then drives out of that area and into another area. So
reallocation by point of collection is not a good way to distribute
the money. Perhaps there could be a regional distribution system.
It also could not be redistributed on a population basis either.
SENATOR KELLY asks if there has been any indication as to what
amount of money is involved.
Number 450
CHAIRMAN SHARP calls a representative from the Department of
Revenue to perhaps answer some of the fiscal questions.
Number 460
SENATOR LINCOLN comments she would like to see where DOT could
possibly cut maintenance costs, perhaps through looking at things
like banning studded tires. The state needs to address cuts,
rather than just increasing the motor fuel taxes. Senator Lincoln
states she does not want to see a situation whereby taxes from fuel
purchased in Fairbanks, but used in the bush, would go towards road
maintenance in Fairbanks.
CHAIRMAN SHARP says that sort of situation would be exempt from the
tax increase provided for in SB 334.
Number 470
PAUL DICK, Department of Revenue states that every cent of motor
fuel tax increase would increase revenues by an estimated 4.8
million dollars. Accordingly, assuming that the municipalities go
with the full two cent increase, there would be 9.6 million
dollars. Although, in the committee substitute, there is a
provision for a one percent administrative cost withholding on
that. So the department estimates approximately 9.5 million
dollars would go to municipalities under SB 334.
MR. DICK says he is concerned with one aspect of the proposed cs
for SB 334: the municipal motor fuel tax is going to open up a
whole new level of reporting requirements by those involved in the
motor fuel industry. Right now, our motor fuel tax is structured
at the wholesale level. The point of taxation is when wholesalers
bring fuel into the state. Under this bill, in order to return
this money back to the municipalities, there will have to be some
reporting by the wholesaler and subsequent distributors, and from
distributors to retail, to the ultimate point of sale so that money
can be allocated back. There will be a whole new reporting level,
which would significantly increase the Department of Revenue's
workload.
Number 491
CHAIRMAN SHARP says the original instructions to the bill drafter
on the cs were to possibly base the rebate on population within the
city or the borough as of the last census date. Realizing that it
doesn't have any direct relation to miles of roads or sales of
gasoline within an area, but the purpose of this is for discussion
on the municipality additions. We all know that municipal
assistance and revenue sharing is decreasing every year, and is
probably going to go away. Most of the larger entities do have
road maintenance responsibilities. It's a use tax; they should
share in that. It was discussed three years ago in House Finance
Committee when the first dedicated fund was proposed by the
governor. The chairman agrees it would be a bearcat administrative
paper trail, particularly since many of the retail facilities sell
fuel outside the area in which they are located.
Number 514
SENATOR RANDY PHILLIPS asks what the breakdown is on the 9.6
million dollars generated from each organized part of the state,
and the unorganized areas. Where is the money being generated and
how much is being generated.
Number 518
MR. DICK responds that wholesalers do not report that information
to the Department of Revenue, so the department does not have any
data available to crunch those numbers.
Number 524
CHAIRMAN SHARP asks if there are any other questions. Hearing
none, he states there is a need to talk about taxing motor fuel.
Number 527
CHAIRMAN SHARP adjourns the Senate Transportation Committee meeting
at 4:13 p.m.
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