HB 104-MOTOR FUEL TAX; VEHICLE REG. FEE  2:26:08 PM REPRESENTATIVE ANDY JOSEPHSON, Legislator, Alaska State Legislature, as prime sponsor, introduced HOUSE BILL NO. 104, "An Act relating to vehicle registration and registration fees; relating to the motor fuel tax; and providing for an effective date." A doubling of fuel tax from $.08 to $.16 as HB 104 proposed did nothing to keep up with inflation, he stated. The $.08 was set when the average wage was $9K per year; in 2021 it was $75K per year. Extra money would go toward road conditions and safety concerns, still leaving Alaska with one of the lowest tax rates in the country. Spill prevention and response would also benefit from the additional tax, he added, as in 2015 House Bill 158 added a $.0095/gallon surcharge on motor fuel intended for the spill prevention and response fund. For the average driver, the cost would be about $10 per year: this is how HB 104 came to be known as the "two-latte tax." 2:31:34 PM REPRESENTATIVE HANNAN asked why aviation taxes have not increased since 1994? NATHANIEL GRABMAN, Staff to Representative Andy Josephson, Alaska State Legislature, said taxes on airports went toward airport maintenance; if those fees had been increased, they would not be available to DOT&PF for road maintenance. Also, fees on aviation fuel and jet fuel put DOT&PF in a more competitive position nationally; concern had been raised that an increase would have a detrimental effect on planes coming into Alaska. 2:33:15 PM REPRESENTATIVE JOSEPHSON clarified the "two-latte tax" referred to the urban driver; in rural areas it would be more. 2:33:57 PM MR. GRABMAN presented HB 104, sharing Alaska's first motor fuel tax was levied in 1945 at $.01/gallon. In 1970, motor fuel tax increased to $.08/gallon, which is where it still is now. In 1977, marine fuel tax increased to $.05/gallon, and in 1994 aviation fuel tax increased to $.047/gallon. From September 1, 2008 until August 31, 2009 motor fuel tax was suspended on all fuel types, and in 2015, House Bill 158 added a $.0095/gallon surcharge on motor fuel intended for spill prevention and response fund, as Representative Josephson had mentioned. MR. GRABMAN went over the current rates followed by what they would change to under HB 104: highway fuel would go from $.08 to $.16; marine Fuel would go from $.05 to $.10; aviation fuel and jet fuel would remain the same at $.047 and $.032 respectively; the refined fuels surcharge would go from $.0095 to $.015; and the off-road use refund would go from $.06 to $.12. Mr. Grabman mentioned there was a refund for fuel intended for commercial fishing vessels contained in HB 104. 2:36:07 PM REPRESENTATIVE SPOHNHOLZ asked about the off-road use refund. MR. GRABMAN replied fuel users on non-DOT&PF sponsored roads could apply for and receive refunds for snow machines, four wheelers, lawn mowers, and the like. REPRESENTATIVE MCCABE offered it was known as the "Farmers' refund." CHAIR HOPKINS asked if one just "went up to the counter" to receive the off-road use refund. MR. GRABMAN replied yes. 2:37:54 PM MR. GRABMAN went over slide 4 on HB 104's impact on the typical driver in Alaska. According to the Alaska Department of Motor Vehicles (DMV) there were about 645,434 registered passenger vehicles driven an average of 9,111 miles per year. If the average miles per year per Alaskan vehicle (9,111) is divided by the average miles per gallon (18.1) it can be determined that 503 gallons of fuel per year multiplied by the current motor fuel tax of $.08 could be $40.24 per year per driver. There would also be an increase to the biennial registration fee charged to electric vehicles (EVs) and plug-in hybrid vehicles, he added, as noted on slide 5. This fee would increase from $100 to $200 and $150 per year respectively, he stated. The reason for the increase in registration is that EVs and hybrids still create wear and tear on roads, they should be paying a commensurate amount in fees. MR. GRABMAN noted on slide 6 Alaska had the lowest tax rate on both highway fuel and marine fuel of any state; in most states, he pointed out, the marine rate was the same as the highway rate. With passage of HB 104, Alaska would remain well below the national average, moving from 50th to 43rd in highway fuel tax rate in comparison to other states, and would remain last in marine fuel taxes. Alaska currently has a more competitive ranking among other states for jet fuel (36th) and for aviation fuel (40th). MR. GRABMAN reiterated Alaska's motor fuel tax of $0.08/gallon had not changed since 1970. By way of comparison, he offered the Consumer Price Index (CPI) had increased by a factor of 6.74 times since 1970. Also, the average cost of a gallon of gas in the US was $0.36/gallon in 1970, and in 2021 was now $2.72 (7.56 times higher). In 1970, Alaskan per capita annual income was $5,911. As of 2019, it was $62,806 (10.63 times higher). 2:41:50 PM CHAIR HOPKINS asked how, after the doubling of motor fuel tax, Alaska would go from 50th (lowest in the US) to 43rd place. MR. GRABMAN directed attention to slide 9, which showed Alaska having the lowest rate. When HB factored in taxes and fees, it became 43rd, since states had different taxes. Pennsylvania did not have a state excise tax, he pointed out by way of example, despite having the second-highest motor fuel tax rate in the US. 2:46:16 PM MR. GRABMAN explained slide 8 was a graph that represented the reduction of the real value of Alaska's motor fuel tax from 1970 to 2021. If HB 104 were to pass, an additional $30 million per year would be added annually, he pointed out. In terms of marine fuels, approximately $5.5 million would be added, less the commercial fishing refund. The refined fuel surcharge would bring in an additional $3.5 million annually, and the additional registration fees for EVs and hybrids about $87K if their use remained constant, more if their use continued to increase. MR. GRABMAN moved on to slide 11, in which he discussed Silver Tip Maintenance Station's 2019 closure. Lower-than-expected revenue from the Motor Fuel Tax was cited in the closure, he imparted. DOT&PF has a deferred maintenance backlog of $153.8 million for highways, and $264.5 million total, he shared, and additional revenue could be used for any of the following: increased safety and maintenance response times; increased maintenance operators; increased winter maintenance; increased response time to priority 1 roadways with more resources; availability to respond to priority 3 and 4 roads; increased number of maintenance stations; reduction of, and more manageable areas of, responsibility for operators; decreases in response times during storms; decreases in road closure times due to acts of nature; increased surface treatment chemicals and materials; and increased ability and resources to repair potholes and guardrails. MR. GRABMAN showed a graph which showed that without additional revenue the Division of Spill Prevention and Response (SPAR) account faced insolvency in the very near future. Multiple staff positions have been lost, despite workload staying the same in that department. 2:48:25 PM REPRESENTATIVE SPOHNHOLZ asked for an unpacking of the relationship between the SPAR account and HB 104. MR. GRABMAN replied there was a $.0095 surcharge on all fuels; that surcharge went toward SPAR account. At the time the charge was instated, it was not realized that certain entities such as local governments would be exempt. An increase to $.015 in refined fuel surcharge would ameliorate this, he stated. 2:49:58 PM REPRESENTATIVE HANNAN asked if there have been more spills, more things the account is being used for, or just erosion over time? MR. GRABMAN said he would have to check. 2:51:26 PM REPRESENTATIVE HANNAN asked what DOT&PF uses of SPAR account. ROB CARPENTER, Deputy Commissioner, DOT&PF, replied maybe for cleanup and maintenance, but in terms of the operating and capital budgets he was not sure if any was used.