2-cent gas tax increase coming Oct. 1

A survey by GasBuddy found South Carolina prices were steady over the past week but higher than...
A survey by GasBuddy found South Carolina prices were steady over the past week but higher than the same week last month.(Live 5/File)
Updated: Sep. 30, 2020 at 8:47 AM CDT
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By CAROLINE BECK, Alabama Daily News

MONTGOMERY, Ala. – Alabamians will pay 2 cents per gallon more for gasoline starting Oct. 1 when the second installment of the state’s 10-cent tax increase goes into effect.

The state’s share of taxes on gasoline will rise to 26 cents per gallon, which will include 8 cents under the 2019-passed Rebuild Alabama Act and the 18 cents that existed before the new law was passed.

The 6-cent increase that began Sept. 1, 2019 under the Rebuild Alabama Act has raised millions for road projects, but new revenue is less than expected at least in part because of COVID-19.

The Rebuild Alabama Act tax collections from October 2019 through August were about $174.5 million, an average of $15.86 million monthly. That’s 2.01% below the cumulative projections, said Kirk Fulford, deputy director of the Legislative Services Agency’s Fiscal Division.

Total gross collections for October 2019 through August, which include the existing gasoline and diesel fuel excise taxes and the Rebuild Alabama Act, was about $705.4 million, about 1.96% below the projections, Fulford said.

“This loss is largely due to the significant reduction in gasoline consumption for April, May, and June, presumably as a result of the COVID-19 pandemic,” Fulford told Alabama Daily News. "It should also be noted that, historically, collections of gasoline decrease in February and March, then begin to increase in the spring and summer.

“Monthly sales of gasoline has since returned to within approximately 2% of historical levels for this time of year.”

Alabama Department of Transportation government relations manager Tony Harris said $122 million in Rebuild-funded projects were underway in fiscal year 2020. Funding includes:

  • $30.13 million for 28 ATRIP-II projects to improve the state’s highway system;
  • $82 million that is combined with other money, including federal funds, for other ALDOT projects;
  • $10.2 million for 43 projects in the act-created Annual Grant Program to help county and municipal governments with local projects.

“It can go towards things like local street resurfacing, small grid replacements and intersection improvements,” Harris said.

Harris also said some projects that deal with the acquisition of right of ways have been delayed because of COVID-19 since they have to go through probate courts. Municipal and county courts across the state paused services earlier this year because of coronavirus concerns.

ALDOT projects
ALDOT projects(ALDOT)

Support from cities and counties was key to the passage of the tax increase in the 2019 special session. About 66% of new revenue generated by the increase goes to the state. But a different distribution formula means municipalities get more of the new money than they do with the previous 18-cent tax. Each town and city will get a base amount of $14,109, then additional money based on population.

The Alabama League of Municipalities Executive Director Greg Cochran said the increase in infrastructure funding has been important for the development of Alabama’s economy and quality of life services.

“Given the impact of the pandemic since mid-March, the additional revenues generated from the Rebuild Alabama Act have provided municipalities resources to ensure their infrastructure is sound,” Cochran said. “The League appreciates (Gov. Kay) Ivey and the Legislature collaborating with us to reinvest in our state and its infrastructure.”

Sonny Brasfield, executive director of the Association of County Commissions of Alabama, said the Rebuild funding has enabled counties to do twice the number of road resurfacing projects and bridge replacements than was done in 2018.

“We told the public this money would go to construction projects directly, that’s what the law says and that’s what we are doing,” Brasfield told ADN.

Brasfield said COVID-19 caused a drop in county collections for this year by 5% but he considers that good news given mid-April estimates of a much worse decrease.

Gas taxes are not uniform across the state. In 2019, the Alabama Department of Revenue said 27 counties had local taxes. Meanwhile, 324 municipalities and police jurisdictions collected a local gas tax. There are 462 municipalities in the state.

Local rates can be found at https://myalabamataxes.alabama.gov.

Harris couldn’t say as of now if the impact caused by COVID-19 will have any significant delays for the second year of projects connected to the RAA.

“At this point, I think it’s premature to speculate and to say what impact we might see on the timeline for future projects,” Harris said.

After the full 10-cent increase is fully implemented next year, it will then be adjusted up or down with the National Highway Construction Cost Index and could increase up to a penny every two years.

When fully implemented, the increase will generate about $320 million a year.

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