February 10, 2014
Road Use Tax is the central issue of debate at the state level that is of interest to the Road Department. Most people have heard the common arguments about how the fuel tax has not increased since 1987 and the cost of construction has jumped to 2.5 times what it was in 1987. This message is intended to be an objective overview rather than a persuasive argument. A bill proposing a 10-cent per gallon increase in fuel tax is currently being debated at the state level.
The Road Department’s annual operations are funded primarily by two funding sources, tax on rural properties and road use tax fund. Road use tax fund has a number of revenue sources, but the most prominent are vehicle registration fees and fuel taxes. The fuel tax is a little different than some other taxes however. Fuel tax is a cents/gallon tax rather than a percentage of sale like sales tax is, so the revenue is not based on the market value of fuel, which has risen dramatically. Currently (and since 1987) fuel tax is about 21 cents per gallon. For instance, in 1987 when gas was 95 cents/gallon the Road Use Tax Fund received 21 cents/gallon. Today when gas is $3.50/gallon the Road Use Tax Fun receives the same 21 cents/gallon. The Road Use Tax Fund revenues have climbed some, but not because of fuel taxes. Despite, the stagnant state of our funding, the cost of construction materials has increased by over two and half times, as shown by the Iowa DOT’s Price Trend Index.
Fuel taxes are generally regarded as a very equitable method for funding road and bridge improvements because the user pays for the infrastructure. Much of Iowa’s RUTF revenues come from out of state with carriers purchasing fuel in other states and using our roadways. Equitability is the reason we focus more on fuel taxes than rural property taxes, which have only increased modestly over the last 25 years. The Iowa Association of Counties issued a press release recently in support of RUTF increases.
This year, the Road Department budget included 1.7 million from RUTF and $1.4 million from rural property taxes. Year to year, expenses such as personnel, fuel, gravel, salt and sand, equipment repairs, and other supplies are relatively stable, but where the deficiency shows up is equipment, roads, and bridges. The current budget planned for about $100,000 in construction and $400,000 in new equipment. For reference, a new dump truck with snow equipment costs just over $200,000. Each of the 17 county snow routes requires a reliable piece of equipment and when stand by machines and other equipment such as mowers, excavators, and pickups are included, several pieces of equipment need to be replaced every year.
The most concerning deficiency is funding for roads and bridges. In the last 4 years, Winnebago County spent about $25 million on roads and bridges. The $25 million was borrowed against taxes generated by the new wind farms and is not a reoccurring revenue source. Despite the huge investment, our roads and bridges are still in need of major repairs. 29 of our bridges have been posted with weight limits, 6 of which were posted for the first time this year. Those weight limits prevent most farm machinery and any commercial traffic from using the bridges. Assuming a 50 year life span for a typical bridge, we need to be replacing 2-3 bridges per year and a typical bridge can cost $500,000 to replace. We also have 150 miles of paved roadways that are aging every day. Assuming a 20 year life span for a typical pavement, we need to be repaving 8 miles per year and a mile of resurfacing can cost $200,000.
The county does have other revenues available specifically for construction. The state administers Farm-to-Market funds, which are transferred from RUTF at the state level and must be spent on Farm-To-Market roads in the county. We receive about $500,000 per year from this source. We also have about $200,000 in Federal funds available annually for construction of major roads and $200,000 in Federal funds available annually for construction of bridges. These funds are all revolving accounts which bank up balances and are used in large chunks.
Using very round numbers for simplicity:
1. Annual funds available for Equipment and Construction
a. Fiscal Year 2014 Budget for Equipment and Construction – $500,000
b. Farm-to-Market Funds – $500,000
c. Federal Funds – $400,000
2. Annual equipment and Construction Needs
a. Equipment – $400,000
b. Bridges – $1.0 million
c. Roads – $1.6 million
3. Annual Shortfall – $1.6 million
ISAC has voiced support for a phased-in 10-cent increase in the per gallon fuel tax and the ongoing evaluation of long term, sustainable transportation funding solutions. The Iowa DOT Office of Program Management recently released estimates that 10 cents per gallon could potentially generate about $400,000 for Winnebago County. However, Program Management asks everyone to remember that an estimate is only that, and is subject to change, up or down, as future trends become more apparent.
The take home message is in Winnebago County the roads and bridges are in moderate shape, but only after a recent critical boost from the one-time revenue stream generated by the wind farm construction. The shortfall is conservative, but realistic. There are two major ways to cut spending at the county level, delay road and bridge projects or regress services, such as snow removal and gravel road maintenance. We work every day to create efficiencies and find savings, but it isn’t enough. Since our citizens dictate the quality and speed of our services through county officials and public pressure, construction takes the hit. If we continue to spend what we are currently spending, a terrible predicament is looming. Our county could dig itself a hole our citizens cannot afford to dig out of.
Contact Scott Meinders, County Engineer with any input or questions.
Note: Thanks to the Lake Mills Graphic for writing a great article in their February 5, 2014 issue.