Local governments supported the final transportation spending bill passed by the Georgia Legislature after strongly opposing the legislation’s initial version.
At first, House Bill 170 sought to convert local fuel sales taxes into a single per-gallon excise tax for each county, but the cities opposed that plan. The local governments also saw the bill as transferring millions in local revenues to the state. The legislation also sought to limit local sales taxes on fuel to transportation purposes, but that resulted in wide revenue discrepancies for counties across the state.
None of that survived into the final version of the bill passed by the Legislature last week. The legislation sent to Gov. Nathan Deal for his signature leaves in place the present local sales tax structure. The 1 percent local sales taxes on fuel will remain, and revenues don’t have to be used solely for roads.
“Put in context, House Bill 170 morphed from a bill that city leaders couldn’t support into a bill with very positive aspects for city taxpayers,” Tom Gehl, director of governmental relations for the Georgia Municipal Association, said in an e-mail to InsiderAdvantage Georgia. “The bill passed in a form which allows continued flexibility on the use of local sales taxes and continues to include motor fuel in the sales tax base.”
But local governments weren’t totally happy with the HB 170, which does away with the 4-cent state sales tax on gasoline, replacing it with a 26-cent-per-gallon excise tax that can only be spent for transportation. Diesel fuel will be taxed at 29 cents per gallon. A total of $900 million annually in additional state revenue is expected to be raised.
The House-Senate conference committee’s compromise places a $3 per-gallon cap on fuel prices for local sales taxes. If fuel prices rise above that mark, local governments would receive no corresponding increase in tax revenues. The Senate version of the legislation put the cap at $3.39 per gallon, the average fuel price for the last four years.
“Although the legislation sets a $3 per gallon cap in place, when gas prices (and road construction and maintenance costs) rise in the future, we hope that the General Assembly will revisit this cap,” Gehl said in his email.
Clint Mueller, legislative director of the Association County Commissioners of Georgia, told InsiderAdvantage Georgia on the last day of the session last week that the group wanted the local taxes indexed for inflation, as the state excise tax will be until July 1, 2018. The state tax will also be indexed for increases in fuel efficiency standards, continuing past 2018.
“We told them we want indexing like you’re being indexed, but we didn’t get it,” Mueller said. In a followup email, Mueller said legislators added the local government cap “to help offset the future increases that will come from indexing the state rate.”
While gasoline prices are now below $3 a gallon, local governments will suffer an immediate falloff in diesel fuel revenues. The diesel fuel price for local sales taxes currently is set at $3.16 a gallon, but that will fall to the capped rate on July 1, when HB 170 will take effect.
Local school boards also will suffer revenue losses. The legislation does away with a fuel tax exemption for school buses. The school buses also will be included under new fees for heavy vehicles. School districts beginning July 1 will have to pay $100 a year for each school bus weighing more than 26,000 pounds, and $50 for those from 15,500 to 26,000 pounds. Counties and cities will also be subject to the vehicle fees.
On the positive side, counties and cities will receive an increase in state Local Maintenance and Improvement grants for local roads.
“We anticipate that the new transportation revenue to GDOT will automatically increase the LMIG by about $40 million per year,” Mueller said in his email.
