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Deal signs into law plan to revamp Georgia’s transportation funding

Quick facts about Georgia’s new transportation plan

  • The state gas tax jumps from about 19.3 cents per gallon to a straight 26-cents-per-gallon excise tax on motor fuel when it takes effect in July 2016. The tax rate will increase automatically as cars become more fuel-efficient in future years. It will also be tied to inflation for the first two years, based upon the Consumer Price Index. Drivers of most vehicles will pay about 6 cents more per gallon at the pump.
  • Heavy trucks and big-rig owners will pay a “highway impact fee” of $50 to $100, depending on the weight of the vehicle.
  • The measure does not set aside any money for mass transit. Technically, money raised from sources other than the gasoline tax could be spent on transit projects in the future. (State law mandates that gasoline tax proceeds only be spent on roads and bridges).
  • It includes a $5 tax on nightly stays at hotels and motels across the state. The tax increase is expected to fetch at least $150 million a year from about 168,000 rooms in the state.
  • House Bill 170 slams the brakes on Georgia’s embrace of plug-in electric vehicles. The law repeals the popular $5,000 state tax credit that made electric cars so attractive, and it slaps a $200-per-year fee on noncommercial electric vehicles and a $300-per-year fee on commercial EVs. Five other states charge an annual registration fee on electric vehicles that ranges from $50 to $100.

Georgia is set to raise nearly $1 billion in new revenue annually to shore up aging roads and bridges across the state. But even that’s not enough to solve metro Atlanta’s dreaded traffic problems.

The bill that Gov. Nathan Deal signed into law Monday will hike gasoline taxes, add new nightly fees on hotel stays and eliminate some lucrative tax breaks. It does not, however, dedicate any money for mass transit and won’t guarantee any funding for highway expansions or other large-scale expansions.

Flanked by orange traffic cones at a bill-signing ceremony, Deal and a handful of legislative leaders proclaimed victory after a hard-fought legislative journey that divided the GOP caucus and, at times, seemed doomed to fail.

It took solid support from Democrats, who unified behind the transportation plan, and many Republicans, who voted for it despite the specter of primary challenges, to pass both chambers. Even then, it required the governor to threaten a special session before House and Senate negotiators reached a final accord.

Change in tax, addition of fees

The new law, House Bill 170, will lift the gas tax for the average driver by about 6 cents a gallon and levy new $5 nightly fees on hotel and motel stays. It will impose annual fees on drivers of heavy trucks and electric vehicle owners, who will also lose a lucrative tax break.

And it includes a feature that allows counties — either alone or in groups — to ask voters to approve up to a 1 percent sales tax increase for projects closer to home without first going through the Legislature.

It was heralded by business leaders, who flooded inboxes with laudatory press releases thanking Deal and leading lawmakers. They needed no reminder that the law was passed just three years after a proposal for a regional transportation sales tax failed miserably in nine of 12 regions.

Transportation analysts said an annual increase of $1 billion was the minimum needed to start bringing the infrastructure network up to level, and one study said roughly $3 billion was needed to expand transit, widen highways and build badly needed interchanges.

Reaching that mark won’t happen right away. Initial estimates from the Office of Budget and Planning indicate that collections in fiscal 2016 will total about $870 million. They’re projected to reach $1.2 billion by 2020.

Money will deal with backlog

Georgia Department of Transportation Commissioner Russell McMurry said most of the money will be spent chipping away at the growing backlog of maintenance projects that includes aging bridges and decaying roads.

It’s unclear how much will be left over to go toward adding capacity, such as new or widened highways. Transportation officials think they can save money by shifting how they allocate federal funding — putting more of it toward maintenance projects and less of it toward new construction. (A more expensive environmental approval process is required when Uncle Sam foots the bill.)

Officials, however, don’t know yet how much money they could save by using state money to fund new construction.

Georgia is one of seven states that have raised taxes and imposed fees this year to invest in their transportation networks. They include North Carolina, a regional competitor that raised the minimum gas tax rate for its variable tax to 36 cents a gallon. South Carolina is also mulling a 10- to 12-cent increase in its gas tax.

Inaction at federal level

States are taking action because Congress isn’t. Gas tax revenue, the main source of funding for roads, has dwindled as Americans drive more efficient cars. Congress has balked at raising the federal gas tax of 18.4 cents per gallon even as Washington has not reduced spending or tapped any new funding sources for transportation projects.

As a result, the federal highway trust fund has been on the verge of insolvency for years, propped up only by periodic appropriations from other bank accounts. The latest extension is set to expire May 31, and no compromise on a long-term funding bill is in sight.

The law also slams the brakes on the state’s embrace of plug-in electric vehicles by repealing effective June 30 a popular $5,000 state tax credit that made Georgia a haven for the vehicles. It also slaps a new $200 annual fee on their drivers to take effect July 1. Furthermore, it ends a 10-year-old tax break on aviation fuel that will cost Delta Air Lines and others about $23 million a year.

A divided highway for GOP

The new plan was passed just months after Republicans consolidated their power in Georgia by sweeping every statewide office. Anti-tax advocates launched unrelenting attacks on the plan’s GOP supporters, which created a rift that divided the state’s Republicans. State Rep. Regina Quick called it a “tax-first approach to problem solving,” while state Sen. Bill Heath proclaimed it “the largest tax increase in Georgia’s history.”

Supporters, though, pitched it as a public safety imperative that’s crucial to keep Georgia in the hunt for big economic development deals.

“There will always be those who find a reason for voting against anything,” Deal said. “But I know they’re going to enjoy riding on those new roads and crossing those safe bridges just like anybody else will.”

Already, there’s a move afoot to revisit some of the changes. A leading legislative critic of the electric vehicle tax break has said he’s willing to entertain potential changes next year. And the hospitality industry, blindsided by the new $5 fees, is mounting a behind-the-scenes campaign to soften the blow.

But many lawmakers, with an eye on a November 2016 election, have little appetite to consider major tweaks to the law after such a hard-fought debate. State Sen. Steve Gooch, a sponsor of the measure, said history will look favorably on their efforts.

“I think that the citizens of Georgia will look back in time and say that this is the right decision,” said Gooch, R-Dahlonega. “It’s going to fix a lot of our problems, and I’m looking forward to seeing more orange cones and barrels around our state.”

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