Myths & Truths About the New Transportation Funding Bill

Provided by AAA Mid-Atlantic:

Pennsylvanians can look forward to smoother and safer roads ahead with passage of a $2.3 billion transportation funding bill.  But what will it cost you?  AAA Mid-Atlantic breaks down some myths and truths about the new law.

MYTH: Gas prices will suddenly jump much higher on January 1, 2014, as a result of the new transportation funding law in Pennsylvania.

TRUTH: On January 1st, two things will happen:

• First, the new law completely eliminates the 12-cent per gallon Liquid Fuels tax, which is a retail tax that consumers have been paying.
• Second, a wholesale tax called the Oil Company Franchise Tax (OCFT) will be partially uncapped and the millage adjusted to make up for the lost 12 cents at the pump. This uncapping is phased in three times over 5 years – 1/3 in 2014; 1/3 in 2015; 1/3 in 2017.  We don’t know yet whether, or how much of the tax, wholesalers will decide to pass along to consumers.

Summing up the costs:

• In 2014, a retail gas tax cut that is offset by a tax on the oil companies, and a partial uncapping of a wholesale tax.  The changes will cost about $1.39 additionally per week, if you fill up a 15 gallon tank weekly, according to a statement made by House Transportation Committee Chairman Nick Micozzie on the day of the vote in the General Assembly.
• Over five years, the wholesale tax will be fully uncapped, plus there will be small increases in vehicle registration and driver’s license fees, starting in 2015. By 2017, with the transportation plan fully in place, it’s estimated the additional costs and fees will amount to about $2.50 a week.

MYTH: Gas taxes are the biggest part of the prices we pay at the pump.

TRUTH: Currently, gas taxes are 50.7 cents per gallon in Pennsylvania – 18.4 cents in federal taxes and 32.3 cents in state taxes.  If a gallon of gas is close to $3.50, that means only one-seventh of the price is taxes. The rest is the cost of crude oil, refining, distribution and other costs of doing business.

• Keep in mind as well, that gas prices already fluctuate significantly during the course of the year, even without any tax changes.   Remember that both crude oil and basic refined gasoline are each subject to constantly changing market pricing due ongoing trading on world commodity markets and their prices are affected by a host of factors.
• Wars, weather, international incidents, refinery outages, seasonal demand, locally and seasonally required specific blends mandated by EPA (34 of those nationwide!) and basic retail competition all affect the cost of filling your tank.
• Average gas prices dropped to a low of $3.29 on Nov. 11 in Pennsylvania, and reached a high of $3.80 on Feb. 26.   So, market forces alone caused a price difference of 51 cents (15.5 percent) this year, without any changes to gas tax rates.

MYTH: It will be cheaper to cross state lines to buy my gas.

TRUTH: Probably not, in most cases.  To make it worth the trip, you’d have to save about ten cents per gallon at a station that is only about 2 miles out of your way (roughly the distance from I-95 exit #1 in PA (Chichester Road) to Naamans Road in Claymont, DE).  You’d save $1.50 on the cost of gas itself, minus the cost of driving, and the mileage expense, for a total savings of 92 cents, based on U.S. Government  mileage calculations. If you have to drive farther, or pay tolls, you’ll wipe out any cost savings.

While no one likes to pay more, AAA’s concern for safety was a major consideration for supporting additional highway funding.  When considering economic competitiveness, time and fuel spent in congestion, the loss of precious seconds for first responders detoured to an emergency, the extra time our children spend on detoured buses, the cost of doing nothing to address our deficient roads and bridges is significantly higher.

• Thirty-six percent of Pennsylvania’s major roads are rated in poor or mediocre condition and 44 percent of Pennsylvania bridges, (average age fifty years old), are structurally deficient or functionally obsolete.
• A study by the Pacific Institute for Research and Evaluation concluded that deficient roadway conditions are a factor in 53 percent of deaths resulting from motor vehicle crashes each year.
• PennDOT reported that in 2012, the economic loss due to traffic crashes was $1,164 to every man, woman and child in Pennsylvania.
• Extra transportation costs are also built into everything we buy, if delivery vehicles have to take long detours around weight-restricted or closed bridges.

It has been 16 years since Pennsylvania enacted a significant transportation funding program. The bipartisan, $2.3 billion transportation funding bill was signed into law by Governor Corbett on November 25th.  “We look forward to seeing bridges fixed, roads paved, and detour signs taken down, so we can enjoy safe and efficient travel,” says Jenny M. Robinson, Manager of Public and Government Affairs for AAA Mid-Atlantic.  This investment is estimated to generate a net of 62,000 jobs – 50,000 new jobs created, and 12,000 additional jobs preserved. Thousands of bridges and more than 10,000 roadway miles will be improved or rebuilt.

Some Philadelphia-area road projects which will have the green light thanks to the new funding:

• Replacement of the approximately $149 million, Route 422 bridge over the Schuylkill River will start construction in 2015. Without the funding provided by the new legislation, drivers in this area would have had to wait until at least 2017 or later for the bridge to be replaced.
• Rebuilding nearly three miles of roadway and 11 bridges along U.S. Route 1 from Old Lincoln Highway to PA Route 413 in Bensalem and Middletown townships, Bucks County; $216 million.
• Rehabilitation of the Chestnut Street Bridge at 30th Street in the City of Philadelphia; $80 million.  Replacement of seven Vine Street Expressway Bridges; $110 million.
• Two construction projects involving pavement reconstruction and widening with two new lanes along an eight mile stretch of U.S. Route 322 from U.S. Route 1 to Interstate 95 in Delaware County; $216 million.

Maryland, Virginia and Washington, D.C. passed transportation funding measures earlier this year. Maryland increased its fuel taxes and indexed them for inflation.  Virginia eliminated retail gas taxes and replaced them with a wholesale tax, as did the District of Columbia.