Case Study #4: Moving Ahead in Utah

This week we turn to our neighbors to the north, Utah, for our monthly look at state-led efforts to upgrade transportation infrastructure. Utah has a strong track record of fiscal conservatism. Proposals to increase taxes are only successful when the evidence clearly shows that the benefits outweigh the costs, and that there is a genuine public need which can only be met by government. These criteria were met this spring with the passage of HB 362.

The non-partisan Utah Foundation issued a research report in 2013 which set the stage for the movement supporting more stable financing for transportation. This report highlighted an $11.3 billion shortfall for priority transportation projects over the next 30 years and a $26.6 billion shortfall for all transportation needs. The report outlined several funding options that could help close the gap.

The Unified Transportation Plan is Utah’s 30-year plan developed by the Utah Department of Transportation and the regional Metropolitan Planning Organizations (MPO). Arizona similarly has a state transportation agency and regional MPOs which often work together. A 2012 economic study by Boston-based Economic Development Research Group, Inc. bolstered the argument in favor of fully funding the Unified Transportation Plan.

Like Arizona, Utah’s gas tax had not been raised in many years and had lost about 40% of its purchasing power due to inflation. More fuel-efficient vehicles and increased telecommuting had put further pressure on strained transportation revenues. Further, Utah’s population was expected to increase by 60% over the next thirty years.

The Salt Lake Chamber stepped up to lead a broad-based alliance supporting increased funding for transportation. The Chamber formed the Utah Transportation Coalition. Two well-known and respected members of the community co-chaired the Coalition – a former LDS Church Presiding Bishop and a Wells Fargo Bank Division Manager. The Utah Transportation Coalition grew to include dozens of businesses, non-profit associations, and city and county governments.

The Coalition worked together to push for a bill that would not only increase the total funding available for transportation, but also reform how the revenue is raised. HB 362, which was enacted in March, is expected to raise revenue by $76 million by FY 2017. The legislation includes several notable provisions:

  • Raises the 24.5 cent gas tax to a 12% assessed rate – This provision converted the historic cents-per-gallon gas tax into a system similar to a sales tax by imposing a 12% tax on the wholesale price of gasoline, adjusted once a year.
  • Automatically increases the amount of tax collected when gas rates go up
  • Sets a floor and a ceiling for the tax – Floor is set at 5 cents higher than the rate at the time of the bill’s passage. Ceiling is set at an assessed tax of 40 cents per gallon.
  • Incrementally increases diesel and natural gas tax rates by 8 cents per gallon to a new rate of 16.5 cents per gallon by July 1, 2018
  • Enacts a new 16.5 cents per gallon equivalent tax applied to hydrogen
  • Implements a program to study a road-usage charge revenue system for potential future implementation
  • Allows counties to raise a quarter-cent local sales tax to fund roads, transit, bicycle or pedestrian transportation infrastructure

Arizona shares much in common with Utah – a fiscally conservative ethos, a young and rapidly growing population, and a transportation system straining to keep up. The methodology for assessing the gas tax and linking it to the price of gas means that the Utah State Legislature will not have to frequently revisit the issue. Setting a ceiling on the tax protects motorists from any possibility of the rate getting out of control. The approach Utah used will prepare the state for a more certain transportation future by enabling it to move forward on the Unified Transportation Plan.

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