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Alabama's Latest Gas Tax Increase to Aid Road Projects

Fri October 02, 2020 - Southeast Edition

Alabamians began paying an extra two cents per gallon for gasoline beginning Oct. 1 when the second installment of the state's 10-cent tax increase went into effect.

The state's share of taxes on gasoline rose to 26 cents per gallon, which includes eight cents under the 2019-passed Rebuild Alabama Act (RAA) and the 18 cents that existed before the new law was passed.

The six-cent increase that began Sept. 1, 2019 under the RAA has raised millions for road projects, but new revenue this year is less than expected at least in part because of COVID-19.

The RAA tax collections from October 2019 through August 2020 were approximately $174.5 million, an average of $15.86 million monthly. That's 2.01 percent below the cumulative projections, said Kirk Fulford, deputy director of the Fiscal Division of the state's Legislative Services Agency.

Total gross collections for October 2019 through last August, which include the existing gasoline and diesel fuel excise taxes and the RAA, was approximately $705.4 million, about 1.96 percent below projections, Fulford reported.

"This loss is largely due to the significant reduction in gasoline consumption for April, May and June, presumably as a result of the COVID-19 pandemic," Fulford told the Alabama Daily News. "It should also be noted that, historically, collections of gasoline decrease in February and March, then begin to increase in the spring and summer.

"Monthly sales of gasoline have since returned to within approximately 2 percent of historical levels for this time of year."

Alabama Department of Transportation (ALDOT) Government Relations Manager Tony Harris said $122 million in RAA-funded projects were under way in fiscal year 2020. Those monies include:

  • A total of $30.13 million for 28 projects to improve the state's highway system through the Alabama Transportation Rehabilitation and Improvement Program-II (ATRIP-II)
  • Another $82 million that is combined with other money, including federal funds, for other ALDOT projects
  • $10.2 million for 43 projects in the RAA's Annual Grant Program to help county and municipal governments with local projects.

"It can go towards things like local street resurfacing, small grid replacements and intersection improvements," Harris said.

Five major ALDOT projects are currently funded by the RAA. They are:

  • The U.S. Highway 82 project, or Prattville Bypass, in Autauga County, which has an estimated cost of $18.9 million
  • Two sections of improvement work on McFarland Boulevard in Tuscaloosa, totaling more than $31 million
  • Another pair of work sites along U.S. 411 in Cherokee County with a total cost estimate of almost $43.5 million. Almost all the monies needed to complete the road project comes from a mixture of RAA and federal funding
  • In Limestone County, crews are making lane revisions to Interstate 565 at a cost of $17 million. The money to upgrade the freeway also was awarded to ALDOT by RAA and the federal government
  • And, in Limestone County, improvements are being made on Browns Ferry Road near Tanner, between U.S. 31 and I-65. That enterprise is projected to cost $27 million.

Sonny Brasfield, executive director of the Association of County Commissions of Alabama, said the RAA funding has enabled counties to do twice the number of road resurfacing projects and bridge replacements than was done in 2018.

"We told the public this money would go to construction projects directly, that's what the law says and that's what we are doing," he said.

Gas taxes are not uniform across the state. In 2019, the Alabama Department of Revenue said 27 counties had local taxes. Meanwhile, 324 municipalities and police jurisdictions collected a local gas tax. In total, there are 462 municipalities in the state.

For now, Harris couldn't predict if the impact caused by COVID-19 will have any significant delays for the second year of projects connected to the RAA.

"At this point, I think it's premature to speculate and to say what impact we might see on the timeline for future projects," he said.

After the full 10-cent increase is fully implemented next year, it will then be adjusted up or down with the National Highway Construction Cost Index and could increase up to a penny every two years.

When the gas tax is at its maximum, the increase will generate about $320 million a year.

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