Proposal for 7 cents-per-gallon road fuel tax before Matanuska Borough Assembly

A proposal for a 7 cents-per-gallon Matanuska-Susitna Borough fuel tax was presented to the borough assembly at its meeting Tuesday evening, June 3.

A public hearing before the assembly is set for July 15. Tuesday’s action was only to introduce the measure. The tax would apply only to fuel for vehicles and not aviation, marine fuel or home heating oil.

Borough manager Mike Brown told the assembly that needs for major road improvements continue to grow and Mat-Su voters have shown wide support and a willingness to pay for them through approvals of transportation bonds.

However, a disconnect is developing in that the financial burden falls mainly on property taxpayers, the borough’s main source of revenue. A municipal fuel tax with revenue targeted to road improvements would spread the burden and also have visitors who drive to Mat-Su pay part of the tax.

The tax is estimated to raise $5 million a year, which will be used to pay debt service on the borough’s road bonds including those sold last year. Right now the borough pays about $15 million a year in payments for all debt including roads, schools and parks and recreation, Brown said.

But needs continue to grow including for new charter schools with state support uncertain. Road improvements will continue to be needed, too. Road Service Areas will continue to make assessments for routine maintenance, he said, but anything substantial will be beyond the RSA capabilities and the borough’s responsibility.

Also, there are about 300 miles of unmaintained roads in the borough. Local residents are asking for help to maintain them but there is now no money to do that, Brown said.

“What this does not do is support government growth,” the borough said in an information sheet posted on the internet. The proposed tax is also lower than a 10 cents-per-gallon road fuel tax changed by the Municipality of Anchorage.

The borough currently has bonds outstanding for road improvements as well as for schools. The state has traditionally picked up a portion of school bond debt, but that is proving erratic given financial constraints on the state budget.

This year, for example, the Legislature reduced the expected state aid for school bond assistance by 25%. That reduced the state’s school debt support payment by $3.7 million for next year, Brown said. That will require Mat-Su taxpayers to pick up the tab because the borough is responsible for general obligation debt like the school bonds.

There was once a program for the state to help shoulder 50% of debt service for municipal roads but that hasn’t been funded for years, Brown said.

Brown was asked if fuel for off-road equipment would be included. This and any other exemptions would have to be determined by the assembly if it adopts the tax, he said. A consideration is that exemptions could add to complexity and costs in administering the tax.

A straightforward tax on all road fuel would be simple to administer because there are only a handful of gasoline wholesalers serving Mat-Su, he said. If approved by the assembly the new tax would go into effect next January.