On March 12th, 2015, the Utah State Legislature passed House Bill 362, Transportation Infrastructure Funding and on March 27th, Governor Gary Herbert signed the bill into law. This new law reforms the state fuel tax to keep pace with inflation and provides local communities with the tools to help address their transportation needs. HB 362 is the first law in 18 years to modify the state fuel tax and the first in state history to comprehensively fund road, transit, bike and pedestrian infrastructure. HB 362 contains two main provisions: 1) a reform and increase of the state fuel tax and 2) a local option sales tax for transportation.
Fuel Tax Reform & Increase:
HB 362 reforms to the statewide gas tax from a cents per gallon to a percentage. Effective January 1, 2016, the law converts the 24.5 cents per gallon (cpg) state motor fuel tax to a 12 percent tax on fuel. This will generate the equivalent of a 4.9 cpg increase in the fuel tax, or approximately $76 million annually. Revenues will be distributed using the existing B&C road formula, with 70 percent directed to UDOT and 30 percent directed to cities and counties.
As the price of fuel changes the amount of revenue will change. This will help to address the decline in buying power of the cpg tax. Due to inflation, the cpg tax has lost approximately 40 percent of its buying power since it was last increased in 1997. This has made the 24.5 cpg tax in 1997 worth effectively only 14.7 cpg today.
Local Option Sales Tax:
HB 362 authorizes counties to impose a 0.25 percent general sales tax for transportation. This is the equivalent of one penny in general sales tax revenues for every four dollars spent. Existing law requires that the tax first go to a referendum for voter approval. The revenues generated would stay within the county that imposed the tax. In counties and cities with a transit district, 0.10 percent of the funds would go to the transit district, 0.10 percent would go to cities, towns and unincorporated county areas, and 0.05 percent would go to the county.
In counties not covered by a single transit district, 0.10 percent of the funds would go to cities, towns and unincorporated county and 0.15 percent would go directly to the county.
Local option sales tax funds can be used for road, transit, bike and pedestrian transportation needs. This includes sidewalks, trails, bus service, road maintenance, etc. For a full list of allowable uses, click here.
On November 3rd, 2015, 17 of the 29 counties in Utah put the local option on the ballot as Proposition 1. Voters approved Proposition 1 in Carbon, Davis, Duchesne, Grand, Rich, San Juan, Sanpete, Sevier, Tooele and Weber counties. Voters did not approve Proposition 1 in Beaver, Box Elder, Juab, Morgan, Salt Lake, Uintah, and Utah Counties. For an analysis on the revenues generated in the counties that passed the local option, click here.