Georgia transportation plan stirs fans and critics

Winners and losers

There were clear winners and losers following passage of House Bill 170 late Tuesday.

Winner: The car rental industry. It successfully fended off a proposed $5 fee per rental in the Senate version.

Loser: The tourism industry. It was blindsided by a new hotel/motel tax tacked onto the bill at the eleventh hour.

Winner: All vehicle owners. They faced a highway impact user fee of $25, or $10 for motorcycles, in a proposal by the Senate that was nixed from the final bill. (However, a fee of $50 to $100 on heavy trucks and big rigs remains intact.)

Loser: Electric vehicle owners and lessors. They saw their $5,000 state tax credit evaporate at the same time they were slapped with a new $200 annual registration fee for noncommercial vehicles and $300 for commercial vehicles.

Winner: Shopping fanatics. The Senate had proposed eliminating sales tax holidays for back-to-school items and energy- and water-efficient products scheduled for July 31-Aug. 1 and Oct. 2-4, respectively. Doing so would have created a $42.4 million windfall for the state. But that provision did not end up in the final bill.

Loser: Delta Air Lines. A partial sales and use tax exemption for jet fuel was eliminated, with the savings to be spent on the state aviation program or for airport improvements. The measure is expected to generate up to $31.6 million per year by 2020.

Georgia lawmakers were lauded on some sides and lambasted on others Wednesday after passing a massive transportation funding bill that would raise close to $1 billion a year.

House Bill 170 would lift the gas tax for the average driver by about 6 cents a gallon. It would impose new fees on hotel stays, electric vehicles and heavy trucks. And it would eliminate lucrative tax breaks for Delta Air Lines and electric vehicle owners. The legislation is expected to bring in about $945 million a year, which state transportation officials say is desperately needed to maintain an aging network of roads and bridges.

Passage of the bill sends an important message, said state Rep. Calvin Smyre, D-Columbus, who helped broker a compromise between Democrats and Republicans.

“We are making transportation one of the main three quality-of-life issues in Georgia — along with education and health,” said Smyre, the longest-serving legislator in the state. “Transportation has always been a political football.”

State Sen. Steve Gooch, R-Dahlonega, a former chairman of the Senate Transportation Committee, said Georgia is facing challenges with how to fund transportation, similar to challenges faced by other states, and the bill represents a diversified approach. The Peach State was among a dozen states considering raising taxes to fund transportation this year.

The aspect of the legislation most likely to hit home for most Georgians is also the bedrock of the bill — an increase in the gas tax.

The state gas tax rate would go from about 19.3 cents per gallon, which is currently derived from a joint 4 percent sales tax and a 7.5-cent-per-gallon excise tax, to a straight 26-cent-per-gallon excise tax on motor fuel (29 cents for diesel).

The tax rate would increase automatically as cars become more fuel-efficient in future years. It would also be tied to inflation for the first two years, based upon the Consumer Price Index.

Drivers would start paying about 6 cents extra per gallon at the pump on July 1, 2016. The gas tax alone is expected to generate almost half of the new revenue for transportation.

The gasoline tax is commonly viewed as the most fair way to fund transportation because the people who use the roads pay the tax. Georgia’s gas tax rate, however, has stayed the same since the early 1970s. Inflation and increased fuel efficiency have chipped away at the proceeds, so that drivers are paying significantly less per mile than they once did.

As a result, state transportation officials said Georgia was facing a $74 billion transportation funding shortfall over the next 20 years. They said $1 billion to $1.5 billion was needed just for upkeep of the existing transportation system.

The Georgia Chamber of Commerce commended state politicians for acting to ensure safety and mobility for travelers.

However, anti-tax conservatives such as Republican Sen. Mike Crane of Newnan criticized the legislation, with Crane characterizing it as an "unqualified midnight run on Georgia taxpayers."

The biggest backlash seemed to come from the tourism industry, which was blindsided by a new $5-per-night hotel/motel fee tacked onto the bill at the eleventh hour. The fee is expected to fetch $150 million a year, assuming a conservative 50 percent occupancy rate for all the hotel rooms in the state.

“This will also have a profound negative effect on leisure travel,” said Molly Swagler, with the Savannah-based Tourism Leadership Council. “This tax will not only affect lodging properties — fewer room nights mean fewer people in our restaurants, retail stores, attractions and tours.”

Metro Atlanta would account for much of the revenue from the fee. The area has about 94,000 hotel/motel rooms, or about half of the rooms in the state.

William Pate, the president of the Atlanta Convention & Visitor’s Bureau, said Atlanta would probably be able to absorb the new fee. It would represent about a 3 percent increase on the city’s average room rate of $165 a night.

The $5 fee would be about a 5 percent increase on the price of an average room in the entire metro area, which tends to cost a little less (about $92 a night).

Ron Fennel, the president of Georgia Capitol Associates, which lobbies the Legislature on behalf of the Georgia Tourism Industry, said there was no suggestion that such a move was coming.

“We frankly were shocked, a little dismayed and disappointed,” Fennel said.

The trucking industry also viewed new fees on heavy trucks and big rigs — between $50 and $100 annually, depending on the weight of the vehicle — as problematic.

Georgia Motor Trucking Association President Ed Crowell said the fee might encourage people to register their trucks in other states.

If that happens, the state won’t collect title fees for those trucks, and “long term it’s not healthy because you start encouraging people to move their business to another state, they may encourage their employees to move to another state.”

“Over time,” he said, “if I’m doing more and more business in another state, then I tend to want to maybe base there.”

Crowell said his group would address the issue in the next legislative session “if it needs fixing.”

No funding for transit was set aside in the bill. State law mandates that funds from the gasoline tax can only be spent on roads and bridges, and that can’t be changed without a constitutional amendment. However, the hotel-motel fee or heavy vehicle fee could technically be used to help pay for transit projects in the future.

Yet another provision of the bill would let counties raise local sales taxes to pay for transportation projects, which could include transit. Local governments would initiate a referendum on the tax. And they could ask voters to approve a sales tax of a fraction of 1 percent, instead of a full penny as before.

Gov. Nathan Deal said he is willing to sign HB 170. He praised lawmakers’ courage for tackling the touchy issue of a tax increase.

“We faced obligations that could no longer be ignored,” Deal said, “and current resources were simply not enough to preserve the infrastructure we need to get to work, to safely take children to school on buses and to keep the lifeblood of our economy pumping.”

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