Virginia has approved a plan to fund improvements on interstate 81 and other parts of the state after an earlier plan to put tolls on the road collapsed.
The new financing plan involves a series of new taxes on diesel fuel and gasoline, some to be phased in as late as 2021 while others will kick in later this year. It also involves higher registration fees.
The new taxes will be paid at the wholesale distribution point, setting up the age-old – and never settled – argument about whether retailers can successfully pass on all or just part of increases that they pay when buying their fuel at the wholesale distribution point, known in industry parlance as the "rack."
The new fuel taxes are percentages of a wholesale price established by the state. But it has an important provision – the levy can't fall below a wholesale price benchmark of a period in February 2013. That period, according to the weekly U.S. Energy Information Administration (EIA) retail diesel fuel price, was the highest since the collapse in fuel prices that occurred after the financial crisis began.
The statewide new diesel fuel tax is 2.03 percent of that state-determined wholesale average. Dale Bennett, the president and CEO of the Virginia Trucking Association (VTA), said the data the state now has for what Virginia prices were in February 2013 would put the statewide wholesale levy under the new legislation at 6.8 cents per gallon.
(In regard to the price back then – the weekly EIA average East Coast diesel price for retail diesel on February 18, 2013 was $4.199/gallon. A week later, it rose to $4.201/gallon. It has not been at or above that level since and has been considerably lower. (It was $3.127/gallon last week.)
The state will calculate the average wholesale price of a gallon of diesel twice a year based on six month periods. But given that current levels would yield a number far less than the floor, the state's calculations will mean little until average retail diesel prices tack on at least another dollar from current levels.
Additionally, that tax does not kick in until July 2021.
Another key impact on fuel prices is a tax to be applied against wholesale rack sales just in a region. That is a 2.1 percent levy on both gasoline and diesel prices, also against a statewide average but also with the February 2013 floor. The bill designates certain state "planning districts," all of them near interstate 81, that will pay that 2.1 percent tax. That regional levy takes effect in July of this year.
The state's basic diesel tax remains at 20.2 cents/gallon and the additional charges will be added on top of that.
There is a third fuel levy, a change in the surcharge that Virginia now adds to the International Fuel Tax Agreement. That surcharge is now 3.5 cents per gallon in Virginia. Bennett estimated that the new charge will amount to 5 cents/gallon on July 1 this year, 5 cents on July 1, 2020, and 6.8 cents in July 2021. Bennett said the current base number for Virginia is 20.3 cents per gallon, plus the 3.5 cents surcharge. The additional fees will be built on top of that.
The higher registration fees vary, but Bennett estimated they would be about a 40 percent increase on the heaviest Class 8 vehicles.
While the new plan grew out of the collapse of efforts to put tolls on an increasingly burdened Interstate 81, there are provisions in the legislation that will send funds to northern Virginia and possibly to other areas of the state. All the funds will be deposited in the Interstate 81 Corridor Improvement Fund. But there are provisions in which some revenues can flow to the Northern Virginia Transportation Authority Fund.
"The proposed plan significantly impacts the trucking industry and our customers, but it is more efficient and less harmful than tolling existing highways," the VTA said in a statement released after Virginia Gov. Ralph Northam signed the legislation. "The trucking industry understands the importance of safe and efficient highways, and in particular Interstate 81. The Virginia Trucking Association supports the Governor's package of amendments to address needed improvements to I-81 by raising funds from all highway users. Under this plan, the trucking industry is stepping up to the plate to pay a large share of the cost of improving I-81 and other interstates in Virginia.
Image sourced from Pixabay
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