Iowa DOT's road funding options include fuel tax overhaul

By Keith Goble, Land Line state legislative editor | Wednesday, October 30, 2013

The Iowa Department of Transportation developed a list of revenue-raising ideas for road and bridge work. Options include overhauling how the state collects tax on fuel purchases and increasing oversize/overweight vehicle permit fees.

At the request of Gov. Terry Branstad, the state DOT worked on the list of options to help close a gap in transportation funding that the agency estimates at $215 million a year.

The list of options offers alternatives to failed efforts in recent years at the statehouse to increase fuel tax rates by much as 10 cents per gallon. It’s estimated that each penny added to the state’s 22-cent-per-gallon gas tax and 23.5-cent-per-gallon diesel tax would generate about $22 million in revenue.

One option IDOT would like state lawmakers to consider during the upcoming regular session is a proposal to end collection of the state’s portion of the fuel tax. In exchange, a 6 percent wholesale tax, or “at the rack tax,” would be implemented.

The sales tax is estimated to raise $467 million a year from 2015 to 2025.

Ryan Bowley, OOIDA’s director of legislative affairs, said it is good to see state officials addressing the challenges facing transportation funding. He said that Iowa lawmakers would be well served to implement similar protections that were adopted this year in Virginia.

Virginia lawmakers approved a nearly $900 million a year transportation funding overhaul that included assurances that transportation money would not be diverted for other purposes.

“From our perspective the gas and diesel tax represent the best way to fund highways,” Bowley said. “We are open to a percentage-based fuel tax as long as those dollars are dedicated back to highways.”

Another funding option would end the exemption for farmers from state road taxes for red-dyed fuel. Applying the state’s 5 percent excise tax would generate about $38 million a year for aging rural roads and bridges.

IDOT points out that agricultural equipment use local roads at various times in the production and transport of agricultural goods.

A separate funding option would come via higher truck fees for certain loads. Specifically, permit fees for oversize/overweight vehicles would be increased.

The agency says higher fees are necessary to cover the costs to issue permits for affected loads and the expense for road repairs.


OOIDA encourages Iowa truckers to contact their state lawmakers about the transportation funding ideas offered by the state DOT.

To view other legislative activities of interest for Iowa, click here.

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