South Dakota road funding plan would raise fuel tax, other fees

By Keith Goble, Land Line state legislative editor | Wednesday, January 07, 2015

A plan to raise $100 million a year for needed road and bridge work in South Dakota would include the first fuel tax increase in more than 15 years.

Road construction and maintenance in the state is funded through multiple sources. License plate fees are primarily used for local and county roads. The state’s fuel tax is the primary source of funding for state highways.

State lawmakers studied possible options over the summer to address the estimated $280 million a year that is needed to maintain roads and bridges throughout the state. Options include higher fuel taxes and increased vehicle fees.

Senate Transportation Committee Chairman Mike Vehle, R-Mitchell, filed a bill for consideration during the regular session that begins Tuesday, Jan. 13, to incorporate some of the options. Among the measures included to help generate $100 million annually is increasing the state’s excise tax rate.

Specifically, the state’s 22-cent-per-gallon tax on gas and diesel purchases would increase by about 6 cents to 28.16 cents through July 2025. The fuel tax rate has remained the same since 1999.

A variable component that would change regularly based on the wholesale price of fuel would also be added. The change is estimated to raise about $50 million in the first year.

The vehicle excise tax would also be raised from 3 to 4 percent. Additional revenue is expected to top $25 million per year.

In addition, fees to license and register vehicles would increase by 10 percent. The new revenue would add nearly $9 million annually for local governments.

The likelihood that the funding plan could be signed into law is unclear. Gov. Dennis Daugaard has opposed tax increases since he took office in 2012. However, during last year’s re-election campaign he said he would participate in the discussion about the state’s future transportation needs without taking any options off the table.

SB1 awaits assignment to committee.

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