State Considers Fees For Alternative Fuel Vehicles

11:47 AM, Feb 10, 2014   |    comments
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By Tim Smith, Greenville News


COLUMBIA - In Washington state, all electric vehicles pay an annual fee of $100, while in Virginia, the annual fee for alternative fuel vehicles was recently set at $64.

South Carolina lawmakers are considering fees as well, $60 for hybrids and $120 per year for electric vehicles.

Across the nation, state legislatures are grasping for ways to collect revenue from alternative fuel vehicles, as purchases of the vehicles go up and gas tax collections go down.

Those legislators believe users of the roads should pay for that use and if they cannot pay at the gas pump, they should pay during annual vehicle registration.

"People who are using electric cars get to ride the roads for free," said Sen. Ray Cleary, a Georgetown Republican who has pushed the Senate to confront transportation funding. "That doesn't sound fair. Of course, everybody wants somebody else to pay for it."

The problem, lawmakers say, is that because the vehicles are powered by alternative fuels, government has an interest in promoting what is good for the environment.

So many states, including South Carolina, offer tax credits for those who purchase or lease vehicles powered by alternative fuels.

In fact, a group of senators has proposed a $1,000 tax credit for those who purchase or lease such vehicles, a bill that was delayed last week so legislators could get more information, including its fiscal impact.

"If we do a credit on one end, and there is no taxing or fee mechanism, then the state is paying someone to not pay for their use of the roads," said Senate Majority Leader Harvey Peeler of Gaffney.

"That's why we wanted staff to look into it and research those kinds of questions."

And all of this comes at a time when the gas tax in South Carolina, which funds the vast majority of the state's infrastructure needs, is decreasing and officials estimate road and bridge repair needs at about $29 billion over 20 years.

According to the state Department of Revenue, gasoline and diesel fuel tax collections went from $558 million in fiscal year 2011-12 to $536 million last year, the latest year figures are available.

Revenue over the past five years has been shaky, with an increase of about $4 million in fiscal year 2012. Fuel tax collections also dipped between 2007-08 and 2008-09. Revenue from fuel taxes didn't increase above the 2007-08 level until 2010-11, according to the Department of Revenue data.

"Most states rely 38 percent on their gasoline tax sales for their roads," Cleary said.

"South Carolina relies to the tune of 80 to 90 percent and that's going down. In a few years we're going to get less money because of cars getting 40 to 50 miles per gallon and that's not even counting the cars that might be running on propane, or dishwashing detergent or anything else we can think of."

And much of what is collected at the pump doesn't go to fund roads or bridges.

According to the state Department of Transportation, in 2012, about $145 million was subtracted from fuel tax revenue for various agencies and local governments, including the Department of Health and Environmental Control, the Department of Agriculture and a state watercraft fund.

Cleary is shepherding a bill on transportation funding that will offer senators a menu of funding choices through amendments, the idea being that the Senate can pick and choose what funding mechanism it can stomach, whether it is increased driver's license fees or indexing the gas tax for inflation. The fees for alternative fuel vehicles are among the choices.

Now increasing the gas tax isn't among the choices on that bill.Separate legislation to increase the gas tax has been filed, but Gov. Nikki Haley has threatened to veto any such increase.

Instead, Haley has suggested that lawmakers shake the General Fund's "money tree," the difference in annual revenue estimates from first to final projections she says average more than $100 million each year.

Currently, South Carolina taxpayers can earn a tax credit for the purchase or lease of an alternative fuel vehicle equal to 20 percent of what the federal tax credit would be, according to the law, which in most cases doesn't amount to more than $700.

That is why some senators want to increase the credit to $1,000. However, not many file for credits, perhaps because of confusion.

The federal government phased out its credits and while South Carolina law treats the federal credits as if they always will exist, the wording can confuse people.

For the 2012 fiscal year, according to the Department of Revenue, 39 vehicle owners claimed the alternative vehicle credit, for a total of $112,436, according to agency spokeswoman Samantha Cheek.

Meanwhile, the number of alternative fuel vehicles is growing nationwide. According to the U.S. Department of Energy, dealers nationwide sold just under 400,000 hybrid electric vehicles in 2012, a dramatic increase from 2004, when fewer than 100,000 of the vehicles were sold.

Other states that have looked at collecting revenue from owners of alternative fueled vehicles, including hybrid electric and all-electric, have come up with a variety of methods. 

In Oregon, for example, owners pay $43 annually. In Washington, electric-powered vehicles pay $100 annually. Vehicles powered by propane and natural gas pay according to their weight, with fees ranging from $45 to $250. In Iowa, the annual fee is $25 unless the vehicles are five years old or older, in which case the fee is $15. In Arizona, owners pay a license tax of $4 per $100 assessed value, that being 1 percent of the manufacturer's base retail price. The minimum tax is $5 per year. And in Louisiana, alternative fuel vehicle owners pay a tax annually of either $120 or 80 percent of the current special fuels tax.

"If these things are going to cut down on the use of gasoline, which is our only source of income for highway construction, we've got to figure a way to generate income for DOT," said Sen. Billy O'Dell, a Ware Shoals Republican who is among the sponsors of the tax credit for alternative fueled vehicles.

O'Dell said it's important for the state also to promote the usage of non-fossil fuels, the idea behind tax credits. "It's going to help the environment as well as make us more self-sufficient in our usage of power," he said.

Bill Ross, executive director of the South Carolina Alliance To Fix Our Roads, said lawmakers have to address the issue of vehicles with alternative fuels because their numbers will only increase. 

"I don't think you have much choice in the long run," he said of fees. "Because we're going to continue to see more and more alternative vehicles and you're going to see a continued decline in the use of motor fuel."


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