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Transportation Advisory Committee
Progress Report #2 to the
Blue Ribbon Transportation Finance
and Implementation Panel
Durango, Colorado
September 10, 2007
1
Transportation Advisory Committee
Progress Report #2
Introduction &
Review of Progress Report #1
More Revenue Options
Your Feedback
2
Transportation Advisory Committee
Progress Report #2
Introduction
3
Progress Report #2
This report follows the August 24 report
and contains advisory options –
not recommendations
– to the Blue Ribbon Panel.
4
Recap of Report #1 Presentation
Funding Thresholds Presented:
$340 million
$500 million
$1.0 billion
$1.5 billion
$2.6 billion
5
Recap of Report #1 Presentation
Revenue Options:
Highway Maintenance Fee
per vehicle
Increase Motor Fuel Tax
with and without indexing
Increase Income Tax
Charge State Visitor Tax
Combination Illustration
using Fuel Tax,
Vehicle Fee, Visitor Tax
6
Recap of Report #1 Presentation
Feedback from Blue Ribbon Panel:
• Panel needs to determine appropriate shares for
local, transit and other transportation elements
• Add a $3.6 billion threshold to sustain all modes
and levels (under 2030 Plan State / Local / Transit).
• Future of existing statutory revenue sources:
SB 97-001 and HB 02-1310.
• Fee on Vehicle Miles Traveled (VMT)
7
Request for Report #2 Presentation
Funding Thresholds:
$340 million
$500 million
$1.0 billion
$1.5 billion
$2.6 billion
$3.6 billion
8
Transportation Advisory Committee
Progress Report #2
Severance Tax
9
Colorado Severance
Taxes
Prepared by the Office of
State Planning & Budgeting
10
Severance Taxes
Collected primarily on the production value of oil
and gas.
½ to Department of Natural Resources, ½ to
Department of Local Affairs
Operational Account at DNR is largely subject of debate
(roughly ¼ of all severance tax revenue).
Extremelyvolatile due to sensitivity to price of
commodities. Potential forecast error is large.
11
Collections ($millions)
$50
$100
$150
$200
$250
$0
FY 90-91
FY 91-92
FY 92-93
FY 93-94
FY 94-95
FY 95-96
FY 96-97
FY 97-98
FY 98-99
FY 99-00
FY 00-01
FY 01-02
FY 02-03
FY 03-04
FY 04-05
FY 05-06
*FY 06-07
*FY 07-08
*FY 08-09
*FY 09-10
Severance Tax Volatility
*FY 10-11
12
-100%
-50%
50%
100%
150%
200%
250%
300%
350%
0%
FY 90-91
FY 91-92
FY 92-93
FY 93-94
FY 94-95
FY 95-96
FY 96-97
FY 97-98
FY 98-99
FY 99-00
FY 00-01
FY 01-02
FY 02-03
FY 03-04
FY 04-05
FY 05-06
*FY 06-07
*FY 07-08
Severance Tax Volatility
*FY 08-09
*FY 09-10
*FY 10-11
13
How Does Colorado Compare?
Estimated Total Tax Burden FY 2005-06
4th out of 5 states in
State Effective Tax Rate
terms of total tax
burden on oil/gas/ Wyoming 11.2%
mineral production New Mexico 9.4%
Only Utah has less
Oklahoma 7.0%
production.
Colorado 5.7%
Utah 4.5%
14
How Does Colorado Compare?
Source: Legislative Council Staff 15
How Does Colorado Compare?
Would have had to increase total tax
burden by approximately $250 million in
FY 2005-06 to reach average total tax
burden of the surveyed states.
TotalState Severance Tax Collections were
$234 million.
16
Additional Considerations
Ad Valorem Tax Credit
State Severance Tax Rates
Minimum Tax Rate
Note: All require voter-approval.
17
Ad Valorem Tax Credit
Producers get non-refundable credit on
87.5% of the property taxes paid on the
production value of extracted minerals.
Worth $100 million to $120 million per year
over the next several years.
Could fluctuate wildly with price changes and
impact would be felt greatest in Weld County
because higher property tax rates than other
producing counties.
18
Tax Rate Changes
Estimated Impacts of Severance Tax Rate Changes*
($millions)
FY 06-07 FY 07-08 FY 08-09
Tax Rate Increase Low High Low High Low High
1% $43.0 $65.0 $47.0 $70.0 $45.0 $67.0
2% $87.0 $130.0 $93.0 $140.0 $89.0 $134.0
3% $130.0 $195.0 $140.0 $209.0 $134.0 $200.0
*Based on forecasted production values of oil and gas provided by Legislative Council Staff and the
Department of Local Affairs
19
Minimum Tax Rate
Could function similarly to the federal
Alternative Minimum Tax. If, after
deductions and credits, a producer’s
liability falls below a certain threshold, then
they would be required to pay, based on a
minimum tax rate.
Setting
a 2% floor would have increased FY
2005-06 collections by $32.7 million (LCS).
20
Transportation Advisory Committee
Progress Report #2
More Revenue Options
21
Option #6
Extend State Sales & Use Tax
to Motor Fuel
Description: Eliminate the sales & use tax
exemption on motor fuels.
Why Considered? Revenue fluctuates with fuel
price.
Should largely protect revenues from effects of
inflation.
TABOR/Limitation: Refer to voters.
Transit ineligible under current interpretation.
Current Rate: No current sales tax on fuel. 22
Option #6
Extend State Sales & Use Tax
to Motor Fuel
Funding Generated Sales & Use Tax
$244 million 2.9%
Assume sales tax on about $3 per gallon
for gas and diesel, including excise tax.
Each 1% adds approximately
$84 million of annual revenue.
inclusive of motor fuel tax; 2008 dollars
23
Option #6
Extend State Sales & Use Tax
to Motor Fuel
Comparison of Sales Tax on Fuel
vs. Motor Fuel Tax
$900
$800 2.9% Sales Tax
Annual Revenue
on Fuel
$700
Generated
$600 9¢ hike in Motor
Fuel Tax;
$500 CPI Index.
$400 9¢ hike in Motor
$300 Fuel Tax;
No Index.
$200
10
13
16
19
22
25
28
31
34
20
20
20
20
20
20
20
20
20
Year
24
Question
How does Colorado’s tax on motor fuel compare to
our neighbors?
Answer: 2.9% sales tax would add about 9¢ per
gallon, raising gas tax to 31¢ and diesel to 29.5¢.
This is higher than the tax of any bordering state.
25
Gasoline and Diesel Fuel Excise Taxes by State
36¢
Washington
36¢ 19¢ 27.6¢
27.0¢ 20.5¢ VT Maine
23¢ 25¢ 28.8¢
Montana North Dakota West Virginia
24¢ 27.8¢ 23¢ 20¢ 20.5¢
Oregon Minnesota
24¢ 25¢ 20¢ 25.0¢ NH 18¢, 18¢
Idaho 22¢ 30.9¢
Wisconsin New York MA 21¢, 21¢
25¢ 13¢ South Dakota 19¢ 23.2¢
22¢ 30.9¢ Michigan
Wyoming RI 30¢, 30¢
20.7¢ 15¢ 31.2¢
13¢ CT 25¢, 37¢
23¢ 27¢ Iowa Pennsylvania
Nevada Nebraska 22.5¢ 28¢ 38.1¢ NJ 14.5¢, 17.5¢
19¢ 18¢
27¢ 24.5¢ 27¢ Ohio
Illinois Indiana DE 23¢, 22¢
Utah 22¢ 16¢ 28¢
18¢ 21.5¢ 17.5¢
California 24.5¢ Colorado 17¢ MD 23.5¢, 24.3¢
24¢ Virginia
18¢ 20.5¢ Kansas Missouri 17.1¢, 14.1¢ 17.5¢ DC 20¢, 20¢
26¢ 17¢ Kentucky
29.7¢, 29.7¢
18¢ 21¢, 18¢ North Carolina
16¢ Tennessee
Arizona 17¢ 21.5¢
Oklahoma 16¢
18¢ New Mexico Arkansas
13¢ S. Carolina
18¢ 22.5¢ 7.5¢
18¢ 16¢ 16¢
Mississippi Alabama Georgia
18¢ 17¢ 7.5¢
20¢
Texas 20¢
8¢ 20¢ Louisiana
Alaska 20¢
8¢ 4¢ 16¢
Florida Puerto Rico
16¢ 4¢ 8¢
Hawaii
16¢
Gasoline Diesel Fuel
Source: American Petroleum Institute – 8/13/2007
1. Totals inclusive of excise taxes and various petroleum business taxes; totals do not include federal excise taxes or other state taxes such as sales taxes, Underground Storage
Tank (UST) taxes, inspection fees, environmental assurance fees, et al.
2. Florida has statewide gas tax of 15.3 cpg for gasoline and diesel comprised of 4 cpg excise tax and 11.3 cpg sales tax; diesel is taxed an additional 13.2 cents in additional state
and local option gas taxes to total 28.5 cpg
3. New Jersey gasoline excise tax of 10.5 cpg and 13.5 cpg for diesel. Totals also include 4 cpg Petroleum Products Gross Receipts Tax
4. New York includes 8 cent per gallon (cpg) excise tax, 16.6cpg/14.85 cpg (gas/diesel) Petroleum Business Tax, a spill tax of 0.3 cpg collected on gasoline and diesel and a
petroleum testing fee of 0.05 cent per gallon levied on gasoline (only).
5. Pennsylvania includes 12 cpg excise tax on gas and diesel; 19.2 cpg oil company franchise tax on liquid fuels (primarily gasoline) and 26.1 cpg oil company franchise tax on fuels
(primarily diesel)
26 6. Tennessee includes 20 cpg excise tax on gasoline, 18 cpg excise tax on diesel; gasoline also includes 1 cpg special petroleum tax
Gasoline and Diesel Fuel Total Taxes by State
36¢
Washington
36¢ 20¢ 29.1¢
27.8¢ 31.5¢ VT Maine
23¢ 26¢ 29.5¢
Montana North Dakota West Virginia
25¢ 28.6¢ 23¢ 20¢ 31.5¢
Oregon Minnesota
24.3¢ 25¢ 20¢ 40.9¢ NH 19.6¢, 19.6¢
Idaho 24¢ 32.9¢
Wisconsin New York MA 23.5¢, 23.5¢
25¢ 14¢ South Dakota 36.2¢ 38.9¢
24¢ 32.9¢ Michigan
Wyoming RI 31¢, 31¢
21.7¢ 32.9¢ 32.3¢
14¢ CT 43.9¢, 37¢
32.5¢ 27.9¢ Iowa Pennsylvania
Nevada Nebraska 23.5¢ 28¢ 39.2¢ NJ 14.5¢, 17.5¢
40.6¢ 31.6¢
28.6¢ 24.5¢ 27.3¢ Ohio
Illinois Indiana DE 23¢, 22¢
Utah 22¢ 41.8¢ 28¢
44.4¢ 41.3¢ 19.6¢
California 24.5¢ Colorado 17.6¢ MD 23.5¢, 24.3¢
25¢ Virginia
45.0¢ 20.5¢ Kansas Missouri 18.5¢, 15.5¢ 19.6¢ DC 20¢, 20¢
27¢ 17.6¢ Kentucky
30¢, 30¢
19¢ 21.4¢, 18.4¢ North Carolina
17¢ Tennessee
Arizona 18¢ 21.8¢
Oklahoma 16.8¢
28¢ New Mexico Arkansas
14¢ S. Carolina
19¢ 22.8¢ 26.5
18.8¢ 20.2¢ 16.8¢
Mississippi Alabama Georgia
18.8¢ 21.2¢ 25¢
20¢
Texas 20¢
8¢ 20¢ Louisiana
Alaska 20¢
8¢ 32.6¢ 16¢
Florida Puerto Rico
32.6¢ 28.5¢ 8¢
Hawaii
45.1¢
Gasoline Diesel Fuel
Source: American Petroleum Institute – 8/13/2007
1. Totals inclusive of all excise taxes, various petroleum business taxes, sales taxes specifically on gasoline/diesel, Underground Storage Tank (UST) taxes, inspection fees,
environmental assurance fees, et al.
2. Totals do not include federal 18.4 cpg excise tax on gasoline and 24.4 cpg excise tax on diesel
27
Option #7
Extend the State Sales Tax
to Vehicle Repair Services
Description: Dedicate 2.9% state sales tax to
vehicle repairs and maintenance.
Why Considered? SB 97-01 set precedent of
using money from vehicle related activities.
TABOR/Limitation: Refer to voters.
Transit eligible.
Current Rate: 2.9% on parts. 0% on labor.
2.9% on services generates about $37.8 million. 2008 dollars
28
Option #8
Increase the State Sales & Use Tax
Description: Dedicate additional state sales tax
on existing sales tax base.
Why Considered? At state level only, Colorado
has lowest sales/use tax burden.
For commerce to thrive, residents and business
need a good transportation network.
TABOR/Limitation: Refer to voters.
Transit eligible.
Current Rate: 2.9% state only.
Additional .1% = $89.2M 2008 dollars
29
Option #8
Increase the State Sales & Use Tax
Aggregate rates are weighted averages that
include county and city rates
Source: Sales Tax Clearinghouse
30
Option #8
Increase the State Sales & Use Tax
Funding Incremental Total State
Threshold Tax Sales Tax
$340 million .36% 3.26%
$500 million .53% 3.43%
$1.0 billion 1.07% 3.97%
$1.5 billion 1.60% 4.50%
$2.6 billion 2.77% 5.67%
$3.6 billion 3.84% 6.74%
31
Question
What if Colorado removed sales tax exemptions on
certain goods?
Answer: $1.58 billion in total 2006 exemptions.
Two thirds from the five largest exemptions:
1.Tangible property resold within another product.
2.Food for domestic consumption.
3.Motor fuels.
4.Residential heat, light, power.
5.Sales of construction materials to
charities/schools.
See report appendix for complete list. 32
Question
What share of total sales & use tax is derived from
vehicle related activities?
Answer: See table. SB 97-01 transfers 10.355% of sales &
use tax only in years when General Fund is fully funded.
Vehicle & Parts Vehicle &
S.B. 97-01
Year % of Total Parts Tax
Sales & Use Transfer
Collected
FY 03 16.3% $296 M $0
FY 04 16.0% $305 M $0
FY 05 14.9% $300 M $0
FY 06 13.8% $292 M $220 M
33
Option #9
Replace the Motor Fuel Tax
with a State Sales & Use Tax on Fuels
Description: Replace the 22¢ / 20.5¢ motor fuel excise tax
and with a sales tax set at a rate that fully replaces
current revenues.
Why Considered? Revenue fluctuates with fuel price.
Should largely protect revenues from effects of inflation
TABOR/Limitation: Refer to voters.
Transit ineligible under current restrictions.
Rate: To replace motor fuel tax revenues in FY 10, rate is 7.36%
Assumes about $3.00/gallon fuel, less current excise tax.
34
Option #9
Replace the Motor Fuel Tax
with a State Sales & Use Tax on Fuels
Funding Generated Sales & Use Tax
Replace – break even 7.36%
Each 1% adds approximately
$78 million of annual revenue.
exclusive of motor fuel tax; 2008 dollars
35
Option #9
Replace the Motor Fuel Tax
with a State Sales & Use Tax on Fuels
7.36% Sales Tax on Fuel vs.
Existing Motor Fuel Tax
2,500,000
2,000,000
Annual Revenue
Sales Tax Revenues
1,500,000
Motor Fuel Tax
1,000,000
Revenues
500,000
0
2010
2013
2016
2019
2022
2025
2028
2031
2034
Fiscal Year
36
Option #10
Replace the Motor Fuel Tax
with an Increased General Sales Tax
Description: Replace the 22¢ / 20.5¢ motor fuel excise
tax and with a general sales tax set at a rate that fully
replaces current revenues.
Why Considered? Option #9 revenue fluctuates with fuel
price. All citizens benefit from transportation system.
TABOR/Limitation: Refer to voters.
Transit eligible.
Rate: To replace motor fuel tax revenues in FY 10, increase
the general state sales tax from 2.9% by .65% to 3.55%.
37
Option #10
Replace the Motor Fuel Tax
with an Increased General Sales Tax
State Sales &
Funding Generated
Use Tax
+.65% to
Replace – break even
3.55%
Each .1% adds approximately
$89 million of annual revenue.
2008 dollars
38
Option #9 vs. Option #10
Comparison:
Option #9 – Impose a sales & use tax on fuel
of 7.36%
=
Option #10 – Increase sales & use tax on
existing tax base from 2.9% by .65% to 3.55%
39
Local Options
Local Excise Tax on Motor Fuel
Description: Collect per gallon excise tax at point of sale
for cities and counties.
Pros: Still must be spent per constitution on highways
but gives locals control over revenues and spending.
Cons: Possible competition among local entities,
statewide fragmentation. Additive to national and
state excise tax. State collects at the distributor; high
administrative burden.
TABOR/Limitation: Refer to local voters.
Transit ineligible under current restrictions.
Need GA to grant authority to locals to put question to
their voters.
40
Local Options
Local Sales Tax on Motor Fuel
Description: Allow local governments to impose a sales tax
on motor fuel.
Pros: Allows local control over revenues and spending,
local taxes, statewide system.
Cons: Possible competition among local entities, statewide
fragmentation. Retailers may lose sales to neighboring
counties with lower tax. Local taxes, though a
statewide transportation system.
TABOR/Limitation: Refer to voters.
Transit ineligible under current restrictions.
Need GA to grant authority to locals to put question to their
voters.
41
Transportation Advisory Committee
Progress Report #2
Still to Come
Vehicle Miles Traveled Fee New Wheels on the Road
Public Private Partnerships Delivery Tax
Tolling Impact Fees
Bonding Statewide Transit Needs
Use of Fees and Fines/
Possible Elimination of “Off the Top”
42
Transportation Advisory Committee
Progress Report #2
Q&A
43
Extra Slides
44
Question
What is the impact of the federal itemized
deduction for state income tax?
Answer:
The estimated average marginal federal income tax rate
for taxpayers who itemize their deductions is 24%.
Approximately 77% of Colorado income tax is paid by
taxpayers who use itemized deductions.
Actual cost of state income tax increase for individuals is
18.5% smaller.
Additional .1% income tax raises $129 million, 2008 $.
45
Question
What % of each of CDOT’s revenue
sources are locally shared?
Answer: Would require state/local analysis of...
46
CDOT Revenue Sources
Highway Users Tax Fund
Miscellaneous CDOT Revenue
Construction Earnings
Rail Bank
State Infrastructure Bank
Construction Workers' Safety
Limited Gaming Fund
Capital Development Funds
GF to HUTF transfer for Construction (S.B. 97-001)
GF to HUTF transfer (H.B. 02-1310)
Local Match & Reimbursements
Federal Highway Administration Funds
Total FTA CDOT Administered:
Total Aeronautics Funds to CDOT
Total Transportation Safety (Driver Behavior) 47
Threshold Costs
(per Colorado resident per day)
Funding Threshold Per Resident Per Day*
$340 million 19.6¢
$500 million 28.8¢
$1.0 billion 57.6¢
$1.5 billion 86.4¢
$2.6 billion $1.50
$3.6 billion $2.08
* US Census Bureau 2006 estimate of 4,753,377 pop.
48
Option #5
Implement a Combination
of the Prior Options
Funding Threshold Fee & Tax Example
+ ~8¢/gal. fuel tax
$500 million + $35 avg. vehicle fee
+ 2.74% visitor tax
Correction of 8/24.
49
Option #6
Extend State Sales & Use Tax
to Motor Fuel
Funding Extend Sales & …or Increase
Threshold Use Tax… MFT by
$340 million 3.9% 12.2 ¢
$500 million 5.7% 17.9 ¢
$1.0 billion 11.3% 35.8 ¢
$1.5 billion 17.0% 53.7 ¢
$2.6 billion 29.5% 93.1 ¢
$3.6 billion 40.8% $1.289
50
Question
How does Colorado’s tax on motor fuel
compare to our neighbors?
Answer: 2.9% sales tax would add 9¢ / gallon.
Gasoline tax/gal. Diesel tax/gal. Gasohol tax/gal.
State
Excise Other Total Excise Other Total Excise Other Total
CO .22 .22 .205 .205 .22 .22
+.09 .22 .09 .31 .205 .09 .295 .22 .09 .31
KS .24 .24 .26 .26 .24 .24
NE .271 .009 .28 .271 .003 .274 .271 .009 .28
NM .17 .01875 .18875 .21 .01875 .22875 .17 .01875 .18875
OK .16 .01 .17 .13 .01 .14 .16 .01 .17
UT .245 .245 .245 .245 .245 .246
WY .13 .01 .14 .13 .01 .14 .13 .01 .14
Avg. 0.205 0.007 0.212 0.207 0.006 0.213 0.205 0.007 0.212
51
Annual Transportation Needs
Total Transportation Needs to sustain entire
system at current levels = $3.6 billion
• Overlay Backlog $xxx
• Fix Deficient Bridges $xxx
• Reduce Congestion rate of Increase by 50% $xxx
• Add’l amount to hold congestion constant $xxx
• Local Transportation Projects $xxx
• Local Transit Needs $xxx
• Aviation Needs $xxx
• Other??? $xxx
52
Article X, Section 18
On and after July 1, 1935, the proceeds from the
imposition of any license, registration fee, or other
charge with respect to the operation of any motor
vehicle upon any public highway in this state and the
proceeds from the imposition of any excise tax on
gasoline or other liquid motor fuel except aviation
fuel used for aviation purposes shall, except costs of
administration, be used exclusively for the
construction, maintenance, and supervision of the
public highways of this state. Any taxes imposed
upon aviation fuel shall be used exclusively for
aviation purposes.
53
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