Today SD Governor Dennis Daugaard signed the massive roads and bridges funding bill into law. During the legislative session I’ve mostly avoided blogging too much about the bill. That is partly due to the fact there were two versions of the bill to begin with, one was Senate Vehle’s proposal (SB 1) and the other was Governor Daugaard’s proposal (HB 1131). Daugaard’s version of the bill was killed. But then the contents of that bill were used replace the contents of SB1 via hoghousing. SB 1 went through many changes both in committees and on the floors of both chambers. Now that the bill can no longer be changed it is worth looking at what is actually in it.
SB 1 – SoDakLiberty Posts – Revise certain taxes and fees to fund improvements to public roads and bridges in South Dakota, to increase the maximum speed limit on interstate highways, and to declare an emergency.
The bill has 31 sections. Here is a brief summary of what each section appears to do (this is cut down a lot from my original draft).
Section 1 – Section 1 creates a local bridge improvement grant fund. This fund can be used by any local government to construct, reconstruct, or repair bridges. It will be up to the Transportation Commission to determine who gets the grant money. In order to receive the grant a county must have “adopted and annually updated its county highway and bridge improvement plan pursuant to the provisions of section 3 of this Act”. The county must also have imposed a county wheel tax per § 32-5A-1.
For those unfamiliar with the wheel tax, it currently allows counties to tax each vehicle $4 per wheel up to a total of $16 (basically up to four wheels). If a county has not implemented this already existing tax the state will not help them out with this new grant money. Spoiler alert! Section 25 of this act actually increases the wheel tax from $4 per wheel to $5 per wheel. It also changes the total amount from $16 (four wheels) to $60 (12 wheels).
Section 2 – Section 2 authorizes the Transportation Commission to create rules (pursuant to Chapter 1-26) to decide how local governments will apply for and how they will choose which projects will get the grant money.
Section 3 – Section 3 authorizes the Transportation Commission to create rules (pursuant to Chapter 1-26) to set the requirements for a “county highway and bridge improvement plan that details proposed county highway and bridge improvement projects in a county for the next five years.” Any county that doesn’t create the plan will not be allowed to receive the grant funds created in section 1 of this act.
Section 4 – This section amends § 32-11-34, Local government highway and bridge fund.
This section of the bill states that every quarter $1,750,000 will be transferred from the Local government highway and bridge fund to the newly created local bridge improvement grant fund. Currently the money in the older Local government highway and bridge fund is allocated to the counties and municipalities as laid out in § 32-11-35. Now the change in this bill will take $1.75 million out of that fund each quarter and place it in the new grant fund created in Section 1 of this act. I wonder if there will be some municipalities and counties unhappy with this change. It could lead to fewer funds for counties and municipalities that choose not to play by the rules set forth by the Transportation Commission. It also seems to be a way to co-opt funds meant for all the counties and municipalities into areas favored by the Transportation Commission.
Section 5 – Section five changes the vehicle excise tax (§ 32-5B-1) from its current 3% to the new rate of 4%. That is actually quite a large increase.
Section 6 – Section six amends § 32-5B-1.4. It just makes sure that if a dealer licenses a vehicle for use at the dealership that they also pay the new 4% excise tax.
Section 7 – This is the section where many of the new gas taxes are implemented and amends § 10-47B-4. Here are the changes in this section:
- Motor fuel (except ethyl alcohol, methyl alcohol, biodiesel, biodiesel blends, and aviation gasoline) has its tax increased from $0.22 to $0.28 per gallon. This is the six cent increase being reported by the media.
- Biodiesel and biodiesel blends are added to the exemptions in this section. Previously it was only ethyl alcohol, methyl alcohol, and aviation gasoline listed as exempt.
- Special fuel (except jet fuel) has its tax increased from $0.22 to $0.28 per gallon.
- Ethyl alcohol and methyl alcohol has its tax increased from $0.08 to $0.14 per gallon.
- A new section of gas tax is created for biodiesel and biodiesel blends ant it is taxed at $0.28, unless it meets the requirements of Section 10 of this act (that is coming up).
Section 8 – This section just sets the fuel excise tax rate for motor fuel and special fuel at $.28 per gallon. This section was used in conjunction with Section 7.
Section 9 – This section sets the fuel excise tax rate for ethyl alcohol and methyl alcohol fuel to $.14 per gallon. This section was used in conjunction with Section 7.
Section 10 – This expands upon the gas tax imposed on biodiesel or biodiesel blends. It says the tax “shall be reduced by two cents per gallon in the quarter after biodiesel production facilities in South Dakota reach a name plate capacity of at least twenty million gallons per year and fully produce at least ten million gallons of biodiesel within one year as determined by the secretary of revenue.” So if enough biodiesel is created in the state there will be a two-cent reduction in the tax. But then it goes on to say that the two-cent reduction will be “repealed in the quarter after thirty-five million gallons of taxed biodiesel and biodiesel blended fuel are sold”. I wonder how the biodiesel industry feels about the short-term and slight tax-break. Personally I think it complicates things and biodiesel should just count as normal motor fuel…
Section 11 – This section of the act repeals old session laws that deal with the fuel excise tax rate and with biodiesel.
Section 12 – Section 12 increases the fees for noncommercial motor vehicles as set in § 32-5-6. Here are the increases:
- Vehicles 2,000 lbs or less goes from a $30 fee to a $36 fee.
- Vehicles 2,001 lbs to 4,000 lbs goes from a $60 fee to a $72 fee.
- Vehicles 4,001 lbs to 6,000 lbs goes from a $90 fee to a $108 fee.
- Vehicles over 6,000 lbs goes from a $120 fee to a $140 fee.
Section 13 – Section thirteen changes the fees for noncommercial vehicles other than automobiles, pickup trucks, or vans (§ 32-5-6.3). Here are the increases:
- Vehicles 8,000 lbs or less goes from a $100 fee to a $120 fee.
- For vehicles over 8,000 lbs there is an incremental fee every 2,000 lbs. That fee goes from $10 to a fee of $12 per 2,000 lbs.
- Currently vehicles over 20,000 lbs the license fee is 60% of the fee that would be for commercial vehicles of the equivalent weight. This act says any vehicles from July 1, 2015, to June 30, 2016, will now pay 70% of the fee that would be charged for an equivalent commercial vehicle. From July 1, 2016, on it would go up to 80% of the fee that would be charged for an equivalent commercial vehicle.
That seems to be a large increase for the vehicles over 20,000 lbs. One thing I wonder though. This act was signed with an emergency clause saying it will take effect on April 1, 2015. The new tax for vehicles over 20,000 does not take effect until July 1 per this section. This section also removes the language for the current 60% rate on those vehicles. Does that mean that any of these vehicles that get their license tabs renewed in April, May, and June of this year don’t have to pay the fee?
Section 14 – Section 14 increases the license fee for noncommercial motor homes (§ 32-5-6.1). Here are the fee increases:
- Motor homes 6,000 lbs or less goes from a $90 fee to a $108 fee.
- Motor homes 6,001 lbs to 8,000 lbs goes from a $120 fee to a $144 fee.
- Motor homes from 8,001 to 10,000 lbs goes from a $150 fee to a $188 fee.
- Motor homes over 10,000 lbs are have a fee of $30 for every 2,000 lbs over 10,000 lbs. That fee is raised to $36.
Section 15 – Section 15 increases the fees for recreational vehicles and noncommercial trailers and semitrailers (§ 32-5-8). Here are the increases:
- 1,000 lbs or less goes from a fee of $15 to a fee of $18.
- 1,001 lbs to 2,000 lbs goes from a fee $30 to a fee of $36
- 2,001 lbs to 3,000 lbs goes from a fee of $45 to a fee of $54
- 3,001 lbs to 4,000 lbs goes from a fee of $60 to a fee of $72
- 4,001 lbs to 5,000 lbs goes from a fee of $75 to a fee of $90
- 5,001 lbs to 6,000 lbs goes from a fee of $90 to a fee of $108
- 6,001 lbs to 7,000 lbs goes from a fee of $105 to a fee of $126
- 7,001 lbs to 8,000 lbs goes from a fee of $120 to a fee of $144
- 8,001 lbs to 9,000 lbs goes from a fee of $135 to a fee of $162
- 9,001 lbs to 10,000 lbs goes from a fee of $150 to a fee of $180
- Each 1,000 lbs over 10,000 lbs current gets of a fee of $15 per 1,000 lbs. That fee is increased to $18 per 1,000 lbs.
Section 16 – This section changes the licenses fees for motorcycles (§ 32-5-9). Here are the increases:
- Motorcycles with a piston displacement of less than 350 cubic cm goes from a fee of $14.50 to a fee of $18
- Currently motorcycles with a piston displacement over 350 cubic cm has a fee of $17, now motorcycles with a piston displacement from 350 cubic cm to 1,000 cubic cm will have a fee of $21.
- Motorcycles with a piston displacement of greater than 1,000 cubic cm will have a fee of $24
An interesting side note: the legislature passed SB 94 this year, which imposes a license fee on electric-powered motorcycles. This act also amends (§ 32-5-9). Does that mean the LRC has to fix the language of SB 94 before it can take effect this summer? The Governor signed SB 94 into law first, but SB 1 takes effect first.
Section 17 – Section 17 increases the fee for the issuance of metal numerical license plates to dealer (§ 32-6B-21) from $84 per year to $101 per year.
Section 18 – Section 18 increases the fee for the issue of metal numerical license plates to motorcycle dealers and trailer dealers (§ 32-6B-23) from $20 per plate to $24 per plate.
Section 19 – Section 19 increases the fee for the issue of metal numerical license plates to an auction agency (§ 32-6B-36.3) from a fee of $84 yearly to a fee of $101 yearly.
Section 20 – This section changes the county levy to match federal aid to roads and bridges (§ 10-12-13). This is an odd one that tiers counties. Currently counties can levy an annual property tax not to exceed $1.20 per $1,000 of taxable valuation. Now three tiers are setup for counties depending upon the counties total taxable valuation:
- A levy not to exceed $1.20 per $1,000 of taxable valuation if the counties total taxable valuation is $1,000,000,000 or less.
- A levy not to exceed $0.90 per $1,000 of taxable valuation if the counties total taxable valuation is more than $1,000,000,000 but less than $2,000,000,000
- A levy not to exceed $0.60 per $1,000 of taxable valuation if the counties total taxable valuation is $2,000,000,000 or more.
That seems like it would provide fewer funds for larger counties. But this section of the bill also removes the need for matching federal aid grants to be used. Removing that provision means the counties can repair their infrastructure with local control and potentially much cheaper.
This bill also makes the levy exempt from the property tax relief set forth in Chapter 10-13 if Section 21 of this Act (coming up next) is followed. But each year after a tax is implemented it can be raised “by applying the growth and the index factor pursuant to the provisions of § 10-13-35.”
Section 21 – Section 21 says that a county may pass a resolution to implement a tax as laid out in Section 20 above by a 2/3 vote on or before July 15th. Most importantly the increased tax levy is subject to the referendum process, so voters can stop a property tax increase if they want to. I like the ability of the tax increase to be stopped by the voters, it ensure the county truly makes the case for higher tax levies.
Section 22 – Section 22 allows the voters of organized townships to authorize an annual property tax levy not to exceed $0.50 per $1,000 of taxable valuation for the “secondary road capital improvement fund for projects and purposes as defined in section 23 of this Act”.
This secondary road capital improvements tax levy is in addition to the levy already authorized by § 10-12-28, which currently limits township levy to no more than $3.00 per $1,000 of taxable valuation. This new levy is also in addition to the levy set forth in § 31-13-22, which currently limits township snow removal reserve fund levy to no more than $0.60 per $1,000 of taxable valuation.
If all three of these levies are added together it means a township can levy no more than $4.10 per $1,000 of taxable valuation.
Section 23 – This section authorizes townships to create the secondary road capital improvement fund used in Section 22 of this act. The fund can be used for “the purpose of constructing, reconstructing, repairing, and maintaining secondary roads, bridges, and culverts under the jurisdiction of the township board of supervisors.”
Section 24 – Section 24 expands the scope of the Department of Transportation (DOT). Here are some bullet points for what Section 24 does:
- The DOT has to establish “performance standards designed to measure the overall condition of the highways and bridges on the state highway system”.
- The DOT has to establish 10-year goals for maintenance of the conditions.
- The DOT may use standards that meet the requirements set forth by the US DOT. I have a feeling that may will be interpreted by DOT as must.
- The DOT will provide a report by the 4th Tuesday in Jan to the House and Senate committees on transportation relating to the current and projected status of the highways and bridges.
- The report will also show the progress towards the 10-year goal.
- Finally, if for some reason the projection shows the 10-year gold will not be met, the DOT has to provide how much more money they want to keep the 10-year goal on track.
Section 25 – This section increases the wheel tax (§ 32-5A-1). The wheel tax increases from $4 per wheel to $5 per wheel. It also changes the total amount from $16 (four wheels) to $60 (12 wheels). I believe the increase from 4 to 12 wheels is likely to cause some people to be unhappy for sure… But it will be a good way for counties to raise some extra revenue.
Section 26 – Section 26 revises the maximum speed limit on the Interstate (§ 32-25-4) from 75 mph to 80 mph. As someone who does a lot of long-distance travel I like this change.. But… I hate that this was added to SB 1. This section is NOT germane to the subject of the bill and should have been introduced as its own piece of legislation. Yes, the title of the bill was amended to make it germane. But that just created a different issue because bills are only supposed to have one subject matter.
Section 27 – This section repeals the inventory tax on fuel in storage (§ 10-47B-14). If I remember the testimony on this section correctly it sounds like most gas stations do not follow the provisions of this bit of code being repealed. Removing this provision prevents small business owners from being fined for not complying with a law too few people understood. I thought this was good, but also feel it maybe should have been done as a separate piece of legislation.
Section 28 – This section repeals the inventory tax on special fuel and jet fuel (§ 10-47B-15). Just like Section 27 I feel it is a good change, but it is questionable if it should have been included in SB 1.
Section 29 – This section repeals § 10-47B-16. It sets for the method to determine the amount of fuel to be taxed by inventory tax. The code being repealed in this section relate the code being repealed in Section 27 and 28 of this act. Just like Section 27 and 28, I feel this should not have been included in SB1. It simply isn’t germane to the purpose of this bill.
Section 30 – This section repeals § 10-47B-17. This bit of code being repeals also works in conjunction with the code being repealed in Sections 27 and 28 of this bill. Technically I think Sections 27, 28, 29, and 30 of this bill should have been introduced as its own piece of legislation. That would have been a single subject matter bill that followed the SD constitution.
Section 31 – This is the emergency clause portion of the bill. It makes the act take effect on April 1, 2015, instead of waiting for summer like most bills.