Georgia’s Transportation Funding Act Of 2015 (HB 170) – Impact On Local Governments

The House of Representatives of the Georgia General Assembly (the “House”) passed a bill on March 5, 2015 known as the Transportation Funding Act of 2015 or House Bill 170 (“HB 170”) to address critical transportation needs in the State of Georgia (the “State”).  Following the House’s passage, a conference committee was appointed and subsequently the conference committee’s report was adopted. HB 170 was sent to and signed by the Governor on May 4, 2015.

For local governments, the immediate effect of HB 170 on cities, counties and schools will be to cap local sales and use taxes (SPLOST and E-SPLOST) on the sale of motor fuel, including diesel fuel, at $3.00 per gallon. Above $3.00 per gallon, local sales and use taxes will not be collected on the sale of motor fuel. Local sales and use taxes currently in effect will not be affected otherwise.

HB 170 also authorizes a region not currently collecting transportation special purpose local option sales tax (“TSPLOST”) to self-start the process for the collection of a TSPLOST by adopting a resolution from a majority of the counties located within the region and allows the rate to be a fractional rate of 0.05% up to a maximum rate of 1.0%. HB 106, which was passed by the State Legislature to clarify and amend certain provision of HB 170, authorizes any county not currently in a designated region to impose a single county TSPLOST at a fractional rate of 0.05% up to a maximum rate of 1.0% for a period not to exceed five years. This authority begins in July of 2017 for counties outside of the metro Atlanta region. Those counties in the metro Atlanta region may impose the single county TSPLOST beginning July 2016. Any such TSPLOST is subject to voter approval by referendum.

At the State of Georgia level, the effects of HB 170 are much more significant. HB 170 phases out the State’s 4% sales and use tax on motor fuel. In exchange, HB 170 raises the excise tax to $0.26 cents per gallon on gasoline and $0.29 per gallon on diesel, the collection of which will be dedicated to transportation funding. HB 170 also (i) creates an up to $100 fee on heavy trucks, depending on their weight; (ii) eliminates the $5,000 state income tax credit for buying an electric vehicle; (iii) impacts owners of total-electric cars, who will now pay a $200 annual fee ($300 for commercial vehicles); (iv) adds an additional $5.00 per night statewide hotel/motel tax dedicated to transportation; and (v) sunsets a 1% sales and use tax exemption for aviation fuel.

HB 170 will reshape the way the State (and local governments to a lesser degree) fund transportation projects and it is expected to raise more than $900 million and finance much of the needed highway improvements and improvements for neighborhoods needing better transportation infrastructure.