What you need to know:
- The Mat-Su Assembly will consider a new 7-cent-per-gallon tax on gasoline and diesel. The proposal is intended to generate revenue for road maintenance and construction and reduce reliance on property taxes. A public hearing is scheduled for July 15.
- The tax would not apply to aviation fuel, marine fuel or home heating fuel. It would apply to fuel sold at gas stations across the borough, including in the cities of Houston, Wasilla and Palmer. The measure does not require voter approval.
- If approved, the tax could generate $5 million annually. The average driver would pay about $28.81 more per year. Raising that same amount of income through property taxes would cost the average borough taxpayer an additional $130 per year. Unlike property taxes, a fuel tax affects both residents and visitors.
PALMER – The Mat-Su Assembly will consider whether to add a new 7-cent-per-gallon tax on all gasoline and diesel sold at pumps throughout the borough, according to a measure introduced this week.
The proposed tax is intended to reduce the borough’s reliance on property taxes while providing a new source of funding for road construction and maintenance, borough officials said.
Mat-Su does not currently tax fuel or impose a sales tax on most consumer goods.
The tax was proposed by Matanuska-Susitna Borough Manager Mike Brown and introduced at a regular assembly meeting Tuesday. A public hearing on the matter is scheduled for a regular assembly meeting July 15.
“We’re here tonight because I do think we have agreement in the community that we have a roads problem and that roads are a priority,” Brown said during the meeting. “We hear it all the time.”
Borough officials oversee about 1,100 miles of roads across a region the size of West Virginia. Another 300 miles of Mat-Su roads, many of them unpaved or below certain standards, do not receive borough maintenance.
Wear and tear on those thoroughfares brought by the region’s growing population means the borough must spend millions annually on major road improvement projects — costs currently covered primarily by property taxes, officials said.
A ballot measure approved by voters last year allows the borough to borrow and repay $33.3 million to fund seven new major road projects. It was the third such bond and road project measure approved by voters since 2020.
Adding a fuel tax could reduce the borough’s reliance on bond debt and property taxes while making visitors who fill up at the region’s gas pumps also chip in, Brown said. It could bring in about $5 million annually, he said.
“This would collect revenues from visitors and tourists that come from outside the borough. As it stands now, you sell bonds, it goes on property taxes,” he said. “This would create a revenue source where we can actually leverage some of that from others that are using our roads, and help generate revenue to support those improvements.”
The tax would not apply to aviation fuel, marine fuel, or home heating fuel, according to the proposal. It would be levied on fuel sold throughout the borough, including within the Wasilla, Palmer and Houston city limits, borough officials said.
If approved, the fuel tax would join a trio of other borough levies intended to diversify revenue away from property taxes. Mat-Su currently collects an excise tax on tobacco sales, a bed tax on short-term rentals and hotel rooms, and a voter-approved sales tax on marijuana.
As proposed, the fuel tax would cost the average Alaskan driver an additional $28.81 per year at the pump, based on the average number of miles traveled by Alaskans annually and the current average U.S. vehicle fuel economy of 27 miles per gallon, according to Federal Highway Administration and Environmental Protection Agency data.
Raising that same amount of income through the property tax mill rate would cost the average borough taxpayer about $130 per year, assembly members estimated during Tuesday’s meeting.
Mat-Su property owners currently pay a rate of 8.485 mills, or about $849 per $100,000 of assessed property value.
The proposal marks the first time such a tax has been proposed before the Mat-Su Assembly, borough finance officials said.
Anchorage is currently the only municipality in Alaska that levies its own fuel tax.
Anchorage’s fuel tax is 10 cents per gallon. The Mat-Su proposal is deliberately set below that amount, Brown said.
Alaskans pay the lowest state fuel tax in the U.S. at 8 cents per gallon. Federal taxes make up an additional 15 cents per gallon of fuel costs.
The proposed tax does not require voter approval because it is an excise tax, not a sales tax, officials said.
Like the borough’s tobacco tax, which officials levy when tobacco is sold to resellers rather than at the consumer point of sale, the fuel tax would be charged to distributors and then trickle down to pump prices, officials said.
If approved, the tax would not eliminate roadwork projects from appearing on borough ballots because borough law requires voter approval for areawide projects, officials said. However, the new revenue could reduce the need for those projects to be paired with new bond sales and the corresponding debt, Brown said.
While the tax is designed to support road improvement costs, the Assembly will ultimately determine how the revenue is used. State law prohibits municipalities from levying a tax with revenue restricted solely to a specific purpose, officials said.
-- Contact Amy Bushatz at contact@matsusentinel.com
