Joe Parsley, owner of the Frederick Shell Gas Station and Car Wash on West Patrick Street in Frederick, believes that the new tax Maryland motorists must soon pay when they fill up will hurt him and his competitors.
Parsley said it will be easy for motorists to drive over state lines to Pennsylvania, Virginia, West Virginia or Washington, D.C., to get their gas cheaper, instead of paying the higher prices in Frederick County.
“Being from Frederick, you can be in another state in 15 minutes,” Parsley said. “I know people that will shop for gas out of state. That’s going to severely impact those stations that are closest to the borders. ... This bill will severely hurt the people of Frederick. Gasoline price is the only product posted on the street. No other product is like that.”
In the 90-day legislative session that ended on April 8, the Maryland General Assembly approved Gov. Martin O’Malley’s (D) proposed gasoline tax increase that is expected to raise $4.4 billion over the next six years for new roads and transit projects.
It is Maryland’s first gas increase in 20 years. O’Malley said the tax increase was needed to improve state roads and expand transit as a result of traffic congestion that is driving businesses out of Maryland to Northern Virginia.
Maryland Department of Transportation officials have warned that no money is available for new highway projects, painting a bleak picture of the state’s transportation woes. The gas tax hike was determined to be the most effective revenue generator.
The gasoline tax increase will go from the current 23.5 cents per gallon to a possible 42.5 cents in July 2016.
To soften the impact on motorists, the tax will be phased in beginning with a 1 percent increase in June, adding 4 cents to a gallon of gas as of July 1.
Unless Congress acts by December 2015 to allow states to tax Internet sales, with a portion of the money going to transportation projects instead of a gas tax, motorists could be paying as much as 20 cents more a gallon in taxes by 2016.
When the gasoline tax is fully phased in, motorists in Maryland will pay $600 million more in gas taxes annually.
When the tax kicks in on July 1, motorists are expected to spend $261 annually in gasoline taxes, which is an increase of $21.60, said Christine Delise, a public affairs specialist with AAA. That figure includes the 18.4 cents per gallon federal gas tax motorists already pay.
In the District of Columbia, the gasoline tax is 23.5 cents per gallon, while it is 31.2 cents in Pennsylvania and 34.7 cents in West Virginia, according to WestVirginiaGasPrices.com.
In Virginia, the 17.5-cents-per-gallon tax has been eliminated, replaced by a 3.5 percent state tax on the wholesalers who distribute the gas.
Groups such as the Maryland Motor Truck Association and the Mid-Atlantic Petroleum Distributors Association protested the bill when it was debated in Annapolis, arguing that it would hurt the state because truckers would avoid filling up in Maryland.
Pete Horrigan, president of the Mid-Atlantic Petroleum Distributors Association, said in an interview Tuesday that consumers in Maryland will be hit twice.
“First they will pay more for gasoline, and they will see an increase in goods delivered by trucks,” Horrigan said. “It’s a double whammy for them.”
Horrigan said consumers will be forced to travel across Maryland’s borders for cheaper gas, which will hurt state coffers.
“Once there, they will certainly buy other goods,” he said.
But Del. Galen Clagett (D-Dist. 3A) of Frederick said he voted for the tax increase because he received assurances from the governor’s office that $82 million of the revenue would go to a new $91.2 million interchange at U.S. 15 and Monocacy Boulevard in Frederick.
Clagett, chairman of the eight-member Frederick delegation, said it was his first time as a state legislator that he brokered a deal with the governor’s office in exchange for his vote.
“We never get very much [in state dollars], and I knew I needed to take something back home,” said Clagett, who is also a candidate for mayor in this year’s Frederick election. “I thought this sounded good. I knew [by voting for the tax] I would go home and catch hell, so I said I will get an interchange.’”
The interchange has been a top priority for the county and the city for three years. Both jurisdictions have already contributed $1.3 million for its design and engineering.
Final design of the interchange is expected to be completed this year, but because funding was unavailable for construction, there is no estimate as to when it will be done.
The interchange will serve as an eastern bypass for the city of Frederick and is intended to improve safety and congestion on U.S. 15.
Sen. Ronald Young (Dist. 3) of Frederick said he voted in favor of the tax increase because he also wanted to ensure that funding would be available for the interchange.
“Whether we voted for it or not, the Senate had the votes to pass it,” he said. “They needed 24 votes, and they already had 27. It was the same in the House. It was very important we got that project for Frederick.”
The Senate voted 27 to 20 to approve the bill and the House voted 78 to 56.
Clagett and Young were the only two members of the county delegation to vote for the tax hike.
Frederick Alderman Carol Krimm (D), a member of the National Capital Region Transportation Planning Board — a group of elected officials that plans transportation improvements in the Washington, D.C., metropolitan area — said the interchange is vital because of the growth planned in that area.
“This [gas tax] is a chance to get that project started,” she said. “Galen has said [the interchange] is ‘critical for that end of the city.’”
Krimm is pushing her own proposal to install bus shoulders on Interstate 270 to help relieve traffic congestion. Her colleagues on the transportation board agreed last year to form a task force to study the idea.
The group is currently discussing how much it will cost to initiate a pilot program.
AAA Mid-Atlantic supported the bill because it included protection for the state’s Transportation Trust Fund.
A companion bill, SB 829, requires that money can only be taken out of the Transportation Trust Fund if the governor declares a state fiscal emergency and it is approved by a three-fifths vote of both houses of the legislature.
Money from gasoline sales, vehicle sales tax and vehicle registration fees flow into the trust fund. For years, state lawmakers have used the money — which is intended to pay for transportation projects — to balance the state budget.
In 2014, voters will be asked to approve a constitutional amendment creating a “lockbox” to prevent such raids on the trust fund.
“We are pleased with Senate Bill 829,” Delise said. “It’s a strong lockbox provision.”
However, there may be some relief from the gas tax in mid-2016 if Congress enacts legislation to tax Internet sales in December 2015, she said.
That bill would allow states to apply sales taxes to Internet retailers, dedicating a part of the revenue to transportation projects, instead of gasoline taxes.
Meanwhile, Delise said gas prices are also continuing to drop, which is good news for motorists heading to the pumps this summer.
As of Friday, the national gas price average was $3.56 per gallon, 7 cents less than the week before, according to AAA-Mid-Atlantic. Gas prices are predicted to be lower this Memorial Day weekend than last year’s.
As of Monday, the price of diesel fuel in Maryland was $4 a gallon, according to the U.S. Energy Information Administration website.
Delise attributed the falling gas prices to lower crude prices, refineries that have finished their spring maintenance earlier this year, and motorists who are driving fewer miles.
“But the reality is that we desperately need transportation funding,” Delise said. “We know it will be a burden, but we need funding for roads and bridges.”