MISSOULA — Joined by a wide range of organizations, the city and county of Missoula on Wednesday defended a 1979 legislative bill that permits individual Montana counties to adopt a 2¢ gas tax with voter approval and direct the funding towards infrastructure.
Missoula County voters adopted the 2¢ local option fuel tax in 2020, and the fee has been in place since September, slowly raising hundreds of thousands of dollars in new revenue for road maintenance and construction.
That’s funding the state can’t or is unwilling to spend to maintain local infrastructure.
But opponents of the tax, including the petroleum and convenience store industry, Republican allies and Enterprise car rentals, oppose the tax and are asking the Legislature to repeal it, even though the Legislature made it a tool for counties to use.
Rep. Matt Regier, R-Kalispell, who sponsored House Bill 464, suggested the local option gas tax was little more than a sales tax, one that hits lowest income earners the hardest. He added that the 2-cent per gallon tax makes it hard for small stations to compete.
When pressed by a fellow lawmaker, Regier admitted that a similar 2¢ gas tax would have little chance of passing in Flathead County, even if it was earmarked for road maintenance.
Still, he urged the House Transportation Committee to pass his bill and ensure that other counties, including Missoula, aren’t able to adopt or keep the tax.
“If you have many businesses across many counties that don’t implement the tax, you can absorb that impact,” said Regier. “But if you have only one gas station in the county, imposing the tax to be able to compete – you’re going to have to eat that.”
Regier suggested the tax, which only Missoula County has adopted thus far – though other counties are exploring the option – leads to administrative problems and threatens to disrupt Montana’s fuel supply chain.
He offered little evidence to support that claim.
Dirk Cooper, president of Hi Noon Petroleum in Missoula and president of the Montana Petroleum Marketers and Convenience Store Association, said reporting the tax to the imposing county, pricing competition between stations, and various administrative costs to the retailer were enough to repeal the local option gas tax.
“It’s really hard for the way we’re set up in retail to collect that from the consumer or the tourist,” Cooper said of the tax. “I totally understand we need infrastructure money. We were proponents of the increase to the statewide gas tax in 2017. But that’s statewide and it helps the competitors maintain pricing. Pricing is a very competitive thing. People will drive across town to save 2¢.”
For months, Cooper said, the street price for a gallon of fuel in Missoula didn’t change even after voters adopted the tax on a 51% to 49% vote. But that was a choice made by some individual retailers, who chose to eat the 2¢ tax rather than adding that to their fuel prices.
A representative with Enterprise Holdings – the business behind Enterprise car rentals – said some customers don’t fill up the car when they return it. That transfers the tax to the business, she said.
The representative didn’t say whether the company passes that cost back to the renter of the vehicle.
“Through that process, we’re being taxed with our one location in the county that has implemented this local option tax with collecting that tax and trying to remit it,” she said. “Our concern is, we have multiple locations across the state of Montana. If more counties start taking this action and implementing their own tax, there’s no guarantee what that tax may be.”
The 1979 legislation that makes the tax possible caps it at 2¢ by law, meaning no county could add more to the price of fuel to help build local infrastructure.
Contrary to fears of varying fuel prices, supporters of the local option gas tax said the price of fuel already varies widely across the state, and Missoula’s 2¢ tax has nothing to do with it.
As of Wednesday night, according to AAA, the average price for a gallon of fuel in Missoula County was $2.60. In Ravalli County, which doesn’t have the 2¢ local option fuel tax, the average price was $2.62.
Just west in Mineral County, the cost was $2.66 while in Yellowstone County, home to a large refinery, the average was even higher at $2.65.
“If the proponents of this bill are upset with what the voters decided to assess themselves for an additional gas tax in Missoula County, taking away this ability for the rest of the cities and counties in Montana isn’t appropriate,” said Eric Bryson with the Montana Association of Counties.
“There are other counties and cities that have engaged in conversations on whether this is practical for them in the future. The ability for a county to invest in infrastructure is pretty limited.”
Other allies of the tax agreed, including the Montana Association of Realtors, which said the tax is a good way to raise revenue without tapping property owners with still more property taxes.
The 2¢ tax represents a user fee and only those who drive pay it.
“We look at the local option gas tax as a source of revenue not tied to property ownership,” said Sam Sill, director of the Montana Association of Realtors. “It doesn’t increase property taxes. It’s why we want to see this continue to be an option. It’s only an option for the communities that want to go that route. If you buy gas you pay it, and if you don’t buy gas, you don’t pay it.”
Dave Gault, head of the Montana Contractor’s Association, also supported the local option tax and urged the committee to kill the bill aiming to repeal it.
“It’s an interesting opportunity for local governments to fund some of their own infrastructure,” said Gault, who used to head the Montana Department of Transportation.
“Regardless of whether you’re a county commissioner, a city councilor or the director of transportation, one thing everyone cares about is how good their roads are. The unmet infrastructure needs we have in this state are well beyond our ability to fund them, to the tune of about 400%.”