The coronavirus pandemic is expected to cause a $100 million dip in road use taxes used for local governments from June to October this year, the Iowa Department of Transportation reported.
That amounts to a 20% drop in revenue for street projects, possibly delaying some work.
The state and local governments can expect a 10% drop from November through June 2021, the DOT reported.
The road use tax fund, which pays for state and local road construction and maintenance, typically is $1.7 billion a year. The money comes mostly from fuel taxes and fees on vehicle sales.
The drops could have been worse. Stuart Anderson, who directs the DOT’s Planning, Programming and Modal Division and Charlie Purcell, director of the Project Delivery Division told local governments in a memo that traffic and vehicle sales both have rebounded more quickly than expected when the pandemic first hit Iowa.
“The July allocations are better than expected so we are cautiously optimistic our initial COVID-19 projections were too conservative,” Anderson and Purcell wrote. “However, we need another month of revenue data before we will be comfortable that this is a trend and not just a one-month anomaly.”
The DOT officials also noted that while the receipts for the year that ended in June likely will exceed the budgeted revenue figure even with the pandemic’s effect, “that likely won’t be the case in fiscal year 2021.”
Todd Ashby, executive director of the Des Moines Area Metropolitan Planning Organization, said cities and counties are likely to delay some projects, focusing on those that are the highest priority first. There is talk of federal legislation that might soften the blow, but so far neither the state nor the federal government have provided assistance to make up for the lost revenue, Ashby added.
Anderson noted that truck traffic stayed steady and even increased slightly at times as the pandemic unfolded, but passenger vehicle traffic fell by 44% in mid-April before recovering. Traffic this week is running 12% lower than last year at this time, according to the DOT’s traffic count site.
In addition to rebounding fuel sales, a change in state law means that E10 ethanol — which makes up 80% of gasoline sold in Iowa — now will be taxed at the same rate as regular gasoline. That will add another $8 million a year to the road use tax fund, the state noted.
There were gains in vehicle sales, too. Sales were down by 50% in April, and were down by a third in May, DOT reported. But new vehicle sales have continued to rebound, and used vehicle sales topped 2019 levels in June.