Lower gas prices mean less money for road projects

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FRANKFORT, Ky. (WKYT) - Gas prices have been plummeting over the past few weeks. Drivers are thrilled.

"Oh, it's unbelievable!" said Steve Davis as he pumped gas in Frankfort.

It's not necessarily good news for everyone, though.

"Less money coming in, which means less funds will be available to do work," said Charles Lovorn, executive director of the Kentucky Association of Highway Contractors.

Kentucky's gasoline motor fuel tax rate is based on the wholesale price of gas. That money is used for things like road projects. The new rate will drop about $.04 on January 1.

"One penny of the motor fuel tax generates $30 million in a year's time. 4.3 cents at $30 million a penny, that's $129 million loss," said Kentucky Transportation Cabinet spokesman Chuck Wolfe.

Those taxes lag behind by a quarter. The January 1 number was calculated in October. The tax rate for the quarter starting in April will be based on gas prices in January, which will likely go even lower.

"If we lose another $.05 as a result of the January survey, then you're talking about basically a $.10 loss, that's $300 million. In all probability, there'll be projects that are, right now, showing in the state highway plan, but that will have to be put off or maybe canceled altogether," Wolfe said.

That'll be a burden on highway contractors who depend on those jobs.

"We'll just have to weather the storm, which is the most we've seen. We've never seen this kind of, let's be realistic, over a dollar a gallon-type price drop," Lovorn said.

Even if gas prices go back up, the excise tax can't go up more than 10% per year. It likely won't keep pace with rising gas prices.

"It will probably take several years for the excise tax to get back to the level it was at the beginning of 2014," Wolfe said.

According to GasBuddy.com, the average price for a gallon of gas in Kentucky is $2.08. The national average is $2.26.



 
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