Gasoline drop will hit city
CATCH News – October 5, 2020
Statistics Canada is reporting no growth in gasoline consumption in 2019 and that was even before the pandemic began. That is worrying news for city finances which depend heavily on transfers of both federal and provincial gas tax monies.
Hamilton gets over $10 million a year from provincial gas taxes that are earmarked for the HSR. And it receives $31 million annually from federal gas tax collections.
The latter monies are supposed to be used for environmental projects, but less than ten percent are directed to such purposes – in this case the purchase of transit vehicles – with the rest sunk into the roads budget. But despite that large federal subsidy, the city continues to fall over $100 million a year behind in maintaining existing roads.
And Hamilton continues to expand road infrastructure despite no clear plan on how to pay for maintenance of what already exists. A drop in gas tax revenues or even their stagnation would certainly increase this challenge.
In Ontario, gas consumption last year fell nearly one percent. The revenue implications are worsened by the failure to tie the tax to inflation or even to the price of gas.
The current tax of 14.7 cents a litre has been frozen for nearly three decades and doesn’t go up as the price rises. The Toronto Blue Jays were world champions when that rate was set. Inflation has meant that that tax has effectively shrunk by 40 percent since then.
The effects of the pandemic are believed to have slashed gas use even further. However even before COVID-19 it has been going down for several years to the 44.8 billion litres sold last year as vehicle efficiency improves and more hybrid and electric cars replace gas guzzlers.
“Annual sales of gasoline peaked at just over 45.0 billion litres in 2016,” notes the Statistics Canada report. “Since reaching this peak, sales have continued to stagnate despite there being a record number of motor vehicles registered in Canada.”
There are now 35.7 million vehicles registered across the country, more than one for each person over 14, although only two-thirds are passenger cars, light trucks and vans.
“In 2019, there was strong growth in new registrations (i.e. first time) of full battery and hybrid electric vehicles, along with a 5.0 percent decline in new gasoline-powered vehicles,” reports the federal statistics agency.
The financial implications extend well belong municipalities like Hamilton. Falling gas sales also cut into provincial and federal road budgets and the tax rates have never been priced to compensate for fossil fuel air pollution and climatic effects.
In our neighbour to the south, half of state governments have imposed additional fees on hybrid and fully electric vehicles to reduce the losses from gas taxes. These extra charges discourage the switch to less polluting vehicles and in many cases mean eco-conscious drivers actually are forced to pay more.
“The average of those annual state fees on pure battery electric vehicles is $128, which is more than twice the $62 a Toyota Prius Eco driver would pay annually in average state gas taxes,” says the Natural Resources Defence Council.
As governments move to ban fossil fuel vehicles – California has recently decided to do this by 2035 and many European countries have legislated even more ambitious timelines – replacing the tax revenues from fuel sales will become increasingly urgent.
Faced with declining tax revenues, governments will likely look for other ways to pay for road infrastructure and transportation-related pollution. In the short term, as shown by the US examples, charging EV and hybrid owners may be easier than collecting road tolls or imposing fees tied to kilometres travelled.
One option might be reforms to aviation fuel taxes which have been bumped up over the last few years in Ontario – although they still are less than half the rate per litre that car drivers pay at the pump.
