Q&A with Bruce Jung and Don Schaefer on the Illinois gas tax

This Q&A is featured in the Illinois Business Journal’s September edition. Bruce Jung, left, is president of Jung Truck Service Inc. in Mascoutah, and Don Schaefer, right, is executive vice president of the Mid-West Truckers Association Inc., based in Springfield.

IBJ: We want to get the lowdown on the recent gas tax increase in Illinois.

Jung: There is a 19-cent-per-gallon tax increase, then there is also a 5-cent diesel fuel surcharge on top of that. You, as an automobile driver, got a 19-cent tax increase. We got 24 cents in our industry.

IBJ: This is the first one in many years.

Schaefer: 1992.

IBJ: Obviously, it’s unpopular but one of the reasons to sell it was it was so long overdue.

Jung: Any tax increase is not a popular subject, but, speaking for myself, the reason we were agreeable, you don’t have to drive on Illinois roads very long to realize we kind of hit rock bottom as far as maintenance and replacement. You travel across other states, and you can tell when you’ve crossed into Illinois.

In previous years, the tax money we put into the road fund was being scraped off and put into the general fund.

IBJ: That new lockbox (amendment prohibiting such transfers) is going to make a difference there, isn’t it?

Jung: That’s why our industry feels better about it. The money is truly going for the roads. We didn’t care to fund everything else in the state of Illinois.

IBJ: Who makes up the Mid-West Truckers Association?

Schaefer: We have about 4,000 companies, all sizes, from the two- or three-person, mom-and-pop operations to the major trucking companies. It’s not just trucking companies, but also other kinds of companies that have trucks.

IBJ: The trucker association is made up of members big and small. Bruce, where does yours fit into that?

Jung: We’re a 90-truck unit. We’re in East St. Louis, Mascoutah and Mount Vernon. The biggest part of our business is import-export ocean containers. Most of it is railed into St. Louis and we get it from the railroads.

My parents started the business in 1977. And my brother and I have since bought it. We have seven companies all together, but they are all transportation related.

IBJ: What kind of a role did the association have in gas-tax negotiations?

Schaefer: The one good thing, we have long been one of the founding members of a group called, Transportation for Illinois Coalition. It’s an interesting group. Labor, the construction industry, the chambers, local road officials and the trucking industry all supported this effort. We’ve told our membership for years that we needed it. We helped negotiate the final package.

Our job was to convince legislators, and they were very skittish about this. Charlie Meier (a Republican state representative from Okawville) got beat up on this thing. But guys like him had to support it for it to pass. And he told the best story, about the cast iron reflectors breaking lose from the highways. That’s a good argument.

IBJ: The original tax proposal was higher?

Schaefer: When the proposal came out, they were talking about as much as a 25-cent motor fuel tax and a 10-cent surcharge. Then, they talked about an additional $1,000 truck registration fee. We said that wouldn’t work. Then, then got that down to $100, and we said we could live with it.

Part of the compromise … the trucking industry back in 2003 under Blagojevich got zapped with a $1,000 commercial distribution fee, which was basically a tax on license plates. The money went into the general fund, it didn’t go for roads and bridges. It drove the cost of registering a truck in Illinois out the window. Close to 40,000 truck registrations left the state.

Jung: It really had an adverse effect at the time. What was gained was easily lost.

Schaefer: In 2006, we were able to get part of it ($600 of the $1,000) repealed, but we still had a chunk on there. So, we said if there’s ever a time we would repeal the remainder, it was going to be part of these negotiations.

Jung: In essence, we’re going to get the (remaining) $400 taken off but we’re going to give $100 of it back (with the new package).

Schaefer: The commercial distribution fee (enacted in 2003) doesn’t come off until July 1 of 2020. We’ll pay for it one more year, then it comes off.

IBJ: Has the gas-tax reaction from the industry been fairly muted because of the need?

Schaefer: I think so. I can count on one hand how many people have complained. I dare say, if you think the roads are bad here (in Metro East), they are even worse up north. In Chicago, Interstate 80 is a minefield. I-55 is craters, and I drive it enough; I know where the craters are.

But this is not just the interstates or the state highways. This is trickle down to the local roads.

The last time we had a capital plan was 2009. They (financed it with) bonds and everything, which we’ll not be doing again. We will still be paying on those for another 19 years. The key concept of this plan is pay as you go. More importantly, this plan, which was not included in the last plan, is that the locals get a good chunk of it.

IBJ: Based on per capita?

Schaefer: All sorts of crazy formulas. Township roads, municipalities and counties pretty much were shut out last time around. But the needs are there. You go around the state, even school buses can’t use some of the bridges because they can’t hold the weight.

IBJ: How are they going to prioritize all these projects?

Schaefer: They (the state Department of Transportation) have been doing it. They worked with the Federal Highway Administration to prioritize and develop what they call a 10-year plan. And based on that, the No. 1 priority in Illinois right now is the I-80 Bridge over the Des Plaines River in Joliet.

IBJ: People have been seeing roads fixed right along. How soon before they see some practical implementation of these new funds?

Schaefer: IDOT, and I’m sure local jurisdictions are the same way, have things ready to go. Here is a good example: The Delhi Bypass (in Jersey County) – the $24.4 million is in there and it’s a top priority project.

IBJ: That’s the last leg for completion of the four-lane …

Schaefer: … U.S. 67, yes. And they are also talking about all the work in Effingham County, involving U.S. 40.  Those are just two examples.

But here’s the thing we always say: Are there enough qualified contractors to do the work?

IBJ: Good point, a lot of Illinois contractors have been going out of state to find work.

Jung: Illinois-based contractors didn’t want to deal with IDOT because they weren’t getting paid.

IBJ: Talk about the impact this is going to have on border communities where neighboring states have cheaper taxes.

Schaefer: In my former life I worked for American Petroleum Institute, a trade association. We talked about the definite impact on border communities. The biggest effect is between Illinois — with the highest tax in the Midwest — compared to Missouri with the lowest tax. How far people are going to drive to save two bucks is the question.

Jung: What most people don’t realize is what I call the great equalizer: We report our mileage to the state every quarter, showing we drove this many miles in Illinois, or this many in Indiana. We paid all that money into Illinois. But we have to show where we bought our fuel. Illinois will say, ‘You drove this percentage in Missouri, we have to pay Missouri this much.’

IBJ: So, some of the gas tax money paid into Illinois is redistributed to other states that are affected?

Schaefer: It’s the big equalizer. It’s called the International Fuel Tax Agreement. IFTA was created to be able to handle the complexity of making sure every state got its fair share of the taxes based on the number of miles traveled in each state.

IBJ: Are there any companies on the cusp of going out of business in Illinois that this gas tax might affect?

Schaefer: I don’t know of any. I will tell you, a lot of companies have fuel surcharges which they tack on to their freight bill to the customers. It’s a formula based on their running costs per mile. If you know your cost of operation, you can determine your surcharge. The surcharge goes up and down, based upon the cost of fuel.

IBJ: How does Illinois rate now on the whole taxing structure?

Schaefer: We’ve gone from somewhere in the middle to nearer the top. But … not every tax paid at the pump goes to road and bridge repair purposes. You’ve got the base price of fuel, you put on the federal tax, then you put on the Leaking Underground Storage Tax, then you put on the state motor fuel tax. Then, depending where you’re at, we have an extra local penny tax.

IBJ: Does Metro East have anything extra?

Schaefer: No, but once you put all those taxes on to the price of fuel, you’re still not done: The sales tax goes on all that.

Jung: A tax on a tax on a tax.

IBJ: Minus the taxes, what’s the price of a gallon of gas?

Schaefer: Way less than $2.

Jung: Our bill reads like a grocery receipt. The base fuel might be around $1.80.

IBJ: What should Illinois have done years ago, if it was going to do things right?

Schaefer: If they had indexed the motor fuel tax (to inflation) like Wisconsin and other states. If we would have been indexing since the last increase in 1992, it would be exactly where it’s at right now.

IBJ: So, will it be indexed now?

Schaefer: It will raise with the rate of inflation.

IBJ: Have you figured on a strategy for how your company will react to all this?

Jung: Yes, based on the cost of how many gallons we used last year this will cost our company $225,000 in a year. Just the increase. We’ll charge more fuel surcharge and we’ll recoup some of this money.

IBJ: So, you won’t go without buying a truck or fixing a few trucks?

Jung: I imagine some of the smaller guys can think that way, but I can’t. We’ve got too big of a system going.

 

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