What is it?

This ordinance proposes a 7 cents per gallon fuel tax, which, if adopted, would go into effect on January 1, 2026.

This would cost $70 per year for a driver who drives 15,000 miles per year at an average of 15 miles per gallon (15,000 miles divided by 15 miles per gallon * .07). This tax would utilize a broader tax base, which includes visitors who do not pay property taxes.

This proposal was introduced on June 3, 2025 to allow six weeks for public comment. This was done to extend the period this would be public before the public hearing on July 15, 2025. Since June 3, the Borough has engaged with an interview on Big Cabbage Radio, KTNA Radio, and there have been news articles in the Frontiersman, Mat-Su Sentinel, and ADN. Staff reports were provided during the June 3 and June 17 Assembly meetings.The proposal was presented to the Wasilla and Palmer Chambers of Commerce as well as presentations to the Big Lake Community Council and the Borough’s Local Road Service Area Advisory Board.

Why?

To fund road improvements.

The intent of a new fuel excise tax is to create an opportunity to fund road improvements projects as they are approved by voters as opposed to bonding (taking on debt).

Pay as you go. The proposal flier above depicts annual Borough debt service payments. As you can see from debt projections in the future, annual debt payments will become a larger part of the overall areawide mill rate. Today, approximately 12% of the areawide mill rate supports debt payments. With decreasing State participation (school bond debt reimbursement and Legislative grants) in the next decade, that could be as high as 32% as illustrated by the three vertical black lines on the chart.

The following illustrates the lost opportunity with bonding projects. In November 2024, Borough voters approved two ballot propositions to borrow $118 million to build roads and charter schools. When considering interest and the 20-year bond, the Borough will borrow $118 million, but pay approximately $168 million over the life of the bonds. That means over the next 20 years $50 million of local taxpayer dollars will not be used to construct infrastructure and will be paid to bond holders, largely outside of Alaska. This revenue to pay as we go would leverage dollars for infrastructure and would not utilize property taxes.

What about the impact on property taxes? As it stands today, debt obligations are paid predominantly by property taxes. This proposal would relieve pressure on property taxes and utilize a broader tax base, such as visitors and other road users who may not pay property taxes in Mat-Su.

When the proposal was postponed on July 15, two key amendments had been passed, setting the expiration date for the tax to June 30, 2027, and exempting off-road use for diesel equipment. Additionally, a resolution is on the agenda to provide direction to the Manager in budget preparation and give the Assembly a clear path for how this new revenue would be spent in each budget. The idea is to integrate this new revenue, if adopted, into the annual budget cycle so the Assembly and the public can see how the revenue is being used.

This item will be discussed again at the Assembly regular meeting on August 5, 2025, at 6 p.m.

How would the tax be administered?

This tax would be collected from distributors, not at the pump. As of today, the Mat-Su Borough has identified 14 distributors.

1. Each distributor must register with the borough.
2. Monthly notification of billing cycle ending will be sent.
3. Monthly tax returns accompanied by payment must be submitted by the last day of the following month to the finance department. (e.g., July sales are due by August 31)
   1. Returns must include:
      1. Total Gallons Sold
      2. Exemptions claimed (must be accompanied by supporting documents)
      3. Taxable Gallons
      4. Tax Due
4. Refunds/Rebates must be submitted within 90 days from the end of the reporting month in which the purchase was made and must be accompanied by invoices and supporting documentation.

The above tax process will be administered by existing staff. This same staff handle the Tobacco Excise Tax, the Marijauna Sales Tax and the Talkeetna Sewer and Water Sales Tax.