Questions and Answers

Q: What are the current sources of highway revenue at the state and local levels?

A: Federal revenues for public roadways are primarily collected via a federal fuel tax and appropriated by Congress to each state through several programs. These programs include Interstate Maintenance (IM), National Highway System (NHS), Surface Transportation Program (STP), Highway Bridge Replacement and Repair Program (HBRRPP), Highway Safety Improvement Program (HSIP), and special appropriations. The IM and NHS funds are used by the state to fund projects for those systems, both of which are only the Primary Road System. The remaining federal funds are allocated between the state, cities and counties through varying mechanisms.

State revenues for public roadways come from Iowa's Road Use Tax Fund (RUTF). The RUTF consists of revenues from the fuel tax, motor vehicle registration fees, motor vehicle use tax, driver's license fees, and other miscellaneous sources. In FY 2007 it is estimated the RUTF will receive approximately $1.1 billion, with approximately 40 percent coming from fuel tax, 36 percent from motor vehicle registration fees and 20 percent from motor vehicle use tax. After off-the-top allocations for certain programs and purposes, the RUTF is distributed by formula to the Iowa DOT for use on the Primary Road System (47.5%), counties for use on the Secondary Road System (24.5%), counties for use on the Farm-to-Market Road System (8%), and the cities for use on the Municipal Street System (20%).

Local revenues for city and county roadways come from local revenue sources, such as property taxes, local option sales taxes, tax increment financing districts, bonding (primarily for cities), and assessments. The amount of local revenue each city and county receives varies based on local taxing decisions.