Transportation is an integral part of HVACR distribution, and based on recent actions from state legislators across the nation, gas prices are headed in only one direction: up.
An amendment to Senate Bill 103 in Illinois would double the fuel tax from 19 cents to 38 cents per gallon. If approved, the hike would take effect July 2019 and rise annually in step with inflation, capped at 1 cent per gallon per year. Additionally, all drivers would see a $50 increase in registrations, as sticker fees would jump from $98 to $148.
Last November, Michigan voters elected Gretchen Whitmer governor. The crux of her campaign focused on “Fixing the Damn Roads,” and she’s intending to do just that through a proposed 45-cents-per-gallon gas tax increase. If approved, Whitmer’s proposal is expected to raise more than $2.1 billion, making Michigan the state with the highest motor fuel taxes in the nation.
Minnesota Gov. Tim Walz has announced a 70 percent gas tax increase, taking the cost from 28.5 cents per gallon to 48.5 cents. The increase, if approved, would be phased in over a two-year time frame and is expected to raise $6.5 billion over 10 years.
Ohio Gov. Mike DeWine’s proposed 18 cents per gallon tax increase has gained the support of more than a dozen Ohio mayors. State legislators aren’t sold, though. The Ohio House recently approved a 10.7-cent increase, while the Senate prefers a 6-cent increase.
Gov. Ralph Northam is proposing a 2.03 percent increase in the diesel tax, beginning in July 2021. Additionally, he’s proposing a 2.1 percent wholesale tax in the localities that line I-81. Revenue in that area would be earmarked for I-81 infrastructure projects. Transportation Secretary Shannon Valentine believes this increase would generate approximately $150 million a year for the I-81 corridor, which is well short of the $4 billion the Virginia Department of Transportation identified last year.
MORAL OF THE STORY
Gas prices are rising. There’s no other way around it. And while consumers will feel the pain at the pump, these increases could potentially cripple businesses that operate large fleets, like HVACR distributors.
There are ways to mitigate these increases outside of baking them into the price of your equipment. Upgrade aging trucks with more efficient replacements. Implement GPS and fleet management software to ensure your drivers are taking the most efficient route and minimizing idle time. Check your inventory list, and then check it again, before sending your trucks on their way to limit the weight of unnecessary inventory. Offer clients a discount if they pick up their own stock.
After reading this column, you can’t claim that these costs snuck up on you. Gain a competitive advantage and get ahead of these incremental increases before they eat into your profit margin.
Publication date: 4/12/2019