States Test Alternative Road Funding
Highway funding is stuck in low gear, but DOTs are exploring alternatives based on vehicle miles driven
As electric vehicles and hybrids capture market share, gas-tax revenues—not adjusted for inflation—dwindle, and roads are not maintained.
PHOTO COURTESY OF NISSAN
Source: Oregon DOT
As the incoming Trump administration looks for ways to fund its massive $1-trillion infrastructure plan, it could find answers by looking toward the states—in particular, Colorado, California and Oregon.
Those states are in the middle of pilot programs to test mileage-based user fees, in which drivers pay a fee for the miles they travel, rather than a set per-gallon fee at the gas pump.
The effort could be pushed along by a Trump administration.
“There’s always opportunity in a change of administration. It’s often easier for new ideas to be considered,” says John Porcari, president of advisory services for WSP|Parsons Brinckerhoff, which is involved in Colorado’s four-month pilot program, announced this month.
Barbara Rohde, executive director of the Mileage-Based User Fee Alliance, says the group has seen some positive indications the new administration will be open to such a shift, but “it’s simply too early to make any predictions.”
The mileage-based user-fee effort is being accelerated through grant funding provided in last year’s highway bill. The Transportation Dept. made the first $14-million round of grant awards in late August.
But even without the money, the mileage-based user fee would have moved ahead, Porcari says.
“You can feel when ideas have momentum,” he says.
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Overcoming a Shortfall
A mileage-based user fee has been debated for more than a decade as a replacement to federal and state gas taxes, which politicians are resistant to increase.
Flat tax collections, combined with more fuel-efficient vehicles, mean that federal and state highway funds find themselves in a downward spiral.
Congress had to use money from the general fund to pay for the current five-year transportation bill because of a shortfall in revenue collected from the federal gas tax. If the gas tax isn’t raised significantly by 2020, when the next transportation bill is due, Congress will need to find $110 billion to $120 billion just to maintain current funding, says Brian Deery, senior director of the highway and transportation division of the Associated General Contractors of America. There is a $1-trillion backlog of roadwork across the nation.
Colorado, which last raised its gas tax in 1991, says it faces a $1-billion funding gap for roadwork in the next 25 years. Oregon expects its gas-tax collections to begin declining in 2020 and expects to lose $340 million in the next decade as more fuel-efficient vehicles hit the road.
“We’re now in a situation that we are operating and maintaining roads, [but] we don’t have funds to do new projects.”
—Megan Castle, Communications Manager, Colorado DOT
“We’re now in a situation that we are operating and maintaining roads, [but] we don’t have funds to do new projects,” says Megan Castle, communications manager for the Colorado pilot program.
But, according to one report from the American Association of State Highway and Transportation Officials, a mileage-based user fee on all vehicles could result in more than twice as much revenue as a gas tax and dwarfs all other revenue alternatives to a gas tax.
Pilot Tests Educate
In most of the mileage-based pilots, drivers are engaging in a paper exercise. They track their mileage with a GPS or non-GPS device, plugged into the car’s dataport, or by using odometer readings or a smartphone app. The drivers are charged a set amount per mile—for example, for Colorado, it will be 1.2¢. A third-party vendor tracks the mileage and sends drivers monthly dummy invoices, showing whether they would owe money or get money back based on what they pay at the gas pump.
According to Colorado’s mileage-based program, someone driving a 2014 Toyota Prius 1,000 miles a month would end up paying $84 a year more than they are paying now in gas tax, while owners of a 2014 Ford F-150 would get back about $12. Owners of pure electric vehicles would pay about $200 a year.
It is an issue of equity, says Michelle Godfrey, a spokeswoman for Oregon’s program. Vehicles getting more than 20 miles per gallon are underpaying for their share of highway work, while those getting less than 20 mpg are overpaying.
Along the Interstate 95 corridor in a handful of states on the East Coast, plans are ramping up for a pilot test that will study how drivers could be charged as they cross state lines and use toll roads. That study may also examine variable rates—for example, charging a lower rate for electric vehicles because they are considered to be less harmful to the environment, says Lou Neudorff, who is CH2M’s project manager for the I-95 pilot.
“It’s looking at transportation as a utility,” says Neudorff.
There is still resistance to the programs, but that’s because most people don’t understand the concept, says Godfrey.
For instance, some people initially were opposed to the programs because they were uncomfortable with having their movements tracked by a device in their car. But as states are offering devices without GPS tracking and allowing drivers to track their mileage manually, that concern has been overcome.
Based on surveys, the biggest concern now is that rural drivers will be penalized more than urban drivers, says Godfrey. That isn’t borne out by the evidence because rural drivers already are paying a great deal in taxes at the pump, she noted.
Others object that the tax will be more expensive to collect than the gas tax, and, unless it is indexed to inflation, it could stagnate as did the gas tax.
Such lingering problems mean the programs are not yet ready for widespread adoption, says Porcari. Lawmakers still need more mature pilot programs before they can adopt a mileage-based user system statewide, he says.
States Take the Lead
But once a state makes the jump to a full-state program, others are likely to follow. Then, the federal government might move to a mileage-based fee by piggybacking onto state or regional programs.
“From a policy perspective, it’s states driving federal policy, rather than the other way around,” says Porcari.
The first state likely to make the jump is California, which is in the middle of a 5,000-user pilot program. Its transportation department will report on the program to the state Legislature in July 2017.
The administrator of that program is counseling patience.
“This is not going to be a solution for tomorrow or next week or even next year,” says Malcolm Dougherty, director of the California Dept. of Transportation, during an AGC-hosted webinar on the fees earlier this year.
Dougherty says it will be five to 10 years before the programs are widespread. “It’s not something that we can flip the switch to do. It’s pretty complicated,” he says.
