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Several States Give Green Light to Mileage Fee Pilot Programs

Posted on July 7, 2016 by Jones, Paul

As Oregon marks the first anniversary of its vehicle miles traveled (VMT) fee program, other states are looking at options to tax drivers based on mileage in light of concerns regarding the sustainability of gas tax revenues.

California officially launched a pilot program on July 1, using 5,000 volunteers who will report their driving habits. The focus of the California program is informational, so participants will report their driving data but won't pay the state any money. The program, which will run until March 2017, is designed to evaluate different approaches to creating a VMT program.

Washington, Colorado, and Utah are also considering studies to assess whether charging drivers for the miles they drive could surpass gas tax revenue as electric vehicles become more common.

"It's no secret that the gas tax system is just not sustainable," California Department of Transportation spokesman Mark Dinger said. "It hasn't been [increased] for more than 20 years here in California, and now people are driving further with less gas."

Dinger said drivers in California collectively drive hundreds of billions of miles annually. Although that suggests strong revenue potential, the state must gauge the impact on people in different regions. "We tried to pick a cross-section," Dinger said of the 5,000 volunteers chosen for the program, including rural and metropolitan drivers.

The program will also test different assessment methods. California VMT volunteers will have the option to use a system that tracks their driving via GPS or other options such as odometer readings.

Oregon was the first state to take the VMT plunge with its pilot program last year. The program allows volunteer drivers to pay or be reimbursed the difference between the fuel taxes they pay and the road taxes they owe.

Michelle Godfrey with the Oregon Department of Transportation -- which helped California with the launch of its pilot program -- said other West Coast states are also weighing VMT studies.

"We have 12 states in our Western Road Usage Charge Consortium . . . those are all at different stages of development," she said. "Washington is very close" and Colorado is working on a small pilot program, she added.

According to Reema Griffith, executive director of the Washington State Transportation Commission, that state's Legislature recently tasked the commission with producing a pilot implementation plan. If the state receives federal grant funding, it could launch a pilot program with 2,000 drivers by the summer or fall of 2017, which could feature coordination with Oregon and the city of Surrey, British Columbia, to explore VMT options across multiple jurisdictions.

The federal government is offering grants under the Fixing America's Surface Transportation (FAST) Act, and "a lot of states have put in for funding," according to Godfrey. "If every state does pilots, it allows us to collaborate on regional pilots . . . that just gets us closer and closer to a really integrated solution."

Several states on the East Coast -- Delaware, Pennsylvania, Connecticut, New Hampshire, and Vermont -- are seeking approximately $1.5 million combined in federal funding under the FAST Act to study the feasibility of a multistate VMT program. Except for Vermont, the participating states will also serve as test sites for VMT programs.

The nearly $3 million study is spearheaded by the I-95 Corridor Coalition, which represents transportation and tolling authorities in 16 East Coast states and the District of Columbia. The coalition applied for a federal grant in May, according to Dr. Patricia Hendren, the coalition's executive director. The states will pay the remaining amount needed, around $1.5 million, according to the application. Hendren said discussion about applying for the federal grant began earlier this year after the co-chair of the coalition's mileage fee steering committee sent a letter in January to all 16 states to gauge interest. After five states showed interest, the coalition applied for the grant.

Under the proposed timeline in the coalition's application (available at http://bit.ly/299PTa0), the study will begin in October.

"I wish we had a crystal ball," Hendren said when asked whether she thought the coalition would receive the applied-for federal funding. "But we hope to find out by early August or early September."

The coalition plans to roll out a public outreach and education plan for the study by December, and the four-month pilot is intended to start in the summer of 2017. Each state pilot will have a maximum of 50 participants -- which may include senior transportation officials and lawmakers -- and participants must use light-duty cars such as passenger cars. Similar to California's test run, participants will receive "faux invoices" on a recurring basis. Once the pilot ends, another four-month period will be dedicated to assessing the data collected and a report will be issued in April 2018, according to the application.

VMT Programs Remain Controversial

While many transportation planners are advocates of testing road-use charges, the idea remains controversial. Privacy advocates say the system could facilitate state surveillance, while tax experts warn there are questions of fairness for drivers who paid more to buy environmentally friendly cars. Conservative critics argue that government waste explains the current road funding problems and that VMT is just an attempt to increase taxes.

Observers say it's possible that VMT charges could fully replace fuel taxes. Alternatively, they could be applied only to high-efficiency vehicles, or levied in addition to fuel taxes. Regardless, a main goal of the fees would be increased overall revenue from drivers.

The I-95 Corridor Coalition's grant application drew bipartisan criticism in Connecticut, where Senate Minority Leader Len Fasano (R) said in a July 1 statement that he wanted to schedule a special session to stop the pilot, calling the study "a huge step toward this new tax." And Adam Joseph, communications director for the Senate Democratic Caucus, said in a June 30 statement that "Democrats in the Senate are strongly opposed to any mileage tax," adding that "any such proposal would be dead on arrival."

Although there hasn't been a similar outcry in Delaware, Pennsylvania, New Hampshire, or Vermont, Connecticut lawmakers aren't alone in their opposition. A 2015 survey conducted by the Mineta Transportation Institute of San Jose State University found that the basic concept of a mileage-based tax is very unpopular, but said "modifying the tax structure so the rate varies according to the vehicle's environmental performance" could increase support for the tax.

Conservatives in other states have previously slammed similar ideas. In 2014 the Howard Jarvis Taxpayers Association in California described SB 1077, the bill authorizing that state's pilot program, as a prelude to an unfair tax regime that "will fall especially hard on those who live in suburbs or exurbs and have to commute long distances to work."

Carl Davis, a transportation tax expert with the Institute on Taxation and Economic Policy, said VMT fees pose numerous challenges. Privacy versus the prospect of constant per-mile tracking has been a major criticism, exacerbated by far-ranging proposals to further adjust tax rates on drivers based on congestion.

He also said the shift to a new system could be a hard sell until more people are driving fuel-efficient and electric vehicles.

"If the federal government were to enact a gas tax increase or find some other major source of funding . . . I can see it setting back the push for these VMT taxes," Davis said.

Liisa Ecola, a transportation expert with the RAND Corp., said other challenges include ensuring that states' VMT programs are similar enough that they don't create headaches for interstate drivers.

"For the trucking industry, that might become a concern," she said, suggesting that the I-95 Corridor Coalition model might help avoid interstate conflicts. The federal government also might need to step in and set standards if enough states took a "go it alone" approach, she added.

Gas taxes are levied at the pump, but a road tax would have to be paid incrementally. And although the use of online accounts could make it convenient to pay the tax, Ecola noted that many people in the U.S. don't have credit or debit cards.

"You've made it much more difficult for people without a credit card to use that system," she said. Bringing such drivers into the system "could be a very daunting challenge."

Davis said he believes a full-blown road-use charge could be premature. He said inflation and the lack of fuel tax increases nationwide are a better explanation for why revenues are low, given the relatively small number of electric cars on the road.

"You can plan for the future, but don't neglect the infrastructure you have now," Davis said, noting that California hasn't raised its overall gas tax in years.

Ecola said another wrinkle is that the amount of driving isn't necessarily a constant. "There was an interesting kind of leveling off or decline in vehicle miles traveled . . . starting in the mid-2000s," she said. "I don't think anyone has ever definitely determined why that leveling off took place . . . that's part of the reason gas revenues were stagnant."

VMT Backers Look to Future

Interest in VMT programs could push more states to hedge their bets and invest in the idea early. While cautioning that the I-95 coalition's effort isn't a guarantee that VMT charges will be implemented, a "feasibility approach to see if it can be done on the East Coast" is necessary, Hendren said.

According to the group's grant application, "a majority of policymakers and industry analysts across the nation now agree that the fuel tax can no longer be solely relied upon to provide sustainable revenues for improving, operating, and maintaining the nation's roadway infrastructure."

Organizing pilot programs is also forcing planners to address the many concerns surrounding the concept. For example, Lee Tien, a senior staff attorney with the Electronic Frontier Foundation, said his group asked to be included in the planning for California's pilot program in order to promote better protection for drivers' privacy.

"We were able to sort of set it up so that the pilot program . . . also tested privacy protective approaches" like odometer readings in lieu of tracking, he said. "I think we ended up with pretty reasonable controls and protocols."

Although Tien said the privacy issue will continue to evolve, the process in California helped convince planners that the issue was important to citizens and led to review of how data could be collected and who would have access to it.

Meanwhile, Godfrey in Oregon said her state's program has brought in valuable information during the first year. "Our economists have been doing projections and creating models for our legislators" using the data gathered, she said. "We have collected revenue, which is exciting. . . . We know it will generate funds for transportation," she added.

Despite calling for increased gas taxes in the near term, Davis agreed that VMT studies will be valuable because although fewer than 1 percent of vehicles now on the road are fully electric, that number is trending upward, he said. "A VMT tax could be very important."

Over the long term, Ecola said she could see VMT programs "spreading out geographically from states that are successful."