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Paying by the mile, not the gallon

Some states are trying road-user charges, a concept Iowa tested early

Dec 21, 2018 at 6:02 pm
    Traffic moves through the S-curve on I-380 as seen in an aerial photograph in Cedar Rapids on Tuesday, Nov. 20, 2018. (Stephen Mally/The Gazette)

    Evan Burroughs pays for roads and bridges while he’s driving, not when he’s at the gas pump.

    That’s because Burroughs, of Salem, Ore., is part of OReGO, the nation’s

    largest pilot project testing whether

    a pay-by-mile, road-user charge could replace gas tax to fund transportation infrastructure and maintenance.

    “I’ve always been interested in alternative fuels, but the hard part is making sure these vehicles pay for their road usage,” Burroughs said.

    Americans have been paying gas taxes since the 1930s, when the fuel was pumped into vehicles like the Ford V-8 Cabriolet, Ford Model B and the Buick Series 40. The first gas tax of 1 cent per gallon was part of the 1932 Revenue Act, a comprehensive tax increase championed by President Herbert Hoover to keep the United States from bankruptcy, according “Highway History” by the U.S. Department of Transportation’s Federal Highway Administration.

    In Iowa, drivers pay for transportation infrastructure and management through gas tax, annual vehicle registration and a one-time 5 percent fee when we buy a vehicle. The fuel

    tax is 30.7 cents per gallon of

    non-ethanol gasoline, 29 cents for ethanol blends and 32.5 cents for diesel and low-percentage biodiesel.

    But as more drivers buy more fuel-efficient vehicles and electric cars, the revenue from gas tax is expected to fall.

    “The trend, going back to 1999, is flat or declining in real terms,” said Stuart Anderson, director of the Planning, Programming and Modal division of the Iowa Department of Transportation. “That’s due in large part to the growing fuel efficiency in the fleet in the past 20-plus years. We expect that to continue and accelerate.”

    Iowa’s gas tax revenue hovered around $430 million from fiscal 2004 to 2014, when Iowa raised the gas tax 10 cents per gallon. While revenue jumped to $655 million in 2016, after the law’s implementation, it’s been flat or falling since, according to Iowa DOT data.


    At the same time, miles driven in Iowa have increased nearly every year since 1999 — up 14 percent from 29.7 million in 1999 to 33.7 million in 2017.

    How it works

    With a road-user charge, drivers pay a flat rate per mile they drive instead of paying a gas tax. That way, all vehicles — even those that use less gas or alternative fuels — still share the burden of paying for road infrastructure.

    In 2013, Oregon passed a law allowing for a pilot project of a distance-based, road-user charge for 5,000 volunteer drivers. That became OReGO, which so far has had 1,500 drivers signed up to pay 1.7 cents for each mile they drive in Oregon. Miles are tracked either by GPS or a non-GPS device installed in the car. Drivers are billed every month and refunded money they pay for gas tax.


    “It’s completely invisible, basically,” Burroughs said. When he joined OReGO in 2015, he set up an electronic wallet through one of the three private vendors that administer the program. “I put $50 in there,” he said. “I still have $10 left. So I’ve only paid $40 and to me, that is extremely worth it.”

    But OReGO hasn’t always had a smooth road. For one thing, recruiting volunteers isn’t easy. As of October, there were only 638 active vehicles, said Michelle Godfrey, Oregon DOT public information officer.

    “We have to help people understand the problem we’re trying to solve,” she said. “Most Oregonians don’t understand how transportation is funded. We have a big task in front of us to bring people up to speed about why this is a problem and why it’s urgent.”

    Iowa research

    The challenge of getting drivers on board with a road-user charge has been around for more than a decade — back when the University of Iowa was one of the early institutions to study the concept.

    Researchers at the UI Public Policy Center recruited 2,600 volunteers in 12 parts of the country for a two-year study that ended in 2010. A device was installed in each vehicle to calculate miles driven over 10 months, according to the final report of the project.

    The device computed hypothetical road-user charges for state, federal and local jurisdictions and participants received a “bill” showing them what they would pay if such a system existed.

    One of the primary goals was to measure participants’ attitudes about a road-user fee. Before the study, 42 percent of the volunteers had a positive or somewhat positive view of the idea of replacing the gas tax with a road-user charge, while 19 percent had a highly or somewhat negative view, and 39 percent were neutral. After the study, 71 percent had a positive view and 17 percent had a negative view.

    “The majority of participants with neutral views at the onset of the study developed a positive attitude toward mileage-based charging after participation in the pilot,” the final report states.

    While the UI hasn’t done a road-user charge study since, that early research helped states such as Oregon keep moving the idea forward, Godfrey said.

    “We were able to get the pilot done, in part, because Iowa studied it so much,” she said. “Public opinion is a huge deal because of the paradigm shift. This makes it completely transparent, but that new shift can be scary.”

    Privacy concerns

    Concerns about the government tracking drivers through a road-user charge have been persistent since the UI study. In that project, drivers could choose to use GPS to tell where travel occurred, but the researchers did not retain or transmit any GPS coordinates or other information about the vehicle’s travel path. Other devices in the study used just odometer readings.

    Participants assessed the trade-off in privacy protection and the auditability of mileage charges by saying whether they preferred a detailed invoice with a day-to-day summary of charges accrued or a general invoice with just the overall fees. Nearly 80 percent of participants favored the more detailed invoice, the report states.

    However, 90 percent of study volunteers said there must be strict laws regulating whoever collects road-user charge data, and 60 percent said they worried about the government using the information to track drivers.

    Privacy concerns have faded somewhat in the past decade as nine-in-ten smartphone owners already use their phone’s GPS functions for navigation, recommendations or other information related to their location, according to the Pew Research Center.

    “Privacy, as in ‘Is government tracking me?,’ was top of mind in 2013,” Godfrey said of the OReGO program. “We are seeing now people’s concerns about data protection. Is my data being compromised?”

    The Oregon DOT never sees the driver information, and the vendors have to destroy data within 30 days, Godfrey said. OReGO puts private vendors through tests to see whether they are up to the level of consumer protection required by law. Volunteers also must sign off at every step of the enrollment process.

    Iowa making plans

    The Iowa Legislature asked the DOT earlier this year to estimate by Dec. 31 the losses Iowa’s Road Use Tax Fund will face because of electric, hybrid and high-efficiency vehicles. House File 2256 says the agency may recommend alternatives to reduce revenue losses.

    “We’re doing more of a range of estimates so that will result on a range of impact on road-use tax fund,” the DOT’s Anderson said.

    Some states have added a surcharge on registration fees for electric vehicles, he said, which would be the easiest change to implement. Iowa also is considering a user fee for electric vehicle charging stations along the interstates, which would capture out-of-state drivers and transportation companies that increasingly are using electric trucks, Anderson said.

    As for a road-user charge, Anderson thinks it would be most successful at the national level.

    “Federal transportation funding is so reliant on fuel tax,” he said.

    “To deal with travel in several states, that would be much more effective.”

    The 2015 Fixing America’s Surface Transportation, or FAST, Act created a program that allows a state or group of states to get federal funding to demonstrate alternative funding mechanisms to help the highway trust fund remain solvent, the National Conference of State Legislatures reported in April.

    The program got $15 million in 2016 and $20 million per year through 2020.

    Other states that have tested road-user charges include California, Colorado, Delaware and Washington, the State Legislatures Conference reported. The I-95 Corridor Coalition is studying a mileage-based

    charge across Maryland, Delaware and Pennsylvania.

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