California Looks at Trading Fuel Taxes for Mileage Charges

June 15, 2016 by Tiffany Hsu, @tiffkhsu

Since well before the Beach Boys dreamed up their classic driving anthem “I Get Around,” Americans have been paying extra at the pump to help maintain public roads.

Only now, they’re driving farther and more frequently, often in trucks and cars that don’t require as much gasoline or diesel. Revenues from fuel taxes are falling, leaving swathes of decaying pavement and few of the funds needed to repair or rebuild them.

Now California—a favored state for road-trippers and freight-haulers—wants to raise more money for its roads. In July, it will launch a pilot program called California Road Charge, in which 5,000 volunteer drivers will test out a system that simulates charging fees based on mileage instead of fuel.

Truckers are conflicted about the effort.

“Historically, road charge isn’t embraced by the trucking industry – it’s always been viewed as another tax scheme,” said Eric Sauer, vice president of policy and government relations for the California Trucking Association. “And in California, it’s a monumental task on a massive scale.”

The federal government has taxed fuel since the Depression. Currently, it takes 18.4 cents from each gallon of gasoline—a figure unchanged since 1993—and 24.4 cents from each gallon of diesel.

The revenue is deposited into the national Highway Trust Fund, which was established in 1956 to finance the interstate highway system. Most states also levy additional fuel taxes.

But critics say the system is outdated and insufficient. The federal gas tax, for example, brings in roughly $34 billion each year – much less than the government spends on surface transportation.

“We’re paying for roads the same way we were in the Korean War,” said Federal Highway Administration spokesman Doug Hecox.

Close up of a Cracked Highway

SAC I-80 between Winters Street and West El Camino- visibly broken and damaged pavement that will need repairs. (Photo: Caltrans)

In the first three months of 2016, drivers logged 746 billion miles in the U.S., beating the record set a year earlier and leading to intense road wear and tear, according to the federal transportation department.

“Roads are doing a job they were never built to do,” Hecox said.

Growing fuel efficiency and electric vehicle innovation is exacerbating the stress. Fewer gas guzzlers on the road mean a slimmer revenue stream via the fuel tax.

California’s transportation agency estimates that as much as half the revenue possible from the gas tax will be lost to fuel efficiency by 2030.

Then there are vehicles like the Nikola One electric truck, which Salt Lake City-based Nikola Motor Co. unveiled in mid-May. The semi would operate using a natural gas turbine that charges the vehicle’s battery pack.

Combined with a regenerative braking function, the 20,000-pound behemoth would be able to travel up to 700 more miles in one go than a standard diesel tank without contributing to fuel tax revenues.

Some states are experimenting with higher tolls and vehicle license fees, bond measures and creative reconfiguring of other state funds. But many governments are trying out so-called road charge programs, or mileage-based user fees.

“People have been looking at alternative ways to fund transportation for decades,” said Adrian Moore, vice president of libertarian Reason Foundation. “When you weigh all the costs and benefits, mileage-based fees clearly come out on top.”

California’s Road Charge pilot program will test several strategies, including a time-based permit that allows unlimited road use for a certain period as well as a mileage permit that approves a block of miles based on expected use.

Some volunteers will pay mock fees based on occasional manual odometer readings. There’s also automated mileage reporting technology, like a FitBit or fitness app for cars and trucks, as well as smartphone applications.

The California Legislature won’t decide whether to create a permanent use tax until 2018 at the earliest. The state, though, needs transportation funds desperately.

Nearly three in 10 California bridges require some sort of repair or rebuilding, while 68 percent of its roads are in poor or mediocre condition. In January, the state’s transportation commission slashed its estimate of available funding by $754 million over the next five years – the largest reduction in 20 years.

BUT-99 Highway Construction Road Widening Update

BUT-99 Highway construction road widening. (Photo: Caltrans)

In December, President Obama signed Fixing America’s Surface Transportation Act, which formed a 5-year, $95-million grant program to help states study road charging.

On both coasts, clusters of states are looking into regional versions. Nevada, Washington, Minnesota and several other states have attempted pilot projects. Last year, Oregon implemented a permanent road charge system in which volunteers pay 1.5 cents per mile and receive a credit for the fuel tax premium paid at the pump.

Some versions charge a flat rate – 10 cents a mile on a highway, for example. Another, more complicated option would calibrate fees based on location, weight, emissions, congestions and other factors.

But detractors say that such programs would require much more administrative attention than the gas tax does. Fraudsters could game the system. And tracking vehicle travel could invade drivers’ privacy.

Although heavy trucks travel less than 10 percent of total vehicle miles in the country, they’re often accused of causing outsized damage to roads because of the weight they’re hauling.

That’s why the Congressional Budget Office has suggested that mileage-based taxes focus on specific vehicles, such as trucks.

But in California, the trucking industry says it already shells out billions of dollars a year in weight fees that are earmarked for road repairs.

“We pay our fair share to operate on California roads,” said the California Trucking Association’s Sauer.

The trade group volunteered to participate in the state’s pilot program, helping to recruit at least 50 trucks representing a diverse cross-section of the industry to offer input and identify problem areas. That way, Sauer said, if a permanent mileage-based fee system is ever implemented, at least the trucking industry will be able to help shape it.

“Ultimately,” he said, “we hope to make it as seamless as the current system, where the general public at the pump often doesn’t even realize there’s a tax.


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