Charging by the Mile: Oregon’s Alternative to the Gas Tax

December 14, 2012

By Julia Pulidindi

A recent NLC blog post talks about the limitations of a diminishing Highway Trust Fund (HTF) and the need to explore alternatives to financing transportation infrastructure systems.  The current transportation financing system, which primarily relies on a federal gas tax, has been called inadequate by several transportation entities ranging from the Transportation Research Board in 2006, to the National Surface Transportation Policy and Revenue Study Commission in 2008 to the American Association of State Highway and Transportation Officials in 2009.  One option that all these groups have identified as a viable alternative worth considering is a mileage-based user fee approach, often known as a vehicle miles traveled (VMT) tax.

Despite being a widely discussed alternative, there is much to learn about a VMT approach since there are very few examples to draw from.  A VMT system would require significant studies to determine feasibility and also an upfront investment to operate as it changes the way revenues will be collected and fed back to the HTF.  Rather than paying a gas tax at the pump, VMT will charge drivers based on the amount of miles they actually travel as opposed to the amount of fuel they consume.  Taking out the logistical implications of this, politically, this could be difficult to implement.

A recent USA Today article makes some compelling arguments against both the gas tax and a VMT tax.  Despite the potential for an increase in revenues to the Highway Trust Fund, a higher gas tax would place an undue burden on drivers.  A VMT tax would be perceived to be no different than a gas tax in this regard and has the added complications of outfitting vehicles with the equipment needed to track miles traveled. 

The Oregon Department of Transportation (ODOT) piloted a VMT project in 2007 and found the approach to be feasible, addressing one of the basic concerns of this model.  In November 2012, they embarked on their second pilot project which sought to address some of the issues that were raised during the first pilot.  Jim Witty, Manager of the Office of Innovative Partnerships and Alternative Funding at ODOT, and Vice-Chair of the Mileage-Based User Fee Alliance, reported that many people were against or opposed to the first pilot despite it being simple to use.  In their first round of exploring VMT, the project required the mandatory use of GPS technology to track miles travelled which required the installation of a device in vehicles.  This step was cumbersome, is very limiting in terms of options for the driver and did not protect personal privacy.  The second pilot, which is backed by the Oregon Legislature and consists of 40 volunteers, provides options to the users in how they report and pay for their miles traveled. 

Volunteers in the ODOT pilot can choose to report miles without a GPS device (a speed sensor installed in the vehicle reports only the miles traveled wirelessly to a central collection system), through a smart phone plan (currently only with Android phones), with a GPS device (which is able to report miles and other mapping specifics so as to differentiate between in- and out-of-state roads as well as public and private roads), or to pre-pay a higher flat rate up front for unlimited miles traveled per month. 

Bills for VMT are likened to a cell phone bill based on the type of plan the volunteer signs up for; invoices are mailed or emailed out and can be paid through a variety of options.  Volunteers in this pilot program will also receive a rebate on any gas tax paid so that they do not pay both the gas tax and 1.56 cents per mile for the VMT tax.  This resource page for volunteers provides more information on the pilot project and allows them to share experiences with what is working and not working with the system. 

Providing choices in terms of technologies to use and ways to pay was one of the hallmarks ODOT identified as a tenet for a successful VMT system and ensured that this was incorporated into this second pilot.  Other features they identified as key to a successful system were that there was no technology mandate (no government-enforced equipment for the vehicle), an open system that would integrate with the technology market (allows for flexibility and adaptability) and to incorporate private sector participation (economies of scale allow them to operate at a cheaper and faster rate.)

Granted there are serious issues with a system that relies on a technology-based approach to collect revenues.  ODOT found that no matter how many options they provided and how easy it was to take part in the pilot, there will always be some users who will not be on board because of aversion to technology or general opposition to institutional changes.  Additionally, while ODOT has already identified ways to improve on this system, it cannot happen without strong partnerships with stakeholders and neighboring states.  Also, as people rely less on cars and other forms of transportation, revenues captured from a VMT system  are reduced.  However, the implications of not exploring this option could have a negative impact from both a revenue-generation standpoint and on technological advances.  ODOT’s second pilot is expected to end in January 2013, and they are slated to report their findings to the Oregon Legislature in February. 

Details: For more information on VMT initiatives around the country or transportation financing, please contact Julia Pulidindi at pulidindi@nlc.org or (202) 626-3176.