Lessons from San Diego’s proposed mileage fee
Photo 169213 © Joanne Harris | Dreamstime.com


Lessons from San Diego’s proposed mileage fee

Mileage-based user fees should replace gas taxes, not be added to existing fuel taxes.

Since the National Surface Transportation Infrastructure Financing Commission’s landmark 2009 report, Paying Our Way, the widely-accepted solution for the long-term decline of fuel tax revenue is to replace the fuel tax with some kind of per-mile charge to fund the construction and maintenance of roads. With ever-increasing federal fuel efficiency requirements for new cars and trucks, plus longer-term federal government and auto company plans to phase in electric vehicles and phase out internal combustion vehicles, charging drivers per mile will be sustainable long-term no matter how many electric vehicles are on the roads. 

To date, just about every pilot project to test mileage-based user fees (MBUFs)—or road user charges (RUCs) as they are often known in the west—has stressed to participants that the fee being tested was a replacement of the gas tax, not some additional charge. Many of the participants were skeptical of mileage fees prior to taking part in the pilot projects, fearing, in part, that the mileage-based user fees would be yet another tax increase on driving.

But by the conclusion of the projects, however, most participants understood the importance of replacing the fuel tax, having seen their monthly reports on what they were currently paying in state fuel taxes compared with the hypothetical mileage-based user fees. And most drivers in the pilot programs became comfortable with the technology used in the projects. 

Unfortunately, a few jurisdictions are trying to implement mileage-based user fees to raise revenue to fund a variety of projects rather than replace the gas tax. One recent example has given MBUFs a black eye in the view of some. In a recent Time article, titled “This California City’s Attempt to Charge People for Driving Back-Fired. Here’s Why That Matters for Everyone,” the magazine focused on the city of La Mesa and the San Diego Association of Governments (SANDAG), the metropolitan planning organization (MPO) for the metro area.

The MPO’s new long-range plan calls for implementing a road-user charge in 2030, to help pay for the projects in its $160 billion regional long-range transportation plan. KGTV in San Diego reports:

SANDAG’s proposed 30-year, $160 billion regional transportation plan includes an initiative to eventually provide free public transit for all San Diegans, major improvements to infrastructure across the county, and a possible high-speed rail system. However, the initial proposal contained the following proposed taxes that would help fund the project:

—a per-mile road usage tax

— two half-cent regional sales taxes for 2022 and 2028

SANDAG’s latest plan was to change the current gas tax that San Diego residents already pay. It would change from per gallon to per mile under the vehicle mileage tax. Under the plan, starting in 2030, it will cost 3.3 cents per mile. In addition to the regional-wide sales tax which if added together will mean four cents per mile through 2050.

But the RUC would be charged in addition to the current state and federal gas tax, not as a replacement. As a result, the program has made itself vulnerable to attacks. In this case, the charge would indeed be “yet another tax on driving,” as charged by Republican activist Carl DeMaio in the Time article.

DeMaio and his allies have made opposition to the mileage tax a key point in opposing any city officials in the metro area running for re-election if their city has signed on to the SANDAG plan. Time notes:

While Lothian and others readily admit that the road-usage fee is hardly the biggest topic concerning local Republicans, they see it as a crucial wedge issue, capable of sparking outrage, wooing moderates, and ultimately gumming up the Democrats’ broader agenda on climate and other issues. DeMaio, who is hosting the town hall, tells the crowd to think strategically: Republicans need to leverage anger over the road-usage fee—which he and other conservatives call a “mileage tax”—to reach voters who might not be following politics closely. “When we approach voters, we only need two or three issues,” he tells the crowd. “This is going to be one of the most important issues in bringing voters over and creating a coalition that can help us change policy.”

One reason the road-usage fee is so politically useful, DeMaio tells me, is because unlike a lot of climate policy, it’s easy to understand: the more people drive, the more they’ll pay—and no one likes to pay.

The article recounts DeMaio-led anti-mileage-tax town halls and the political pressures that have led a number of city officials to reverse their previous support for the mileage tax. Time reporter Justin Worland wrote that “SANDAG expects [the mileage tax] to raise $14 billion in revenue over two decades, which would help underwrite new trolley lines, more efficient highway lanes, and rideshare programs.” In the majority of states, however, including California, gas taxes can only be spent on roadways, consistent with the users-pay/users benefit principle. Clearly, what SANDAG has proposed is not only an add-on; it is an overall transportation tax that would be paid for only by roadway users, thus violating the users-pay/users-benefit principle. Instead of having a debate about how road user charges work and provide a more sustainable option than the gas tax, SANDAG has to explain why it wants to implement new taxes.

It’s not as if the SANDAG board was not told about the need for the mileage-based user fee to be a replacement rather than a supplemental revenue source. In a Zoom meeting with the SANDAG board, I personally provided several data points to ensure MBUFs were not implemented as a new, general use tax. The points I made at the time included:

  • Express toll lanes can control traffic congestion and can generate revenue;
  • All lanes of a congested Interstate can be (legally) tolled to manage congestion;
  • Transportation equity is very complicated; and,
  • We need to replace per-gallon fuel taxes with per-mile charges.

Several months later, senior SANDAG staff invited me to discuss some of the recurring political challenges that come with the implementation of mileage fees and how to best address drivers’ concerns. The MPO’s leaders said they were impressed with the points in my Reason paper, “A Conservative Case for Highway Tolling,” which noted the wave of opposition from Republicans:

…a growing number of state DOTs, governors, and legislators are looking at tolling as a way to increase highway investment. In some states (e.g., Colorado and Virginia) tolling has had bipartisan support. But in others, recent years have seen growing opposition, especially from conservative groups and legislators. For example, in Connecticut, the General Assembly Conservative Caucus staunchly opposes legislative efforts to re-introduce tolling to that state. In Texas, despite more than $10 billion in recent toll projects that are delivering real benefits in the Austin, Dallas/Ft. Worth, and Houston metro areas, conservative legislators have imposed a moratorium on most new toll projects. And in South Florida, a grass-roots anti-tolls movement has led to legislative efforts to abolish the successful Miami-Dade Expressway Authority, which operates five heavily used toll roads in that metro area.

This policy brief reviews conservative opponents’ arguments, finding some of them to be justified and others to be mistaken. It provides some historical context on American tolling and cites economist Milton Friedman’s prescient assessment of the defects of the gas-tax model back in 1952. Building on those thoughts, this brief explains how tolling could be reformed consistent with basic conservative principles of limited government, decentralization, and markets.

I accepted SANDAG’s invitation, but, evidently, I failed to stress strongly enough the need to ensure that a road user charge should be a replacement for the fuel tax, not an addition to it. And now SANDAG is facing a major political blowback.

Some conservative groups have regularly complained about tolling and mileage-based user fees and it is quite possible DeMaio’s group would have chosen this political battle against road use charges regardless of SANDAG’s approach.

But SANDAG pursued the wrong path. California is testing a mileage fee pilot program and San Diego should be looking to transition away from gas taxes. Unfortunately, SANDAG played right into the hands of opponents and skeptics who already claim MBUFs will be additional charges, not a replacement for gas taxes. MPOs like SANDAG and the rest of the transportation community need to avoid making poor policy decisions that limit support from elected officials, raise doubt and opposition from drivers and make it more difficult to build and maintain the roads and highways we need.

Mileage-based user fees represent the best option for moving away from the current gas tax, which is an increasingly ineffective way to fund roads. But mileage fees are a replacement for fuel taxes, not something to add to them.

A version of this article first appeared in Robert Poole’s Surface Transportation Newsletter.