Oregon Leading the Way with Mileage-Based User Fees

For more than a decade, Oregon has been at the forefront of efforts to find a replacement for declining gas tax revenues. Earlier this month, the legislature passed a groundbreaking bill to begin charging volunteers based on how much they drive on state roads, instead of how many gallons of gas they buy in the state. The bill, passed by the legislature and awaiting the governor’s signature, establishes a program that will test the feasibility of transitioning away from gas taxes towards mileage-based user fees (MBUFs), which charge travelers based on how many miles they drive.

This legislation, building on years of research and multiple demonstrations by the Oregon Department of Transportation, will provide 5,000 Oregonians with the option to pay 1.5 cents for each mile they travel on state roads, rather than paying the state’s 30 cents per gallon gas tax. Participants will be refunded their share of the gas tax each time they fill up, in exchange for paying the fee on miles traveled. Oregon recorded over 19.4 billion vehicle miles travelled in the state in 2011.

This is not only a more logical and fairer method of paying for state highway needs, it is also inevitable. As far back as 2001, state officials began investigating ways to offset declining gas tax revenues with other methods of paying for roads. Over the next few decades, federal fuel economy standards will increase average fleetwide fuel efficiency, encouraging more driving while collecting less tax revenue for each mile traveled. The rise of hybrids and electric cars has brought the issue to a head, as many citizens have noticed that electric car owners are literally free riding on the state’s highways, which are still maintained in large part by gas taxes.

The key to securing passage for the mileage-based user fee (MBUF) was that it be a voluntary, opt-in program. Other important factors were ease of use, privacy protections and options for participants. The bill does not dictate which technology drivers have to use, but instead allows them a choice between a variety of payment methods.

One possibility, used in Oregon’s pilots, is a GPS device or smartphone app that records the raw number of miles driven in-state, so as not to charge drivers for miles driven outside Oregon. It would not transmit citizens’ specific travel history or coordinates, and by law all personally identifiable information would be erased within a month. Another option is a device similar to an odometer that simply keeps track of total miles traveled; this provides additional privacy but wouldn’t distinguish between in- and out-of-state travel. For those who simply don’t want to think about it, ODOT also allows participants to opt-out and pay a flat monthly fee.

Importantly, revenue from the MBUF would be earmarked exclusively for the state’s highway fund, so that it can only be used for road construction and can’t be raided for politicians’ pet transit projects, such as the wildly expensive light rail line that derailed the Columbia River Crossing project last month. While the program isn’t perfect, it is still a long overdue step towards a realistic, modern approach to paying for roads.

Future improvements to the MBUF could include congestion pricing—varying the fee based on location and time of day—to incentivize driving during off-peak hours. An earlier ODOT pilot used GPS to note when volunteers drove in the Portland metro area, and last year San Francisco also contemplated a variable MBUF to help manage congestion during rush hours. Other changes might include an annual fee for completely electric cars similar to one that Washington State passed in 2012. Another bill to impose a 1.55 cent per mile tax on vehicles with higher than 55 mpg fuel economy died in committee because it lacked the required majority for new taxes.

In 1919, Oregon became the first state in the nation to institute a gas tax to help fund transportation infrastructure. Almost a hundred years later, it is leading the way from that model towards a more fair, efficient and responsible road payment method. This program will provide an ongoing model for policymakers around the country. Thanks to innovative policies such as MBUFs, Oregon will continue to be on the cutting edge of transportation funding in the 21st century.