California, Oregon Testing Per-Mile Fee in Lieu of Fuel Tax

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By Paul Shukovsky

California and Oregon are planning to launch the first interstate pilot program that charges a per-mile fee rather a fuel tax at the pump.

Oregon, which led the nation in 2015 with the first pilot of a still-operational road usage charge (RUC) program called OReGO, is teaming up with California, which completed its RUC pilot in March. Now the trick is to find a way that the neighboring states can operate a pilot together so drivers crossing the state line will pay the proper fees to the proper state.

Oregon, acting on behalf of the 14-state consortium called RUC West, will use a $2.59 million Federal Highway Administration grant awarded earlier this month to link its system with California’s system in July 2019, with the intent of creating a regional RUC platform that other states can join when ready.

The push behind paying a penny or two pennies per mile is driven by the ever-increasing fuel efficiency of vehicles and the use of alternative fuels, which means drivers on average are paying less tax money per mile driven. With projections showing motor fuel tax revenue beginning to drop in the near future, there’s a sense of urgency in state transportation departments to find a more reliable way to get revenue for roads.

Metrics of Success

What are the metrics of a successful marriage between the two state programs?

“Mileage and fuel tax credits are accurately recorded and credited to the account, each state receives its proper aggregated data and money, and it’s seamless from the perspective of the driver,” Oregon Department of Transportation Project Manager Kathryn Jones told Bloomberg Tax.

Drivers would have one RUC account, one bill that they have to pay, and they’ll be able to log on to their account and see how all of that is calculated, she said.

Jones, who wrote the application for the highway administration grant, said the biggest technical challenge facing the two states will be accommodating varying state laws and policies on issues including privacy, data security, and the handling of public funds.

On the political side of the equation, the pilot program will have to navigate concerns about potential intrusions on driver privacy, given the use of GPS systems to track mileage. “We never get trips or what you do in a day,” Jones said of the OReGO program. That data is sent to a private-sector account manager, “but the government itself doesn’t see that data.”

500 Rural Drivers

Another political challenge is the perception that rural drivers who have to travel greater distances to go the supermarket or get services are disadvantaged by RUC programs. Jones said research shows that because of the prevalence in rural areas of low-mileage vehicles, such as pickup trucks, people living in the country on average pay more traditional gas tax than they would under a RUC program.

Because the Oregon-California border is sparsely populated country, the interstate pilot hopes to recruit some 500 largely rural drivers who frequently drive across the border, she said.

Jones said she is pleased that California’s RUC rate of 1.8 cents per mile differs from the Oregon rate, which will increase from 1.5 cents per mile to 1.7 cents per mile on Jan. 1.

“When we have a bunch of states, they are all going to charge different rates,” she said. “I think it’s great that we have different rates from California because that’s one of the things we want to test.”

One goal of the interstate program is to create a menu of interoperable requirements, in part “so that if a private company wants to do business in the RUC world, they know what it takes to get certified” to administer and operate a RUC system, Jones said. OReGO uses private contractors to administer its program, including providing devices to track miles, keeping track of those miles, and keeping tabs on revenue.

21st Century Funding Model

Jones called the interstate pilot “a pivot point in the right direction” that will ultimately lead to a coast-to-coast RUC program, which she thinks is perhaps 10 years away.

“Transportation infrastructure is right now dependent on burning fuel,” Jones said. “It’s a 20th century model for funding transportation. A 21st century funding model for transportation is by mile. It’s a utility. You pay for what you use. As cars become more fuel efficient, that’s great for our environment. It should also be great for our transportation system. So we really need to decouple transportation funding from burning fuel.”

In addition to California and Oregon, other RUC West states such as Colorado, Washington, Utah, and Hawaii have either already conducted their own RUC pilots or are poised to do so. On the east coast, the Federal Highway Administration in early October awarded $975,000 to the Delaware Department of Transportation to study privacy and equity issues such as the concerns of rural drivers for the member states of the I-95 Corridor Coalition.

To contact the reporter on this story: Paul Shukovsky in Seattle at PShukovsky@bna.com

To contact the editor responsible for this story: Jennifer McLoughlin at jmcloughlin@bna.com

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