October 19, 2021

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Pay-per-mile tolling systems are poised to hit highways

Electric vehicles might be good for the environment, but they’re terrible for state budgets, which depend on fuel taxes to pay for road maintenance. So states like Oregon and Utah are experimenting with new road user fees — known as “vehicle mileage taxes” or VMTs — that reflect changing mobility trends.

Why it matters: By charging drivers for the miles they drive — instead of taxing the gas they use — states can ensure that everyone pays their fair share for public roads. But some drivers might wind up paying more than they do now, and the preliminary technology involved is raising privacy concerns.

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How it works: In Utah and Oregon — where EVs and increased fuel efficiency are blowing a hole in road repair budgets — drivers are being asked to enroll in voluntary experiments in pay-as-you-go tolling.

  • Under a VMT system, drivers report their mileage electronically, using a plug-in device in their cars or a smartphone app.

  • Per the Deseret (Utah) News: “Users are given the option to pay 1.5 cents per mile traveled or an annual flat fee of $120 for electric vehicles or $20 for gas hybrids.”

  • Oregon is testing several potential funding models based on the time of day and other factors.

  • Under one potential scenario, a driver could pay a statewide 1.8-cents-per-mile fee, plus a 20-cent metropolitan Portland surcharge, plus a virtual toll on Interstate 5 and another fee for entering downtown Portland.

Pros and cons: On the plus side, user fees can help manage traffic congestion and address climate issues by charging different amounts for certain regions, roads and times of day.

  • However, requiring drivers to insert a transponder in their car is a red flag to some.

  • And rural drivers, who tend to drive more, could find themselves paying more than urban and suburban residents.

The big picture: The federal Highway Trust Fund, which pays for roads and transit systems through the existing 18.4-cent per gallon fuel tax, is running out of money.

  • The budget gap will inevitably grow wider as cleaner cars burn less fuel and EVs become more popular.

  • States are feeling a similar pinch from their shrinking gas tax collections.

  • “Oregon is at the cutting edge of a problem everyone will face,” says Michelle D. Godfrey, a spokesperson for OreGO, the state’s road usage pilot program. “We have to get real about funding, because it affects everybody.”

Driving the news: The $1.2 billion infrastructure bill working its way through Congress includes $125 million to fund several pilot programs to test the feasibility of VMTs.

The intrigue: One way to implement more sophisticated fee policies is through a layered pricing scheme that uses dynamic road pricing and advanced tolling.

  • ClearRoad, a New York-based startup, is helping several states test automated digital pricing systems without installing roadside cameras, sensors and toll gates.

  • Such fixed architecture can be expensive: New York’s MTA awarded a $507 million contract to a Nashville company to design, build and operate the toll system equipment and infrastructure needed to begin congestion pricing in Manhattan.

  • During the pandemic, officials in London didn’t want to burden essential workers with congestion pricing premiums, but there was no way to distinguish among vehicles, so they had to turn off the entire system.

  • “When traffic patterns move, you can’t move the cameras,” said ClearRoad cofounder Paul Salama.

If it sounds like getting nickled and dimed to death, Salama points out it’s no different from what Uber and Lyft do every day.

  • Their fares often includes extra fees for wait times, surge pricing, highway tolls and airport access.

  • “It’s all digital, so you can change the policies on the fly,” said Salama.

The bottom line: Roads have to be funded, even if gas taxes disappear. Figuring out an equitable fee system is going to be a big challenge.

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