VMT fee: The right remedy at the right time?

When the 21^st century reaches its half-way point, projected is a U.S. population of 400 million people; that’s up from the 300 million mark reached in late 2006, early 2007, if memory serves me well.

Now, as for driving, that’s another story. And, speaking of stories, it’d be a different tale entirely if the amount of driving done was inversely proportional to population growth. Well, guess again. Fact is, as there has been growth in population, there has likewise been a rise in overall vehicle miles traveled (VMT) despite the fact that VMT per capita has been tumbling. What this tells me is that more people are driving although drivers individually are driving less.

That more people are driving, what Is this saying? The picture is not pretty.

Consider that the American Society of Civil Engineers (ASCE), in its 2013 infrastructure report card, reported that the congestion rate America’s highways face is 42 percent. Alternately stated, this country’s highways see a traffic free-flow rate of just 58 percent. That’s right – a 58 percent traffic free-flow rate. On most grading scales, that’s failing. Not surprisingly, the ASCE in that very same report card gave America’s roads a grade of D. “D” for “deficient”? If not that, then “poor” for sure!

There is an upside: motor vehicle fuel economy is improving – slowly, maybe, but improving nonetheless.

This is reflective of aggregate fuel consumption by American motorists either being flat or tapering off. The opposite no doubt would be true if gallons of gasoline purchased had risen.

Now, in putting two-and-two together, roads and highways overall being in poor condition and only so much revenue being raised through taxes and tolls, how to effectively address a severe infrastructure-funding shortfall has become the question.

One innovative approach is being tried in Oregon where as many as 5,000 motorist volunteers will be assessed a vehicle-miles-traveled or VMT-fee, scheduled to take effect after July 1, 2015.

Here is how the Oregon Department of Transportation (ODOT) explains its Road Usage Charge Program or RUCP.

“After two successful pilot demonstrations in 2007 and 2012, the RUCP is now law and a permanent program in Oregon.

“After July 1, 2015 ODOT approved volunteers will pay the road usage charge [1.5 cents per mile] when the system is operational; no other drivers will be impacted. Total participants are not to exceed 5,000. No more than 1,500 may have a vehicle rating greater than 17 mpg, and no more than 1,500 may have a vehicle rating of at least 17 mpg and less than 22 mpg.”

Why – for these motorist volunteers – the VMT charge as opposed to the traditional gasoline tax?

“Highly fuel-efficient vehicles are taking to the road in increasing numbers, in Oregon and across the country,” ODOT acknowledged. “This is important for protecting the environment and reducing our nation’s dependence on fossil fuels, but it also reduces funding available for road maintenance.

“Historically, states (and the federal government) derived money to pay for upkeep of roads in large part through a tax on fuel. If vehicles using the road don’t visit the pump (for example, because they are all-electric), or they very rarely need to because they get high miles per gallon of fuel, then the owners of those cars are, unfortunately, not paying their portion of upkeep for the roads they use. The RUCP establishes a funding model of direct payment for roads used, based on miles traveled.”

If you are wondering how such mileage will be tracked, think Global Positioning Satellite (GPS) system technology.

Will this effort make a difference?

Way more should be known after the program has been in effect for some time after July 1, next year.

Furthermore, on the same ODOT Web site page there is an accompanying “Gas Tax Revenue” graph.

Shown on the horizontal axis are years 1985 to 2020. Meanwhile, the left-hand vertical column shows revenue in 2012 dollars and goes from $0 to $600,000,000 while the right-hand column shows vehicle miles traveled and ranges from 0 to 40 billion.

For year 2010 gas tax revenue was just south of $400 million. As for VMT, it was a skosh north of 34 billion. This compares to gas tax revenue in 2005 in Oregon being just shy of $450 million with annual VMT weighing in at right around 35 billion.

Meanwhile, gas tax revenue appeared to peak in what looks to be 1994 at somewhere around $540 million with peak mileage reached a decade later in 2004.

Bottom line gas tax revenue in Oregon is in retreat and that trend is projected to continue to 2020 and beyond.

Working through the numbers, with Oregon’s gas tax being right around 24 cents since 1997, and assuming an annual gasoline consumption rate of 550 gallons, revenue per driver generated would be $132.00. On the other hand, using a VMT tax of 1.5 cents per mile driven, if a volunteer participant drives an annual 10,000 miles, this person would be assessed a VMT tax of $150.00. In comparison, to match that VMT tax and using the gas tax instead, an Oregonian driver would need to purchase in a year’s time 625 gallons of gas. That number is a fairly realistic or representative number for many.

In one circumstance, drivers pay a flat fuel tax, and the amount paid is determined by fuel consumed. In the other circumstance drivers are charged on the number of miles driven regardless of the amount of fuel consumed and will apply regardless of vehicle type.

At the end of the day, less driving and/or driving more fuel-efficient cars and trucks points toward fewer emissions produced overall.

If a VMT tax results in fewer produced emissions plus more money becomes available for infrastructure improvement work, then this type of revenue-generating and air-quality-improvement mechanism would seem, at minimum, well worth further consideration.

Without ever putting a program of this nature into practice, one could never know what the outcome of such an effort is.

Whether this is the right remedy at the right time and/or the shape of things to come, time will tell.

More can be found on the RUCP here.

For like stats (population, drivers, gasoline tax rate, vehicle miles traveled and more) for your state, look here.

– Alan Kandel