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Oregon Gets Company in Testing Gas Tax Alternatives

As the gas tax brings in less and less revenue, states are watching Oregon and California as they experiment with different ways to charge by mile.

For a decade, Oregon has been the undisputed leader in pursuing the idea of taxing drivers not on the amount of fuel they buy but on the number of miles they drive. Starting this summer, though, the Beaver State will get some company: California plans to launch a nine-month experiment in July to test out different ways of charging by the mile.

The pilot project comes as the gas tax continues to lose its buying power. In nearly two-thirds of states, gas taxes have not kept up with inflation. What's more, California estimates it will lose half of its fuel tax revenues by 2035 because of increased fuel efficiency.

That's one reason states will be watching California's and Oregon's experiments closely. Another is that the federal government wants states to test alternatives to the gas tax. The FAST Act, the transportation funding law that passed Congress last year, includes $95 million over five years to help states run programs similar to California's and Oregon's.

While states are a long way off from scrapping their fuel taxes entirely, these initiatives help them prepare for the future, said Jim Madaffer, a former San Diego council member who now chairs the California Road Charge Pilot's technical advisory committee. "The whole purpose of the pilot is to come up with some ideas so we can find a way to have a long-term, reliable funding source."

Under California's trial, drivers will get to choose how to keep track of the miles they drive, either by buying a decal for an allotment of miles or using GPS-enabled systems to tally them. That's more options than Oregon offers its drivers under its mileage tax program, which launched last summer.

Oregon began looking at using a vehicle-miles traveled (VMT) tax 15 years ago. It conducted two pilot projects in the last decade before launching OReGO last summer. The new program allows drivers to pay 1.5 cents per mile driven, instead of the state's 30-cent per gallon fuel tax. Participants still pay the fuel tax at the pump, but the amount is credited against their bill for mileage taxes.

Two outside vendors keep track of the mileage each vehicle travels, bill customers and send the fees to the state. The arrangement is designed to protect the privacy of the drivers by preventing the state from knowing where vehicles have traveled, their speed and other driving behavior. The companies also offer other features, such as fuel efficiency monitoring, to attract participants.

The Oregon Department of Transportation (ODOT) originally proposed making the program mandatory for new fuel-efficient vehicles, like hybrids or electric cars. In the end, though, the legislature made the program voluntary. In fact, lawmakers actually reserved more space in the program for inefficient vehicles, which would qualify for refunds because they use more gas per mile. Oregon chose not to highlight that benefit, said Jim Whitty, a consultant who until recently was ODOT's leader on its VMT efforts.

Strangely, the biggest group of drivers enlisted in OReGO are those who would pay the most: the owners of fuel-efficient vehicles. Forty-three percent of vehicles in the program in April averaged 22 miles per gallon or more. "Individuals who pay less in gas taxes understand that they need to pay their fair share for road maintenance," said Michelle Godfrey, an ODOT spokeswoman. "They want good roads to drive on, so they see the value in the program for Oregon."

While both states designed programs for 5,000 vehicles, fewer than 900 were participating in Oregon's program as of April. More than 8,000 Californians, on the other hand, have signed up for the program there.

Whitty, the former ODOT official, said he thinks other states like California will now start to build on what Oregon has learned. "[Oregon] has reached its peak, and so we're kind of hoping other states carry ball the forward," he said. "In a rugby match, you get tired, you need to hand the ball forward."

Dan is Governing’s transportation and infrastructure reporter.
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