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As Washington Drags Its Feet, States Take the Lead on Mileage Fees

Oregon, true to its history as the first state to implement a gas tax, was also the first state to consider getting rid of it -- in exchange for adopting a mileage-based system for highway funding. And the Beaver state isn’t alone: A number of other states have done studies and introduced legislation to charge drivers for the distance they travel instead of the gasoline they consume.


To date, none of the states have passed legislation to enact a vehicle miles traveled (VMT) fee. But with an increase in the federal gas tax seemingly impossible in an election year and federal funding increasingly uncertain, states may well be left with little alternative but to reconsider an idea many experts agree makes sense.

With Americans driving less and opting for more fuel-efficient cars, revenues from state gas taxes have been on the decline. Data from the Federal Highway Administration show that between 2007 and 2008, 30 of 50 states experienced declines in their gas tax receipts, dropping by an average of two percent. If electric cars one day replace America's internal combustion fleet entirely, revenues based on gas taxes could dry up altogether.

For many states, VMT fees may be just what the doctor ordered. While the prospect of a mileage-based system has led some to argue that the GPS technology needed to make it work optimally is an invasion of privacy, there is a growing consensus that it is a much more sustainable option for transportation funding. Earlier this year, the Congressional Budget Office issued a report stating that the VMT fee system is a feasible transportation funding option and would result in a more efficient use of the highway system. This follows several earlier reports, including from two federal transportation financing commissions, recommending that the federal gas tax be gradually replaced with VMT fees [PDF].

In the past decade, about two dozen states have examined the feasibility of such a system. Here are some of the more noteworthy initiatives:

Oregon: Having learned valuable lessons from its original VMT pilot program in 2007, Oregon transportation officials redesigned the ways that vehicle mileage is recorded and fees are collected in a Phase II pilot program this year. Instead of a pay-at-the-pump concept, the state's Road User Fee Task Force proposed legislation (HB 2328) based on an “open technology” platform applied only to drivers of electric and plug-in hybrid vehicles.

The original pilot program exposed design shortcomings and significant public opposition to the mandatory use of GPS technology to track vehicle miles traveled, so the new proposal would give Oregon’s DOT the flexibility to establish multiple methods for reporting VMT. An “opt-in” feature would allow drivers to choose the method by which they report their mileage and pay their fees. The revised concept also envisions a larger role for the private sector in the data collection and management of accounts.

Colorado: In 2007, a blue-ribbon commission exploring alternatives to the gas tax recommended that a pilot program be established to test the feasibility of implementing VMT fees, and that pilot is now underway. Some legislators are also considering introducing bills to require that only electric cars pay the fee, at least in the beginning. A final report is due in May 2012.

Minnesota: In May of this year, Minnesota began a pilot program in which a group of 500 drivers from two counties are asked to test VMT collection technology. The participants will use smart phones and GPS technology to submit information that MNDOT will use to evaluate whether travel data is being recorded and conveyed accurately and reliably. The test will also examine whether other applications -- such as real-time traffic alerts on construction zones, crashes, congestion and road hazards -- are effective in communicating safety messages to motorists. Three different groups of volunteers will test the devices for six months each.

Nevada: Last year, Nevada also completed a feasibility study, which noted that it could take a decade or more to fully phase in a VMT fee program and that public acceptance will be critical to its success. Nevada hopes to eventually replace the gas tax as a funding source for surface transportation.

Idaho: A transportation task force, appointed by the governor to address a growing gap between the state’s transportation system needs and available revenues, proposed a list of options including mileage-based user fees. The formula used to allocate funds to local jurisdictions would be adjusted consistent with user-pay principles.

Texas: Research on VMT fees has been ongoing in Texas since 2007. This year, state legislators introduced a bill (HB 1669) that would have developed a pilot program in response to a state-authorized Texas Transportation Institute study [PDF] calling for a mileage-based system. Although the bill failed to make it out of the House Transportation Committee, there is a strong possibility that it will come up again in the future.

Hawaii: A bill, SB 819, was introduced this year but failed to pass. It would have established a pilot program in the state and authorized refunds of motor vehicle fuel taxes paid to participants.

Massachusetts: A bill similar to Hawaii’s (HB 2660) is pending, which would create a pilot program to study the challenges of adopting a VMT fee.

Multi-state: Perhaps the most intriguing of all the state trials is the federally-funded, multi-state VMT field test by the University of Iowa. Six sites were chosen: Austin, Texas; Baltimore, Maryland; Boise, Idaho; Eastern Iowa; and the Research Triangle, North Carolina. While the final report is currently being reviewed by the U.S. Department of Transportation and its findings have not yet been made public, it’s the most geographically broad test to date and could be the most significant in showing whether the system would work on a nationwide scale.

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