GAO floats mileage-based fee as an alternative to Highway Trust Fund

Even with a new federal transportation bill— MAP-21 (Moving Ahead for Progress in the 21st Century—signed into law last July, transportation funding on many levels is replete with concerns over future revenue streams.

This is, perhaps, most evident when it comes to how to best finance the Highway Trust Fund (HTF), whose revenues are allocated for highway repairs, construction, and maintenance, and are supported by the federal fuel tax of 23.4 cents for diesel, 18.4 cents for gasoline—has been unchanged since 1993. Because of inflation, the federal fuel tax does not provide enough funding into the Highway Trust Fund, which repeatedly has had to have an injection of funds from the general treasury the past few years in order to remain solvent.

Because of the myriad financial issues surrounding the HTF and lack of Congressional action when it comes to the possibility of raising it, there have been various ideas floated in transportation circles regarding how to come up with alternative ways to pay for the HTF, which is currently expected to be insolvent by 2015. This is not surprising as the HTF currently pays out more than it takes in and has repeatedly needed to get bailed out by the United States General Trust Fund.

One way to possibly pay for it is the concept of a mileage-based user fee, which was the focus of a report released this week by the United States GAO, entitled “Highway Trust Fund: Pilot Program Could Help Determine Viability of Mileage Fees for Certain Vehicles.”

In its report, the GAO explained that mileage-based user fee initiatives in the United States and abroad show that such fees can lead to more equitable and efficient use of roadways by charging drivers based on their actual road use and by providing incentives to reduce road use.

While a fair amount of this is geared towards the roughly 230 million passenger vehicles traversing the U.S. on a daily basis, it applies to commercial vehicles, too.

According to the GAO, mileage fee rates could be set to replace or supplement current HTF revenues, and it calculated that average mileage fee rates for passenger vehicles and commercial trucks needed to meet three federal revenue targets that range from $34 billion to replace current fuel tax revenues to $78 billion to increase spending to maintain existing system conditions and performance. And to meet those targets, GAO said that mileage fees between $108-$248 annually for passenger vehicles would be required compared to the current $96 currently paid out in federal gasoline tax per vehicle.

But for commercial trucks, GAO said mileage fees could also increase users’ costs, especially for larger trucks that log more miles, adding that in 2000 the Federal Highway Administration estimated that “heavy commercial trucks generally pay less in taxes than the road damage costs they impose,” going on to say that “adjusting mileage fee rates to account for vehicle road damage costs would increase rates for commercial truck users,” although FHWA estimates may not reflect current conditions, the report said.

To meet the challenges in the coming years, the GAO recommended that if Congress looks into mileage fees it should consider setting up a pilot program to test the viability of these fees for both commercial and electric vehicles, the latter of which whose number are expected to increase and do not contribute to the HTF. This type of pilot would be key in assessing whether mileage fees for these vehicles “could be a viable and cost-effective tool to help address the nation’s surface transportation funding issues.”

American Trucking Associations (ATA) Director of Highway Operations Darrin Roth told LM that the best way to stabilize the HTF and stabilize funding is through an increase in the federal gasoline tax.

“We believe that could be a viable primary revenue source for highway projects well into the future,” said Roth. “We need a viable alternative for at least the next ten-to-15 years after which point it gets harder to project what will happen with technology or electric cars or other types of fuel. We don’t believe a replacement for the fuel tax is necessary. Costs and inflation continue to rise while HTF revenue has basically flat lined. It is unsustainable if we don’t increase revenue to meet future needs. At some point we need to find additional money to make up for the shortfall and taxes need to be raised at some point.”