Minnesota takes closer look at mileage tax

02/20/2007

All those fuel-efficient cars we drive are using less gas — and that means less money for the state road budget.


BY DENNIS LIEN
Pioneer Press


Gas-sipping cars and trucks are easy on pocketbooks and the environment. But they aren't much help to Minnesota's transportation budget. In fact, they promise to put a big hole in it someday.

Gov. Tim Pawlenty wants to plan for a time when state and federal gasoline tax revenue starts drying up. In his budget last month, he proposed $5 million for a pilot project to study technologies the state could use to move to a tax based on how many miles people drive instead of how much gasoline they use.

Critics of alternatives to the gas tax question whether a fair system can be established for cars with wildly different gas-mileage rates. And technology that tracks where and how far individuals drive prompts privacy concerns. But something might have to be done.

For every gallon of gas sold in Minnesota, motorists pay 38 cents in state and federal motor-fuel taxes, which accounts for half the state's transportation income. If motorists continue trading in gas guzzlers for higher-mileage cars, gas-electric hybrids or futuristic hydrogen-fueled models, they will buy less gas and spend fewer dollars on gas taxes. Over time, that will mean less money for road construction and maintenance.

"We've seen this coming for a long time,'' said Ken Buckeye, program manager for value pricing at the Minnesota Department of Transportation. "And we're looking for a long-term solution.''

Buckeye said gas-tax revenue already has begun to level off and eventually will decline. The state gas tax of 20 cents per gallon, which could be increased to delay or halt that trend, hasn't gone up since 1988, even though DFL lawmakers have been proposing increases for years.

With little talk about Pawlenty's proposal so far, it's too early to say how it will fare the current session of the Legislature. But if lawmakers come up with the money, the transportation agency would begin the pilot project this summer.

Buckeye said the transportation agency would team up with a private business but wouldn't have to start from scratch. Oregon has been studying such a switch for years.

"What we want to do is build upon all their work and make it better,'' Buckeye said.

Oregon began studying alternatives to the gas tax six years ago and will have a final report available this summer. After looking at 28 funding options, it narrowed them to four and settled on the mileage tax, said James Whitty, manager of the office of innovative partnerships and alternative funding for the Oregon Department of Transportation.

"We wanted a system that was simple to use and wouldn't have the motorist doing a whole lot of new things,'' Whitty said. "A system that would have a low evasion rate and that wouldn't be expensive to collect.''

Oregon then launched a study of the tax.

Last year, 280 vehicles were recruited for a 10-month study, which ends next month. For each, mileage-counting equipment was added, with motorists being charged 1.2 cents a mile instead of Oregon's 24-cent-a-gallon gas tax. For vehicles that get 20 miles to the gallon, the cost is roughly the same, Whitty said.

Two gas stations in Portland are equipped with devices that read mileage figures. Each time the cars pull into them, updated mileage totals are relayed to computers, which calculate how much tax is owed. When the motorists pay, the gas tax is deducted automatically and the road-use tax is added.

Whitty said gas-tax income in Oregon is projected to begin a permanent decline in a decade. Until then, as people use more fuel-efficient vehicles, he projected a widening gap between the revenue that could be generated by the gas tax and what actually comes in.

A big concern so far, he said, has been how to structure the rate that motorists should be charged. With one rate, some vehicles would fare better than others.

"The winner would be the gas guzzlers — the Hummers — and the losers would be the highly efficient ones,'' Whitty said. "That offends people's sense of fairness.''

An option, he said, is a tiered system, in which everyone pays the same basic rate. But, in a second tier, gas guzzlers would be charged disproportionately more.

Another concern is privacy. The cars would have technology that identifies where they're being driven, Whitty said, so critics have questioned what might be done with such information. None of it, however, is collected or stored, he emphasized.

Rep. Bernie Lieder, DFL-Crookston, brought up the mileage tax in Minnesota more than a decade ago and has watched the debate get off to a sputtering start. "Everyone is concerned about the privacy issue,'' Lieder said.