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Paying by the mile for California roads, infrastructure

Traffic on the Harbor Freeway in downtown Los Angeles. (Photo: Jose Luis Stephens, via Shutterstock)

Keeping roads pothole free has been a challenge in California for decades.

But an unusual solution has emerged — a per-mile-driven fee on motorists, called a Road Use Charge, with the money going to build and maintain infrastructure, including roads and highways.

Four years ago, the state authorized a little-known pilot program for the Road Use Charge, or RUC, and 5,000 motorists participated over a nine-month period.

Currently, California has the highest gas taxes in the country, with a total of about $1.18 in state and federal taxes and fees charged on every gallon of gas pumped.

“The pilot program confirmed the viability of many aspects of a mileage-based financing mechanism but did not test the actual collection of revenue,” according to legislative legal analysis. “The collection of revenue was simulated in the pilot program through mock invoices and payments.”

The revenue is crucial. How should it be monitored and collected? Should it replace the existing state’s per-gallon fuel tax, or should it be added to the existing tax? Gas prices are high already, angering California motorists, so is the RUC politically feasible, given that this tax already goes to road construction and maintenance?

Currently, California has the highest gas taxes in the country, with a total of about $1.18 in state and federal taxes and fees charged on every gallon of gas pumped.

The federal government gets 18.4 cents per gallon in excise taxes; California charges 50.5 cents in excise taxes per gallon, which includes a recent 12.7-cent bump specifically for infrastructure and transportation programs. It also charges a variable sales tax, that averages about 10.7 cents per gallon, but differs according to the region.

In addition to the taxes — a total of bout 80 cents per gallon —  there are several fees. Those include a 2-cents-per-gallon charge for underground storage tank safety, 14.3 cents for the state’s cap-and-trade program and about 22.6 cents for the Low Carbon Fuel Standard environmental protection program.

Sen. Scott Wiener, a San Francisco Democrat, authored SB 339, which Gov. Newsom signed in September. The bill extends the pilot program, requires the California State Transportation Agency to develop a workable RUC system and keeps in place a Technical Advisory Committee at the California Transportation Commission to also examine the issue.

A 2017 report stated that fees from out-of-state drivers would be non-collectible without a gas tax.

Nothing happens immediately, though: The final report to the Legislature isn’t due until 2026, with an interim report due two years earlier.

Even if California, which has nearly 400,000 lane miles across the state, replaces its fuel tax with a road use charge, motorists could still be on the hook for federal gas taxes, over which California has no control.

And there is some confusion about how the RUC money should be collected.

On the one hand, the state says it plans to use RUC to replace the gas tax.

But a 2017 report stated that fees from out-of-state drivers would be non-collectible without a gas tax. So it was suggested in the report that the gas tax could remain in place, and that Californians would have to file for refunds for any sales tax they were charged under an RUC program.

The original pilot project legislation was contained in AB 1077 by then-state Sen. Mark Desaulnier, now a congressman. His bill arose from a funding gap discovered by Caltrans stemming from the increased adoption of zero-emissions vehicles in 2010.

The bill authorized the California State Transportation Agency to begin researching the feasibility of an RUC in addition to a pilot program to help see how the RUC would actually operate if it went into effect.

The California Transportation Commission also oversaw the creation of a 15 member RUC Technical Advisory Committee to advise the Transportation Agency specific kinks in the RUC system, including alternative programs,  collections and the potential dollar amount of any RUC.

An option is the use of the mileage data already tracked by insurance companies, while the other requires an annual odometer reading.

The California State Transportation Agency published a report on the road use charge, which estimated that nearly 20% of the RUC revenue generated would be lost in collecting the tax.

The RUC would cost more per-mile driven than the current gas tax, because the existing tax is automatically covered whenever a driver puts gas in the tank.

But the RUC is based on tracking mileage, and two major options have evolved.

One is the use of the mileage data already tracked by insurance companies, while the other requires an annual odometer reading. Both of these methods have been suggested due to their inherently low cost.

An earlier — but more costly — possibility is the use of GPS transponders. These could track motorists, whether from inside or outside the state.

Adding to the complexity: Taxes are being collected at the wholesale level from oil refineries under a gas-tax model. Under a road use charge system, tax collection is pushed off onto the consumer.

Critics contend the RUC negates the financial benefits of ownership of zero-emission vehicles.

 Also, due to the sheer number of vehicles on California roads, about 15 million registered vehicles alone, the state has opted instead to forgo collecting the tax in-house and has planned to contract private account managers to collect the tax from motorists. These private account managers would be responsible for verifying miles driven, issuing statements, and collecting payment.

Most affected by the RUC are commuters and low- to zero-emission vehicle owners.

Currently, the state encourages the purchase of electric vehicles through rebates. Last year, the governor signed executive order N-79-20, prohibiting new internal combustion engine car sales by 2035.

But critics contend the RUC negates the financial benefits of ownership of zero-emission vehicles.

Besides the state electric vehicle registration fee, EV owners have enjoyed not paying any vehicle use taxes that fund the roads. Like EV owners, hybrid owners have also saved big on gas taxes due to the high fuel economy offered by their vehicles.

As envisioned currently, RUC fees would likely be paid via a statement similar to a utility bill or perhaps a yearly lump-sum payment.

However, many in the transportation world note that for roads to be funded, non-gasoline vehicles must pay some form of taxes, including RUC, to fund roads.

The other group most affected by RUC is commuters.

The average American drives thirty miles a day round trip to work, and in California, that average is significantly higher.

At a fee of 1.8 cents per mile driven, which has been proposed, a commuter can expect to pay $5.76 a day for their commute, $28.8 a week,$115 a month, with a yearly total of $1382.4 in mileage-driven fees. Super commuters who commute over 120-miles a day round trip can expect to pay $21.6 a day for their commute. This figure does not include miles driven for pleasure by motorists.

Commuters already pay more to drive due to their above-average purchase of gasoline, and the RUC would fundamentally change how motorists budget.

As envisioned currently, the schedule of payment of RUC fees would likely be in the form of a statement similar to a utility bill or, as in the case of an odometer reading, a yearly lump-sum payment.

Requiring the payment of fees all at once could substantially affect low-income and moderate-income motorists.

That is why Caltrans is actively looking at things like caps, the number of miles taxed, or different mileage fees based on income level.

The state RUC pilot program with 5,000-plus volunteers is taking the big step this year to collect revenue.

“Our goal is to create a system for the Legislature to consider what is fair, transparent, and sustainable in the long-term that works for all of California,” says Lauren Prehoda, Caltrans’ RUC program manager.

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