Washington advances pay-by-mile pilot as gas tax alternative

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PHOENIX – Washington State is moving forward with a small pilot program to study a road-usage fee.

The program is viewed as an opening bid toward replacing pay-by-the-gallon fuel taxes with pay-by-the-mile usage fees to fund and maintain highway infrastructure.

This month the state began recruiting a hoped-for 2,000 drivers to take part in the road usage charge pilot program, an idea several years in the making that Washington and several other states have received federal grants to pursue.

The pilot aims to test the real-world viability of a per-mile charge system that could supplant the traditional gas tax as a means of providing revenues to back bonds that finance the state’s infrastructure needs. Washington has some $8 billion of outstanding bonds that rely on gas tax revenues, according to a recent estimate prepared for the governor and legislature.

In 2012, the state legislature directed the Washington State Transportation Commission to work with a steering committee to evaluate whether a road usage charge could provide the revenue the state needs.

After several years of study, the committee and the WSTC determined that a road usage charge is feasible. The state’s transportation agencies, which include the WSTC and the Washington State Department of Transportation, have said that the road usage charge, or RUC, would completely replace the gas tax rather than being in addition to it.

During a transition time where the gas tax would coexist with the road usage charge, those agencies have said, drivers would pay one or the other but not both.

Gas taxes have become increasingly problematic as a revenue source as increasingly fuel-efficient and alternative fuel vehicles fill the roadways and travel further on less gas. While Washington has increased its fuel taxes in recent years, the state’s 49.4 cents-per-gallon tax is already the second-highest in the nation after Pennsylvania’s.

Efforts to raise gas taxes are politically difficult at the state level, although Washington’s latest increase in the 2015/2016 legislative session was bipartisan. Federal gas taxes haven’t been increased in decades and most agree that any try at it would be a political non-starter.

Washington is following the footsteps of Oregon, which launched what the National Conference of State Legislatures described as the largest user-fee pilot program to date in July 2015.

The steering committee’s “conservative estimate” said Washington’s vehicles will average 35 miles per gallon by 2035, a sharp increase over the estimated average 20.5 miles the state’s vehicles travel per gallon today. If so, Washington’s gas tax revenue would drop an estimated 45%, to 1.4 cents per mile traveled from the current 2.4. The RUC would be equivalent to that current 2.4 cents per mile rate, according to materials distributed by the steering committee.

“The program seeks to answer questions such as, ‘How convenient is it for people, and does it open the door to evasion or not?’” Court Street Group Research’s Joseph Krist wrote in a commentary this month. “What would we have to do to actually think about verifying reports like that?”

Krist said that depending on what policymakers do with the RUC going forward, it could potentially be advantageous compared to the current system.

“Should decision makers decide to explore how a road usage charge could be applied beyond a flat rate, the road usage charge offers more potential flexibility than the gas tax,” wrote Krist.

Participants in the pilot project, which the state is recruiting from different regions, will not have to pay anything to participate and no actual fees will be collected during the pilot. Those participating drivers will have four options available, ranging from “high tech to no tech.” They can pre-select a block of miles, take quarterly odometer readings electronically or in-person, install an automated mileage meter with both GPS and non-GPS options, or utilize a smartphone app.

While the intent of the RUC program is that drivers would only pay for miles they drive in Washington, Oregon and border Surrey municipality in British Columbia have agreed to participate in testing the potential interoperability of the program.

“Given British Columbia is also starting to examine road usage charging as a possible future funding mechanism, it will be important to understand how two countries would reconcile road charge obligations,” the final RUC report says.

At least 50 vehicles from Surrey and the surrounding area will participate, with maximum participation capped at 200. Surrey will set its own test rates, and Washingtonians who travel there will be “charged” those rates while Surrey participants in Washington will be subject to Washington rates.

While most of the pilot will not involve any real charges or revenue collections, the state’s interoperability test with Oregon will be an exception. Oregon’s road usage charge program, OReGO, has been in operation for 18 months and will work with the Washington RUC pilot to test financial interoperability with real cash transactions.

“The small number of participants from both Oregon and Washington will test how an actual transaction will be processed from start to finish so that there is a better understanding of how every dollar in road charges will be reconciled and transmitted to the collecting state, considering differences in administration and operations, treasury laws, accounting policies, etc.,” according to the final report.

Under the current timeline, Washington seeks to identify all of the pilot program’s participants and set up their accounts by the end of this year, with the one-year pilot launching in early 2018.

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Infrastructure Gasoline tax Transportation industry Revenue bonds State of Washington Washington