Because the need is great and current funding is inadequate, the transportation funding system in the United States will require reform during the next two decades. The TRB report, The Fuel Ta x and Alternatives for Transportation Funding, noted that road use metering and mileage charging appear to be " ... the most promising technique for directly assessing road users for the cost of individual trips within a comprehensive fee scheme that will generate revenue to cover the costs of highway programs."29
In a November 2005 report, the National Chamber Foundation also endorsed a mileage-based transportation revenue system that would help address long-term funding short-falls.30 The chamber suggests both a state VMT fee and a local option VMT fee. The state fee would supplement-and eventually replace-the state motor fuels tax, while the local option fee " ... could be implemented at state and local discretion to address urban congestion and local transit needs."31 According to the report, the state VMT fee should represent the average cost of providing a vehicle mile of travel and be applied to the aggregate annual VMT total of each vehicle operated in the state. States could vary the fee by vehicle weight environmental impact or other factors to meet other public policy goals. Such a system will provide a sustainable source of funding, enable governments to manage congestion, ensure that all drivers pay their fair share, and separate highway use fees from fuel use and taxation.32
Oregon's Mileage Fee Proposal is a novel proposal to replace declining gas taxes during the next several decades. A Road User Fee Task Force, established by the Oregon legislature in 2001, recently recommended a mileage fee and congestion pricing to replace the revenue generated by the state's declining gasoline tax. The proposal, which is contained in a June 2005 report to the legislature, would be phased in over a 20-year period, and the mileage fee will be pilot tested starting in March 2006.33
The task force determined that 80 percent of Oregon's road revenues depend either directly or indirectly on gasoline taxes and that this revenue source is "in increasing peril."34 Gasoline tax revenue expressed in inflation adjusted dollars per vehicle miles traveled has declined by 50 percent, from 2.31 cents per VMT in 1973 to 1.16 cents in 2003. Mean-while, the state's population grew by 69 percent, and statewide VMT grew by 171 percent. Gas tax revenues actually grew by 36 percent but, allocated over the increase in VMT, show a significant 50 percent decline. The report states, "The gasoline tax is failing the purpose for which it was originally intended-funding the operation and maintenance of Oregon's road system."35
The task force stated that the existing gap will be compounded by fuel efficiency improvements and the increasing use of vehicles powered by non-gasoline fuel sources such as natural gas and hydrogen fuel cells. It is estimated that gasoline fuel tax revenues will flatten from 2017 to 2023 and then drop on a permanent basis thereafter.36 Other contributing factors to the declining purchasing power of the Oregon gas tax include the fact that no gas tax increase have been enacted since 1993, the gas tax is not indexed for inflation, road construction and maintenance costs have escalated, and record gasoline prices have dampened gasoline consumption.37
To replace the gas tax, the task force recommended two market-based solutions that it considered fair and stable. One is a mileage fee-a distance-traveled charge imposed according to the amount a vehicle uses the road system in Oregon. To replace the amount of revenue currently collected by the 24 cent per gallon fuels tax rate, the mileage fee would need to be 1.2 cents per mile.38 The second solution is congestion pricing or peak period pricing, where the vehicle is charged a fee for using certain roads during periods of high congestion. It could be incorporated into the mileage fee system, as could a local option addition to the fee.
The mileage fee would be collected at the gas pump, using equipment installed in newer vehicles by the manufacturer. Motorists with older vehicles would continue to pay the fuels tax at the pump. Oregon's weight-distance tax for heavy trucks would remain the same; only instate miles would be subject to the mileage fee.
The privacy of motorists would be protected by eliminating the possibility that their movements could be tracked through the design of the data transmission system. No behavior changes would be required of motorists, and the increased administration burden on fuel retailers would be negligible because the system is paperless.39
The task force adopted these proposed solutions based on the following criteria:40
• User Pay System-Any future revenue collection system should be a "user pay" system.
• Acceptable to Public-A new revenue system must be acceptable to the public.
• Transparent to the Public-A new revenue source should be visible to the taxpayers and not confusing.
• Support Entire Public Highway and Road System-A new revenue mechanism should be designed to support the operation, maintenance and preservation of the highway and road system for the state and cities and counties in all parts of the state as the fuel tax does today.
• Revenue Sufficiency-The sources comprising the new system must collectively have the ability to raise revenue sufficient to ultimately replace the fuel tax on gasoline as the primary revenue source for Oregon's roads.
• Minimal Non-Governmental Burden-A new revenue source should not impose substantial financial burdens on taxpayers or the private sector.
• Enforceability-A new revenue source must be enforceable to ensure tax evasion is not substantial.
• Non-Local Government Revenue Source-Revenue sources that are traditionally and primarily the province of local governments should not be usurped by the state.
The concept will be tested through the Road User Fee Pilot Program using 300 vehicles in Portland from March 2006 through March 2007. A final report and recommendations to the Oregon legislature are expected in late summer or early fall 2007.
Other states are watching Oregon for the results of the pilot tests. A few states are beginning to consider the idea. A recent analysis of the South Carolina transportation funding system, for example, made this recommendation:
"Over the long term, the state will need to consider alternatives to the fuel tax to address revenue losses associated with expected technological change and greater fuel efficiency in vehicles. Smart odometer and GPS units are in development and should be operational within the next decade. The state should be proactive in terms of an eventual transition to a VMT and/or weight/distance based funding system."41