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Transportation Troubleshooting: How States Are Approaching Electric Vehicles and Highway Maintenance Funding

Paula Hammond on October 5, 2023 - in Articles, Column

The way roads and highways are funded must change. Motor fuel tax revenues are declining due to the increasing fuel efficiency of vehicles, and this trend will accelerate as plug-in hybrid and fully electric vehicles (EVs) command a greater share of personal transport.

EVs use the same public roadways as drivers of internal combustion engine (ICE) vehicles—and, due to the extra weight of batteries, EVs can cause more wear and tear per mile than ICE vehicles do. However, EV drivers don’t pay fuel taxes, and this will exacerbate the existing funding shortfalls for operating, maintaining and improving roads and highways.

Registration Fees

This crisis is looming worldwide, and governments have a limited range of policy levers available to remedy it. In the United States, the most common response has been states imposing additional registration fees on EVs. According to “Funding the Gap,” a recent white paper by a global team of WSP transportation experts, 32 U.S. states have taken this approach, with varying fee amounts per EV—from an additional 2 percent in Alabama to 8.3 percent in Nevada, according to the paper.

This reflects the reality that drivers in different states have different driving patterns, and state legislatures have different political leanings regarding new taxes.

“Each state can pick the solution that meets its drivers’ needs,” says my colleague Nate Breyer, WSP senior director of Road Usage Charging (RUC). “There’s a large difference between Oregon, Utah and Virginia.”

Some states have addressed this problem by levying a higher registration fee for EVs in lieu of a per-mile tax to help bridge the funding gap. Unfortunately, in many instances, these registration fees still don’t equate to what a vehicle with an average fuel economy is contributing for its use of the road.

But Breyer and I—and many others in the world of transportation—believe that more regional and national coordination is necessary to ensure we get this right. A state-by-state patchwork of policies will likely be inadequate to the challenge ahead—as well as inequitable in many instances, such as in the Mid-Atlantic and Northeast, where drivers routinely cross state lines for work, shopping and other purposes.

There are also major questions about how EV owners will pay a fair share equivalent of the federal gasoline tax—currently 18.4 cents per gallon—vital to funding the federal Highway Trust Fund states rely on.

Best of RUC

There’s also a strong case to be made for a national push to go beyond state surcharges for EVs at registration to forms of road-usage charging that more fairly and comprehensively recover revenues from drivers based on their actual driving—also called mileage-based or distance-based fees.

This is a brand-new concept to most drivers, and it’s evolving slowly—as it should. There are challenges and concerns with privacy, complexity and disadvantaging rural drivers who must drive longer distances than their urban and suburban counterparts.

The challenges all can be addressed, and the concerns eased. Rural drivers with older pickup trucks, for example, will likely pay less annually with an RUC than they do with fuel taxes. But a concerted, coordinated national effort will leverage different states’ experiences and provide the best RUC approaches.

As my colleague David Kim pointed out in a May 2023 column, the Bipartisan Infrastructure Law (BIL) appropriated $10 million per year for five years for the U.S. Department of Transportation (USDOT) to conduct a national RUC pilot and $15 million annually for a Strategic Innovation for Revenue Collection grant program. The law also called for a Federal System Funding Alternative Advisory Board and directed USDOT to continue awarding grants to states and local governments to test approaches to RUC.

Due to the complexity of implementing the massive BIL programs, the RUC work has yet to move forward.

Meanwhile, states continue to work on this problem on their own and in collaboration. RUC America (formerly RUC West), for which WSP developed a 10-year strategic plan, involves 20 states testing, researching or implementing RUC programs.

There’s historical precedent for this, as Oregon was the first state to implement a motor fuel tax for roads and highways—more than 100 years ago. Within a few years, every state and the federal government had followed suit.

I hope we can see this type of progress with RUC … and soon.

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About Paula Hammond

Paula Hammond is senior vice president and national multimodal market leader, WSP USA; email: [email protected].

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