State Fees as Transportation Funding Alternatives

The Alternative Fuels Data Center provides a searchable database of state and federal incentives, laws, and regulations related to alternative fuels and vehicles, air quality, vehicle efficiency, and other transportation-related topics. The Laws and Incentives website also includes representative examples of incentives and regulations at the local level. This feature provides Clean Cities coordinators and other interested stakeholders with information and trends related to state incentives, laws, and regulations promulgated or otherwise enacted.

States face declining revenues from gasoline and diesel taxes. Vehicle fuel efficiency improvements, increased adoption of alternative fuel vehicles, and reduced miles traveled are the principal factors contributing to decreased conventional fuel use in vehicles. Coupled with limited financial resources to build, operate, and maintain complex transportation systems, states seek alternatives to traditional revenue streams created by, for example, motor fuel taxes.

To date, several states have undertaken studies to better understand transportation funding needs as well as revenue generating options. In 2016, a Vermont study committee released its final report, Vermont Transportation Funding Options. Among other options, the report suggests a vehicle miles traveled (VMT) fee, which is a direct “user pay” charge based on miles driven rather than fuel consumed. A VMT fee system has the potential to be both stable and equitable, but also challenging to administer and implement.

In 2013, the Oregon Legislature passed the first legislation in the United States to establish the Road Usage Charge Program (RUCP) following a 2012 pilot project. In 2015, as an alternative approach to transportation revenue generation, the Oregon Department of Transportation began collecting $0.015 per mile driven from 5,000 volunteer vehicles and issued a gas tax refund to participants.

States are also exploring charging fees for vehicles that use certain fuels, like electricity, which are not currently subject to state fuel tax. These fees are meant to recover revenue the state would otherwise capture through the motor fuel tax, had the vehicle been running on gasoline or other fuels subject to tax. Because plug-in electric vehicles (PEVs) are joining the roads in increasing numbers—and use little to no gasoline (instead consuming electricity distributed through completely separate infrastructure)—states are particularly interested in identifying alternative revenue-gathering options for these vehicles.

The Indiana Legislature convened a committee to study road impact fees on PEV and hybrid vehicle users. In its 2013 annual report, the committee recommended further investigation into alternative revenue mechanisms, including flat fees and fees that vary based on the vehicle type. The committee also recommended that the study consider avenues for collecting revenue that are technology neutral.

Other states are implementing such fees. PEV owners in Colorado must pay an annual fee of $50 for a Plug-In Electric and Electric Vehicle Decal. This decal is required for use of public electric vehicle supply equipment (EVSE) in Colorado. The annual fee contributes to two funds, with $30 going to the Highway Users Tax Fund and $20 to the Electric Vehicle Grant Fund. The first contributes to the same fund as the traditional motor fuel tax, while the latter provides grants to local governments to install EVSE.

The Nebraska Department of Motor Vehicles (DMV) imposes an annual fee of $75 on any vehicle powered by a source not otherwise subject to state motor fuel tax, which in that state includes electricity. The Nebraska DMV collects the fee at the time of initial vehicle registration and regular renewal. Similarly, all-electric vehicle (EV) owners in North Carolina must pay a fee of $130 on an annual basis. An annual license tax of $64 applies to EVs in Virginia, and an annual license tax of $200-$300 applies to PEVs in Georgia. All of these fees are in addition to other required registration fees.

Drivers of registered PEVs in Idaho must pay an annual fee of $140, and hybrid electric vehicles owners pay an annual fee of $75, in addition to the regular vehicle registration fees. Additionally, EV drivers in Washington must pay an annual vehicle registration renewal fee of $150, compared to the conventional passenger vehicle registration fee of approximately $45 to $65. However, if the Washington Legislature imposes a fee or tax based on VMT, the EV registration fee will no longer apply. Washington is testing this alternative with a PEV road user assessment pilot.

As an alternative to VMT or technology-specific fees, several states have chosen to revisit their motor fuel excise tax structure to account for differences in the energy content of alternative fuels compared to gasoline and diesel. Fuel tax rates that compensate for energy content more closely correlate to the distance a vehicle will travel on a given volume of fuel. For this reason, many states are revising fuel tax rates based on energy content to create greater parity among fuels.

For more information about the laws, programs, and studies discussed here, refer to the Alternative Fuels Data Center’s Laws and Incentives website. Contact your Clean Cities coordinator for insight related to how these fees and programs are being implemented in your area.