Over $14 Million Awarded to Eight Projects to Find Alternatives to Gas Taxes

The U.S. Department of Transportation is funding ways to transition from the gas tax to other user-based revenue mechanisms to fund transportation infrastructure. The federal gas tax hasn't keep pace with transportation expenditures since 2008.

8 minute read

September 6, 2016, 9:00 AM PDT

By Irvin Dawid

The federal government has subsidized the Highway Trust Fund to the tune of $143 billion since 2008 according to the Congressional Budget Office, including $70 billion in the five-year Fixing America's Surface Transportation Act (FAST Act), a landmark transportation reauthorization bill approved by Congress last December. 

Furthermore, there's no end in sight to these General Fund transfers due to the unwillingness of both Congress and presidents, including the two major presidential candidates, to raise gas taxes, though many states have been able to do so. [See list at base of this post of 11 states that approved gas tax increases last year.].

Advocates for user-based, sustainable transportation funding supported the inclusion of the $95 million Surface Transportation System Funding Alternatives grant program in the FAST Act.

The program "will fund projects to test the design, implementation and acceptance of user-based alternative revenue mechanisms", according to the Aug. 30 U.S. DOT press release, in order to "to test alternative revenue mechanisms to help sustain the long-term solvency of the Highway Trust Fund," as noted by the March 22 press release that invited applications for the the first year of grant funding. Below is the authorization calendar for the grant program:

Fiscal year
$15 M $20 M $20 M $20 M $20 M

Credit: U.S. DOT

The eight projects

The three largest grants awarded by the Federal Highway Administration went to, respectively: Hawaii, Washington, and Oregon.

Delaware receive a grant on behalf of five states in the I-95 Corridor Coalition and Oregon received one of its two grants on behalf of the 11 states that compose the Western Road User Charge Consortium.

All states but Minnesota and Missouri will use their grants for programs based on mileage fees, generally referred to as road user charges, vehicle miles traveled (VMT) fees or mileage-based-user fees.

Recipient state and partners
Project Description

California Department of Transportation

Road User Charge (RUC) using pay-at-the Pump/ charging stations.


Delaware Department of Transportation

  User fees based with on-board mileage counters in collaboration with members of the I-95 Corridor Coalition.


Hawaii Department of Transportation

  User fee collection based on manual and automated odometer readings at inspection stations.


Minnesota Department of Transportation

Use of Mobility-as-a-Service providers (MaaS) as the revenue collection mechanism.


Missouri Department of Transportation

Implementation a new registration fee schedule based on estimated miles per gallon.


Oregon Department of Transportation

Improvements to Oregon’s existing road usage charge program.


Oregon Department of Transportation

Establishing the consistency, compatibility and interoperability in road user charging for a regional system in collaboration with members of the Western Road User Charge Consortium.


Washington Department of Transportation

Testing critical elements of interoperable, multi-jurisdictional alternative user-based revenue collection systems.  Piloting methods of road usage reporting with Washington drivers.




Credit: U.S. DOT

Both Oregon and California, currently running road usage charge programs, won grants to expand their current operations.

Oregon is by far the most advanced in administering a mileage fee program. It has been operating a permanent, though limited road usage charge program called OReGO since July 2015. Oregon completed two pilot programs in 2007 and 2013.

The Oregon Department of Transportation wanted 5,000 subscribers to test the road usage charge. "As of August 30, about 1,263 vehicles were enrolled," reports Junnelle Hogen for the Statesman Journal on the $2.1 million grant which will be used to enroll more vehicles.

California has been operating a pilot program since July called the California Road Charge Pilot Program, though the charges are simulatedWhile the grant indicates the $750,000 will be used for "pay-at-the Pump/ charging stations," the Caltrans press release (via SCV News) isn't as specific, only stating that the grant will be used to "explore alternative mileage reporting and recording options."


The Minnesota Department of Transportation will use its $300,000 grant for a program that uses Mobility-as-a-Service (MaaS) as the revenue collection mechanism. Subscribers can select from a variety of mobility programs like car share, bike share, ride-hailing.

"The competition between services and modes creates additional choice for travelers, resulting in the perception of transportation as a service to be purchased," according to Minnesota GO, a project run by the Minnesota Department of Transportation

According to UITP (International Association of Public Transport), "[t]he concept of Mobility as a Service itself, providing integrated mobility packages based on customer needs, is nothing new. "

Mobility as a Service is an initiative that is already up and running in Hannover (Hannovermobil 2.0), Vienna (Smile), and across Germany via Deutsche Bahn’s Qixxit, for example."


The $250,000 grant, awarded to the Missouri Department of Transportation (MoDOT), would "[i]mplement a new registration fee schedule based on estimated miles per gallon." Currrently, registration fees for passenger vehicles are determined by a vehicle’s taxable horsepower [PDF]," ranging from $18 to $51 annually, according to the Missouri Department of Revenue. 

According to a February 2016 policy study [PDF] by Joseph Miller of the libertarian think tank, The Show-Me Institute, "[l]icenses, permits, and fees for motor vehicles make up about 14% (or $288 million) of MoDOT’s highway revenue," the third largest state source of funding after fuel taxes and vehicle sales and use taxes. Revenue peaked in 2006.

Look for more information on the grant project in "comments" below if/when it becomes available.


Unlike Missouri, which hasn't increased its 17.3 cent gas and diesel taxes for two decades and has seen fuel tax collections decline by $29 million since 2005, according to Miller, Washington increased its gas tax by 4.9 cents on July 1, the second installment of it's phased 11.9 cent gas tax increase signed by Gov. Jay Inslee (D) in July 2015.

Washington's 49.4-cents gas tax is less than a penny shy of Pennsylvania's, which has the nation's highest at 50.3 cents as of Aug. 9 according to API. So why experiment with a mileage fee?  Reema Griffith, Executive Director of the Washington State Transportation Commission, penned a piece [PDF] for the American Public Works Association Reporter in July to explain:

The fast-paced progression in driverless, highly-efficient and alternative-fuel vehicles holds great promise for improving highway safety, reducing environmental impact, and bringing great efficiencies to our mobility. However, this same progress also threatens to undermine our hallmark funding source for roads and bridges: the gas tax.

The problem we face going forward is simple: as vehicle fuel economy increases each year, gas consumption decreases, and consequently, so do gas tax revenues. 

According to 'conservative' forecasts, the "state will see its current average fleet MPG increase from 19.8 to 35 MPG by 2035—equating to a nearly 50% reduction in state gas tax revenues," she adds.

Some advocates argue for raising the gas tax more often to keep ahead of diminishing fuel consumption, or index it to inflation. But political realities make that challenging at best, and simple economics make it a nonstarter. 

However, the necessary gas tax increase doesn't appear excessive, at least not to this observer.

In Washington State, where the gas tax will be 49.4 cents this July, it would take annual increases of about 1.5 cents per gallon every year starting in 2019 just to keep transportation funding at the levels produced today.

Washington Road Usage Charge Assessment preparing to launch

The Transportation Commission, in close cooperation with Washington State Department of Transportation and a steering committee, has been studying the Road Usage Charge Assessment program since 2012 upon the request of the state legislature.

Griffith writes [PDF] that the state "is preparing to launch a statewide RUC pilot project where up to 2,000 volunteers from five different regions in the state will test four mileage reporting options as follows: Time Permit, Odometer Charge, Automated Distance Charge, Smart Phone Application."

According to a January 2015 Road Usage Charge Folio [PDF], the steering committee has recommended that a three-pronged work plan that would include:

  • A demonstration program
  • A public attitude assessment
  • A public communications and engagement

The FHWA grant of $3,847,000 will likely be directed to this work as "[t]he estimated budget is between $3.4 and $6.0 million, and would take from 24 to 41 months," according to the folio.

Related posts on Surface Transportation System Funding Alternatives grants:

  1. U.S. DOT Announces First Year of Grant Funding for State VMT Fee Pilot Programs, March 24, 2016
  2. Connecticut Among States Competing for Federal Grants to Study Mileage Fees, July 3, 2016 [Application was by five states in the I-95 Corridor Coalition, with Delaware as the lead applicant].
  3. [Mass.] Gov. Baker Looks Toward California and Oregon While Vetoing Mileage Fee Pilot Program, August 12, 2016


Unlike the federal government, states show willingness to increase gas taxes.

Of course, states have to balance budgets, unlike the federal government that can transfer funds from the General Fund, though Congress justifies these transfers by utilizing offsets, also referred to as pay-fors, and when applied to transportation, often simply called gimmicks.

In 2015, 11 states increased gas taxes, or adjusted them to prevent steeper reductions. The political party of the governor is indicated below (Democrat, Republican, Independent), along with the amount and/or type of gas tax increase.

  1. Alaska (Ind.):     .95 cents (small but monumental as it was the first increase in 45 years)
  2. Georgia (R):      About 8 cents, a result of conversion from fuel sales tax to an excise tax. 
  3. Idaho   (R):        7 cents
  4. Iowa (R):          10 cents
  5. Kentucky (D):     An "effective increase" because it stopped the decrease.
  6. Nebraska (R):     6 cents. Bill became law when legislature overrode veto by Gov. Pete Ricketts.
  7. Michigan (R):      7.3 cents
  8. North Carolina (R): Like Kentucky, the legislature 'adjusted' its gas tax to prevent deeper reductions. While the tax did drop one cent on July 1, it is expected to begin increasing next year, "at an average of 2.3% a year."
  9. South Dakota (R):  6 cents
  10. Utah (R):                  5 cents
  11. Washington (D):   11.9 cent

Tuesday, August 30, 2016 in U.S. D.O.T. Press Release

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