Could vehicle-based mileage fees make up for shortages in Tennessee’s falling fuel taxes for roads?

Staff file photo by Robin Rudd / Traffic backs up at the Interstate 75-Interstate 24 interchange improvement project just north of the Ringgold Road overpass in East Ridge. Vehicles on the right are moving down the on-ramp from Ringgold Road.

NASHVILLE -- With state fuel tax revenues already failing to keep up with Tennessee's current highway needs, let alone future demands and pressures, state senators this week heard testimony from experts advocating the state consider implementing mileage-based user fees on a pay-per-mile basis.

Baruch Feigenbaum with the libertarian Reason Foundation told Senate Transportation Committee members on Wednesday that the advent of electric vehicles, combined with increasing gains in gas and diesel-powered vehicle fuel efficiency, are turning the once-dependable fuel tax into a "rock star on its farewell tour."

"Over the long term, it's no longer reliable," said Feigenbaum, a senior managing director at the Reason Foundation.

Mileage-based user fees are also known as vehicle miles traveled fees. Drivers are charged a fee based on the number of miles driven as opposed to taxing motor fuel, long the workhorse for federal and most states' transportation infrastructure spending.

Feigenbaum said some 20 states are piloting user fees and added that Virginia has already implemented a program. Georgia officials are looking at a pilot program, he said.

He said fees are typically 1.5 cents to 2 cents per mile, adding he is not necessarily recommending Tennessee do that.

Patricia Hendren, the executive director of the 17-state Eastern Transportation Coalition, which includes Tennessee, also said transportation funding faces a turning point, telling lawmakers fuel taxes no longer effectively function and the situation will only worsen.

Hendron said data collection is a "really big" issue.

"Most people think the big bad government is tracking everywhere you go," she said.

But she said drivers will have alternative ways to calculate mileage, and devices would be operated by private vendors. Devices can also be restricted to providing information about mileage within Tennessee and not reflect specifics on where people are driving, she said.

Hendron also said some issues would have to be addressed, such as a partnership with neighboring states, with 30% to 40% of Tennessee's current fuel tax paid by truckers and other out-of-state drivers.

Senate Transportation Committee Chairwoman Becky Duncan Massey, R-Knoxville, said she invited experts to discuss the concept to allow colleagues to get up to speed as more and more electric vehicles are hitting the market -- not paying the gas tax that funds state roads.

Moreover, Massey said, the federal government's standard for new cars is rising to 60 miles per gallon, which will further limit the ability of the gas tax to adequately fund roadways.

Massey said she is open to a pilot project and recently allowed the installation of mileage-based monitors in her personal vehicle. She said the per-mile fee she would pay for her road use was basically identical to her gas taxes.

The Bipartisan Policy Center has said the federal Infrastructure Investment and Jobs Act directs the U.S. Department of Transportation to establish a national per-mile road usage fee pilot program while continuing to support state-level pilots.

The nonpartisan Sycamore Institute said taxes on fuel and vehicle registration are the largest funding source for transportation projects in Tennessee. Tennesseans and visitors driving through Tennessee who need to refuel here pay 26 cents per gallon for gasoline along with 27 cents for diesel.

Lawmakers in 2017 began raising annual fees for electric vehicles to $300 annually. There are fewer than 30,000 EVs in Tennessee.

Fuel taxes bring in $1.1 billion annually to the Tennessee Highway Fund. The Tennessee Advisory Commission on Intergovernmental Relations recently reported that the state, one of just six which does not take on debt for road projects, has $34 billion of transportation infrastructure needs.

Gov. Bill Lee and his transportation commissioner, Butch Eley, said congestion on roads, primarily interstates, is expected to cost the state $26 billion to address.

Both Lee and Eley say toll lanes in highly congested areas, including Chattanooga, would help ease problems. Their preferred term is choice lanes, given that motorists would be able to decide whether to pay a toll or sit in traffic.

The state would contract with private companies to build and operate the special lanes just as states like Georgia already do. The governor is expected to seek permission from lawmakers this year to proceed with the concept. The governor said that will free up funding for more rural projects.

Proponents say the mileage-based user fee system also often cuts costs for rural drivers, who apparently tend to drive less fuel-efficient vehicles -- and therefore pay more in gas taxes. Hendren said there should be multiple options when it comes to reporting mileage, including phone app, reporting odometer readings or paying the average fee for people with the same type of vehicle.

Count Sen. Frank Niceley, R-Strawberry Plains, in the skeptic category when it comes to installing monitoring devices.

"We're one nation under surveillance," the farmer and businessman said.

Tennessee last raised gas and diesel taxes in 2017 following a major battle in the General Assembly, in which then-Gov. Bill Haslam's administration got much less of an increase than it sought in its first price-per-gallon increase since 1989. The per-gallon gas tax rose by 6 cents to 26 cents and diesel by 10 cents to 27 cents.

In order to get even that through, Haslam was forced to cut even more money from other taxes in nontransportation areas.

Cleveland Mayor Kevin Brooks, a former Republican state representative who serves on the Tennessee Advisory Commission on Intergovernmental Relations, said in a phone interview Thursday the state needs to act to secure transportation funding into the future, recalling the 2017 battle.

"Nobody wants to raise the gas tax again. I lived through that once," he said.

"Tennessee, as you know, is a pay-as-we-go state so far as roads and bridges and infrastructure," he said. "And we can't keep up at the current taxation. So this pilot program could be one of the ways."

House Transportation Committee Chairman Dan Howell, R-Ocoee, who listened in to Wednesday's Senate discussion, said in an interview at the Capitol on Thursday that he wants to know more about the pilot project. He recalled it would cost somewhere under $400,000, then noted that in the big picture of a $50 billion-plus state budget, under $400,000 "is kind of pocket change."

Once the state gets enough information to understand how the program works, Howell said, lawmakers would be in a better position to make a decision.

"The one concern that I've had, and the one concern from my constituents, is the concern about privacy," Howell said. "Will the government be tracking my movements? I was assured by the presenters there were ways to do that, to separate it out. They just know how many miles you drove, they don't know where you are. They don't know where you drove, they just know you drove this many miles on Tennessee roads.

"That," Howell said, "would be one big hurdle we're going to have to be assured of, I think, before we did anything like that in Tennessee.

"I would support a pilot program just to see what it looks like, because we need all the information we can get from all sources because we do know our gas revenue is flat and continues to trend downward, and we've been depending on the revenue from gas tax for the last 100 years."

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