Mileage-Based User Fee Pilot Programs and the IIJA

The federal government and many state governments rely on excise fees on motor fuel to maintain safe, efficient modes of transportation. However, as vehicles become more fuel efficient, gas taxes will not be a long-term sustainable means to fund roads, bridges, and other transportation infrastructure.

The Biden administration has set the ambitious goal of a 50% electric vehicle sales share by 2030—a critical step in helping the administration meet its overall goal of net-zero U.S. greenhouse gas emissions by 2050. Several major U.S. auto manufacturers have signaled their intention to help meet that target. Even without these efforts to boost EV uptake, the number of EVs sold in the U.S. is expected to more than double between 2021 and 2024, with EVs representing a growing share of cars on the road.

45 states and DC provide some sort of incentive for EVs; 13 states and DC require manufacturers to sell a certain number of vehicles that do not emit tailpipe emissions per year. Many of these states rely on state-level gas taxes to fund transportation infrastructure, in addition to federal support. As EV ownership rises, transportation infrastructure will require an alternative source of dedicated revenue at both the state and federal levels.

Federal surface transportation legislation from 2015 established the STSFA program, which has provided $95 million in grants to individual states and coalitions of states, with a minimum 50% matching requirement for grantees. The STSFA program was intended to inform Congress about whether mileage-based user fees could serve as a viable replacement for the gas tax. In addition to designing and implementing the pilot programs, grantees were required to conduct outreach raising public awareness about the need for alternative highway funding sources and to provide recommendations for a future user-based road fee program.

As seen in the three maps below, STSFA funded pilots in 13 individual states as well as two coalitions of states: the Western Road Usage Charge Consortium (RUC West) and the Eastern Transportation Coalition, which both aim to test the feasibility of regional mileage-based user fee systems.

All STSFA pilots were limited to volunteer participants, ranging from 100 to 5,000. Six states have ongoing pilot programs funded by STSFA. Oregon and Utah have the most advanced pilot projects, where drivers can avoid paying registration fees by opting instead to pay mileage-based user fees, with revenue directed to transportation infrastructure projects.

A recent GAO report highlighted some of the primary challenges for mileage fees—some of which BPC explored in a previous video series—that arose during STSFA pilots and ought to inform IIJA pilots and any broader mileage-based user fee programs in the future:

• Privacy: State pilot administrators found that drivers were concerned about the government tracking their location. Technology to track miles driven does not have to include GPS data, and technology that does track location can be subject to various privacy policies.
• Equity: Some state transportation officials noted that the public believed rural drivers would pay more than their fair share under a mileage-based user fee system. However, despite this perception, several states reported that disparities in fees paid by rural drivers compared to other drivers are greater under gas taxes than mileage-based user fees.
• Administrative costs: Pilot administrators noted potentially expensive aspects of mileage-based user fees including start-up costs of a new system, operating costs and data processing, and enforcement costs with certain mileage tracking technology.

While funding for STSFA pilots through the FAST Act in 2015 has come to a close, these programs are eligible for continued funding through the IIJA.

The IIJA includes funding for two mileage-based user fee pilot programs: additional grants for state-level pilot programs, and the establishment of a new national pilot program.

Strategic Innovation for Revenue Collection (IIJA Section 13001)—$75 million over 5 years

This updated version of the STSFA will provide grants for state-level user fee pilots, but expanding eligibility from state-level DOTs to local governments and metropolitan planning organizations. The new version of the grant also increases the federal share for new pilot projects to 80%, with a 70% share for recipients who have already received STSFA grant money. IIJA Section 1301 also explicitly requires USDOT to submit a report to Congress in 2024 with recommendations on a national alternative revenue mechanism based on results from the state pilots.

National Motor Vehicle Per-Mile User Fee Pilot (IIJA Section 13002)—$50 million over 5 years

This new program directs USDOT to carry out a nationwide pilot, soliciting volunteer participants from all 50 states, including commercial and passenger vehicles. The legislation requires the pilot program to offer different methods for participants to track their mileage and directs USDOT to set annual per-mile fees for different types of vehicles. Within 90 days of the bill’s passage, USDOT must establish a Federal System Funding Alternative Advisory Board—made up of state transportation officials, STSFA recipients, industry representatives, advocates, and academics—to provide recommendations for developing and implementing the pilot program and carrying out a public awareness campaign. One year after participants begin the federal pilot program, USDOT and Treasury will submit their first annual report to Congress with a comprehensive analysis of the pilot.

The IIJA laid out suggested technology to track mileage for the national pilot, including:

• Smart phone applications: Apps can use GPS tracking, but do not have to.
• Telemetric data collected by automakers: Telematics transmit data about vehicles to manufacturers through the internet. They require cooperation by manufacturers and not all cars have telemetric data capability.
• Motor vehicle data obtained by car insurance companies or fueling stations.
• Other methods used in STSFA pilots: Under STSFA, some states allowed participants to manually report odometer readings periodically.

USDOT has stated that the next milestones for both the state and national pilot are still to be determined, but in the coming months the agency will likely release comprehensive guidance for grant applicants.