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Looking for a new way to pay for Minnesota’s roads

As vehicles become more fuel-efficient, gas taxes don’t raise enough revenue to pay for highway construction and repair.

With fuel efficiency on the rise, gas taxes may no longer provide enough revenue to maintaining the state's roads.

Everybody agrees that America would be better off if we used less gas. We wouldn’t be so dependent for oil on countries that don’t like us. Our air would be cleaner, and our family budgets would look a little less grim.

Some people have already cut down by riding bikes or taking public transportation. The rest of us (a group in which I include myself) are too lazy and/or old and/or crotchety to put up with the inconvenience. Our hope is that at some point in the near future our cars will get 90 miles to the gallon or run on dirty water.

When that day arrives, however, there’ll be a problem. Where will we get the money to pay for our roads and highways?

Right now, gas taxes fund much of highway construction and repair. The federal tax on gasoline is now 18.4 cents per gallon; Congress hasn’t had the guts to raise it since 1993. Minnesota’s levy is 28 cents per gallon, and it’s due to tick up by one-half cent on July 1. (The average among the states is 31.1 cents.) The state raked in $823 million in 2010, which is about 80 percent of the highway budget. The rest comes from sales taxes on vehicles and registration and licensing fees.

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Those revenues are already taking a hit. Vehicles are increasingly fuel-efficient.  The average car now gets nearly 32 miles a gallon, up from 27 in 1985. By 2018, the U.S. Department of Transportation is projecting an increase to nearly 34 mpg. So, even though Americans are driving more — double the number of miles in 1980 —  we are using only 50 percent more fuel, and experts predict consumption to rise only modestly in the next 15 years. (Those cyclists, train riders and car poolers are probably having an effect, too.) The state is estimating a — gasp! — $50 billion shortfall for road construction and maintenance over the next 20 years.

Annual Minnesota state gas taxes paid

Chart of Annual MN State Gas Taxes PaidHumphrey School of Public AffairsAs fuel efficiency increases, gasoline taxes become a less-reliable source of funding for the state’s highways.

Lee Munnich, a senior fellow at the Humphrey School of Public Affairs, summed it all up at the 23rd Annual Transportation Research Conference held this week:   “The question is who is going to pay for the roads as vehicles become more fuel-efficient?”

One possible answer from the folks at MNDOT: MBUF.

True, the acronym sounds faintly pornographic, but it stands for Mileage-Based User Fees. Rather than pay for road use by the gallon, people would pay by miles driven. So those who own Priuses or electric cars — and cause the same damage to the roads — would no longer get a free (or cheap) ride by buying less fuel. 

How it works

Researchers from MNDOT and elsewhere explained how such a system might work. Every car would have a device installed, a kind of GPS or global positioning system. It would contain customized software that counted miles and periodically collected a fee by credit card or PayPal. 

A demonstration of the technology, authorized by the 2007 Legislature, is already underway, with its last wave launching this month. So far, drivers in Wright County have tested devices for four-month periods. According to Christopher Armstrong of Science Applications International, which conducted the test, preliminary results showed that drivers pretty much liked the system — and liked it more as the test went along. And, the demo was set so that drivers wound up with much the same bill they would have had if they had paid gas the tax. What’s more, the devices not only kept track of miles but issued safety warnings when, for example, the car entered a school zone or exceeded the speed limit. In fancier variations, the system could levy extra charges if the car used roads that were highly congested or traveled at times when traffic was heavy.

There were some drawbacks. Some people forgot to put the mile-counter in their cars. The devices weren’t always accurate. Drivers thought the safety warnings were useful — for other people, of course — but distracting.

Researchers were surprised to learn that drivers weren’t that concerned about privacy. The government or whoever else had access to the information would know where you went and when, for example, that seedy motel on Route 25 or the ice cream parlor that Weight Watchers told you to avoid. But those in the study were less worried about the government than hackers who might steal credit card numbers.

An opinion poll conducted about the same time found that Minnesotans liked the idea of MBUF and thought it would be fair to charge drivers of heavier vehicles more, since they put more stress on the roads. They weren’t wild about congestion and time-of-day pricing, however, because most people can’t choose when they have to report for work or pick up their kids from daycare.

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Industry objections

MBUF sounded very cool, but then representatives of the trucking industry raised objections. Some were silly — that the system would be inflationary, for example, if it assessed charges by vehicle weight.

But others made sense. Daniel Murray of the American Transportation Institute, a trucking association, pointed out that buying and installing the devices would cost billions. Instead of collecting the tax from a relatively small number of oil companies, the state would have to create an expensive system to exact payment from hundreds of thousands of drivers. Boosting collection costs would leave less money to fix and build roads. Hybrids and electric cars would continue to be a tiny portion of the market, he argued. So gas taxes would still be a reliable source of funding.

John Hausladen of the Minnesota Trucking Association contended that MBUF was “a bad, unnecessary idea, just an effort to get more money.” There are more efficient ways to raise funds for highways: increase the gas tax and hike registration and licensing fees.

Several speakers pointed out that in the current anti-tax climate, it wouldn’t be so easy to get legislators to raise the gas tax. Others said that getting legislators to pass the mileage-based system would also be tough.

Margaret Donahoe, executive director of the Minnesota Transportation Alliance, an advocacy group, summed it all up. “It’s hard to get anything passed,” she said.