Paying by the Mile

A new Oregon program to replace the gas tax rewards Hummers over hybrids. Why did the state spend millions on this?

Drivers of hybrid and electric cars enjoy lots of benefits. They can feel good that they're churning out a lot less carbon. Their energy costs are lower. And they don't have to pay as much as they once did for the state's roads. That support is paid primarily through the gas tax. When you don't stop at the pump, you don't have to pay.

But what's been good for the environment has been bad for the Oregon Department of Transportation.

After decades of steady funding from the gas tax, ODOT is in serious financial trouble. The agency's budget, driven also by truck-mile fees and DMV fees, can no longer keep pace with the state's road needs and payments on billions in debt ODOT now carries for past transportation projects. 

"ODOT faces long-term funding challenges," the agency told lawmakers in a March presentation. "The state highway fund is essentially fully committed to debt service, highway maintenance work and agency operations."

It's not just because hybrid and electric car owners scoot past the gas pump. Oregonians have cut back on their driving, especially as gas prices have climbed, and their cars and trucks are more fuel-efficient overall.

"The gas tax is becoming more unfair every day," says Jim Whitty, manager of ODOT's Office of Innovative Partnerships and Alternative Funding. "The separation between fuel-efficient and not-fuel-efficient vehicles is becoming wider."

The agency wants to move away from fuel taxes and instead charge drivers based on the distance they drive.

ODOT officials have been conducting a decade long search for ways to do it—and it's turned into an unfocused, meandering and expensive effort.

The latest plan: Starting July 1, the state is seeking as many as 5,000 volunteers to pay the state a mileage-based rate rather than taxes at the gas pump.

The pilot program, called OreGo, relies on drivers signing up with one of three companies that will supply plug-in devices to count the miles.

But the plan is already troubled. 

ODOT is struggling to find ways to lure drivers of hybrid and other fuel-efficient cars into a program that could penalize them for using less gas. According to OreGo's own Web-based calculator, cars that get better than 20 miles a gallon would actually pay more under OreGo.

But it's the perverse incentives that the program creates that could pose the greatest dilemma for ODOT.

OreGo would reward drivers of gas guzzlers who already pay plenty in fuel taxes now. OreGo's flat rate of 1.5 cents a mile would actually cut such drivers' costs and create an inducement to keep driving their carbon-spewing vehicles.

"People can do that math," says Portland economist Joe Cortright, a frequent ODOT critic. "If you own a Prius, you'd be crazy to sign up—you'll pay more. If you own a Hummer, you should sign up."

Legislators have supported finding ways to help ODOT raise revenue, but some are dumbfounded that it's taken 14 years to develop a program that drivers of fuel-efficient cars would be crazy to join.

"From what I've seen," says state Sen. Betsy Johnson, (D-Scappoose), "I have deep reservations about OreGo and the state's ability to implement it."

The state started searching for an alternative to the gas tax in 2001. State legislators, meanwhile, have raised questions about why ODOT has sent Whitty on more than 100 trips in the past decade. His most frequent destination has been Washington, D.C.-—a trip he made 20 times in the past 12 years—and he often traveled to other states as well. Whitty also took three trips to London, two trips to Brussels, and one trip each to Barcelona, Singapore and the Gold Coast of Australia. 

Since 2003, records show, the agency has footed $65,000 of the bill for Whitty's travel. But that's only a fraction of what his trips have cost—the rest has been covered by conference sponsors, although ODOT has spent money to cover some of the costs of most of the 415,000-plus miles he's traveled.

ODOT defended that travel in a document sent to legislators in April, saying the trips helped make Whitty "one of the world's foremost experts" on the concept of charging drivers by the mile. Whitty, who earns an annual salary of $123,672, tells WW the travel was necessary to develop the OreGo program.

"We learned from others, either technologically or from their views and arguments," Whitty says. "It was a lot of learning."

"Every trip had a reason," he adds. "You just don't take a bunch of trips, they've got to have a business purpose."

Gas consumption peaked in Oregon in 2006, and the state last raised its gas tax—now 30 cents a gallon—in 2009.

Compounding the agency's financial pain, it has borrowed about $3 billion in the past 15 years to repair aging bridges and build new infrastructure. Payments on that debt now consume one in five dollars the agency spends.

The result: ODOT says there's no new money to fix decrepit bridges or add new lanes to clogged highways.

The $343 million transportation package that crashed in Salem last week was, in effect, an ODOT bailout, the agency's best hope for new money to help keep Oregon's 70,000 miles of public roadways in good condition.

OreGo is the state's third try at finding a way to charge drivers by the mile. A 2006 test plan tracked driver miles using GPS, but drivers and legislators balked at the idea of making Big Brother a passenger in their cars. 

A 2013 plan used a device plugged into the car's diagnostic port to record mileage—the state tested it on 88 cars. Two years ago, lawmakers approved a 2015 pilot project to expand it.

In the current plan, drivers who take part will pay a rate of 1.5 cents per mile, with their gas tax costs deducted from the bill. Drivers who pay more for gas taxes than miles will be paid back the difference.

Cortright says OreGo contradicts Oregon's goals for emission reduction by rewarding cars that are less fuel efficient. "They are incentivizing gas-guzzling, road-damaging vehicles," he says.

State officials acknowledge that owners of fuel-efficient cars have little or no financial incentive to take part in OreGo.

"Higher-MPG cars will be slow to enroll, but there are other values that participation can fulfill," says Michelle Godfrey, OreGo's public information officer. "Given the feedback we're hearing, we're optimistic."

When asked what might prompt drivers of fuel-efficient cars to participate, Whitty replied, "Guilt." He later clarified his answer, however, by noting that—aside from the financial impact on any one individual vehicle owner—all Oregonians should be willing to pay for roads.

"Every Oregon driver has an interest—indeed an investment—to ensure that the roads are available and in good shape," he says. "Maintaining the road system reduces personal costs for each individual in addition to ensuring a pleasant driving experience."

The state has so far spent $7.7 million on the program since 2009, and will spend another $7.9 million in the next two years.

Whitty says the program would work better if legislators required hybrid vehicles to take part, but ODOT didn't have the votes in 2013.

The voluntary pilot project, Whitty says, will help ODOT determine what works and how the program needs to be adjusted before legislators consider making it a statewide requirement.

“What the public thinks will matter,” Whitty says. “If there are improvements to be made, ODOT will listen.”