As road funding negotiations continue, stakeholders pitch lawmakers on mileage-based fees

As orange cones and construction warning signs spring up with the summer season, members of the Michigan House of Representatives on Tuesday heard pitches from several organizations on a potential long term fix to fill the funding gap for road maintenance.

As the state’s $3.5 billion road bonding plan runs dry, lawmakers are searching for a new solution to fix the state’s crumbling roads, with Michigan House Republicans advancing a $3.1 billion road funding plan in March with support from several Democrats.

Testifying before the committee on Tuesday, representatives from both the libertarian Reason Foundation and the Michigan County Road Association emphasized that the House’s more than $3 billion plan is a short to medium term solution. 

While Michigan roads are mainly funded through state and federal fuel tax revenue and vehicle registration fees, policymakers have long acknowledged that Michigan is in need of new funding.

The proposal at hand? Mileage-based fees for drivers. 

Both the Reason Foundation and the County Road Association warned that gas tax revenue is on the decline due to electric and hybrid vehicles and the increased efficiency of vehicles powered by gasoline. 

“I like to say the fuel tax is like a rock star on his farewell tour. You know, we keep saying, ‘Well, this is going to be it. We’re going to find a solution. We’re going to find a solution. We’re going to find a solution.’ And we’re to the point now where the rock star has done three or four farewell tours, and we actually need to come up with something,” said Baruch Feigenbaum,  the Reason Foundation’s senior managing director of transportation policy.

The gas tax has lost about 50% of its spending power over the last 30 years due to inflation and a lack of indexing on the tax, Feigenbaum said. 

In its place, Feigenbaum and the other individuals testifying called for a pilot program to examine what it would look like to implement a mileage-based charge on vehicle owners to cover the cost of road repairs in Michigan 

While the state has previously conducted a study looking at road tolls as a potential solution, Feigenbaum argued more will be needed to fix the state’s road funding issues. 

“Tolling by itself is not going to work, because local streets can’t be tolled. [On] roads with traffic signals, tolling is a challenge, and so we need something that can work on all streets in all places,” he said. 

Under this proposal, the Reason Foundation recommends these fees be applied to all vehicles, not just electric or hybrid vehicles. Rates can be flexible and are generally two to three cents per mile depending on the gas tax rate. Additionally, heavy duty vehicles would pay a higher rate as their higher weight means more wear on Michigan’s highways. 

The fees could also be applied in a number of different ways, Feigenbaum said, noting that residents often raise concerns about the government tracking them.

“There is a high-tech option where the device plugs into the vehicle’s OBD2 port and collects the when and the where of highway use. … There’s also a medium option, where you have a device, but it’s only collecting the miles, it’s not looking at the location or the time,” Feigenbaum said. “And then a low-tech option, such as an odometer reading, which can be done with a photo, other types of verification at a mechanic through various inspections that requires very little in the way of new technology and little in the way of new costs.” 

There are also other new options in the works including using a vehicle’s telematics to track location, allowing drivers to pre-pay on mileage, or by using a phone app, Feigenbaum said. 

While some rural residents have raised concerns that this system would cost them more because they have to drive more than residents in urban areas, Feigenbaum noted that drivers in rural areas tend to drive less fuel efficient vehicles, meaning those drivers are paying more in fuel taxes and could benefit from shifting to a mileage-based fee system. 

While Feigenbaum emphasized the mileage based fee should be used as a replacement for the state’s fuel tax rather than a supplement, Rep. Tom Kunse (R-Clare) asked how the collection costs compared to the 2-3% cost of collecting the fuel tax. In states that had looked into this type of program the cost had been 5-10% of their revenue, Feigenbaum said.

Hosting a pilot program would allow Michigan to examine how this kind of system would work in the state, examining questions like the impact of out-of-state vehicles, options for privacy, and how to best address drivers traveling across multiple states. 

It also allows the state to look into whether they should charge drivers once at the end of the year, or throughout the year, he said. 

Ankur Agarwal, the CEO of electronic tolling and road usage charge company GeoToll, offered assurances on the privacy concerns these programs carry, noting that one of the methods using systems integrated with certain newer vehicles only shares data with the consumer’s consent. Even using a GPS method, GeoToll has been able to completely maintain a user’s privacy, he said. 

“So privacy issues were there in the earlier times, but with the recent technology that has been rolled out, the privacy concerns have been completely addressed and they have been eliminated from this road usage charge perspective,” Agarwal said. 

However, Agarwal advised against a GPS plug-in approach, noting that while it is user friendly, it carries a high cost between the device’s hardware, the cost of sending data to a server and maintaining hardware over time.

While Rep. Jennifer Wortz (R-Quincy) asked whether these fees would apply to other vehicles traveling on roads like off-road vehicles, all-terrain vehicles and tractors, the stakeholders emphasized that is the Legislature’s decision to make, should they adopt a mileage-based fee system. 

Should the state pursue a pilot program, Denise Donohue, CEO of the County Road Association, emphasized that the state will first need to educate residents about the impact of these programs, alongside hosting focus groups to gather perspective from residents across the state’s various regions, as they have very different thoughts on these kinds of efforts.