Drivers of electric and hybrid cars would pay more at the DMV, if a bill to increase funding of the State Highway Fund is passed by the Nevada Legislature.
Critics worry the bill would disincentivize consumers from buying clean-energy vehicles, but backers say the bill provides an equitable solution to a critical funding problem. The debate centers on what is perhaps an uncomfortable truth: low-emission vehicles aren’t currently paying their fair share of taxes to fund the construction, maintenance and repair of public highways.
That’s because the State Highway Fund is funded by fuel tax. Fuel tax is paid by fuel suppliers and built into the per-gallon prices seen by drivers at the gas pump. The fuel tax rate hasn’t changed since 1992. Due to increased fuel efficiency in vehicles and the availability of clean energy options like fully electric or hybrid vehicles, the amount of fuel tax collected has declined significantly over the past decade — to the tune of $80 million annually.
That loss is expected to double to $160 million annually by 2030.
“The conversation has been postponed too long,” said Assemblyman Alexander Assefa, who sponsors the bill. “We need to figure out the gaping hole in our state highway funding system. If we do nothing and kick the issue down the road then we will arrive at a point where we will not be able to adequately fund the maintenance. Then we’ll be faced with a bigger issue.”
Zero emission vehicles are no doubt good for the environment and reduced carbon emissions are tied to better air quality, which has a positive public health impact that saves governments money overall. However, transportation experts say these vehicles are neutral when it comes to impact on infrastructure. They take up the same amount of physical space and produce wear and tear at the same rate as their gas guzzling counterparts.
“Fuel tax has served us well but has become increasingly dysfunctional as the world around us has changed,” said Derek Morris, the engineer and former Washoe County transportation leader who spearheaded the proposal. “If we think about it rationally, they should pay the same (toward highways) but they’re not.”
What Assefa and Morris are proposing in AB401 is the creation of a DMV fee based off vehicle miles traveled (VMT). A fee of 1 cent per mile would apply to any “light-duty vehicle” — meaning most SUVs, sedans, pickup trucks and cars — registered in the state, regardless of its fuel efficiency. The fee would be charged alongside annual vehicle registration and most cars would verify their mileage as part of their already required annual smog check.
For vehicles that use gas, the VMT fee would be offset by a credit for fuel taxes paid at the pump. That credit would be based off estimated city/highway miles per gallon ratings already calculated at the federal level through the Environmental Protection Agency. The system would be entirely automated and not require drivers to track their own fuel spending or mileage.
Here’s a chart showing how different types of vehicle would be affected:
In the example above, a pickup that drove 12,000 miles at 15 miles per gallon be charged a $120 VMT fee, offset by a $141.20 credit based off estimated fuel taxes paid at the pump, resulting in a refund of $21.50. Meanwhile, a more fuel efficient sedan that drove 12,000 miles at 22 miles per gallon would be charged the same $120 VMT fee, but would only have it offset by $96.19, resulting in the driver owing $23.81.
Finally, a fully electric car that never visited a gas pump — and therefore paid no fuel taxes benefiting the State Highway Fund — would be charged the $120 VMT fee outright.
Morris says the financial incentive to own an electric or hybrid car still exists within this mileage-based fee system: “The benefit from moving to a fuel efficient vehicle is not in the taxes or VMT. It’s in the underlying price of gas.”
In the above examples, the electric vehicle would indeed pay the DMV more during annual registration, but they would also have paid zero dollars in fuel over the past year, compared to the other two vehicles.
During the 2017 Legislative Session, an assembly bill — also numbered 401 — was proposed to charge electric and hybrid vehicles a flat fee to support transportation infrastructure. The bill went nowhere.
Assefa suggested the approach of that 2017 bill could be considered discouraging clean energy, but his bill should not be construed that way.
“This bill is saying let’s bring it to equity,” he says. “One class of people are contributing to highway maintenance and other people are not paying. This brings everyone to equity.”
Assefa’s bill received a lukewarm reception at its hearing in the Assembly Growth and Infrastructure Committee on Tuesday. Several legislators praised the assemblyman for “starting the conversation” but took issue with the methodology, timeline and specific details of the extensive bill.
Assemblywoman Rochelle Nguyen wondered whether it was “premature” for Nevada to embrace such a system. She referenced Oregon, where legislators have been studying, debating and piloting programs based off vehicle miles traveled for almost two decades and have yet to adopt it statewide.
Nguyen also pointed toward a different bill introduced this session, AB483, which calls for a pilot program to gather data on the annual vehicle miles traveled: “Is that something we’ve considered? Waiting to see — so we can have a results-based program in place.”
Morris acknowledged Oregon has pioneered mileage-based user fees but stressed that the bill before Nevada legislators is significantly different because it is simpler and far more cost-efficient. Fuel tax would still be collected at the pump by fuel retailers and suppliers as it is today. Drivers would not be required to track their own mileage or install any privacy-invading devices in their cars. Various programs explored in Oregon have involved GPS-tracking or required overhauling existing systems for fuel-tax collection.
“That’s the beauty of this,” responded Morris. “There is no tech to pilot.”
He further suggested the state can’t afford not to act.
Added Morris, “We have to address this. We’re short as it is, and we’re going to be even shorter in the future.”
The American Society of Civil Engineers graded Nevada a C (“mediocre: requires attention”) on its 2018 infrastructure report card. The report noted the state faces a $450 million backlog of road and bridges repairs. Furthermore, it cautioned that much of the infrastructure within the state is considered new by industry standards but will in the next few decades require replacement or significant repair.
“Available funding is insufficient to address future needs,” the report noted.