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Legislators

Michigan Lawmakers Explore Mileage-Based Fees to Fix Road Funding Gap

Strategic Insights

— 2 min read

Michigan's lawmakers are facing a road funding dilemma, with the state's $3.5 billion road bonding plan running dry. A potential solution involves introducing mileage-based fees for drivers, which could help alleviate the financial burden. Representatives from the Reason Foundation and the Michigan County Road Association testified before the House Transportation and Infrastructure Committee, emphasizing that gas tax revenue is on the decline due to electric and hybrid vehicles. A pilot program would allow Michigan to examine the feasibility of this system and address concerns about privacy and collection costs.

Key Takeaways:

  • The Reason Foundation recommends implementing a mileage-based charge on vehicle owners to cover the cost of road repairs in Michigan.
  • The proposed fees could be applied to all vehicles, not just electric or hybrid vehicles, with rates ranging from 2-3 cents per mile depending on the gas tax rate.
  • Heavy-duty vehicles would pay a higher rate due to their increased weight and wear on Michigan's highways.
  • The fees could be applied in various ways, including using a high-tech option with a device that plugs into the vehicle's OBD2 port, a medium option with a device that only collects miles, or a low-tech option with an odometer reading verified through photos or inspections.
  • Other new options in the works include using a vehicle's telematics to track location, allowing drivers to pre-pay on mileage, or using a phone app.
  • Representatives emphasized that drivers in rural areas tend to drive less fuel-efficient vehicles and could benefit from shifting to a mileage-based fee system.
  • Rep. Tom Kunse (R-Clare) asked about the collection costs, which were estimated to be 5-10% of revenue in states that had looked into this type of program.
  • A pilot program would allow Michigan to examine the impact of out-of-state vehicles, options for privacy, and how to best address drivers traveling across multiple states.
  • The privacy concerns associated with these programs have been addressed with recent technology advancements.

Statistics:

  • Michigan's $3.5 billion road bonding plan is running dry.
  • The state's 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.
  • The proposed mileage-based fees could be applied at 2-3 cents per mile, depending on the gas tax rate.
  • The costs of collecting mileage-based fees are estimated to be 5-10% of revenue in states that have looked into this type of program.
  • Heavy-duty vehicles would pay a higher rate due to their increased weight and wear on Michigan's highways.

Sources:

  • "Michigan Republicans advance $3.1 billion road funding plan" (michiganadvance.com)
  • Testimony by Baruch Feigenbaum, senior managing director of transportation policy at Reason Foundation
  • Testimony by Ankur Agarwal, CEO of GeoToll
  • Meeting of the House Transportation and Infrastructure Committee (michiganadvance.com)

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