First here is an article from June 13, 2006 in the Seattle Times
PORTLAND — If a test drive of mileage-based fees for drivers pans out during the next 10 months, it could replace Oregon’s gas tax and serve as a national model for road funding in the future.
Oregon’s 24 cents-a-gallon gas tax, which is used to fund roads, has not increased since 1993. Some at the state Department of Transportation say the money could dry up in future years as hybrids and other fuel-efficient cars become more popular. So the state is investigating other alternatives to pay for roads.
The mileage-fee project was designed by engineers at Oregon State University. The system works by using a Global Positioning System in a car to determine the number of miles traveled inside and outside of Oregon and at what times, which could lead to peak-driving-time fees. When the car pulls into a service station, a radio transmitter sends the data to a reader in a gas pump. The mileage fee is added to the bill, and the gas tax is subtracted.
“Still, there will be people who don’t believe it,” said Jim Whitty, who is overseeing the project for the transportation department. “We know the navigation systems are more invasive, and they will be standard equipment on GM cars a year from now.”
The cost would be about $33 million to install the equipment in all state service stations, and about $1.6 million a year to collect the taxes, Whitty said.
Nearly 300 Portland-area volunteers will begin testing the system this week. They will be paid $300 to carry a global-positioning device in their car and fuel up at two participating Leathers service stations.
If the pilot project goes well, Whitty said, it could spur federal investment that would make the project more likely to become a reality. However, he said putting the plan into effect is at least 14 years off.
The mileage-based system still faces a few challenges. By charging people by mileage, it removes a major incentive for people to use fuel-efficient cars that are less polluting. Additionally, only new-car owners can take advantage of the system because of the need for a global-positioning unit.
Fast forward to January 14, 2009
Oregon Live
Oregon envisions gas tax based on miles, not gallons
Gov. Ted Kulongoski wants the state to become a center for the production of electric vehicles.
In Washington, D.C., the incoming Obama administration and Congress are pushing automakers to improve fuel efficiency and build cars that run on some fuel other than gasoline.
All of this would reduce the nation’s dependence on foreign oil, but it also would reduce Oregon’s revenue from the gas tax, the main source of money to maintain and improve the Oregon highway system.
As a result, the Oregon Department of Transportation is in the early stages of an experiment to meet the expected decline in gas tax revenue by developing a transportation tax system that is based not on gallons purchased at the pump but on miles traveled within the state.
It’s called a “vehicle mileage tax,” and it’s raising concerns over privacy and practicality.
Kulongoski’s proposed 2009-11 budget includes $10 million to continue the experiment, which most recently involved a pilot project in Portland using 285 vehicles and two service stations that were equipped with technology that calculates the mileage fee.
“This is not something the governor expects to be in place next year or even in five years,” said Anna Richter-Taylor, Kulongoski’s spokeswoman. “It’s probably eight to 10 years away. But gas tax revenues are not sustainable so he wants to be sure that when we do face that cliff, we don’t fall off.”
The Oregon Constitution mandates that gas tax revenues can only be spent to maintain and improve the state highway system. They account for about 60 percent of ODOT’s highway budget. That budget is getting squeezed from two directions, said James Whitty, manager of the agency’s Office of Innovative Partnerships and Alternative Funding.
One is inflation, driven by the rising cost of building materials and labor, which has been running at about 5 percent a year. The other is a decline in revenues due to improved fuel efficiency that costs the highway budget one-half of 1 percent in each of the past two years, Whitty said.
The Legislature saw this coming. In 2001, lawmakers created a task force to study alternatives to the gas tax.
The result is the proposal that uses Global Positioning System equipment to track miles traveled within Oregon. Whitty said the technology exists but needs to be perfected before a mileage-based tax system could be developed statewide.
How it would work
ODOT conducted the pilot project with help from engineers from Oregon State University. The system requires vehicles to be equipped with GPS devices and for service station pumps to have electronic reading devices to collect mileage data from the vehicles.
The pump reading devices first determine electronically whether a vehicle is equipped to pay a mileage-based fee. If not, the normal gas tax is applied to the transaction. For vehicles with a GPS device, a mileage fee would be added to the cost, and the gas tax would be deducted.
ODOT has concluded that it would be too difficult and expensive to retrofit existing vehicles to pay a mileage-based fee, so the new system would apply only to new vehicles with the necessary GPS devices. Whitty said that means it would take 20 years or more to phase in a new system completely.
Before that process even begins, there are dozens of issues to be resolved.
Zoned fees
The Legislature would have to set the mileage fee and decide whether additional fees should apply for miles traveled in designated zones — for example, Interstate 5 in Portland during rush hour. A mileage-based tax system would make such “congestion pricing” feasible.
Whitty said the biggest single concern is privacy and public suspicion that a GPS-based system could be used to track motorists. He said the devices used in the pilot project did not send out an identifying signal and did not store any data for later retrieval.
“The device could locate itself but nobody else could track it,” he said.
Others have complained that a mileage-based tax would be unfair because gas guzzlers would be charged the same fee as fuel-efficient vehicles driven the same distance. Whitty said depending on what policy makers decide, a fee system could be devised that would reward fuel-efficient vehicles.
There are many other hurdles to clear before Oregon gets close to replacing the gas tax, including the willingness of manufacturers to make the GPS devices standard equipment in new vehicles. But Whitty said the need to do that will become increasingly clear.
“Vehicles are coming that get upwards of 100 miles per gallon and electric vehicles are coming,” he said. “They’re not too far away, and they won’t pay any gas tax. We need a road revenue system that can sustain itself.”
Senate Business and Transportation Committee Chairman Rick Metsger, D-Welches, said he is not ready to commit to the $10 million that Kulongoski seeks in his budget, but he supports continued experiments into alternatives to the traditional gas tax. He said the solution will probably have to come from the federal government, but only after states such as Oregon lead the way with such experiments.
“As we look into the future, we have to come up with a way to pay for transportation without assuming the amount of gasoline you buy is the basis for it,” Metsger said.