Michigan eyes miles-traveled charge for roads as EVs cut into fuel tax

• Michigan will spend more than $5 million this fall to survey 20,000 residents about road usage charges
• Alternatives sought as revenues from gas taxes are expected to decline as automakers build more electric cars
• Some have already raised privacy concerns about placing GPS trackers in vehicles

LANSING — Michigan officials are exploring whether to replace gas taxes with “usage charges” as the auto industry’s shift to electric vehicles is expected to cut into tax revenues for road repairs.

With fuel taxes projected to decline by hundreds of millions of dollars in coming years, the $82 billion budget Gov. Gretchen Whitmer signed last week supports ongoing efforts to explore one possible alternative: charging motorists for each mile driven, rather than each gallon of gas consumed. 

Michigan plans to spend more than $5 million — including $2.6 million from a federal grant authorized in the budget — to survey 20,000 Michiganders this fall and study the potential impact of a road usage charge system.

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Among other things, the survey will gauge residents’ willingness to allow GPS systems in their cars to record mileage. 

The budget also directs MDOT to apply for federal grant funding for a national "motor vehicle per-mile user fee pilot program" created through the $1 trillion infrastructure bill signed by President Joe Biden in late 2021.

If awarded the grant, Michigan must use it "to establish a pilot program to determine the feasibility of road usage charges as a replacement for motor fuel taxes as a basis for transportation funding,” according to the new state law.

The budget directives come as Michigan prepares its own research report on road usage charge programs in other states like Oregon, Utah and Virginia, which have already implemented voluntary mileage-based pilot programs.

Lawmakers requested that research as a follow-up to a toll road study the department released earlier this year, said Jeff Cranson, a spokesperson for the transportation department. It’s due by the end of September.

The ramped-up research timeline comes as the Democratic governor and new Democratic majorities in the Michigan Legislature continue to plot the future of road funding in the state. 

Upon winning re-election last fall, Whitmer told Bridge Michigan she would not propose another fuel tax increase after lawmakers in 2019 failed to support her plan for a 45-cent hike that would have made Michigan’s gas tax the nation’s highest.

Michigan’s gas tax is now 28.6 cents a gallon, which combined with a 6 percent sales tax on fuel that does not fund roads, means state motorists pay the sixth-highest rate in the nation.

Instead, Whitmer told Bridge in December that she wanted to convene a broad group to find a bipartisan approach to road funding “that recognizes the historic transition that's happening in the auto industry.”

That call took shape in June when Whitmer created a population growth council tasked with making Michigan more alluring to new residents, in part by figuring out a long-term plan to upgrade and modernize transportation and water infrastructure. 

MDOT’s pending road usage charge survey predated the governor’s recent push and legislative interest in the similar concept of toll roads, said Jean Ruestman, administrator of MDOT’s Office of Passenger Transportation.

“Hopefully, what we do can help inform that bigger discussion that the department and the Legislature has to have about how we make up for the lost revenue, because we're using a source right now that we know is not sustainable,” Ruestman told Bridge Michigan.

Chairs of the Michigan House and Senate transportation committees did not immediately respond to requests for comment from Bridge. 

Earlier this year, legislators hosted hearings on another potential revenue option: toll roads, a concept Whitmer has also said she would consider. 

Michigan now generates about $1.5 billion in annual fuel tax revenue to help fund road repairs. But because of electric vehicle adoption, experts project the state could lose a third of that money, $500 million, per year by 2030.

In a project narrative prepared for the federal government, MDOT said it "believes that (road usage charges offer) public entities a powerful tool to a) efficiently raise revenue, b) holistically manage roadway performance and reduce congestion, and c) increase the environmental sustainability of our transportation system."

As part of the survey, the state hopes to learn how many residents would be "willing to share GPS data with a third party" to compute a miles-driven tax.

But the state does not want to give the impression GPS tracking devices are a foregone conclusion, Ruestman said. 

"We don't want people to come away somehow thinking, ‘Oh, the state's planning on putting a chip in all of our cars.’ They're going to track every mile.’ We want to make it clear that this is just to understand how you would feel,” she said. “How would you feel about self-reporting the number of miles you travel?”

Supporters acknowledge that the push for a mileage-based tax system is complicated by privacy concerns about placing GPS data collection devices in residents’ vehicles.

States that have begun pilot programs have also provided non-GPS options, including odometer image capture systems that allow users to upload cellphone pictures in a manner akin to a mobile check deposit. 

Oregon lets drivers decide who to share their mileage data with: The government, or two private vendors that contract with the state to administer the program and tax payments.

Road usage charges have become popular with libertarian and free-market groups like The Reason Foundation and Mackinac Center for Public Policy, which last year recommended Michigan begin the transition toward a mileage-based tax system on interstates and freeways only.

Doing so would allow the state to overcome privacy concerns by using in-car transponders like the EZ Pass toll system already used in other states and “proven as acceptable to millions and millions of people,” Bob Poole of the Reason Foundation told Bridge earlier this year.

In a second phase slated for early next year, MDOT plans to work with The Rapid and SMART public transit networks in Grand Rapids and metro Detroit to assess whether road user charges could reduce congestion and carbon emissions by “educating participants about the environmental impact of their transportation choices and offering viable alternatives,” according to the project narrative.

Working with technology subcontractor VIA Technologies of California, MDOT will provide some residents with  “a mobility wallet,” giving them a certain amount of money for transportation along with information about their potential spending choices, including gas for a single-passenger car or a local bus ride. 

The goal is to see whether understanding a mileage-based road usage charge will "impact people's choices," including whether they’d be more likely to use public transit if they understand the actual cost, said Ruestman. 

Public transit is an important part of the discussion because most of the state funding for local systems also comes from fuel taxes, she said. 

“It makes it even more complex to try and figure out a fair and reasonable funding source for public transit because by the very nature of us trying to get people on transit — encouraging them not to necessarily own their own car or to drive their own car less —  it actually reduces our income.”