There’s little dispute that America’s roads and bridges are in a state of disrepair. But there's less agreement about whether hybrid and electric vehicle drivers ought to pay a dedicated fee to fix them.
Roads in the United States, which the American Society of Civil Engineers recently gave a D grade, face a $170 billion capital expenditure shortfall. Meanwhile, the National Highway Trust Fund is on the brink of bankruptcy, in part because the gasoline tax that replenishes it hasn’t kept up with inflation and in part because vehicles are getting better fuel economy, causing them to consume less gasoline overall.
Faced with declining revenues, Wisconsin could become the next state to impose a fee on fuel-efficient vehicles, joining five others across the country.
The $50 annual charge that would be applied to both electric vehicles (EVs) and hybrids is expected to raise $4 million by 2017, as part of $751 million in new fees and tax increases proposed this month by the Wisconsin Department of Transportation. Governor Scott Walker (R) now has an opportunity to make changes to the two-year plan before releasing his budget next year, which then goes to the state legislature for consideration.
The new fee on EVs and hybrids is designed “to ensure these owners continue to pay their fair share of the operating costs of our infrastructure,” Wisconsin DOT Secretary Mark Gottlieb, a former Republican state representative, wrote in a letter to Walker.
Washington, Colorado, Nebraska, Virginia and North Carolina already charge EV drivers special fees to make up for revenue they don’t pay in gas taxes. If the budget is approved as-is, Wisconsin would become the only state to place a fee on hybrid vehicles. Earlier this year, Virginia repealed its $64 fee on hybrids amid a backlash from drivers.
The Wisconsin proposal would maintain the $75 registration fee on traditional gasoline-powered vehicles. It also calls for an increase in the state’s gasoline and diesel fuel taxes, amounting to roughly $28 per year for a midsize sedan. Still, environmentalists say the new fee on fuel-efficient vehicles is premature and politically motivated.
“It’s a little bit like charging an ex-smoker for not smoking,” said Steve Hiniker, executive of the environmental group 1000 Friends of Wisconsin.
Rather than penalizing consumers for making responsible vehicle purchases, the state should rethink allocations for highway expansion projects, particularly since data shows that people are driving less, he said.
“Transportation is the only department that has been getting funding increases for the past four years,” said Hiniker. “For me, that just speaks to the power of the road builders because they want to build more projects.”
Gov. Walker received nearly $731,000 in campaign contributions from road builders between 2011 and July 2014, the Star Tribune reports. State legislators accepted nearly $300,000 from road builders over the same period.
Hiniker went further to suggest that the fee is Walker’s “political retribution” against the stereotypical Prius driver in the Democratic stronghold of Madison, Wisconsin. If the state is concerned about drivers not paying their fair share for road upkeep, they should target owners of heavier vehicles like SUVs and trucks that cause considerably more damage to highway infrastructure, he said.
Clean energy advocates in Wisconsin have also railed against the recently approved fees on residential solar projects. Opponents say the rate structure change could slow the adoption of solar installations. Environmentalists have made the same claims about new fees on fuel-efficient cars.
But in Washington state, the $100 fee on battery electric vehicles enacted last year hasn’t affected sales, said Tonia Buell, interim director of public-private partnerships at the Washington State Department of Transportation.
Washington is among the top states in EV market share, where EVs make up more than 1 percent of new car sales. Of the 10,000 EVs in the state, more than 70 percent run on electricity alone. That’s because battery electric vehicle owners can save 7 percent to 10 percent of their vehicle costs through state incentives, shaving thousands of dollars off of the purchase price.
“I would say Washington’s financial incentive to purchase electric vehicles far outweighs any annual road maintenance fees,” said Buell.
Wisconsin does not offer a tax credit for hybrids or EVs, although these vehicles do qualify for up to $7,500 in federal tax incentives.
Oregon is taking a different approach to charging fuel-efficient vehicles their fair share for road use. Next year, the state will launch the third phase of a pilot program that allows drivers to pay a fee based on vehicle miles traveled (VMT) rather than a flat fee or a tax on fuel purchases. The 5,000-vehicle project will include cars that get less than 17 mpg to 22 mpg and above, including hybrids and EVs.
“The beauty of gas tax and a VMT tax is that it’s a user fee,” said Craig Honeyman, legislative director for League of Oregon Cities. “A VMT would be slightly more complex in terms of how it's collected, but it’s still a user fee, which I think is an attractive way to fund the maintenance and upkeep of our state’s roads.”
With the Highway Trust Fund running on empty, a VMT charge could, eventually, offer a more equitable replacement for both state and federal fuel taxes. Implementing a user fee would also be less risky than appropriating from general funds that are subject to the political vagaries of the day at the state level, but especially in Congress, said Honeyman.
“I don’t think I want to rely on pension smoothing to fund the National Highway Trust Fund too much longer,” he added.
EV drivers generally want to pay their fair share to keep roads and bridges in good repair, and the fairest way to implement a fee is based on VMT, said Jay Friedland, director of Plug-In America.
But even per-mile fees shouldn’t apply to EVs just yet, he added.
States should wait until they have 100,000 EVs on the road (California is the only state to achieve this so far) before starting to collect road use charges, according to Friedland. Until EV adoption reaches a critical mass, administering a fee is likely to cost more than a state can expect to make in returns.
Buell didn’t offer a direct response when asked if Washington’s $100 fee was generating more revenue than the cost it took to administer. But she remarked that the system is collecting valuable data on the exact number and type of EVs being adopted in the state (previously this information was self-reported), which has been beneficial for the administration.