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Hawaii Is Looking to Adopt Mileage Tax

Hawaii is one of a handful of states looking at implementing road usage charges to make up for falling gas tax revenues and increased road repairs.

(TNS) — The Hawaii Department of Transportation is looking to charge motorists for the number of miles they drive — as opposed to the amount of gas they buy at the pump — under a proposal that would overhaul the way the state collects taxes to fund road repairs.

A mileage-based tax system could possibly replace the state’s fuel tax, which currently makes up 33 percent of the state Highway Fund.

The Transportation Department recently secured a $4 million grant from the Federal Highway Administration to conduct a major three-year demonstration project that will test the road usage charge. The state will provide $1.5 million in matching funds.

The demonstration project would include nearly every vehicle in the state, according to the Transportation Department’s federal grant application, which was released Thursday following a records request from the Honolulu Star-Advertiser.

The Transportation Department didn’t respond to interview requests to discuss the program. Spokeswoman Shelly Kunishige said by email that a test run of the program will be optional and that billings will be simulated. But details of how the department would carry out the program weren’t available, except for the broad concepts in the grant application.

A formal adoption of the program is expected to require approval from the Legislature, which could come during the 2019 legislative session, according to the timeline in the department’s grant application.

The proposal comes as the Transportation Department is struggling to raise more money for its Highway Fund.

Earlier this year, the Legislature rejected a proposed hike in the gasoline tax that was expected to increase costs for a typical motorist by about $83 a year. Also rejected were increases in vehicle registration fees and the vehicle weight tax.

The department argued that the hikes were needed due to declines in gas tax revenue brought on by greater fuel efficiency and the increasing popularity of hybrid and electric cars. Statewide, taxes from fuel consumption are not expected to keep up with the increasing costs of maintaining and repairing roads.

The hikes were expected to bring in about $75.3 million in added revenue annually to the Transportation Department. But lawmakers criticized the department for a history of inefficiency, poor contract management and a track record of allowing hundreds of millions of federal dollars to languish unspent.

Some lawmakers questioned whether the increases would actually translate into improved roads.

Gov. David Ige said he planned to push again for the gas tax hike next year, but the proposed per-mile usage charge may eventually eclipse debates over gas tax increases.

It’s not yet clear how much motorists would be charged under such a program, or how much added revenue it would bring in to the state. But the Transportation Department indicated that the mileage charges could provide it with a more stable revenue stream.

Tom Yamachika, president of the Tax Foundation of Hawaii, said Thursday he hasn’t yet seen the new tax proposal, but noted that it appears to be the result of an underlying public policy conflict in Hawaii. While the state is seeking to dramatically reduce its reliance on fossil fuels, it depends on the purchase of gasoline to fund road maintenance.

“People are relying on gasoline less, which is supposed to be a good thing,” said Yamachika. “It’s working, much to the chagrin of DOT.”

A second demonstration project with approximately 500 people per county would test different methods of reporting mileage, such as using smartphones or other technologies that are placed inside vehicles, according to the department’s grant application. The department will also explore different payment methods.

The Transportation Department plans to “collect, store, transmit and use vehicle data and periodic odometer readings from 1.1 million motorists as a foundational aspect of the project, through the periodic motor vehicle inspection process,” according to the grant application.

The data would be used to generate “prototypical billings” tailored to each motorist, showing the road use charge, federal, state and county fuel taxes and other fees.

The road use charges could end up replacing federal and county fuel taxes, according to the application.

Hawaii is one of a handful of states looking at implementing road usage charges, more traditionally known as tolls, to make up for falling gas tax revenues and increased road repairs under a program signed into law last year by President Barack Obama.

Oregon has been at the forefront of efforts to implement a road usage charge. Under its voluntary OReGO program, motorists are charged 1.5 cents per mile and can receive credits on their bill for the fuel tax they pay at the pump.

Michelle Godfrey, the education and outreach coordinator for the Oregon Department of Transportation, said Tuesday that motorists in the OReGO program can pay less or more than they would in gas taxes based on the fuel efficiency of their vehicle.

“This allows us to get away from a funding source dependent on the consumption of fossil fuels,” she said.

Godfrey said that the public reaction to the program has been mixed.

“Anytime you are talking about a tax there is automatic resistance,” she noted.

But she said that drivers have surprisingly become less worried about privacy issues relating to GPS devices that track their mileage, and another key concern, that the tax would unfairly burden rural drivers, hasn’t proved to be necessarily true.

Ultimately, the Transportation Department’s proposal will require buy-in from state lawmakers. Sen. President Ron Kouchi and House Speaker Joe Souki both submitted letters in support of the demonstration project, according to the department’s grant application, but other lawmakers told the Star-Advertiser that this is the first they are hearing of the idea.

Kouchi suggested that the program could create a more equitable system for motorists, where drivers of electric cars are paying their fair share for road maintenance.

“This will help them get some data so that we will be able to get a little more information available for the discussion about what is appropriate for the electric vehicles to pay,” he said.

Rep. Matt LoPresti (D, Ewa Villages-Ocean Pointe-Ewa Beach), vice chairman of the House Transportation Committee, said Thursday he hadn’t been briefed on the project, but it’s something that he would have a hard time supporting at this time.

“The biggest concern I have with a proposal like this is regarding how it seems to punish people who live further out and seems to punish those who live in rural communities and people living in the only place they can afford to live,” he said.

LoPresti said he was particularly concerned with the “bedroom communities” that are being developed in Ewa Beach and Kapolei.

“They are not putting jobs out there,” he said. Meanwhile, “people are made to buy houses there because they can’t afford it elsewhere.”

©2016 The Honolulu Star-Advertiser Distributed by Tribune Content Agency, LLC.