Member Briefing: February 26, 2021
- February 26, 2021
- Posted by: Joe Milazzo II
- Category: Member briefing
This week’s RTA member briefing focuses on one of our top priorities: modernizing state highway funding.
The briefing highlights the increasing unfairness associated with fuel taxes, and the opportunity to transition to a simpler, more sustainable access-based approach.
Read a summary of the concept below, and learn more in the complete RTA Thursday Thoughts at 3 blog devoted to the access fee approach here.
Fuel taxes are increasingly unfair — to both travelers and NC retailers. Let’s end them, and go with an access-based approach.
Under an “access-based” approach, one would pay a fixed monthly or annual fee for access to the entire state roadway system, regardless of usage. This is no different than paying a monthly fee to access a reliable mobile phone network.
In fact, North Carolina already has the basis of an access fee in place for electric vehicles: they pay an additional annual fee, since they cannot pay fuel taxes. The proposed access-based concept simply applies the existing electric vehicle fee approach to all registered passenger vehicles, using fee levels commensurate with the reduction or complete elimination of fuel taxes.
An access fee-based business model is still a user fee approach. It’s just a simpler, fairer, more resilient one that is based on accessibility.
An access fee is more equitable for rural and metropolitan NC residents
The fuel tax you currently pay varies by how much you travel, which sounds reasonable. However, it also varies by how fuel efficient your vehicle is. While increasing fuel efficiency is laudable from both an environmental and personal financial standpoint, it’s not a fair basis or proxy for funding the state highway system.
In addition, the more affluent you are, the easier it is for you to purchase new, more fuel efficient vehicles. As well, rural residents tend to drive longer distances for work, consuming more fuel and paying more fuel taxes.
An access fee approach provides a level playing field. It doesn’t matter what you drive — or how far you live from your job — you are paying the same access-based fee per vehicle. Such a simplified access fee that is independent of individual travel is reasonable, because “indirect user fee” approaches do not always align with NCDOT’s cost of providing infrastructure anyway. As an example, an auto driver who rarely travels in congestion might give rise to near zero incremental costs to the state, in terms of added pavement width or depth.
The reality is that NCDOT must make the entire roadway system available, accessible, and well-maintained for everyone, regardless of the level of usage for any particular motorist.
An access fee can incentivize new business activity for NC retailers
The reality is that our state fuel taxes are higher than what our neighbors in Virginia, South Carolina, and Tennessee charge. So our fuel prices are higher. This means that travelers passing through our state also pass by our fuel stations more than they otherwise would. And that means that they are also passing by our restaurants and other retail outlets near those stations more than they otherwise would.
Reducing or replacing fuel taxes with an access fee-framework would allow our filling stations to offer more competitive pricing, and the nearby businesses will also benefit from increasing use of gas stations along our interchanges.
Access fees are less volatile and more resilient to economic downturns
If we had an access fee based approach in place now, instead of the current indirect user fee-based approach via fuel taxes, the pandemic would have had far less impact on NCDOT’s finances. An access-based vehicle registration fee is much more resilient to economic downturns or other shifts in driver behavior – since the revenue is independent of variation in travel, unlike mileage-based fees.
How are we moving this conversation forward?
RTA is pleased to be a part of the NC Chamber’s Destination 2030 initiative; the access fee-based approach is included in this effort. The concept is also a natural extension of several of the options mentioned by the NCDOT FIRST Commission. We will continue to elevate the potential for an access fee approach as part of a future solution package and help advance the conversation on the need to modernize highway funding — while remaining open to any and all solutions that will be fair, sustainable, and acceptable.
Let’s get moving,
Joe Milazzo II, PE
RTA Executive Director