BILL ANALYSIS �
SENATE TRANSPORTATION & HOUSING COMMITTEE BILL NO: Sb 1077
SENATOR MARK DESAULNIER, CHAIRMAN AUTHOR: desaulnier
VERSION: 4/21/14
Analysis by: Eric Thronson FISCAL: yes
Hearing date: April 29, 2014
SUBJECT:
Mileage-based fee pilot program
DESCRIPTION:
This bill requires the Transportation Agency to develop a pilot
program by January 1, 2016, to explore various methods for using
a mileage-based fee (MBF) to replace the state's existing fuel
excise tax.
ANALYSIS:
The state derives its transportation funding primarily from a
variety of excise and sales taxes on gasoline and diesel fuel.
Existing law requires that the state spend the revenue from the
base 18-cent-per-gallon fuel excise tax to maintain and operate
the state highway system. Excise tax revenue from gasoline
above the base revenue is used primarily for local streets and
roads as well as new capacity projects. A statewide sales tax
on diesel is dedicated to supporting transit operations in the
state.
In addition, existing law establishes in state government the
Transportation Agency, which oversees and directs policy for a
number of transportation-related departments, including the
California Highway Patrol, the Department of Motor Vehicles
(DMV), and the Department of Transportation (Caltrans).
Section 1 of Article I of the California Constitution declares
that all people have certain inalienable rights, including but
not limited to the right to individual privacy.
This bill requires the Transportation Agency to develop a pilot
program by January 1, 2016, to explore various methods for using
an MBF to replace the state's existing fuel excise tax. The
bill requires the agency, at a minimum, to assess the following
issues related to implementing an MBF in California:
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Different methods for calculating mileage and collecting
road usage information that include alternatives to using
electronic vehicle location data. Any methods considered
shall collect the minimum amount of personal information
necessary to accomplish the goals of the MBF.
Processes for managing, storing, transmitting, and
destroying data to protect the integrity of the data and
ensure the privacy of drivers.
Types of equipment that may be required of the state and
of drivers in order to implement an MBF, including a
discussion of the advantages and disadvantages of the
equipment, the privacy implications of the equipment, and
contingencies in the event of equipment failure.
Estimated costs, both public and private, associated
with the initial implementation and ongoing operation of an
MBF system.
Processes and security measures necessary to minimize
fraud and tax evasion rates.
The appropriate government entities to collect data and
handle revenue collection, and the frequency at which
charges should be billed or collected.
In addition, the bill requires that the Transportation Agency
consult with entities such as DMV, Caltrans, the Institute of
Transportation Studies at the University of California, or any
other entity that has expertise in automotive technology,
revenue collection, and protecting the public's private
information.
Finally, the bill requires the Transportation Agency to submit a
report of its findings to the Legislature no later than June 30,
2017. The report shall include, but not be limited to, all of
the following elements:
Recommendations regarding how to best implement an MBF
in a manner that minimizes confusion and inconvenience to
California's drivers while also providing safeguards that
ensure their privacy.
Recommendations regarding public and private agency
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access, including law enforcement access, to the data
collected and stored for purposes of the MBF that ensures
individual privacy rights as protected by Section 1 of
Article I of the California Constitution.
Given the technological and institutional demands
associated with implementing an MBF, a discussion of
different processes that may be used to transition from the
fuel tax to an MBF over time.
A discussion of issues the Legislature may wish to
consider when evaluating whether and how to implement an
MBF, including the potential impact of new, rapidly
changing technology, such as cars electronically connected
to each other and the infrastructure around them, which
could provide new and possibly more efficient options for
collecting mileage data while protecting the privacy of
drivers.
With the transition from a fuel tax to an MBF, a
discussion of protections and safeguards that can be put in
place to ensure that the MBF has at least the same level of
protection from being diverted and used for
non-transportation purposes and the same eligible uses as
the fuel taxes being replaced, including consideration of
voter approval.
This bill sunsets on January 1, 2018.
COMMENTS:
1.Purpose . According to the author, today's funding mechanism
for our transportation system, the excise tax on fuels, is
unsustainable. In order to address this challenge, other
states have been considering various ways to replace the gas
tax with something that more closely aligns with a fee for
use. The author contends that this bill is a critical first
step toward California considering an MBF as an alternative to
the excise tax on fuels.
2.Why do we need to replace the fuel excise tax ? The excise tax
on fuels was originally created in the early 20th century to
serve as a substitute user fee for the construction,
maintenance, and operation of the transportation system. At
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the time, it was technologically very difficult to track
actual usage of the roadway by vehicle, but most vehicles on
the road were very similar and experienced similar mileage.
Therefore, a tax on fuels served as a suitable stand-in for
usage.
Today, a trifecta of circumstances is combining to undermine
the sustainability of the fuel excise tax. First, the fuel
excise tax is not indexed to inflation, and therefore its
value erodes over time. The last increase to the base fuel
excise tax was in 1994; due to inflation, a dollar in 1995 is
only worth 55 cents today. Second, both state and federal
governments have adopted policies requiring vehicles to become
significantly more fuel efficient over time. Simply speaking,
this means that as vehicles drive farther on less fuel, they
do more damage to the roadway system per dollar available to
maintain that system. Third, demographic trends and state
policies are encouraging Californians to drive fewer miles per
capita. With fewer miles driven in more fuel-efficient cars,
less fuel is purchased. The dire result of this combination
of factors is that government is left with dwindling resources
to address growing transportation problems.
Not only is the fuel excise tax unsustainable, but today's
varied vehicle marketplace is leading to significant
distortions in the market. Many drivers today travel
exceedingly long distances on a gallon of fuel, or without
purchasing any fuel at all, and therefore contribute little or
nothing to the maintenance of the road system necessary for
that travel. Further, nearly all of these highly efficient
vehicles are new models and relatively expensive, suggesting
that high-income individuals are more able to use public
infrastructure without contributing requisite tax revenue.
Meanwhile, many of the least efficient vehicles on the road
are older, less-expensive models typically driven by
lower-income individuals. This often means that those who can
least afford to are increasingly shouldering the burden of
funding the maintenance and operation of the public roadway
system. If the state were to increase the fuel excise tax to
try and slow down the diminishing buying power of today's
principle funding mechanism, it might only exacerbate this
regressive tax situation.
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Due to technological advances, the state can address this
downward pressure on the fuel excise tax by shifting to some
other fee that more accurately measures usage. Many states
are exploring, and advocates argue, that some sort of MBF
would effectively and fairly replace the fuel excise tax. It
seems reasonable that California explore the potential
benefits and challenges of replacing the fuel excise tax with
some version of this true user fee.
3.Recent studies raise and address potential issues with an MBF .
As the funding realities have become increasingly apparent, a
number of states and entities have conducted studies
concerning the challenges of implementing an MBF to replace
existing funding revenues. Some of the primary issues these
studies have raised and addressed include:
Privacy issues. One of the primary impediments to
implementing an MBF has been the concerns raised about the
government being able to track one's driving behavior and
movement. Studies suggest that four basic approaches are
available to help alleviate these concerns: (1) relying on
metering options that provide no information about the
location of travel, such as a flat annual fee; (2) relying
on a trusted third party as a clearinghouse to protect and
secure private data from governmental review; (3) designing
the metering technology with built-in privacy safeguards,
if possible; (4) establishing privacy legislation that
clearly distinguishes between permissible and impermissible
uses of personal travel data. The State of Oregon has
applied many of these options jointly and has been so
successful in its efforts that its program has earned the
endorsement of the ACLU for its privacy protections. This
bill seems focused on ways to replicate Oregon's success
with finding solutions to these privacy concerns.
Urban vs rural drivers. One central concern of
implementing an MBF is the notion that rural residents
drive longer distances and will therefore suffer an unfair
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burden from mileage charges. Research suggests, however,
that on average there is no significant difference in the
distance driven per year between urban and rural residents.
This is because, although rural residents tend to drive
longer distances for typical errands, they also tend to
engage in such activities less frequently than their urban
counterparts and are much more likely to combine trips. In
fact, when looking strictly at miles driven on public
roads, rural households on average drive significantly
fewer miles than urban drivers, according to recent
research. It is reasonable to assume the pilot program
created by this bill will consider the issue of fairness
for all drivers in the state.
Administrative costs. One significant advantage of the
fuel excise tax is that, because it is collected from a
small number of fuel wholesalers around the country, it is
relatively inexpensive to administer. An MBF, in contrast,
could involve collecting a fee from each individual driver
or vehicle owner, which would be inherently more
complicated to administer. The state expends roughly one
percent of the revenue to collect the fuel excise tax.
Recent evidence and modeling suggests that a state-level
MBF system could cost around five percent of the incoming
revenue. It is important to remember that even with
greater administrative costs, however, an MBF may yield far
more net revenue over the coming decades than the fuel
excise tax given the shifts toward higher fuel economy and
alternative-fueled vehicles. The pilot program imagined in
this bill needs to consider this particular challenge and
adequately justify any increased costs with data supporting
the switch to an MBF.
1.Previous legislation . In 2010, this committee heard SB 1299
(Lowenthal), which would have required DMV to implement a
similar vehicle-miles-traveled pilot program. That bill
passed this committee with a vote of 7-1 on April 13, 2010,
but the Senate Appropriations Committee held it on its
suspense calendar.
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POSITIONS: (Communicated to the committee before noon on
Wednesday, April 23,
2014.)
SUPPORT: Transportation California (sponsor)
American Council of Engineering Companies of
California
American Planning Association, California Chapter
Associated General Contractors
California Asphalt Pavement Association
League of California Cities
OPPOSED: None received.