Pay tax by the mile, not gallon?

Falling revenue for roads leads to some new ideas - and a test project soon.

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GPS unit that will be used to track mileage among participants in the test the Minnesota Department of Transportation will conduct as it seeks an alternative to the gas tax.

How about paying for roads and bridges by the miles you drive rather than the gasoline you burn?

Falling gas tax revenue from more fuel-efficient vehicles has driven the Minnesota Department of Transportation (MnDOT) to look for volunteers to experiment with technology that could lead to new ways of paying for highways.

About 500 urban and rural motorists will begin testing gear in July that contains GPS links to track distances traveled.

The experiment underscores Minnesota's need for new sources of revenue to pay for highway construction and maintenance.

The state is facing a shortfall of as much as $50 billion for highway work in the next 20 years. It relies nearly entirely on revenue from the gas tax, vehicle registration fees and motor vehicle sales taxes.

Those sources have flattened during economic hard times. Minnesota's gas tax is expected to rise from $823 million in 2010 to $878 million by 2015, but there is concern that increases won't keep pace with construction needs.

"The gas tax is really becoming less viable as a source of revenue to fund the transportation system," said Lee Munnich, who has researched miles taxes for the Center for Transportation Studies at the University of Minnesota. "Very shortly we're going to start running out of money."

A miles tax could capture revenue lost from more fuel-efficient vehicles while continuing the principle of using motorist fees to pay for most highway work. It's too soon to say whether a miles fee would eventually replace a gas tax, or merely complement it.

Don't expect a quick change

But experts say a miles-driven tax has drawbacks as well as advantages and may not be practical for more than a decade.

"It's not going to happen quickly," Munnich said.

One of the drawbacks -- at least for now -- is cost.

While the gas tax is simply collected at the pump, special gear needed to collect taxes based on miles traveled creates a new expense.

A miles tax is "a lot more expensive to collect" than a traditional fuel tax," said Zhirong Zhao, a professor at the Humphrey School of Public Affairs who has studied ways that cash-strapped governments can raise revenue.

"We are researching alternative financing methods today that could be used 10 or 20 years from now ... when the number of fuel-efficient and hybrid cars increases and no longer produces enough revenue," said Cory Johnson, manager of the project, which is expected to end by December 2012.

Firm will seek sample drivers

He said MnDOT has hired a firm to randomly identify rural and urban drivers in Hennepin and Wright counties who might be willing to participate in the $5 million project.

Iowa, Nevada and Texas are also studying a miles-based tax. Oregon lawmakers are considering charging electric-vehicle owners for every mile they drive to replace the gas taxes they won't be paying.

Oregon would charge drivers of electric and plug-in hybrids up to 1.43 cents for each mile they drive in the state beginning with 2014 model-year cars. That's about $172 per year for a car covering 12,000 miles, and about the same as the gas tax paid for a vehicle that gets 21 miles per gallon.

In contrast, Minnesota's experiment will include all kinds of vehicles.

One challenge for any system is curtailing expense.

Zhao said it costs about 5 cents to collect every $1 of gas taxes, but can cost 20 cents or more to collect $1 in miles taxes. He said there is hope that with better technology it can quickly fall to 15 cents."

Another challenge is assuring drivers that government won't use the data to violate their privacy.

"You don't want government to be in the business of tracking someone on their GPS," said Munnich, who helped organize a symposium on the mileage-based taxes a year ago.

MnDOT says the state will keep participants' names and home contact information private, as well as data that identify vehicles, financial account information, travel routes and days and times of trips.

Three groups of volunteers will test the devices for six months each. They will be paid a stipend to cover the expenses of the test. The volunteers, who will be recruited starting in May, will use a smartphones with GPS applications programmed to submit information.

Pat Doyle • 612-673-4504 Paul Walsh • 612-673-4482

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