Assembly Standing Committee on Transportation

Good afternoon. Or should I say good late evening or good late afternoon? I'm not sure what it is. It's 5:20. That's right. Good afternoon. Good evening. All right. Good evening. The Assembly Transportation Committee is called to order. Welcome, everyone. Today we have a two part hearing.

First, we will have a regular order of business Bill hearing to hear three highway naming resolutions. Then we will adjourn and call to order an informational hearing on other states alternatives to the gas tax. The hearing room is open for attendees of this hearing and it will be watched from a live stream on the Assembly website.

We seek to protect the rights of all who participate in the legislative process so that we can have effective deliberation and decisions on the critical issues facing California. In order to facilitate the goal of hearing as much from the public within the limits of our time.

We will not permit conduct that disrupts, disturbs or otherwise impedes the orderly conduct of legislative proceedings. We will not accept disruptive behavior or behavior that incites or threatens violence. We encourage the public to provide written testimony by visiting the Committee website.

Please note that any written testimony submitted to the Committee is considered public comment and may be read into the record or even reprinted. With that, we will begin our hearing. Secretary, please call the roll.

[Roll Call] We have a quorum.

Thank you, Madam Secretary. We have three highway memorial naming resolutions on our proposed consent calendar. They are Our file item 1, ACR109. Arambula file item 2. SCR78. Mcguire file item 3, SCR90. Grove. I'd like to entertain a motion in a second for our consent calendar. So moved by Ro. Ransom and seconded by Papin.

Madam Secretary, please call the roll consent calendar.

[Roll Call]

Hello.

We have someone on our witnesses. If you hold one second. We're finishing up our cassette calendar. We. We have 11 votes. We are only. We're not holding the row open. And so that bill. Those the consent column items are out with 11 Aye votes.

And no, no votes before we adjourn I'd like to acknowledge Aj Menziola, who is the Science Fellow placed in the Assembly Transportation Committee this year. Aj has a PhD in biochemistry, molecular, cellular and developmental biology from UC Davis. Go Aggies.

And Aj was a valuable Member of the team and completed analysis of various bills and generally provided overall support to other staff whenever they needed him. We'd like to thank him very much for his service to our Committee. We look forward to seeing where the next step in your career takes you, hopefully right here in the building.

Aj you were truly a value add. I appreciate you in so many ways. And you were a bright, your bright smiley face in our office meetings was always, was always warming to my heart. And just the way you approach the work with a sunny disposition was just really valuable.

And I thank you for the support that you not only gave me, but the staff on this Committee and Members of this Committee. And so in honor, we're going to show your, your resolution that we were able to give on the floor.

And we also have special treats, cupcakes for you and Members of this Committee as we thank you for your service. Can we give a round of applause to A.J. all right. And with that, the bill hearing portion of our Committee is now complete. Gavel tapped if you want a cupcake, you can grab one. You can eat those.

With that we will move on to our informational. They're going to bring it back to the area over here. With that we'll move on to the Assembly Transportation Committee informational hearing. It is now called to order. Welcome to part two of today's hearing. It is an informational hearing exploring other states alternatives to the gas tax.

We will first hear from researchers on transportation funding mechanisms and then we will hear from other states about their implementation of alternatives to the gas tag.

As chair of the Assembly Transportation Committee, I'm committed to ensuring that California's multimodal transportation system is safe, safe and effective and affordable for the millions of Californians who rely on it every single day.

And today's hearing is intended to continue the conversation we began in March when we heard from California State, regional and local transportation officials, academics and other transportation experts about the looming impacts of declining fuel tax revenues.

As we heard from California's Transportation Commission, California's projected transportation funding shortfall is expected to grow by approximately 31 billion over the next decade. The math is simple.

And as more Californians drive more full, efficient and zero emission vehicles, fewer drivers are paying their fair share of user based fuel taxes that Fund improvements for roads, bridges and public transportation projects. And so, hold on, let me move on. California, excuse me. California leads the way in transitioning to fuel efficient and zero emission vehicles.

Now we must look ahead and modernize our transportation funding system in a way that is fair, accountable, sustainable to ensure that we have the funding necessary over the long term to implement critical safety repairs and transportation infrastructure improvements. This isn't just a California problem.

Other states have already begun exploring and implementing solutions to address their own transportation funding shortfalls. Today we will have an opportunity to hear from transportation officials from Hawaii, Oregon, Utah and Virginia about how they're adapting to evolving technologies and travel behaviors and ensuring that critical transportation repairs and enhancements can be funded well into the future.

These insights, in addition to community and stakeholder input we are gathering through a series of regional town halls throughout the state, will be critical as we continue to lead an inclusive, multi year conversation to shape policy solutions that will work for all Californians.

If you talk to any Legislator, Legislator in this building, they'll tell you that an issue that comes up regularly when we talk to our constituents is potholes, traffic and road conditions. It's something that affects all of us and in a way, unites all of us. Now we need to find solutions that work for all of us.

So with that, would any other Members of the Assembly Transportation Committee like to make any opening remarks? Seeing none, we will move on. Today we will have presentations from each of our speakers and ask that the speakers remain accessible for questions.

We will open it up for Members to ask questions after all of the speakers have have made their presentations. So I'd like to invite our first panel for discussion. There are three. Two of them are virtual and one is in person. So we'll start well, the panel.

I'll introduce the whole panel and they'll go in the order that they have been told. The first panel is on research and transportation funding mechanisms. We have Douglas Shinkle, Transportation Program Director, National Conference of State Legislatures. He's virtual. Alan Jin, Associate Professor, University of California Institute for Transportation Studies and Trish Hendren, Executive Director, Eastern Transportation Coalition. Virtual.

All right, I think we will begin with Mr. Shinkle, as I understand it.

Hello, Assembly Member Wilson, Chair Wilson, can you hear me okay?

We can hear you just fine.

Fantastic. Thank you very much for inviting me today and it was nice seeing you at our Legislative summit. Just checking. I don't know if something changed. Is someone pulling up my slides or do I need to run them myself?

I think they're pulling them up. We can see you now and then they're going to be Moving to your slides.

Okay, very good. So just very quickly, as I think you all likely know, NCSL is a membership organization comprised of every single state lawmaker in the country and all the state legislative staff that serve them. And I'm very happy to be here to provide a overview of what states are doing with respect to state transportation funding.

And I have just a quick presentation I'll get through and then commend you on a great slate of speakers. I'm very curious myself to hear some updates on what's going on in in some of the states. So without further ado, let's get going. So let's see next slide please.

Want to give just a little foundational information on why we're here Real quick. So there's, you know, I don't want to say there's a transportation funding crisis, but we are in a situation where the traditional forms of revenue that states are reliant on are beginning to decline, particularly gas, the gas tax.

And as you can see from this slide from the National Association of State Budget Officers, the most important thing to look at in this slide is the top line, the blue line. You'll see that in 2016 that state transfer the gas tax comprise 41.1% of state transportation revenue.

You fast forward just eight years later and that has already declined almost 6% down to 35.9%. And that of course is because of the increasing prevalence of electric and other alternative fuel vehicles, but also just the increased efficiency of the vehicle fleet overall. Next slide please.

And this slide just kind of shows specific to electric vehicles, depending on some different electric vehicle adoption kind of forecasting that you'll see. Essentially that yellow line at the top line is what we would expect a states to collect in fuel tax without any change in the current mileage per gallon of the national fleet.

And then depending on these different projections and you can see the gap gets larger and larger and larger every five years, kind of pointing that this problem is going to likely get worse and worse over time. Next slide please.

And of course this is also impacted by the fact that the purchasing power of the gas tax and this slide specific to the federal gas tax has just fallen just because of inflation and fuel efficiency gains. Next slide please.

So I just want to give a quick overview really what my job here to do is just give you a quick sense of what other state legislatures have done with respect to transportation funding, mostly focusing on user fees. But we'll start with the obvious gas taxes. Since 2013, 35 states and D.C. have increased their Gas tax.

There are now almost half of the states that have indexed or variable rate gas taxes, meaning that in some way they track with population growth or inflation, what have you. But what we have seen is a trend towards fewer states considering gas taxes because they don't think that is evidence.

And that the first slide I showed kind of a decreasing source of revenue in General and more of an emphasis on trying to generate revenue from users via different mechanisms. Next slide please. This is what I call the kind of potpourri or kind of just throw all options at the wall slide.

This shows you just some of the many, many different ways that states Fund their transportation systems. And some of these are pretty unusual. A couple that I would point out are like hotel revenue. Georgia has created a tax, a fee on hotel stays and dedicated some of that money to transportation.

Some states use oil and severance taxes, some states use sales taxes, some states use some of their lottery fees. So this is just something that I find sometimes generates some ideas for different states. So I include for that purposes, for those purposes. Next slide please.

So the most common approach that states have taken, they've created flat registration fees on the registration of alternative fuel vehicles and or plug in hybrids and or traditional hybrids. And what you'll see now is that 41 states have these annual electric vehicle registration fees. These are on top of the traditional registration fees.

And these fees range quite a bit from $50 in Colorado, Hawaii and South Dakota up to around $290 in New Jersey by 2028. You also see that 34 states have plug in or non plug in hybrid fees. That's a trend that we've really seen of late.

In some states, I believe there are six have started to index some of these fees so they don't have to go back and raise them again just to create some sort of indexing provision that they raise with inflation or 5 to $10 per year. Next slide please.

And can you click one more time and this should populate some, some info on the slide? Yeah. So our speakers from Hawaii, Hawaii, Virginia, Oregon and Utah will speak to this more completely.

So I don't want to belabor this, but essentially road user or road usage charges, also known as mileage based user fees or or vehicle miles traveled fees have been quite the discussion of late and of course there's been a lot of piloting and studying of that. In California led by Lauren Perhoda.

There are four states that currently operate voluntary rec, Oregon, Utah, Virginia and Hawaii. I think the important thing to know is those all were created by the Legislature in their respective states and they are all voluntary at this time. Next slide, please click two more. Yeah, one more time. There we go.

And so this is an overview of the three kind of older programs. Hawaii's program just started in 2025, and you'll learn more about that in a bit. Just note that there's not a lot of necessarily enrollees in all these programs, although you'll notice that Virginia and Utah have quite a few more enrollees.

Virginia, the way that they have constructed their program leads it to just having more enrollees in General. And I do think that's something worth considering. For California and other states, the mileage rate is fairly similar. Next slide, please.

I just want to mention quickly on Hawaii that, you know, Hawaii is a RUC program, just started about a month and a half ago.

The one thing I want to note is that when in 2028 the RUC program will become mandatory for electric vehicle owners, and it will thus become the first mandatory RUC program for a certain class of vehicle owners in the country. I won't go into that anymore. Next slide.

And with Virginia, the main thing that I would note is that when you look at eligible vehicles that--fuel-efficient vehicles--those--and they define those as those getting 25 miles per gallon or over--are also included in this.

I think this is important because once again, the decline in the gas tax is not just caused by the proliferation of alternative fuel vehicles, especially electric vehicles. Arguably more in the short-term, it's being caused by fuel-efficient vehicles. Next slide, please.

So a couple--I'm going to quickly go over some of the other user fees that states have looked at. So one has been transportation network company fees, transportation network companies or Uber and Lyft and other ride-hailing services. You'll note here that there's about, I want to say, 12 states that have these TNC fees in place.

Many of them are actually just for administrative purposes and to kind of do regulatory oversight of the TNC driver safety background check systems, but you'll notice there are states such as California, Colorado, New York, Massachusetts, Georgia that have dedicated some of these fees for transportation purposes.

Notably, Georgia and New York are dedicating almost the totality of their fee revenue to transit, and these fees kind of vary quite well widely. They vary from about five to 50 cents per ride. So, next slide, please. Delivery fees--and it's something I spoke with Assembly Member Wilson at our legislative summit a few weeks ago in Boston--there are just two states that have put in place delivery fees: Colorado back in 2021 and then Minnesota in 2023.

There are a few other states I have considered and debated such bills, but these are the only two states enact them thus far. You'll notice that the way they're constructed is quite a bit different. Colorado's fee is lower, it's 27 cents, but it applies to any delivery, meaning you get a $1 package or you get a DoorDash delivery, and critically, the Colorado fee does apply to meal delivery whereas Minnesota's is 50 cents for each retail delivery purchase but that only kicks in at $100.

And critically, they exempted some medical, child products, and also food ingredients, so quite a bit of difference there but they're both expected or have generated a good amount of revenue. You can see in the first year that Colorado collected this fee, collected almost $76 million in fees, which is mostly dedicated to transportation purposes. Next slide, please.

Another user fee approach that states have taken within a particular eye towards, well, with a specific eye towards electric vehicles, is kilowatt-per-hour charges, also known as electric vehicle public charging station fees. There are now ten states that have these fees, and these fees only apply at public EV charging stations.

It is possible to collect these fees from private residences, but there is some more technology and compliance kind of issues related with that, so it's certainly technically possible, but a little bit more tricky from an administrative purpose.

This is something that I think states find attractive because if you think of a state that was previously--you know, you have someone in Arizona and they're driving to Oregon and they're doing that via California and they used to have an ICE--an internal combustion engine vehicle--well, they would, you know, probably stop at least a couple times in California and pay a gas tax.

Well now, if they have an electric vehicle and they're just recharging the state, they're not paying anything. So this is a particular way to try and capture revenue from users such as that, but like I said, that the one downside I think particularly to this is that those that have the ability and the privilege to charge at home are not being charged this fee, although, like I said, technically possible but a little bit trickier. Next slide, please. The last trend I'll mention is states with managed lanes.

Managed lanes are also known as express toll lanes, choice lanes, etcetera, and California is one of, I believe, 11 states that don't have those. There's been a big proliferation of these lanes.

Critically, managed lanes have a little bit less of a political bar to clear because managed lanes are where one or a certain amount of lanes are tolled whereas the other lanes are still free so you have a choice to use these lanes, and these managed lanes serve two big purposes: they manage congestion in congested metro areas and they also generate revenue. That revenue can be used in that corridor or elsewhere.

Another associated benefit is that public transit vehicles, buses specifically on bus rapid transit, can use these managed lanes, and that typically increases their speed and frequency, which leads to increased ridership and also to increase fare revenue, so there's a lot of kind of co-benefits with managed lanes. Next slide, please.

And this is just an overview of some of our main transportation funding resources, some of which have been updated just in the last week or so, and then my contact information is on the next slide, and I think that's all I have and I will try and hang on until the end in case there are any questions, and thank you very much for having me, Assembly Member Wilson and members of the committee.

Thank you so much. Dr. Jenn.

All right. And I also have a couple slides. Hopefully we'll be bringing those up. Yeah, and I wanted to thank Doug for this presentation. It's a really good sort of foundation for some of the material that I'll be talking about. So he introduced a bunch of these different fee structures and fee mechanisms, and what I want to do is take a step back and think about what are the metrics that we use to judge whether or not these fee mechanisms are good or bad, right?

And so I've put together, hopefully, a kind of simpler set of slides that will kind of walk through some of the fee mechanisms, some of the more popular ones that folks are talking about so that we can think about that. Yeah. All right. So if we go on to the next slide? Yeah.

And so the main thing, right, that we're--the sort of meat of it--is thinking about whether or not revenue can actually meet your funding requirements. So the first one, where kind of our baseline is the gas tax, right, and so you've heard from speaker today, and as I take it earlier on in a previous session, about the problems with the gas tax, right? And so I'm not going to belabor this, but what I'll just mention, the three main things: inflation, fuel efficiency, and then alternative fuel vehicle growth, so electric vehicles mainly.

I think a lot of people kind of grasp onto the EV part of it, but actually the other two tend to be kind of the bigger thing, at least for now, impacting revenue coming from gas taxes. The other really popular one that you've been hearing, we just heard in the previous presentation--registration fees, right?

And so many, many states are doing this and it's relatively easy to implement, but one key thing to keep in mind is, so suppose in California, everyone were driving electric vehicles and we paid for our funding, transportation funding through registration fees, but the current structure that's set up, we would be in a terrible deficit, right?

So there is not--there isn't a connection with the way the registration fees are currently structured and with the actual funding needs of our transportation system. So that's another piece to keep, keep in mind. The other one that I'll talk about is the zero-emissions vehicle fuel tax.

So this is essentially the dollar-per-kilowatt-hour charge that was mentioned in the previous presentation, and so this would be kind of the equivalent of if you drove an electric vehicle, you would be kind of paying a gas tax equivalent, right? Every time you charge your vehicle, you pay a little bit, and so to the extent that this would solve that first issue, you do solve this issue of missing the revenue from electric vehicles but you'd still run into issues related to fuel efficiency improvements and so that can continue to be a problem.

Road usage charges--so this is a sort of longer-term solution. I think it addresses the sort of--neatly addresses--the three issues that we're talking about that are facing the gas tax, and so in this particular category, kind of rate it as very good, so the color scheme: red is kind of really bad and green is kind of the best possible solution. Okay, and so moving on.

So that's talking specifically about revenue requirements, and so what about implementation? So this is thinking about the ease of implementation but also the costs. The gold standard is the gas tax. It is the easiest and cheapest thing that you could possibly do, and the reason for this is the way that we collect gas taxes is actually at what's known as the bulk storage terminal.

So that's where our gasoline sits right before it goes off to a gas station, and in California, there's about 30 of them, right, and so the taxman gets to go around and collect taxes from 30 people.

Now, as soon as you start charging based on individual vehicles, now you're talking about, instead of collecting taxes from 30 people, you are now collecting taxes from 30 to 40 million, right? That's how many cars we have in California. So it's literally a million times harder to do.

So for basically all of the other alternatives, most other alternatives, I should say, the cost of implementation is tough. It's very difficult. Registration fees: okay, this one is actually one of the more compelling reasons why we've seen it become popular in some states. You're already paying for registration fees, and so to add that on as an extra fee from an administrative standpoint tends to be a little bit easier.

These fuel tax, the dollar-per-kilowatt-hour, so it was mentioned that there are technical and administrative difficulties. From a implementation standpoint, actually, it's actually very costly. The problem is with electricity, right, we don't just use electricity for cars, right?

We're powering our lights and our TVs and so on and so forth, and so to be able to actually measure and separate the electricity use in cars, you'd need essentially another meter separate for your vehicle or other sort of hardware equipment that could do that measurement and that's expensive, unfortunately.

Imagine having to have that equipment for basically every car out there, not to mention issues with gaming the system, maybe someone plugs into a different, you know, outlet, right, and so from an implementation standpoint, I think this one is particularly challenging. Road usage charges: there are costs associated with the hardware, costs with the administration.

There are, there's a lot of movement in the pilots that exist to try and think about solutions to help bring down the cost, and those projections, I think, are promising, but I don't think you'll ever get to a point where it's going to really be as cheap as the gas tax and that's something that we just have to acknowledge, and as we pursue something like a road usage charge, that's something that needs to be kept in mind that you're never really going to get to as cheap as we were before in terms of implementation. Okay, next one.

Okay, so this is maybe a little bit more theoretical, but there is a fundamental design when we initially started using a gas tax, which is you pay for the roads based off of how much you use it, right, so someone who drives 10,000 miles is going to pay less than someone who drives 20,000 miles.

We start to depart from that a little bit from a fuel when the fuel economies are different, right, and so that's one of the reasons why efficiency starts to depart from this kind of principle. Registration fees, as I mentioned before: totally decoupled from the amount that you drive, right?

So I could park my car in my garage the entire year, drive zero miles, and I would pay the exact same amount of money for registration as someone who drove 10,000 miles a year, and so from that perspective, registration fee is kind of a really poor mechanism.

I will kind of really quickly mention that this user pay principle, it's not necessarily the sort of correct way. There are other countries that pay from a General Fund, right, but in the United States, generally the way that we've thought about making this equitable is to make sure that people are paying based off of how much they're using. So you have a same issue with the ZEV fuel tax as you do with the gas tax.

With the road usage charge, you don't suffer from this idea that more efficient vehicles will pay kind of less of their share. Everyone's essentially paying the same amount per mile that's, that's driven, and so from this kind of principle that we originally designed our funding mechanisms to be based on, this is kind of the best that you could do.

Okay, and I think there's one more. If we go next? Yeah. The what is the equitable nature of the pricing mechanism, and so when we think about equity as it pertains to paying for your transportation system, it balances this user pays principle that I was just talking about but also thinks about income sensitivity and the actual ability to pay.

So if we think about gas taxes as kind of the baseline here, this is relatively neutral from a usage perspective; it's not correlated with income necessarily but it is, it does follow the user pay principle.

Again, registration fees--probably the poorest example here--both electric vehicle users and gas users are going to pay sort of different amounts irrespective of income. It's not tied to any income sensitivity or ability to pay. And the ZEV fuel tax is going to be about the same as gasoline.

With road usage charges--and this is something that you'll hear from various pilot programs and this is kind of backed by evidence in our research and other research as well--tends to be less regressive than gasoline. So typically more rural drivers and drivers in lower income, disadvantaged communities tend to drive less fuel-efficient vehicles and so they end up paying more when they're under a gasoline tax system, whereas with a road usage charge system, it basically gets rid of that sort of advantage on the fuel efficiency side for paying less under the gas tax.

So we tend to consider this to be slightly less regressive than a gas tax. Okay. And so--yeah, last thing, kind of to sum all of this up, you're going to hear a lot about specifically the road usage charge. From the theoretical perspective, it kind of ticks a lot of the boxes that we think about when we're measuring these things across different metrics, but from an implementation perspective, still has lots of challenges to overcome.

The cost that I mentioned is really big. We have to figure out ways to bring the cost down to make implementation of this at a wide scale more realistic, and then one piece that I haven't mentioned, but perhaps you guys have heard, the public perception piece is really important here.

There's a lot of misperception of how the road usage charge works, especially relative to the gas tax, but one promising thing, right--and maybe Caltrans has kind of told you about this already--so for the folks who were involved in the pilot program, once they kind of learned about how it worked, the perception of using that as a pricing mechanism became a lot more positive.

And so I think that's one thing that you'll really need to do is to kind of promote and educate awareness of how this payment fee really works. The last thing that I'll kind of leave you with is there are other pricing mechanisms that folks are talking about and implementing throughout the country, things like congestion fees, things that might be connected to emissions, and one of the things that we kind of really push for or advocate to think about is all of these have associated sort of implementation costs.

And to stand up pilots and programs for these things, if you have lots of different organizations pushing these pricing mechanisms forward, that can be really costly, and so one way to really think about--one way to help promote a lot of these things is to try and put them together, right?

So what I always kind of say is if you can have this be kind of a software update as opposed to like a hardware update, that might create a lot more opportunity to help support different pricing mechanisms together. Yeah, and so I'll leave it there for the last talk.

All right. I'm going to go--we'll do questions after each section unless somebody has pressing--I know members do have to leave, so if you can hold till the next person? Thank you. All right. We'll move on. Thank you, Dr. Jenn. We'll move on to Trish Hendren, Executive Director, Eastern Transportation Coalition, and then we'll open it up for questions for the first panel.

Great. Thank you. I want to do a sound check because I'm coming the farthest into your room today.

Yes, we can hear you. Wow, thank you so much.

Great. Wonderful. Thank you. So actually, I want to reflect a little bit on why we're all here by going back in time a little bit. If we can go to the next slide? Maybe I should say go back in time a little bit more, back to 1919, and that's when Oregon actually brought our country the state fuel tax. And you might be thinking, why am I going so far back in time besides I still think the Ford Model T Sedan is a pretty cool looking car?

At that time, we basically had that kind of car, and so what in essence the fuel tax became for our country was a user fee. So if you drove a mile, then you pretty much paid the same amount for that mile in a fuel tax. So now if we go to the next slide and we look at today, we love choices in our country and we got a lot of them when it comes to our vehicles.

So we have over 300 models made in our U.S., lots of different fuel efficiency, and some not using any fuel at all. So what that really means is that link between using a mile of a road and paying for that is really broken. So if we go to the next slide, I'll use my car as an example.

So that's old Bessie. She's the one on the left there, so I inherited her from my late father. She's over 25 years old, but she's still going pretty good, and I looked at down the road, my neighbor got a new car a couple years ago--that's her Toyota Camry--and I just did some calculation.

We're both driving about 12,000 miles a year on average, and what are we paying in fuel tax? And this is kind of the point here that we're at this user pay crossroad that Alan had had touched on, which for 100 years has kind of been our philosophy of funding transportation.

So why is it that because of the car, that I haven't gotten a new car, maybe can't afford a new car, that I'm paying twice as much in fuel tax? So that's something I think we need to think about together as a country as we're figuring out that sustainable path forward.

So if you go to the next slide, part of the challenge that we're going to face is that people have no idea how much they pay or how little they pay, quite frankly, in fuel tax, and that's because I don't know when that decision made--I would love it if anyone could answer that question, that when you get your receipt, when you fill up at the gas station, that it doesn't tell you how much is for the fuel and for taxes.

So we really have a challenge of trying to engage with the public about the problem we're facing, which is this declining collection of fuel tax. So if we go to the next slide, part of this issue--oh, see if we can go to the next one. Does that work? Uh oh. Am I frozen or are you guys frozen?

There we go. Okay, we're unfrozen. Wonderful. It's a little bit late on the East Coast, so maybe things are moving a little slow on my end. The other challenge is that from the public perspective, they actually see or think that the amount of transportation revenue we have is going up or staying the same.

So again, kind of going to the next slide, putting this all together, so we really are facing a challenge that you all are very aware of, I think, from your last hearing, when I go into some of the details about these projections, but it is every mile people are driving, the amount of revenue that we are able to have to create, as Madam Chair had mentioned, a sustainable, reliable, pothole-free type of transportation system. We're having less revenue.

So going to the next slide, what states are doing. So both Alan and Doug touched on these a bit. Those annual flat fees, kilowatt-hour fees, and this distance-based approach, which us East Coasters apparently call it a mileage-based user fee, and out West, y'all call it the road user charge.

So going to the next slide, you might be wondering again, why is an East Coaster in this discussion? And I'm glad, Madam Chair, that in your opening comments you talked about our transportation system is a national need and also having sustainable revenue for that system is a national need.

So this is not an East Coast/West Coast issue. We all need to have this reliable transportation system in order to really be the engine of our economy, but how do we really convince the users of that system that transportation is worth paying for? And so I think it's great that I'm able to zoom in there literally and have this conversation across the country with you all.

Because in the--if we go to the next slide, a big focus of some of the work--you can click through the next bit there--that we've been focusing on with this group of 20 states on the East Coast is really on that distance-based approach, and the reason--if you go to the next slide--is because of a federal grant program, which I know California has also been a recipient of some of these grants, which really was a game changer because talking about how you fund transportation is hard.

And again, as several of the speakers have alluded to, the public doesn't really have that much--we never told them about how this gets paid, so there's a lot of work that we need to do together and using these grant funds to kind of give people real-world, hands-on experience about this potential new way of funding transportation. So that's what we've done on this group of eastern 20 states. We've done 14 passenger pilots and three commercial pilots.

So going to the next slide, what I really wanted to kind of bring to you all for you for discussion is what have we learned from all those pilots that we're kind of talking about on the East Coast, what you all have learned in California, and states, you know, in between?

So we've learned a lot, and I think a bottom line is that this transition to a different way of paying for transportation, different than the fuel tax, is feasible. The challenge is, change is hard, and these four kind of barriers, I would say, really keep bubbling up. And again, they've been touched on a little bit already but I want to go through each and talk about some ways that we're finding to go through some of these barriers. So going to the next slide, let's start with the gap and public trans--public understands--let's go to the next one.

So what we found in the work we've done with those pilots, with focus groups, surveys is we just gotta talk about the value of transportation, and I confess to be a total transportation geek. So I think it's a fascinating topic, but quite frankly, so do your neighbors.

I mean we all use transportation for those packages in our front door or getting groceries, going to the doctor's office, but we just don't talk about it maybe as openly as we, as other countries do, and I think that we can. I think we can really talk about the importance of transportation and people will engage with that.

We've seen that in, again, these focus groups and participant surveys, that people are interested in having that reliable transportation system. So going to the next slide, we've also learned on this kind of gap in public understanding that nothing beats like real-world, hands-on experience.

And it was talked about in an earlier presenter that when the pilot happened in California, people's understanding of what a distance-based approach could be and their support of that went up because people are like, 'oh, it's not what I thought.' This kind of theory becomes something very different when you actually do a real-world pilot.

And again, that's why we've done 14 of these. You're thinking that's a lot, but that's because we have different states, different stakeholders, so it's just key for us to continue to do this real-world pilot as a way to close that gap in understanding.

So going to the next slide, I think also we can close that gap by making it personal. So everybody wants to know what it will mean for them, for their household, for their wallet, and so we have a calculator on our website that you can put in your car type and how many miles you drive and you can see what your annual cost would be for a fuel tax versus a distance-based approach.

And I'm the mom of two teenage girls and if you don't have videos, then no one is paying attention to you. So we need lots of videos, cute, fun videos to explain what in the world we're talking about. So again, there's this gap in understanding. So going to the next slide: privacy.

So this is a barrier that is very real, and as you can see in this slide, what we found with the privacy concern, which is very strong, very negative about a distance-based approach because people are thinking that it is devices in their car, they're being tracked, it is government invasion, etcetera.

But then when you actually interact with technology, what you see is people realize what this--it's not what they think it is, and it's a very personal choice-based approach is how these programs are being designed and I'm really excited we're going to hear from four of the programs later in your session.

But what this dark blue versus light blue is showing is across the board, decrease in concern, and so again, that importance of addressing privacy is a real thing. We need to recognize that and explain to the public how their privacy is being protected if we choose to move to this different way of funding transportation.

So going to the next barrier--go to the next slide--on fairness. So right after privacy concerns, again changing from a fuel tax to something else, comes this one, which is: is this fair or how are we as a user pay principal fair, especially to rural communities, which makes a lot of sense.

If we go to a distance based approach, rural communities are driving more miles because they're driving farther to do their daily activities, and so what we found though, if we bring data into this discussion, and all those yellow little boxes on this slide are showing that on average, a rural household will pay less under a distance-based approach compared to the fuel tax. And before you guys think I don't know how to do math, I promise you I do.

Someone else checked my numbers. The reason this result is what it is is because on average, rural communities have larger, older vehicles. So translating all that, that means they're paying more today in fuel taxes than some of their urban counterparts.

So again, if we're going to engage with the rural communities, we need to explain what's happening today is what we've learned as far as how to address that fairness, kind of really strong reaction. On the next slide, EVs have been mentioned several times, so there's lots of numbers on this slide, but there's kind of two main takeaways for this that we have learned on addressing this fairness issue.

So first and foremost, we're not facing an EV-generated revenue issue. Yes, they're part of the issue. That's why we have seen, as Doug mentioned, over 41 states have EV registration fees. That is a way to have them contribute, to pay for using the roads, but our revenue decline is really because those vehicles, the ICE vehicles are going farther on that tank of gas. So our solutions need to get aligned with kind of the issue that we're facing.

And again, I think Virginia's program, which will--Scott will talk about later, is a great approach to try to address today's real issue, which is improved efficiency as well as EVs. Okay, so the last big barrier I wanted to touch on, again, of the four things that we've learned from all this work that we've done from our states and from across the country is really on that cost. And Alan mentioned this. So the fuel tax is cheap to collect.

We figured out over 100 years how to do it very efficiently and effectively. So any change that we make, whether it be kilowatt RFE, package delivery, you name it--it's likely gonna be more expensive. So what we need to do together as a country through all the different pilots and programs is share with each other how we're figuring out ways to lower that admin cost.

So for example, we just did an EV pilot or a pilot--excuse me--in New Jersey with EV owners to try to think how could we design an EV choice distance-based approach for that state that would be cost-effective to implement?

So let's, again, use pilots and implementation ideas to come up with a more cost-effective way. On the next slide, which I know that we'll hear more about from Hawaii, is leverage existing systems. So Hawaii's approach is really brilliant on how they've leveraged an existing process, and so I know Mindy will talk more about that, but that's a way for us all to learn.

We're all looking at Hawaii, Mindy, to figure out is that a real cost-effective way to move forward down a distance-based path if we so choose. And another way in the next slide, I'm looking at that lowering the cost, again, is Virginia. I talk about Virginia a lot because they are an eastern state, but I think Virginia has done a great job and they're the largest program in the country because they've really communicated with Virginians about why would someone choose to do a distance-based approach versus a flat fee.

So again, these are ways that we can address this new way of funding transportation and lower that admin cost and kind of be smarter about how that future could look like. All right, so my last slide here: I felt a little bad putting this in because my husband actually had an imaginary frog as a friend when he was a kid. I love frogs, but we don't want to necessarily be a frog. So you hear me out.

I know it's a little late on the East Coast, but because people don't know that we have this revenue problem, don't even know how we're paying for transportation, we're just sitting happy in this kind of warmish water, but we know, the folks in the room, the folks you have on this Zoom today, that we are facing a revenue issue, but it's slow.

And so we need to make sure that we're kind of bringing up awareness about the challenge that we're facing and solutions that we can do so we don't sit in that pot of water too long, shall we say? All right, with that, I will pass it over back to Madam Chair.

Thank you, Director Hendren. I appreciate it and I appreciate the analogy around the frog, and yes, we want to protect our beautiful frogs and don't want to be a boiled frog. And so I'm going to bring it back to the committee for any questions. I know that Assembly Member Ransom had a question for our first panel.

I do. Thank you, Madam Chair. First of all, I want to thank all of the presenters. It's been a long day for all of us, but this is clearly a very important issue. So I definitely have concerns. I'm going to start with, I guess, questions, and really I want to kind of challenge some of the hypothesis and, and, and see if you can help me really think through some of these things.

So when we talk about the vehicle miles traveled, I represent a community that's not a rural community, but it is--we have over 100,000 of my constituents have to travel because they are traveling to where the jobs are, the housing is where we live, and it's housing they can afford, right? So these are not wealthy people who just have money to, you know, get on the freeway and travel.

And so as we think about vehicle miles travel, I'm just looking for the--I understand what we're saying is that, you know, hey, it's different because different cars of different ages, you know, have different gas efficiency and how that would help, but they're still going to be driving the same cars because it's about the price of cars and EVs are more expensive than traditional cars.

So I'm trying to see how this is fair not just to rural people, but to commuters who--how, how are we--if you can help me understand how this will actually result in lower, you know, taxes, if you will, because it's still a tax paid for traveling and, and still be able to build the revenue.

Yeah, so yeah, I'd be happy to take that one. So the road usage charges are meant to be kind of a replacement for the gas tax. And on average your driver is going to be paying the same amount. Right.

If we structured the mileage fee to basically raise the same amount of revenue as the gas tax, where it starts to get different is based on the fuel efficiency of the vehicle. So if your car tends to be more fuel efficient than the average car, then you end up paying more with the road usage charge.

But if your car is less efficient on average than your average gas car, then you end up paying less. And the reason. Right, so think about it this way. Right? So you have like a Toyota Prius and like a Ford F150. Right. So they both go the same distance, but which one uses more gas? The Ford F150.

Right. Because it's less fuel efficient than your Prius and because it uses more gas, that vehicle will pay more in gas taxes. What the mileage fee does is it makes it so that they both pay the same amount. So there will be winners and losers. There's no way around that.

Some people will pay more money and some people will pay less. And the General analysis that folks are talking about in rural communities, if you look at the math, it turns out that they are the ones who end up paying a little bit less.

And then we've actually done some work looking specifically at like lower income and disadvantaged communities and they pay a little bit less, but not, but not that much in comparison to like rural communities.

So I'm still kind of wondering, so we still have to put gas in the car, Right. So even though the gas tax is less, you still have to put gas in the car. And then in your example of the Prius versus the F150.

Well, one, we don't even want you driving an old school traditional F150 causing all of these other issues. Yeah. And so you're still putting gas in the car. You're still going to. If your car is less fuel efficient, you're still going to pay more because you still have to put more gas.

And then on top of it, you're going to have this vehicle miles traveled and taking out rule and taking out low income. How is this fair to. And I'm just, just, I don't know that it's not fair. I'm just trying to, you know, work on this together.

How is this fair to people who are not low income, not rural, who have to commute to their jobs every day, paying vehicle miles traveled. I'm just trying to. Because you still have to put gas in the car.

Yeah, yeah. So. So the important thing though is that this would, you wouldn't be double paying, so this would replace the gas tax. So you're still using all this gas, but you, you would no longer pay a gas tax and instead you would pay this, use this, like, road usage charge.

Okay, I'm going to move on, but I want you to consider the fact that some people, yes, you pay for your mileage, but you still have to buy more gas because you have to drive further. So, so while it's not, you know, technically a tax, it's still taxing.

I also wonder about our competing priorities and, and whether we're competing against ourselves. So if you can address how we have things like high occupancy vehicle, you know, discounts where people are piling up in a car, how are we going to get those, you know, vehicle. Miles traveled.

And then we have people telecommuting, you know, which also declines. So when I'm looking at the decline of the gases and the gas tax, part of it is people don't want to pay more money, so they find other ways. Right.

And the other part is we say pile in the car together and we're going to let you pass bypass traffic. So explain to me how that helps. We're competing against ourselves.

Yeah, and that's great. That's what we want, right, Is we want more carpooling, we want more telecommuting and those things. So I think the distinction is, yes, those do detract from your revenue.

But also you're using the roads less, Right, because you've got five people in one car instead of five different cars that are driving on the road and causing damage to the roads.

So to the degree that you are decreasing the amount that people are traveling on the roads, that should correspond to less of a necessity to Fund the roads. And so I think those, those particular issues are maybe a little bit separated from the fact that you've got this overall sort of funding decrease from, from the gas.

But, Madam Chair, I apologize. Please give me a moment. Okay, Because I kind of what you just said, that would, you know, eliminate our need to Fund the road. That's the same thing that's happening with people choosing not to drive, people choosing carpooling.

And, and so I just, I guess I'm concerned that, I guess I need to see where this is actually benefiting people in the same. In other places and how that actually works because we're seeing a decline in gas tax because less people are choosing to pay the gas tax.

It's because gas is so high they choose other alternatives or their HLV users. So that, that is concerning for me. I also want to, I guess maybe this may be a, a question for our first presenter. Was that Alan or is that, are you Alan? Who's Alan?

I'm, I'm Alan. Yeah.

That's Dr. Jen you're talking about Doug Schinkle who I think is still on. Okay, we can check.

So I'm just, I'm just going to go quickly because I feel like I'm monopolizing time. But when we talk about the electric, the extra fees for as one of the alternatives kind of like these extra fees that would go with EV vehicles. So I'm, I'm just operating in the spirit of fairness. Right.

And when we, the electric vehicles already cost more, they already, it's inconvenient as it is to try and charge an electric vehicle when you're out. It's expensive.

I'm just trying to, to see in some of the alternatives that you've seen, how has a trade off been economically fair for folks because they're already paying extra for the car to begin with. How is that working out?

Yeah, I can speak to that. And Alan and Dr. Jen and Trish may be able to weigh in as well. But a couple of thoughts there.

So you know, I'm not super well read on the research but what I do know is that, you know, electric vehicle owners do tend to have much higher incomes and they are making the choice to purchase those vehicles.

I think there are certainly equity trade offs with electric vehicle registration fees or just alternative fuel registration fees in General because as Alan spoke to, they are not, you know, they're not connected to use in any way. They're just flat.

And so that does create problems when you have say someone and the research tends to show that people that own electric vehicles tend to drive less in general.

Now that may change over time but what we know as of now is that electric vehicle owners tend to drive less and, and so that they're driving less but because of these flat registration fees are in some circumstances in some states perhaps paying more than their fair share.

The flip side is that the electric vehicle, these registration fees are incredibly simple and cost effective to implement and so that they are a very easy way for a state to get money into their system quickly. And so I think that's another dynamic to consider.

But I'll let you know, Electrician Dr. Jen, weigh in as well.

Before you move on, I think it's another question of competing against yourself. And so I know you mentioned that folks who purchase electric vehicles may have more income, but as we are trying to incentivize people and transition into electric vehicles and then potentially making them more expensive, are there concerns that this may actually disincentivize people in regards to purchasing them?

And then to your point about it seems like people who have electric vehicles travel less, is it related to the fact that you just can't go that far on an electric vehicle? Do we know the correlation?

That's a good question. I would guess that is part of it.

I'm going to guess another part and I'm guessing Dr. Jenn and Trish might have some insight on this, but I'm guessing part of it too is because electric vehicle owners tend to be more affluent, which means they tend to be a little bit older, which means they tend to be maybe not in the job market and stuff.

And. Yes, but I would guess that range anxiety would be part of it as well.

Assembly Member I do think that you have hit the nail on the head that the tension here and something that I often talk to state lawmakers from across the country is that it is really important to try and make these policy decisions in a kind of synergistic, kind of collaborative way.

I always phrase it as Transportation Committee Members are trying to deal with the negative repercussions of electric vehicles. Now let's start with the positive. Why are electric vehicles something that the nation has and you know it sometimes and and states have incentivized. It's because they want to reduce emissions. And so that's the positive. Right?

That's the benefit of having electric vehicles. That is more just an issue that is of the jurisdiction of an environment or an Energy Committee in a respective state. Whereas the folks on a Committee such as yours, and of course very much depends on the state, they're more focused on the negative repercussions of electric vehicles.

That is, they are destroying the main base of transportation funding that exists for that states are reliant on. So I think that I don't have an easy answer. No state has an easy answer. But I do think that you need to think about this in concert.

An Assembly Member this is why we've seen and you'll note that, you know, Colorado and Hawaii are two of the states with the lowest electric vehicle registration fees. They're also two of the states that are more aggressive in trying to get rid of emissions in their states.

And so that is an intentional choice that they have been less reliant on electric vehicle registration fees because the strategy and the policy approach in their states is is more focused on decreasing emissions and not as focused on raising revenue. If that makes sense.

It does. Thank you for that. Go ahead.

Sorry, jump in. Really briefly, I think the reassuring finding from the research is that these annual EV fees have not been a deterrent to have individuals purchase EVs. So I hear a Sunday Member the conflict, which is in California we want to promote the adoption of EVs.

So why would we then turn around and charge EVs additional funds that De incentivize them? So I think reassuring findings from around the country is that's not true. And you may think, well, why not?

And it really comes down to the dollar amount that people are spending on fuel tax or on an EV fee is such a small portion of either the purchase of the vehicle costs the fuel, whether it be energy or actual gasoline or diesel, to move that vehicle around. Maintenance costs, everything.

So I think you're in a not a very tough position to try to find a way a policy approach that adheres to what California wants to do, but then also ensures that you have a reliable funding source and the fuel tax is just not going to be it.

And flat registration fees, eventually the public will, I think, push back on that because it's just not fair. So what I think from some of the other states you'll hear from, there are some kind of mixed approaches to address that we want to. And I think this is a choice preserve that user pay principle.

So Alan had mentioned we could go to a General Fund approach for transportation that strikes utter fear into my heart. And I would think as an elected official with all the challenges and demands on the purse of California, education for doctors, for emergency responders, you name it.

If we add transportation in there, I think it'll be very challenging to keep our roads going. So we're just, we don't play as well or against schools. And I'm being very blunt, maybe because it's late in the evening and on the East Coast.

But what has preserved our, you know, very strong transportation system in our country is that protected user pay principle. And that's the crossroad we're at right now. So I just want to go back and make one more comment. I'll stop when you're asking for those commuters that are driving farther to get to work.

I think the frank answer is they may have to pay more because they are driving a longer distance but they're paying more now and the fuel that they are buying. So we just need to decide are we going to retie using the road to paying for it by the mile which it historically has been.

Hence the reason why I brought us all back to 1919 in my slide. Okay, I'll stop there but I to respond.

Thank you all. Okay, I think Assemblymember Lackey, did you have a question or for this panel before we move on to our our pilots?

I don't have a question. I have some things I want to say that I think are very cogent to our discussion. First of all, in the hearing we're hearing about alternatives to the gas tax. But I think we need to be clear what we're really talking about.

Whether it's a road charge or a highway fee or a mileage fee, we're talking about imposing a brand new tax on our drivers for every mile they drive. And while this new tax is pitched as a replacement or alternative to the gas tax, I don't think that's a reality here.

I think truthfully nobody involved in shaping this proposal, the Administration or the super majority will commit to to repealing the gas tax. That is not going to happen. I do not believe that unless the gas tax is actually repealed, we're talking about a second tax.

And Californians already pay the highest gas tax and gas prices in the entire country. California's gas prices are currently about a $1.40 above the national average. And the cost of gas is one of the biggest affordability issues facing our constituents.

According to the U.S. bureau of Labor Statistics, California spend more on transportation costs than any other household expense except for housing itself. Our constituents are struggling with affordability. Now is not the time to consider a new tax on drivers that makes transportation even more expensive, particularly for the low income drivers.

My district, similar to my colleague from Stockton, have a majority of commute that's out of necessity. They drive in my district, the average commute is about 100 miles and their average vehicle worth is about $5,000. So to the point about fuel efficiency, that's a considerable thing.

And I actually share the concern raised about the declining revenue for roads. But much of this decline will be caused by owners of zero emission vehicles as we've been talking about and they pay 0 at this point. And California's revenue decline will be more dramatically due to policy choices here. That's in our hands.

And according to UC Davis Institute of Transportation Studies. I think we had another person here from UC Davis. The analysis of zero emission vehicle buyers in California get a load of this. They have a mean income of $190,000 a year. The average income in my district is 45,000. 81% of these ZEV owners are homeowners and not renters.

81% of them are also college graduates. While there's hope that this could change someday in the future, a recent study from the UCLA Luskin center concluded that even in the most optimistic cases, it appears that California's most marginalized communities will remain far behind. Clean Vehicle Access.

This is why programs that we are hearing about today in other states focus mostly exclusively on ZEV owners. California should do this as well. We should not impose a second regressive tax on low income and middle class drivers who already pay a disproportionate share of their share of the funds to our roads.

And that's really all I have to say.

Thank you for your comments. I appreciate them and your concern. I think we all shared them as evidenced by my colleague from Stockton who noted some of the same. And that is why we're here today. Great.

We are here to look at what are the possibilities as we look at a sustainable future as it relates to our transportation system, our network of highways and roads, dealing with potholes and ensuring people have safe, reliable ways to move in and around our state.

And that really our transportation system matches the fact that we are the fourth largest economy in the world. And so that is what the point of this conversation is.

There is no proposal yet, but through these series of hearings as well as our town halls, we will get to where we have some type of proposal before the legislative body to consider. I'd like to now invite our second panel.

This subject of this panel is this is our second and final panel is our other states alternative transportation funding mechanism. I thank them for their patience. They have held on all day long. We had a much longer session than had intended and so I just appreciate them for making themselves available.

And although we have lost quite a few of our Members, this will be memorialized via video. And so they'll have an opportunity, Members of the Legislature opportunity to look at this. And this will be part of the record as it relates to looking at ways to sustain our transportation system. I'll name all four.

They know what order they're going in. I'll name them off and I will hold introductions and then we'll have it available for questions at the end. So we have Mindy Kimura, Hawaii Road Use Its charge provide program manager from the Hawaii Department of Transportation. We Have Leif Elder, Director of Policy.

And Legislative Services, Utah Department of Transportation. We have Scott Boardman, Innovative Program Policy Advisor, Oregon Department of Transportation, and Scott Cummings, Assistant Commissioner for Finance, VA Department of Motor Vehicles. Now, I don't know, based on time, if we're going to lose some some before others.

And so if you all need to switch your order, please just do so and. And we will accommodate.

Oh, sorry. Can you guys hear me okay?

We can.

Okay, I'll wait for my slide deck to come up. Thank you very much. Okay. Hi. Good afternoon, everyone. My name is Mindy Kimura and I'm the Hawai'i Road Usage Charge Program Manager with the Hawaii State Department of Transportation.

So today I'll be talking a little bit about the Hawaii Road Usage Charge Program, which we've just launched our implementation on July 1st of this year. The next slide please.

So, as the previous panel members have mentioned before, a road use discharge, again is a consumption charge that assesses a per mile fee on a driver based on how many miles that they drive during a certain period of time. It does three things.

It employs the user pays principle, it ensures that everyone pays for the fair use of the system, and it provides sustainable long term transportation funding. As you can see in this graph, the light green bars show the disparity of the fuel tax between the different types of vehicles.

But with the road usage charge shown in the dark green, a driver would pay based on the number of miles that they drive and not based on the amount of fuel they use.

Especially for Hawaii, where we do have residents that drive bigger vehicles who need to drive higher mileage, these residents can't afford either high mpg vehicles or electric vehicles. So right now they're currently being unfairly charged for their use of the road. Next slide please.

So seven years ago, the Hawai' I Department of Transportation began looking at a road usage charge. It first began with a feasibility study and then with the Hawaii Department of Transportation applying for an STSFA grant in 2017. Hawaii was awarded this federal grant in 2018, and that's when the Hawaii Road Uses Charge, or Hiroc project began.

The Hawaii Department of Transportation conducted numerous focus groups that covered all of our Hawaii islands. We also conducted phone surveys and community meetings.

In addition to our demonstration phase, we've also produced a driving report which was used as an effective communication tool that reached over 350,000 Hawaii households, which introduced Hawaii Public to what a road usage charge is and showing how a road usage charge would personally impact them.

In addition to this driving report, we've also conducted a technology test drive which helped volunteer participants understand what a road usage charge is and to actually get hands on experience through different mileage reporting options. Next slide please.

So with all the extensive efforts done from our demonstration phase and a lot of the community input that we saw leading up to our final report Recommendations the Hawaii Road Use Discharge Bill was first introduced in 2022 in 2022, the Hawaii RUC Bill was first introduced and there are many different legislative initiatives that were lumped into the RUC Bill that supported numerous different positive policies.

However, having these numerous different initiatives added to this Bill resulted in its failure in that session. It was clear that any legislative initiatives outside of strictly converting from the gas tax to a road usage charge would result in the bill's failure.

As such, in 2023, the Hawaii Road Usage Charge Bill was then reintroduced and it was solely focused on the Department of Transportation's need to move from the gas to a road use in charge.

This legislation and effort and was and is important to Hawaii to ensure that we move towards a user fee process as a step in helping Hawaii, all states and the nation so as the fourth state to adopt a road usage charge, Hawaii's road use discharge legislation closely follows our final report recommendations.

The legislation specifically included the following provisions. So began a road usage charge effective July 1st of this year, specifically just for electric vehicles. It allows EV drivers a choice between paying a per mile road usage charge and a $50 flat annual road usage charge until June 302028.

The road usage charge rate is set in our legislation at $8 per 1,000 miles, which is about a little bit less than a penny per mile. In addition to that, the state will be utilizing the annual safety checks for mileage reporting and beginning July 12028.

So three years from now, the state will move to a per mile road usage charge that is mandatory for all electric vehicles, meaning that the flat annual choice gets removed.

In addition to the reducer charge being live and active, the Legislature also required that the Hawaii Department of Transport develop a transition plan to include all light duty vehicles in this road usage charge program by 2033.

The plan must be completed and submitted to the Legislature prior to the 2026 legislative session and this plan will be comprehensive and lay out the plan to transition all vehicles to a ruc. Next slide please.

So in our HYBRA program we have multiple government agencies involved in implementation and not all agencies are aligned with one another or at the same level of government. We have the State Department of Transportation as the administrator of the program.

We also partner with our four county Departments of Motor Vehicles, our four county Departments of Finance, and the Honolulu City Department of it, which supports all four counties motor vehicle systems. As you can see, in implementing a road usage charge program, collaboration is needed amongst all of the agencies in order to implement a road usage charge.

As specifically in Hawaii, each county has slightly different vendors, processes and requirements. So Since January of 2024 we've been meeting all together with the four counties and the Department of it. We've held numerous one on one meetings with each counties and there are various vendors that support the state and county operations.

This HDOT led inclusive approach has allowed us to achieve consensus in a relatively short amount of time and at each step we've collected data, interviewed our partners, performed detailed analysis and come up with workable options to achieve consensus and results in a timely manner.

Next slides please so this is a quick schematic of what the road usage charge and how it works in Hawaii.

So like I mentioned before, the Hawaii Road Usage Charge Program does utilize the existing safety check and annual vehicle registration process that have already been uphold and withstanding and this really was to utilize existing systems to support the smooth implementation and operation of the program.

So from a driver's perspective, they'll just continue to drive their vehicle as normal and will continue to conduct their safety checks and registration renewals on an annual basis. On the back end, the Hawaii Department of Transportation and the county DMVs as well as our safety inspections will handle the road use, discharge calculations and the payments.

I do want to note that in our annual vehicle inspection process, which has been already upstanding, the part of the inspection process requires an odometer reading to be captured at that time of of inspection and inspection needs to be conducted before a registration can occur.

So research showed that leveraging this existing system would be the least expensive way to administrate a road user charge program in Hawaii rather than reinventing the wheel. Next slide please. And then a quick overview of what the Hawaii Road Usage Charge program looks like from an EV owner's experience.

So beginning on July 12025 eligible EV owners will see the road usage charge on the registration renewal notice. On that notice, EV drivers will then be able to choose between either paying a per mile road usage charge that's capped at $50 or a flat annual road usage charge of $50.

The road usage charge choice that they make will then be owed to their vehicle registration payment process. So it's just another line item on the existing registration payment and Then they complete their registration renewal using any of the existing registration renewal methods. That's just a quick overview of the program.

I'm happy to stick around if there's any questions after the panel.

Thank you. I'll ask a quick question before we move on so you don't have to stay because we did. We are. We are limited to the chair now, and that is if you. If they pick the per mile, does that mean they pay at their inspection?

They pay at the time of registration.

They still pay at the time of registration. If it's the per mile capped.

If they choose the per mile or the flat fee, it'll be added onto their registration fees.

Okay, yeah, sounds good. But how would they get the refund if it's per mile? If they only did $40 worth, it would be an offset at the next registration.

No. So the inspection always happens before the registration. Zero, okay. Yeah. At the time of the registration. They've only drove in 40 miles worth on the registration. It'll only show the $40.

Okay, sounds good. Thank you. All right, moving. Moving on to our next presenter.

Can you hear me?

We can.

Awesome. My name is Leif Elder. I work for the Utah Department of Transportation and have spent about 20 years working in state government. 13 of those years were staffing our state Legislature. So, Madam Chair, you run a great meeting. And I also want to tell you, you have some really fantastic staff.

They've been really good to work with.

Thank you. I agree.

Okay, so I'm just going to jump right into this. I know people, it's late. People are probably tired. So Utah believes in fairness and responsibility when it comes to transportation funding. And we think the fuel tax used to match those values.

And you know, in short, it used to be a system where you paid for what you used. And because of the reasons. I loved Trish's presentation with the MBUFF Group. She did a fantastic job kind of showing how things have changed and wholeheartedly agree with that. The gas tax was, was originally created with that philosophy.

And this, this chart here is really to kind of show, hey, if, if we don't do something about the gas tax, there's problems ahead. And, and the longer we don't do something about it, the more we're kicking the can down the road. So go ahead and go to the next slide.

This shows kind of our legislative pathway that we went through to get to the road usage charge. The very first item on there shows you that the Legislature, the Utah Legislature started a task force clear back in 2003 and 4. And this is kind of the first time where the Legislature considered a mileage based funding method.

And of course, it really wasn't ripe at that time. It seemed like a good idea at that time, but it isn't something that you just go and implement quickly. It requires some change of mind.

It requires a lot of effort, and there's been a lot of effort over the last 20 years to get us to where we're at. And I'll just highlight that at that time, our Legislature chose to bring in some sales tax money into our transportation funding system.

And they actually earmarked some sales taxes that goes into our road capacity program. And you can see the next step there. In 2015, UDOT was given the task to study RUC more earnestly, which we did. We had looked into doing a pilot and, and just kind of studied the issue and reported to the Legislature on that.

We also did raise our gas tax at that time, and that's also when we indexed our fuel tax to inflation. Then in 2017, we established another funding task force for transportation. And out of that came a bill that established a committee to look at how to stand up a RUC program in Utah.

And then of course, in 2019, we had another bill which established our road user charge program. And that of course began on January 1 of 2020. Let's go ahead to the next slide. Here's another slide to kind of help understand the urgency, at least in Utah. And I think California is probably in a similar situation.

Utah is a state where EV vehicles have been highly adopted and we have a lot of people that are interested in choosing that method of transportation. You can see in 2024 we had 74,000 new vehicles that were registered. 44% of those were a highly efficient vehicle and that would include EVs.

So 20% of that total 74,000 were actually EVs newly registered in Utah. This change in Utah's fleet continues to put pressure on the gas tax system. Let's go to the next slide. So what are we doing about these issues? Again? The Utah RUC program began on January 1, 2020.

This is a voluntary program similar to what Hawaii just presented when it first began. Owners of hybrids, plugins and EVs could join. We have since discontinued the ability for additional hybrid and plugins to join.

So only we're only accepting EVs into the program, though those plugins and hybrids that joined previously are able to stay in if they choose to do so. So at this we, the Legislature established an annual fee for EVs and that fee is currently $143.

So the way this works is an EV owner can choose to pay the annual fee or join the RUC program. If they join the RUC program, they only pay for what they use and they're charged by the mile and that rate is set at 1.11 cents per mile.

And of course the RUC charges are capped at that $143 mark. So they won't pay more than that annual fee, but they could have the opportunity to save, which that really is what gives us the, the ability to incentivize people to join the program. They can't lose, but they could save.

And, and I'll note that both the annual fee and the RUC rate are indexed to inflation. So they increase annually based on that next slide. The first four years of the program we used odometer reporting and what's called an OBD2 port plug in device.

An OBD2 port is a standard port in many vehicles that allows access to the vehicle's computer system for diagnostic purposes, and that includes Mileage information or odometer information. The first reporting option that we had was, was a bit expensive and kind of clunky.

We hired a new account manager last year in 2024 and with that came a new reporting system. You can see on this slide that we now have two options and they're used about equally the odometer photo option and the telematics option.

The odometer photo users use an app to submit a picture of the odometer which is used to calculate the RUC charge. The telematics option is used for newer EVs that have a telematics feature. A third party vendor pings the vehicle.

The vehicle wirelessly sends the info to the third party vendor who sends udot the mileage and the vin. I would like to highlight the importance of privacy and that was highlighted earlier by Trish. She did a great job highlighting that issue.

And so we've made sure that we only receive data that is needed for the billing and in this case it's the VIN and the mileage. And then of course we destroy data as soon as practicable. Next slide. This chart shows enrollment since the beginning of the program.

The blue and brown show hybrids and plugins which as I mentioned earlier, can no longer join the program. EVs are in the green. We have doubled enrollment in the last year and we're adding about 400 users per month. We're about to hit 10,000 participants probably next month. That's.

That's kind of an exciting thing as we start to scale up. It's really pretty cool. Let's go to the next slide. This slide shows some of the expenses and revenues for the program. One of the challenges for a RUC program is keeping the admin costs low.

As was mentioned earlier, the gas tax is really pretty inexpensive to administer. It'll be very difficult to be as efficient as the gas tax. Before we signed our new contract in FY25, the program was small and very inefficient.

Under the new contract, we have gained some efficiencies and grown the program which has led to a 66% cost reduction. As the program continues to grow, we expect cost to continue to go down and revenues to increase. Next slide.

The last thing I want to share with you are a couple of RUC changes that the Utah Legislature is now considering just to give you a flavor for some of the policy considerations that are being made.

These scenarios are not to be are meant to be an incremental step to moving the RUC program toward the eventual goal of all vehicles participating and paying for what they use. And again, when Utah talks about a RUC, we're talking about a replacement for the gas tax.

There is no interest or desire to have a new tax that is piled on top of that gas tax. Okay, so this is the first scenario. This would remove the payment cap for RUC participants such as EV owners, and then they would pay for what they use.

The the bar chart compares projections for the status quo, meaning the program. I just explained to you with the scenario one where the the cap is removed. And this shows our projections for fiscal year 2027. You can see under this scenario we project that we would lose some participants.

And of course the reason for that is if you remove the cap, there are going to be participants that will pay more under that scenario.

And so we would expect people to make, of course, the rational decision to leave the program and pay the annual fee if they project that they're going to drive more miles than would be allowed under the program and still pay less than that annual fee. Next slide. This is my final slide showing the second scenario.

And this is mandatory participation. So removing that choice to participate in the program and then also remove the payment cap, you can see under this scenario, RUC revenue goes up dramatically while the annual fee revenue goes way down.

And I'll just point out that under the scenario, EVs would not be required to join the RUC program until after the first year. So that's why you still see that annual fee generating some revenue because you have the first year EB owners paying the annual fee and then they transition to the RUC program on year two.

And that's really all I have to with regards to the Utah program. I appreciate the opportunity.

Thank you so much. I have just a couple of follow up questions. You noted that the mileage based fees is a pay as you go system. Very similar to how we do that when you have a gas tax that's pay as you go.

So how often are they sending in the odometer photos or telematics when they're using the mileage based fee versus the annual flat one?

Yeah, great question. So originally in the program we did that on a monthly basis and we kind of recognized that, you know, and we got feedback from users that, you know, that they'd be okay going to a quarterly basis. And that also lowered our administrative costs going to a quarterly basis.

And so that's the current program is it's a quarterly hit as far as when you're paying. And that's what we do.

Thank you. And then finally, for the. You mentioned on the reporting option selection side about privacy, personal data privacy and people being concerned, and you're only collecting the VIN number and the odometer, but you also noted that you keep the information for a certain amount of time. What's feasible? Do, do you.

Could you share, like, how much time are you keeping it and is it related to how much time government keeps things for an audit or how does that get.

Yeah, we actually have the ability to, to delete that within 30 days if, if it is appropriate. And sometimes we'll keep it for up to 90 days, just, just making sure that, hey, yeah, it is paid and there's no disputes.

And so I'd say between 30 and 90 days is generally how long we keep the information and then we get rid of that as soon as we can.

Okay. So it is based on basically a dispute. So if someone doesn't dispute pays the Bill, then it's deleted. But if it is a dispute, then that person's retained to resolve the dispute.

Yep. And as soon as that's resolved, we can go ahead and get rid of that.

Okay, great. Thank you. All right, and then 11 more for you. I'm going to ask this of others if it's relevant. And you all chose particularly to focus on EVs, the eventual adoption of everyone. But why choose? Why start with a RUC versus the kilowatt hour charge?

Okay, sure. Thank you. We actually do have a kilowatt per hour. Well, we have a, a charging tax. So it's 12 and a half percent of the price of charging at a private vendor. So, you know, if you charge your EV at home, of course you're not paying this tax.

But if you're filling up at a, at a charging place, a private charging place, then, then we do have that tax. You're right.

I'm looking on our little, on our little other sheet that told us all the states. Okay, go ahead. Keep going.

With. With regards to. And really, the main reason we do that is we recognize that many locals will charge at home. And so the folks that we felt like there was a little gap was folks coming in from out of state. I drive an EV, I drove down to Arizona.

And so EV drivers, they do go on road trips. They get around. And so when folks come into the state, we wanted to be able to collect a tax on those folks as they charge up their vehicles. We felt like that was a gap in our system with regards to starting with EVs on the RUC.

Of course, it just, you know, it made sense because they're the folks that aren't already paying a gas tax. And, and having that annual fee provided a great opportunity to do that voluntary program where they can choose one or the other. So.

Thank you. One follow up question. You noted that you do charge it on the public charging infrastructure in the State of Utah.

Do you all fund the public infrastructure related to EV as a part of the work that you do, or is it primarily relied on by like for instance, Tesla charging or companies that charge a fee that creates the infrastructure and then charge a fee on top of that?

Yeah, so we generally don't provide the infrastructure other than the NEVI, the federal NEVI program. And we have been very quick to try to spend that money. And so we are putting in charging stations with that, that federal NEVI money. We do. We don't, those are basically turned over to private entities to run them.

So, you know, we don't, we don't hold on to those, but that's the infrastructure that we do build. So.

All right, thank you so much. All right, now we will move on to our next presenter, Scott Boardman.

Okay, great. For the record, my name is Scott Boardman. I serve as the Innovative Programs Policy Advisor with the Oregon Department of Transportation. And I will try and move through this presentation relatively quickly. So next slide please.

So I usually like to kind of set the scene in terms of Oregon structural funding challenges when giving this type of presentation might not be as necessary this evening given the presentations that have occurred before me.

I think we all know at this point that fuel tax revenue is on the decline as vehicles become increasingly efficient, while we're also dealing with challenges related to inflation as it relates to labor, materials, construction, all of those things.

So it's kind of this 12 punch that's affecting the gas tax and investment that we can make in our transportation system. So for Oregon, we do not use inflation resistant funding mechanisms.

And I think maybe the one unique thing on this slide might be our statutory direction in the sense that those DMV fees, registration, title fees, things along those lines, about 75% of that goes to local governments, state highway projects and other programs that aren't actually spent on delivering DMV services.

And then our last, our most recent large transportation funding package was in 2017. And that bill was HB 2017. Very, very unique in terms of its naming. As you can see here, less than 3% of the taxes from that project from that bill went to highway maintenance and operations. That was a very project heavy package.

And so we are now facing, you know, a big challenge as it relates to O and M for our transportation system. Next slide. So how does Oregon differ and how is Oregon the same from others?

You know, I think two things unique to our states that many other states don't have is the idea of cost responsibility built into our constitution. And so that basically requires each category of highway user to contribute to or contribute revenues to in proportion to the cost that they impose on the system.

So basically you're looking at ensuring that light and heavy duty vehicles are paying in proportion to the cost that they impose. And then also the weight mile tax where heavy duty vehicles in Oregon do not pay a diesel tax, they pay based on their weight and the amount that they drive in the state.

So those are two unique items for us as it relates to our transportation funding mix. Things that we don't have that many other states do is indexing of the gas tax or other fees such as registration fees, tolling on state highways. Oregon does not have a general sales tax.

And so in many other states that do have a sales tax, local governments, you know, might any might impose a local option sales tax that might help pay for, for transportation at the local level. We do not have that. So local governments are heavily reliant on the state.

We have what we call the 50/30/20 split where the state retains 50% of the revenues and then gives 30% to the counties and 20% to the cities. So our local governments are very reliant on a healthy state highway fund for them to make their own investments.

And then generally we do not have any General Fund or other non user fee funds. We did have a transfer from the General Fund. I think that was a special session at the end of 2024 and that was a pretty significant decision that was made because that's not something typical for the State of Oregon. Next slide.

And so we, you know, from, from ODOT's perspective this is something that we've been banging the drum for a while on of the fact that know within our transportation funding mix we have kind of this three legged stool and one of the legs is about to fall off, that's the gas tax.

Another leg is a little wobbly as I mentioned, in the sense that DMV's fees often go to other projects or other investments. And then the motor carrier element is the, the weight mile tax for the heavy duty vehicles.

And so what we really see is this roadmap to financial stability sustainability includes various other fees such as, you know, indexing those to inflation, user Fees, which I think, you know, we'll get into in terms of the idea of a road usage charge and potentially General Fund sources in the future as necessary.

But it's not something we necessarily want to rely upon. But this is, you know, we have been working with the Legislature in recent years to really explore what those new or diversified funding streams might be to try and shore up the agency's budget and its O and M investments. Next slide, please.

So, you know, in some ways this echoes a little bit what Utah had described. We had created a task force. I think Leif said theirs was 2003. So it sounds like we beat them by two years.

But we have what's known as the Road User Fee Task Force, what we lovingly call rough tough, that was created by the Legislature in 2001, largely in response to the emergence of hybrid vehicles, that the Legislature kind of recognized that as vehicles were becoming increasingly efficient, that the gas tax was not going to be a long term sustainable option for raising revenue.

And so they were guided by eight overarching criteria. Those things included one theme that we've heard a lot tonight, which is the user pay principle, as well as revenue sufficiency. And they considered roughly 28 funding ideas. Many of these were taxes on specific items. Again, Oregon does not have a general sales tax.

They were looking at taxes on things like batteries or tires, but found that, you know, the idea that if you're taxing those specific items, that might disincentivize someone from putting four new tires on their car and running them to a point where maybe it's unsafe.

And so really looking at all these, guided by those eight criteria, the idea that really emerged was road usage charging. And so that was identified as the preferred alternative. And the state conducted pilots in 2006 and 2012, which both went quite well, which led to legislation in 2013 that created our program known as Orgo in 2015.

So, next slide, please. And so the Orgo program, we are the first operational RUC program in the nation. When we went live in 2015, it is voluntary. Virginia and Utah have surpassed us in terms of enrollments. But we are hoping that our numbers go up soon.

And I'll mention that in a couple of slides, but basically, at this point in the voluntary program, drivers of vehicles that are rated at 20 mpg or better can enroll. The RUC rate is set at 5% of the fuel tax in law.

Currently, our per gallon fuel tax is $0.40, which puts the RUC rate at $0.02 per mile. I know that, you know, this Idea of fuel tax and RUC, there's concern about double taxation for any vehicle that still uses gasoline or, you know, other taxable fuel.

They receive a credit for any fuel tax paid and they only pay the difference in terms of what they owe in RUC versus what they've already paid in fuel tax. Obviously that doesn't apply to EVs because they are not paying fuel tax in addition in any way in addition to the RUC.

So in Oregon, we have a tiered registration structure where vehicles pay an additional amount supplemental registration fee based on their efficiency. And so the vehicles that are rated at 40 plus MPG as well as EVs do not have to pay those supplemental registration fees if they enroll in the OReGO program.

So instead of, you know, paying at least for EVs, it's currently set at $115 per year. Instead of paying 115 at registration, they can enroll in the program and simply pay by the mile. They are able to choose from account managers what they are, business partners, private entities that we certify that provide those services to the participants.

And so among the account managers, participants get to choose between different mileage reporting options, similar to what Leif from Utah was mentioning in terms of odometer capture with your phone, telematics or the OBD 2/plus plug in device that we are trying to move away from.

The plug in device as those are more expensive, can be confusing for people to install on the vehicle and then also subject to, you know, anybody can remove it at any given time as well. So it's not particularly secure in terms of a more widespread or wide scale program. GPS is not required though it has been offered.

And so basically for anybody who uses the GPS device, if I'm in Portland and I drive across the river to Washington, it would know at that point that I do not owe for any of the miles driven because I'm out of state. Next slide.

And so we have a special legislative session coming up at the end of this week. One has been called for August 29th, and that is to address ODOT's budget gap and structural funding challenges. This was a big topic during our 2025 regular session.

Unfortunately, a bill did not pass and so the agency is facing some, some severe budget challenges. And so they are convening again this Friday.

The proposal, the funding proposal being considered would increase many of the traditional revenue sources such as the fuels tax, vehicle registration and title fees, as well as the payroll tax, which goes to transit providers across the state. And this legislation also includes provisions that would create a mandatory RUC program for certain vehicles. Next slide.

And so as it relates to the mandatory RUC or the potential mandatory RUC program as this, you know, nothing's set in stone quite yet. This is the proposal currently being considered. So it basically phase in for certain types of vehicles over time. It would begin first with EVs at their next registration.

So existing already registered EVs beginning in July of 2027. New EVs would then be subject January 1st of 2028. You might ask, why are we separating those out?

Part of that is because there's additional education to be done with stakeholders such as vehicle dealers and lenders, so credit unions and banks, because those new EVs, when you're purchasing at the dealership, they would need to be enrolled at the program at the point of sale.

And so that's kind of an additional process that we figure that starting with the EVs that are renewing the registration, which, that interactions entirely between the vehicle owner and the state will provide a bit of an opportunity to grow the program over those six months before bringing in the new EVs.

And then after that we'd bring in both new and renewal hybrids. So that's both plug in and kind of the traditional hybrid electric vehicles in July of 2028.

I will mention that, you know, ODOT has proposed legislation in the past that would have also included any vehicles beginning in a certain year that were rated at 30 mpg or better. So it wasn't just limited to electric and hybrid vehicles.

So at least from an agency perspective, I can't speak to legislative intent, but we do view this as kind of a first step in a more expanded program where efficient Ayes vehicles would also be subject at some point.

For those who do not want to pay a RUC, they have an option included in this bill that would allow them to opt out and basically and pay that fee of $340 per year.

I should emphasize that if the vehicle is subject to the RUC program or if they are choosing to opt out, they're still not subject to those supplemental registration fees. That's once they're part of the RUC program, those supplemental registration fees no longer apply to their vehicle. They'd either be paying RUC or that opt out fee.

And again, vehicles that use fuel, so those, those hybrid vehicles would continue to receive a non refundable fuel tax credit for any fuel tax paid. So I'm, I, I've been working on this for a while in terms of policy development and so I'm excited Getting to Friday for our special session.

Hopefully early next week, we might have some additional information. And happy to answer any questions when we finish this panel.

Thank you. Can you just go over that last bullet point again? You noted that vehicles paying RUC will not have to pay the supplemental. Can you just review that last part?

Yeah. So Oregon uses a tiered registration structure where vehicles pay a supplemental registration fee based on their efficiency. And so while, you know, in this moment an EV is subject to a supplemental registration fee of $115 per year. And so basically once they are part of the mandatory RUC program, that fee no longer applies to them.

They're just paying the base registration fee that every vehicle pays. And then they're either paying the RUC by the mile or the opt out fee on an annual basis.

Okay, and then you also noted that the participants receive a credit for the fuel tax paid. How do they record the fuel tax paid?

Yeah, so it depends on the mileage reporting option that they use. And so for those who use the OBD2 device, that device can determine how much fuel is being used. It knows the efficiency. And so when it reports that information to the account manager, they know exactly how much fuel they've used.

And so they can calculate the credit against what they OMROC charges for. For those utilizing telematics, there's a similar situation where the vehicle effectively knows how much fuel has been consumed, passes that along to the account manager.

Lastly, for the odometer capture at that point, since there's no kind of technological integration in terms of the fuel used, the account manager relies on the combined EPA rating for the the vehicle to determine, you know, from how many miles they've driven based on the last time they submitted an odometer read and the efficiency of the vehicle as it's rated by the EPA to calculate the fuel tax credit.

And so it is an estimate basically. So it's not calculating it based on. I actually paid this amount because I went to this particular gas station versus a gas station a little ways away that was, had, that had a lower price. So it's taking what the average expected.

Well, regardless of which gas station, the fuel tax itself per gallon remains the same. And so the, it's, it's. They'd be funded at 40 cents per gallon.

Thank you. I think I had one more question for you.

You noted on your, for the governor's. He called the special legislative section, and you noted that you all have revenue sources from payroll tax for transit providers. Is that related at all to your transportation funding overall, or could you say what that is?

Yes. So that payroll tax, it's, it's one tenth of, of 1%. Currently, they're, they're talking about doubling it to two tenths of a percent. And so that money comes out of, you know, people's paychecks, and that money gets deposited into our STIF Fund, which then helps fund transit across the state.

So everybody in the state who works pays for that and that goes for transit? Correct. Okay. All right, thank you. Okay. Thank you so much. With that, moving on to our next, our next and final panelist, Scott Cummings.

Good evening.

Hello. We can hear you.

All right, so I'm going to talk about Virginia's Mileage Choice Program.

And thank you for being our final panelist all the way from Virginia.

My pleasure. All right, next slide. So Virginia started Texan fuel in 1923. Not quite the 1919 that Trish pointed out, but for 100 years, we've been relying on that as a major funding source for our transportation program. In the ensuing years, we have diversified the pool of transportation funding sources, a lot of those that Doug highlighted.

But we still rely on fuels taxes for about a quarter of our transportation budget. And in 2018, we saw how shaky that reliance is. That was the first year that vehicle miles traveled in the state increased, but revenue from motor fuels taxes decreased when compared to, compared to the prior year.

They've both fallen in times of recession, but typically when people traveled more, they paid more than gas tax. And the fact that that didn't happen meant that the impact from the looming fuel efficiency issue that was up on the horizon and finally come to Virginia.

So in response, the state Legislature directed our secretary of transportation to convene a working group to study the impact of fuel efficiency on the sustainability of transportation revenue. Next slide.

So the working group confirmed that that trend of disparate trend lines between BMT and gas tax revenues was here to stay and it was going to accelerate in the future. But they really honed in on the cause of that less what conventional wisdom would say was from electric vehicles.

And they really concentrated on the impact from rising fuel economy of traditional internal combustion engine vehicles. They said that was where in the short term, by 2030, Virginia's impact was really going to be coming from. Next slide. So in response, they recommended several different solutions, from short term out to long term.

In the near term, they said we should increase the gas tax and indexed into inflation so that our purchasing power would stop being eroded. They also recommended a highway use fee aimed at those fuel efficient vehicles and capture revenue that was not being collected from gas tax or gas purchases at the pump.

Long term, they said we need to get away from gas tax altogether and move to a mileage based user fee. And recognizing how long term that solution would be, they said in the mid term we should impose a mileage based user fee program by collecting that highway use fee on a per mile basis. Next slide.

So that report came out in December and the following month. In January of 2020, the Virginia Legislature convened and they adopted many of the recommendations that the working group made. They indexed or they raised the gas tax by $0.05 cents a year for two years and then indexed it to inflation thereafter.

They also established a highway use fee on all fuel efficient vehicles which the legislation set at 25 miles per gallon or greater. And I'll go into the highway use fees calculations in a later slide. The highway use fees due at the time of registration.

And the legislation also directed the Virginia Department of Motor Vehicles to set up a optional mileage choice program allow consumers to pay that highway use fee by per mile basis. They gave us two more years to implement it.

The highway use fee became effective July 1st, 2020 and we needed to have the mileage choice program up at the running by July 1st of 22. Next slide. This shows the impact. This top chart is the impact of that gas tax increase going all the way back to 1923.

You can see it's been raised over years with long periods of static, no changes. And then the impact of the legislation in 2020, those two 5 cent increases and then the the impact of the CPIU inflation factor. The table lower that shows the financial impact from those changes.

The increase has has stopped the downward trend of revenue collections from fuels taxes. And then, next slide. You can also see the impact from the highway use fee, $105 million this fiscal year is the estimate. So the highway use fee is imposed on all fuel efficient vehicles.

We use a VIN decoder to get the manufacturer's fuel economy for a particular vehicle. And then all the ones that are determined to be 25 miles per gallon or above are assessed a formula.

It basically takes the fuels taxes paid by the average vehicle which the legislation set at 23.7 miles per gallon and also determined that the average miles driven by a vehicle in the Commonwealth is 11,600. Then it's just math that average vehicle buys 489 gallons of gasoline.

That's assessed at that particular fiscal year's per gallon gas tax rate, which which this year is 31.7 cents per gallon. That means that the average vehicle pays $155 at the pump. All the fuel efficient vehicles are measured against that benchmark and assessed 85% of the difference.

So an electric vehicle which pays no gas tax pays 85% of that $155. So their highway use fee is $131.88 for this fiscal year. The graphic on the right kind of shows the variations of the average vehicle and the electric vehicle and their gas tax payments versus their highway use fee.

Hybrids and fuel efficient vehicles pay a mix of gas taxes at the pump as well as the highway use fee. So the highway use fee varies by the particular vehicle depending on depending on its fuel efficiency. But every single vehicle is assumed based on Highway Use Fee speed to drive 11,600 miles.

The Highway Use Fee doesn't allow for any discretion about how much that vehicle is actually driven. Next slide. The discretion comes from the mileage based user fee program that we have. Customers can enroll in that with our commercial account manager Emovis.

When they enroll, Emovis interfaces with our system and get the vehicle information the highway use fee charge for that particular vehicle as well as their per mile rate.

Once the customer completes the registration, Emovis interfaces with us again to turn on an indicator in our system that lets us know not to charge the highway use fee when the customer subsequently renews their registration. We have also partnered with the Eastern Transportation Coalition to leverage some federal funding for the ad campaign and focus groups and surveys.

We also are using the SDSFA grant to offset program costs. Next slide. So customers go to the VamileageChoice.com to enroll. That's the site run by a Emovis. When they sign up, they can choose to participate through their in car telematics or they can choose to get the plug in device.

Right now about 80% are using the plug in device participating through their cars telematics. They can also choose to have GPS enabled if they like. There's no programmatic benefit to having the GPS enabled. Virginia's law does not exempt out of state miles or miles traveled on private roads.

All miles traveled are recorded and assessed the per mile fee. The GPS features do. There are some benefits in the smartphone app that customers need to download to participate. That GPS enablement allows them to use some Find My Car and Trip information and other features. The smartphone app is a requirement to participate in the program.

Customers use that to record an odometer capture process when they first enroll in the program as a starting point, as well as some check points periodically to true up the miles captured by the device.

Customers create a prepaid account and all monthly invoices that OMOVIS sends them are debited against that prepaid account, much like a toll program would. So that prepaid wallet ensures that the customer customers have the funding already established that Emovis can take. And every month Emovis collects from customers and sends the funds to Virginia.

It's a fully turnkey system. Virginia doesn't have any real interaction with the customers, they are participating through the Emovis. Next slide and this just shows you sort of the range of participating vehicles from 25 miles per gallon at the gas point all the way through electric vehicles.

It was interesting once we set up the program we thought we'd see more participation from that the higher fuel economy vehicles just because they would have more opportunities to save money with the higher fees. But we found a lot of participation from drivers of all types of vehicles.

Right now about half of our participation is from gasoline vehicles, 30% is from hybrids and 20% is from EVs. Roughly 2 million out of the 7 million registered vehicles in Virginia are assessed a highway use fee. About 1% are 23,000 are participating as of earlier this summer. And most Mileage Choice users are saving money.

They're staying below the cap. Their participation in Mileage Choice can't cost them any more than they would have just paid by staying with the Highway Use Fee. And most are finding that they save money and they are enjoying the program. 80% renew for a second year and 71% are still participating. Participating.

Coming up on our fourth year of offering the program. On average, our participants in Mileage Choice record about six and a half million miles every month paying about $90,000 in fees. And this is a permanent program for Virginia.

We continue to enroll new customers every day and gain more valuable insight about how the program can help transition the Commonwealth away from the gas tax and to a mileage based user fee approach.

Thank you so much. A few follow up questions. Originally, when you the Bill was passed in 2020, have there been any thought about it going from voluntary to mandatory? Is it always meant to be a voluntary program?

It has been a voluntary program. The Highway Use Fee is a mandatory fee fee. Right. But this is in lieu. Right?

Right. But this is is lieu? The voluntary is in lieu of paying the highway fee?

Paying it on a per mile basis.

Nobody can opt out of paying the Highway Use Fee. All they can do is opt in to paying it on a per mile basis.

So that they can potentially pay less?

Correct.

Okay. And then you noted I was wondering and I was actually running your. As you begin to talk, I wondered this throughout all of the presentations, issues of payment and and you said your program is a prepayment.

So they prepaying what the Highway Usage Fee is and then it's being hit up against that over time or what are they prepaying? How much are they prepaying I guess?

I believe it's a $15 amount. And then when it gets down to a certain level it auto renews and goes back up to that amount.

Okay, so like you said, just like a toll. So it's not a large amount. They could work their work their way up. And then what would you say were the biggest challenges that you had from a community perspective when you all were discussing this legislation?

I think one of the challenges was just getting the Mileage Choice Program back in the consumer's mind. That was where the ad campaign supported by the Eastern Transportation Coalition really came and was very helpful.

The Highway Use Fee was first assessed in July 1, 2020 and there were lots of news stories and other media coverage about the new tax, new fee that was being imposed and then all that had died down two years later when we rolled out Mileage Choice we really needed to get that option back in front of customers and let them know that they had an alternative to paying it all up front with their registration fee.

And you all had two years of the raised gas tax by 5%. And then to help with the transition to the HUF, right?

The there were two 5 cent gas tax increases in fiscal year 2021 and 2022. Yeah. And then it was indexed to whatever inflation the inflation rate is. The Highway Use Fee is. Since that's tied to the gas tax, it's also essentially indexed inflation as well.

So they're paying both. Okay, so you're. Okay, that makes sense. Now what I'm looking at? Okay, so they are paying. They before they were only paying the gas tax and whatever registration fee they were paying to the DMV or whatever. Now they're paying higher gas tax and this higher usage. Highway Usage Fee.

Yes. We had a license additional registration tax on electric vehicles. It was $64 at the time. But there was nothing on all other efficient vehicles. They were just paying less over time. So somebody replaced a 10 year old car and gain 30% fuel efficiency. They were just paying less in fuel taxes. There wasn't any offset.

So you're. We were having this conversation. I wasn't sure if you were on for it, how much the average user would be paying before and after. So post, was your average user paying more? Post the adoption of this, they would be paying more for transportation needs. The investment in transportation infrastructure in your state.

Yes. The mileage space user fee, the Mileage Choice Program. It's not an alternative to the gas tax. It's just a different way to pay the Highway Use Fee. Okay. That new fee was envisioned to increase transportation funding in the commonwealth.

Okay, thank you. If there are any other panelists here who can speak to the issue of payment. I just wondered if there was any other states who were doing any kind of prepay system.

I know Hawaii has a particular system that they're doing, but any others as an issue of payment for the pay as you go and they might not still be here, but if you are, give you a chance.

So we have currently for our OReGO program in Oregon, we have two account managers providing services and one of them uses similar to what Scott from Virginia mentioned that it is a prepaid digital wallet, effectively. And I believe the other account manager is postpay where, you know, they-

The participant would have a credit card on file and then it's just billed for the amount that they owe after the reporting period.

Okay. But there is some mechanism on file so you don't have to worry about having to have a collection system, so to speak, or spend a lot of time dealing with collections. Okay. If there was anybody else, I'll give an opportunity to speak. I'm trying to look at my list. All right. There being none.

I would like to thank all of our panelists for those that are still here and that are not. The work that you do is incredibly important for your communities.

And I'm so thankful that you took the time, especially after a long day waiting for us to be finished, took the time to come and speak to California and help guide our decisions by giving us a detailed information.

And so, you all have been amazing and patient and wonderful and this will be really helpful for the Members of our Legislature to have this as a reference point on how to ensure that we're doing the right things for Californians and making sure that we have a transportation system and infrastructure as it relates to transportation that works for the future, that is safe and reliable, gets people where they need to go, but at the same time being done in the most efficient way that it alleviates the burden on our taxpayers or just the people in our community.

It has not lost on us that we have to focus as a Legislature on affordability. So we have this conversation guided through that lens. We have to make California more affordable, especially when it comes to the cost of transportation and the impact that it has on their work on their pocketbook. I'll look to staff before I go.

Oh yes, we do need to do public comments. We could not have a a hearing without public comments. So this is an opportunity for members of the public to provide comments as it relates to our hearings.

Please come to the podium and provide your comments. Given that it is a- I will let you be liberal in your comments in the time allowed for your comments. I thank you for your patience today as well.

Thank you Madam Chair and Members and staff of this important Committee. Jason Bryant on behalf of Transportation California and our 28 Members of our coalition, the Fair Transportation Funding Coalition, we're assembling. Really appreciate the Members attending and participating, asking great questions, making some profound statements about the issues that are being discussed.

We also want to thank the presenters. To be able to have real life examples from across the country about what works in their state gives us some great insights into what might work here in California. We submitted a letter to each of your offices outlining five major principles that we're focused on as a coalition.

Given some of the statements from Members of this Committee. You know, fairness rises to the top for me listening to the debate here tonight, making sure that we're fixing, we're addressing whatever solutions and sticking to this user pay principle. I think that's really important and something that I think we heard from this Committee.

Just want to thank the Committee for working with this coalition on identifying the problem and looking at solutions. And we look forward to working with you in the future and happy to be a resource to you and your offices. Thank you very much.

Thank you.

Good evening Chair Wilson. I'm Sophia Rafikova with the Coalition for Clean Air and thank you so much for holding this very informational hearing. And we're very encouraged to see the Legislature looking at alternative sources for transportation funding and especially looking to other states for examples.

And we want to use this opportunity to encourage you to use this program to incentivize the use of fuel efficient cars and promote the transition to zero emission vehicles which is crucial to meeting our air quality and climate targets set by state and federal law.

And as we heard today with states like Oregon and Virginia are already doing this with Oregon exempting electric vehicles and cars within mile per gas above 40 from paying supplemental registration fees and with Virginia, tying the cost of the highway use fee directly to the vehicle fuel economy and employing similar strategies will help California meet its climate and zero emission targets.

On the contrary, implementing a road charge fee without considering fuel efficiency will result in additional 45 million tons of GHG emissions. And we also want to use this opportunity to urge the Legislature to consider affordability when designing a road charge program.

Low income Californians are already struggling to pay their transportation costs and studies show that a flat road charge fee would increase costs for the poorest urban households by $27 annually. This is an opportunity to create a variable fee structure based on income to ensure that we're not further increasing the economic burden on low income communities.

And furthermore, the funding generated by this mileage fee should go to programs that make it easier for low income households to acquire an electric vehicle to use EV car sharing to use transit, bike and walk to further help reduce reduce costs associated with using a vehicle. Thank you.

Thank you.

Hi Chair Wilson. Hi staff. I'm Catalina Gonzalez with the Center for Progressive Reform and I also want to align our comments today with principles, equity principles shared by the Climate Plan Coalition who also attended the hearing but couldn't stay for comment.

I think Climate Plan and The Center and Climate Plan, we agree that this is an important funding gap to address. So thank you so much for having these presenters here. Thank you for the presenters.

I think the case studies that they presented were extremely helpful in helping our state to explore options of what a multi pronged approach could look like.

I think some of the principles that we support are a phased in approach that continues to incentivize people to uptake electric vehicles and look to that as a goal, as an option to help us meet our climate and clean air goals. And I also want to state, I'm from Southern California where we love our cars.

We certainly want that to continue to be an option, but we also want more transportation options that are affordable and also that allow for clean air.

I also want to just underscore some of what the experts testify to, which is that this funding gap is also due to inflation and it's also due to increasing costs for labor and construction.

And I want to thank you again for the hearing and for the information and continue to encourage you to prioritize fairness and equity, especially for communities that live along transit corridors that see heavy diesel truck traffic and really look at a solution that allows us to address that issue.

I also attended the the town hall hearing that you hosted in the Central Valley. Thank you for going to the Central Valley and hosting that.

So, yes, like, can we want to continue to look at those options that promote fairness and equity for port communities and for Central Valley communities that see this heavy truck traffic and don't really get a lot of benefit from it. But, you know, it goes through it go goes through their communities. Thank you.

Good evening, Madam Chair. My name is Gabriela Cervantes. I'm here on behalf of ACEC California. And we just wanted to echo our comments made by the our Transportation of California advocate. Thank you.

Thank you. Thank you, everyone. As a reminder there, we need to do something else? Just making sure, as a reminder, there are cupcakes in honor of AJ So if you have not had a cupcake or you need a cupcake before you leave to be able to drive home, there are available.

And with that, our informational hearing is adjourned.