The 2025 Oregon Legislature is poised to address Oregon’s quickly deteriorating highways, roads and bridges. The Joint Legislative Committee on Transportation is conducting a statewide tour to hear from citizens on how to address the problem. The latest hearing was on June 18 in Tillamook.
Numerous paths can be taken to ease Oregon’s transportation funding problem, some more bumpy than others. Change itself is one of the biggest obstacles, as deviating from the known to the unknown can create anxiety and opposition as the comfort zone is left behind.
What is certain is that legislators will have to steel their will to make any meaningful progress as the political lift required is significant. No matter which of the funding possibilities addressed here is selected, the opposition will be intense. Knowing that, legislators should evaluate their options based on the efficiency of the new approach, the value obtained, and the sustainability to meet future needs.
Below are some of the ways the Legislature could seek to address funding our state’s roads and highways. We don’t offer support or opposition to any of them. We do offer a look at the arguments for or against each alternative that legislators are likely to face when the hearing gavel strikes.
TAX ON VEHICLE MILES TRAVELED (VMT)
Charging drivers per mile traveled has been a fundamental way to pay for building and maintaining roads since the first gas tax was passed in 1919. Each mile traveled burns gasoline, and in turn the driver would pay a tax on the consumed fuel. The more you drive, the more gas tax you pay.
The VMT can be designed to work the same way (although advocates now want to refer to it as a Road Usage Fee rather than a Tax per mile. It probably polls better!). Like the gas tax, people who drive little pay less. People who drive a lot pay more. Touted as a replacement for the gas tax, it seems a reasonable approach to mirror that concept as gasoline-powered cars continue to be replaced by electric vehicles. Both policies are based on actual road usage and thus a pivot to the VMT would appear to be a rational transition.
What Proponents Will Say: A key argument in favor of the VMT is that it can be made to replicate the gas tax drivers have paid for over a century. It is a ‘user pays’ system maintaining a long-held public policy. Unlike the gas tax, the revenue from which will diminish over time, the VMT revenue not only will not be eroded, but it can also be adjusted for inflation to sustain its buying power properties.
Modern technology will help in measuring the number of miles traveled. Most newer cars are equipped with GPS devices or are GPS enabled and data can be retrieved to add the miles and assess the usage fee. These devices can also determine whether the miles were traveled in-state or out of state, so as not to charge the driver for miles driven outside of Oregon’s borders.
It also has the near-future potential to assist in congestion pricing, as data could be retrieved to determine which cars traveled on roads in a toll zone during the tolled time of day and send the driver a toll fee. That would make all those toll gantries obsolete in the future and save the state tens of millions of dollars.
What Opponents Will Say: The modern technology that some find as a reason to support the VMT is the same that others will utilize to oppose it. Many Oregonians are still concerned that “I don’t want someone to know where I am driving,” even though the reality is, for most of us, they already know or could know. Many new cars now have telemetrics imbedded in the car’s computer system that can track the movements of the car. Some automotive observers say that soon 98% of all new cars will have that technology. Your driving habits are already an “open secret” as car manufacturers can access that data now and do so, such as for insurance companies.
The argument that this technology can help with congestion pricing is also an argument that others would likely use to oppose the VMT.
One of the biggest unknowns about the VMT is how high the administrative costs could be to implement and maintain. Unlike the gas tax, which is embedded in the retail fuel price and has an efficiency rate of about 98%, the VMT requires measuring, computing, soliciting and then collecting up to a couple million individual bills every month. How big of a bureaucracy needs to be created to handle all of that? No one has tried a mandatory system like this and thus no track record to measure it. Then there is that question about what to do with those 140,000 trips Washingtonians take to and from Portland every day.
The VMT rate may have to be significantly higher than the gas tax rate to generate enough revenue to equal the equivalent collection after all administrative costs is accounted for. That would negate the argument that it is an equal replacement for the gas tax.
RAMP UP TOLLING
Ah, yes. Tolling. The current plan to toll I-5 and I-205 in Portland is on hold after Governor Tina Kotek donned the orange vest and held up the STOP sign earlier this Spring. The idea of tolling promoted by ODOT and Portland-area transportation officials was supposed to reduce congestion while raising revenue for projects. One of the major problems, in addition to significant citizen pushback, was that there was little clarity on whether the plan would actually raise much money, or worse, actually lose money. Various advocates pressured ODOT to exempt so many drivers for personal income reasons (something no other toll operation in the United States does) that after spending 38% or more on administering the toll, exempting or reducing tolls for another 25-50% of all drivers, and then the cost of setting up a department to run the low-income toll program, there wasn’t much, if any, money left. Still, the statute requiring tolling is still on the books. It will work for revenue collection on the new I-5 bridge (if it is built in our lifetime) since it has a captive audience, but tolling existing freeway lanes has issues.
What Proponents Will Say: Tolling freeways can reduce congestion as drivers stop using the freeway during peak rush hours to save the cost of the toll. It can also pay for itself if ODOT ensures that most, if not all, users pay. It may also promote more multi-passenger trips over solo excursions. Tolling could also encourage a greater use of public transportation if available.
What Opponents Will Say: The public is not exactly enamored with the idea as evidenced by the outcry when tolling was in the works for I-5 and I-205 last year. It also has limited use. A toll won’t collect a bottle deposit worth of revenue on 95% or more of all the mostly rural roads in Oregon. Extremely high administrative costs, along with political pressure to exempt drivers who would be needed to pay the toll to make it cost-effective, negates its value as a revenue generator on most roads. Low tolls could work to reduce congestion and mitigate the need for low-income exemptions, but if generating revenue is the objective, it just doesn’t pencil. Additionally, tolls will simply divert drivers to local arterial roads, replacing congestion on the highways with congestion in neighborhoods and local communities. Local governments would then demand whatever money is left from the tolls must be spent to mitigate the impacts of the congestion issues diverted to their roads.
RAISE THE GAS TAX
Lawmakers could decide to just raise the gas tax, say by 20 cents a gallon, dedicate the new revenue entirely to maintenance and preservation, and raise serious money to address state and local road maintenance backlogs. They could also require all owners of electric vehicles to enroll in the alternative OReGO program that is the current voluntary VMT pilot program. At about $16 million per penny increase, this would raise an additional $320 million a year. That’s a lot of paving.
What Proponents Will Say: Advocates will point out that this raises a lot of money with no additional administrative cost since the program is already in place. It will raise significant revenue, while not having to battle the political pitfalls of the Road User Fee or Tolling. It also will promote greater usage of the Road User Fee that is currently voluntary and help move the state to a more robust and inclusive Road User Fee program in the years ahead.
What Opponents Will Say: This kind of increase will fall disproportionately on low-income drivers who can’t afford a couple of extra bucks a week to drive to school and work. Gas prices are already too high and this exacerbates the problem. It doesn’t solve the long-term problem of how to pay for roads once all cars are electric-powered.
END THE LOCAL REVENUE SHARE PROGRAM
Oregon is believed to be the only state that shares its state road revenue 50/50 with county and city governments. Reducing or eliminating that practice will allow cities and counties to raise their own revenue for local roads, which will allow the state to jumpstart its own resources by hundreds of millions of dollars a year. The revenue withdrawn from local governments could be dedicated by the legislature to be used only for maintenance and preservation purposes. Rep. Paul Evans has already suggested the current arrangement needs to be reviewed.
What Proponents Will Say: Oregon should not be the only state carrying the burden of local road maintenance to the extent that it does. This provides significant new revenue to ODOT while allowing local governments to engage with their citizens on how they want to pay for the roads under their jurisdiction. It also does not require a super-majority vote in the Legislature and eliminates the need for legislators to raise any fees or taxes at all.
What Opponents Will Say: City and county officials will go nuts! They will say this is another betrayal of the state/local government partnership. They don’t want to ask their voters for more money just because the state has backed away from a decades-long promise to share responsibility for transportation infrastructure. If the transportation needs of the state are to be solved, it has to be done with a working partnership with the state, city and county governments all at the table.
CREATE ONE-CENT RETAIL SALES TAX FOR TRANSPORTATION
Oregonians have long boasted that we don’t have a state sales tax, and we don’t pump our own gas. Well, the latter disappeared last year when the Legislature finally allowed Oregonians to pump their own gas. In reality, Oregon has plenty of state sales taxes now. We pay taxes on liquor, beer and wine, tobacco, marijuana, and hotel stays to name a few. All are dedicated taxes, designed to support one program or another. Some cities have also started sales taxes within their borders as well. If you have dined recently in Cannon Beach or Ashland, you may have noticed the sales tax addition to your tab.
A one-percent tax on the sale of goods and services, dedicated to roads and highway maintenance and preservation, would, according to Legislative Revenue, generate as much as $500 million a year. That is a whopping amount of money and could quickly transform the state’s roads and highways into the best in the country. Translated, that one penny would only bump the price of that $8 lunch at Subway to $8.08.
What Proponents Will Say: A one-penny sales tax would solve Oregon’s maintenance and preservation problem at both the state and local levels. The administrative costs are far less than anything other than the gas tax once the initial startup costs are completed, as the model has been used successfully by almost every state in the country for decades. Lawmakers won’t have to fret over GPS tracking citizen cars, worry about creating a low-income driver program, face the anger over those opposed to tolling and all the administrative costs, or anger city and county officials.
Oregonians have long opposed a state sales tax, but it hasn’t been tried for more than 30 years (1993). Plus, those sales tax proposals were all much larger and were designed to help fund all of government. Safe, pothole-free roads, have wide support of Oregonians and if the tax were just a penny and dedicated only for that purpose, then this approach just might fly. Almost two dozen states help fund transportation with sales tax dollars. Arkansas, not exactly a bastion of liberal voters, recently passed a constitutional amendment by a near-landslide to charge a small sales tax dedicated to funding its roads and highways. If Arkansas voters can do it, certainly Oregon can.
What Opponents Will Say: Oregonians are already taxed enough and we have long opposed a state sales tax of any kind. If one is passed, then it will open the door for ambitious tax and spend legislators to increase the tax later for other purposes than just roads. It would be the camel’s nose under the tent. ODOT needs to tighten its belt, right-size the department to align with all the technological advances that make having so many state employees obsolete. Let’s not talk more taxes until we utilize the resources we have now, and ensure we are getting maximum value for the dollars we already pay.
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Whatever approach the Legislature takes will be fraught with political potholes. The heavy lifting required cannot be underestimated. Legislators will also have to contend with multiple advocate groups attempting to pivot the discussion to paying for new projects rather than sustaining what we already have. But there is an opportunity as well. We will see what pathway they choose to travel.
Content provided by Rick Metsger, Pac/West Lobby Group