A Nevada advisory panel is recommending the state adopt a mileage-based road usage charge for zero-emission vehicles, creating a new transportation funding source to help replace declining gas tax revenue.

Under the panel’s recommendations, the per-mile road usage charge would initially apply to zero-emission vehicles but be extended to all new vehicles by 2035, replacing the state fuel tax.

And as a shorter-term measure, the panel said, the state should charge a special fee for registering electric vehicles until the road usage charge is in place.

The Nevada Sustainable Transportation Funding Advisory Working Group approved the recommendations during a virtual meeting on Wednesday. The group’s recommendations will be included in a report to the state legislature ahead of the 2023 session.

Assembly Bill 413 of 2021 directed the Nevada Department of Transportation (NDOT) to convene an advisory working group to study and make recommendations on sustainable funding options for the state’s transportation needs. The 29-member group started meeting in July 2021. (See. Nev. Looks to Other States for Ways to Replace Gas Tax Revenues.)

As cars become more fuel-efficient and more drivers switch to electric vehicles, the state is worried about the impact on gas tax revenue. Since 2010, fuel tax deposited in the State Highway Fund has dropped from 1.27 cents per vehicle mile driven to 1.03 cents per mile, according to a draft version of the working group’s report.

“Like all states, Nevada is heavily dependent on fuel taxes to generate funding for highways, bridges, local roadways, and activities related to maintaining and operating these facilities,” the draft report said.

Much of Nevada’s gas tax goes into the State Highway Fund, which is used to pay for highway construction, maintenance and repair. The NDOT-managed road system will need about $17 billion over the next 10 years, but funding from state and federal sources for that period is estimated at $11 billion, leaving a $6 billion gap.

Fixed or Mileage-based Fees

The working group recommended that the road usage charge give electric vehicle drivers an option to pay either a fixed annual fee, allowing unlimited mileage, or a charge based on actual miles traveled.

That’s similar to the system used in Utah, where owners of electric or hybrid cars pay an alternative-fuel vehicle fee on top of the regular annual registration fee. But EV owners can choose to pay per mile instead of the alternative fuel vehicle fee. The per mile fee is capped at the amount of the alternative-fuel vehicle fee.

This year, Utah’s flat registration fee for an electric vehicle is $123 and the charge per mile is 1.52 cents.

In addition to the road usage charge, the working group is recommending other ways to boost revenue for transportation projects. Those include increasing vehicle registration fees; indexing fuel taxes to keep up with construction cost increases; and allowing counties to adjust their portion of the gas tax for inflation.

The working group considered several other revenue-raising measures but decided to not recommend them for further analysis at this time. Those included an EV battery tax, a tire tax and a parcel delivery fee.

Other State Programs

Oregon rolled out the nation’s first road usage charge program in 2013, according to the National Conference of State Legislatures (NCSL). Participants in the voluntary program, called OReGO, may drive gas-powered or electric vehicles. The per-mile charge is 1.9 cents. Drivers of gas-powered vehicles who participate in the program receive a credit for gas tax when they pay at the pump. EV drivers are eligible for reduced registration fees.

In 2020, Virginia started imposing an annual highway use fee on EVs, alternative fuel vehicles and vehicles with a fuel economy of 25 miles per gallon or more. In July, Virginia gave drivers who pay the annual highway fee another option: participating in the mileage-based Mileage Choice Program. Participants install a device in their cars to track mileage.

At the federal level, the Infrastructure Investment and Jobs Act (IIJA) of 2021 established two new grant programs for exploring road usage charges as a replacement for the gas tax, NCSL said.

The Strategic Innovation for Revenue Collection program will support pilot projects proposed by states, metropolitan planning organizations or local governments. With $15 million set aside for each of five fiscal years, the program will focus on road usage charge issues such as data privacy, administrative costs, implementation and equity.

The IIJA will also establish a pilot program for a national motor vehicle per-mile user fee, which could potentially be used to bolster the federal Highway Trust Fund.