In the search for ways to bolster the state’s transportation funding, Nevada might borrow approaches used in other states, such as a parcel delivery fee adopted in Colorado or Utah’s per-mile charge for EV drivers.
Those are some of the ideas being considered by an Advisory Working Group on sustainable transportation funding convened by the Nevada Department of Transportation (NDOT). The group met Tuesday to narrow down some of the transportation funding options.
Formation of the working group was a requirement of AB413, passed during the state’s 2021 legislative session. The 29-member panel began meeting in July. A report on the group’s findings and recommendations is due by Dec. 31.
Funding Shortfall
The working group is looking at sources of revenue for the State Highway Fund, whose use is restricted to highway construction, maintenance and repairs.
In addition, the group is evaluating “flexible” funding options that could be used for transportation projects that fall outside of the restricted uses of the highway fund. Those projects might include public transit or bicycle projects.
Revenue from the gas tax, which is Nevada’s largest source of transportation funding, has been decreasing on a per-mile-driven basis as vehicle fuel economy improves and more drivers switch to electric vehicles, according to an NDOT report to the working group.
Fuel tax deposits to the highway fund have dropped from 1.27 cents per mile in 2010 to 1.03 cents per mile in 2020.
At the same time, construction costs are rising and demand for transportation infrastructure investments are growing, including at the city, county and regional level, the report said.
Narrowing Options
The working group has reviewed a wide range of transportation funding options and is now narrowing down the choices.
During a meeting on March 8, consultants with CDM Smith presented three potential packages of transportation funding measures. The packages included short-term and long-term strategies, along with options that offer flexibility on how funds are spent.
Working group members then selected the funding strategies they viewed as the most promising. The options will now undergo further analysis.
One option the group supported as either a short- or long-term strategy, or a flexible funding source, was a parcel delivery fee.
A report from CDM Smith proposed a 50 cent fee for deliveries made by USPS, FedEx, UPS and Amazon, and even food-delivery services. The fee would be collected from the seller of the goods, similar to sales tax collection.
The report proposed reducing the fee to 25 cents for deliveries made by a zero-emission vehicle.
The proposal “responds to concerns that e-commerce is overburdening roadways and not paying fair share,” the report said. The fee, as proposed in the report, would raise an estimated $67 million per year.
Colorado has adopted a 27 cent fee on retail deliveries made by motor vehicle that will take effect in July. The fee was included in SB21-260, a transportation funding bill signed into law in June.
Per-mile Fees
As a longer-term strategy, the working group supported exploring a road usage charge for light-duty vehicles.
In its simplest form, the road usage charge would be a modest fee applied equally to all light-duty vehicles based on miles traveled. But the fee could also vary for electric versus gas-powered vehicles, according to speakers at the working group meeting.
Making a road usage charge a longer-term strategy would give the state more time to analyze the costs and benefits of such a system, while allowing other states to forge ahead first, “taking on the first-mover risks,” the consultant’s report to the working group said.
AB413 specifically asked the working group to analyze a road usage charge model proposed by the Natural Resources Defense Council (NRDC).
Under the NRDC model, an annual fee would be assessed on EVs based on the miles-per-gallon-equivalent rating of the model, the gas tax and the number of miles driven each year.
In a second part of the system, the gas tax would be indexed to inflation and total fuel consumption. The idea behind the two-part system is to address the erosion of transportation funding while not slapping EV owners with “unjustifiable high fees” that discourage EV ownership, NRDC explained in a blog post.
AB413 also asked the working group to look at the road usage charge program adopted in Utah.
Utah charges an alternative fuel vehicle fee for electric cars each year on top of the annual registration fee. But under the road usage charge program, drivers can opt out of the flat fee and instead pay 1.52 cents per mile. The mileage-based fee is capped at the amount of the flat fee, which is $123 this year for an EV.
Other Proposals
The working group supported several additional revenue proposals for further analysis. Those include increasing the base vehicle licensing fee or raising the governmental services tax that is assessed on vehicles based on their value.
Increases to the state fuel excise tax rate are also being eyed, including increases indexed to inflation.
Another possibility is a carbon tax, which would assess a fee on each ton of CO2 emitted. The fee could be charged to refineries and factories, to fuel distributors or to drivers. No state currently has a carbon tax, according to the consultant’s report, but several states have a cap-and-trade system.
The advisory working group’s next meeting is scheduled for April 12. More information is available on the Nevada Sustainable Transportation Funding website.