Most of the N.C. Department of Transportation’s annual $5 billion budget comes from people who use the state’s roads, through taxes on gasoline and the sale and registration of cars and trucks.
But what if many people — perhaps a majority — don’t pay those taxes, because they drive electric vehicles that don’t use gasoline or because they use ridesharing services such as Uber and Lyft and don’t own a car.
The NCDOT is trying to prepare for those and other possible scenarios where the current way of paying for the state’s transportation system may no longer work, because of changes in technology, demographics and travel habits.
The department has formed a committee of business people, politicians, economists and others to explore alternative strategies for paying for transportation. The N.C. FIRST Commission will meet over the next year and is looking for some guidance from the public through an online survey, at publicinput.com/ncfirst.
Government has built and maintained roads and other transportation systems mostly using fees and taxes paid by the people who use them. The biggest single source of revenue is the gas tax: The state tax of 36.2 cents per gallon accounts for 40% of NCDOT’s budget, while the federal gas tax of 18.4 cents a gallon provides the bulk of the federal money that makes up 25%.
The “highway use tax,” which is essentially a 3% sales tax when a vehicle’s title changes hands, and Division of Motor Vehicle registration fees account for most of the rest of the budget.
The gas tax has already become less dependable as a source of revenue, as improved mileage means people pay less in taxes to drive the same distance. Improvements in battery storage and reductions in cost are expected to make electric vehicles more attractive to consumers in coming years, reducing gas tax revenue even further.
“We’ve always been a user-pay system,” says Burt Tasaico, NCDOT’s director of strategic initiatives and program support. “The challenge is, how can we maintain that in light of all the changes that we see?”
Other changes on the horizon include autonomous vehicles. While Ford CEO Jim Hackett recently said carmakers have been overly optimistic about the development of self-driving cars, the industry still predicts their arrival in years, rather than decades, which could also lead to drastic changes in vehicle ownership.
Tony Seba, a Silicon Valley entrepreneur who heads a think tank called RethinkX, predicts that by 2030 nearly all of the road miles traveled in the U.S. will be provided by on-demand autonomous vehicles owned by fleets, in a new business model he calls “transport-as-a-service.” And those vehicles will all be electric, Seba says.
N.C. Secretary of Transportation Jim Trogdon cites Seba in explaining why he created the FIRST Commission (Trogdon has invited Seba to speak at next year’s transportation summit in Raleigh). He notes that others think the transition to fleets of on-demand, all-electric vehicles will take longer to come about, but the point is the state needs to be ready for some dramatic changes.
“Even if we’re 50% correct, we’re still better off,” Trogdon said in an interview. He added that even some of the most fantastic scenarios for transportation in the future involve pavement.
“Unless everyone is flying in unmanned aerial vehicles, I would anticipate that we’re still going to need roads,” he said.
The shift to electric vehicles will likely be gradual, giving the state time to adjust, says Amna Cameron, NCDOT’s deputy director of strategic initiatives and program support. When the FIRST Commission makes recommendations to the General Assembly ahead of the 2021 session, Cameron said, she expects they will include some modest proposals to boost transportation revenue, such as taxes on Uber and Lyft or on electric scooters.
“We are not at a crisis point in terms of any revenue stability,” she said. “This will be a phased-in plan.”
The FIRST Commission’s public survey, which will be open through the end of the month, asks which new sources of revenue the commission should consider and provides six choices: a fee based on vehicle weight; a variable fee based on congestion; a dedicated state sales tax; a fee based on miles traveled; a sales tax on motor fuel; and a tax on electricity.
It also leaves a space for people to suggest their own ideas.
The commission’s name is an acronym: Future Investment Resources for Sustainable Transportation. It is led by Raleigh Mayor Nancy McFarlane and Ward Nye, president and CEO of Raleigh-based Martin Marietta, which provides stone, gravel, cement and other materials for road and other construction projects.