How Utah’s road funding system could translate to Michigan

Drivers of hybrid and electric vehicles in Utah have the option to pay approximately 1 cent per mile driven in lieu of an annual registration fee.

The state is four years into its pay-per-mile pilot program, which can save some motorists money while making up for lost gas tax revenue on vehicles that use little or no fuel. Ultimately, Utah plans to enroll all vehicles in the program.

RELATED: Michigan could test gas tax replacement using $5 million per mile pilotT

Michigan is considering a similar user fee system to replace the gas tax and address its nearly $4 billion annual road funding shortfall. Lawmakers have proposed spending $5 million to test a voluntary program over two years.

To draw on Utah’s experiences, the County Road Association of Michigan invited Utah’s director of technology and innovation to Michigan to give a presentation about the system on Wednesday, June 5, in Lansing.

“As transportation changes, Utah has been asking for a solution that is sustainable for the long term,” said Nathan Lee, who has served the Utah Department of Transportation for more than 23 years.

“For us, our program is an opportunity for people to make choices.”

The average driver in Utah pays $2,464 per year in gas and fuel taxes (18 cents per gallon at the federal level and 35 cents per gallon at the state level). That’s much more than the average annual cost of $850-$955 for EV drivers, according to the Utah DOT.

Drivers in Michigan pay the same in federal gas taxes, and slightly less in state fuel taxes (30 cents per gallon).

RELATED: If Michigan eliminates its gas tax, what might a replacement look like?

Currently, Utah’s road use charging system is only available to drivers of electric and hybrid vehicles. About 20% of eligible drivers have enrolled, although Lee said that percentage has increased since the 2020 implementation.

All drivers of hybrid or electric vehicles must pay an additional annual registration fee, as is the case in Michigan ($155 on top of license plate and tab fees). Those who enroll in the user fee program will waive that fee and instead pay 1.06 cents per mile.

“If you only drive 6,000 miles a year, you’ll pay half the cost you would pay upon registration,” Lee said. “You could drive 15,000 miles before hitting that rate, which is more than what the average driver does.”

Utah lawmakers initially planned to expand the program to gasoline and diesel vehicles by 2032, but Lee said he expects that timeline to be pushed back. With 4.5% of vehicles on the road being electric/hybrid, Lee notes there is no significant need to rush this as petrol taxes are still paid by 95.5% of drivers.

Program participants have the choice of submitting a monthly photo of their odometer to report their mileage to the state, or having their vehicle’s technology automatically report mileage.

Lee said there is technology available to exclude miles beyond state lines. Those miles account for about 6.5% of miles driven, according to aggregate-level data available to the state.

Starting in May, Utah stopped differentiating where miles were driven and allowed drivers to exclude their out-of-state mileage. Lee said the technology could be useful in the long run and may be ahead of its time.

“The technology works great, it’s just a lot more expensive to collect that information,” he said. “If your idea is about how do I get revenue for roads, then the last thing you want to do is spend a lot of money collecting information.”

Utah’s program does not currently allow commercial vehicles to register. Those vehicles already pay gasoline taxes, plus a fee through the International Fuel Tax Agreement that is returned to each state based on the number of miles traveled within their borders.

Lee said there are ongoing discussions and pilot programs looking at ways to ensure commercial vehicles pay their share of road usage fees in a future where fuel taxes are replaced by other revenue streams.

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Details surrounding Michigan’s proposed pilot program have not yet been finalized. However, the voluntary pilot is expected to start in late 2024 and end in late 2026.

Participants will pay a mileage allowance and receive a refund for any motor vehicle tax or vehicle registration fees paid during the study.

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