The Last Waltz of SANDAG’s Mileage Fee  | Voice of San Diego

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The Last Waltz of SANDAG’s Mileage Fee 

Conservative leaders have for years fought a proposal to charge drivers for every mile they drive, but last week it was progressives who killed SANDAG’s proposal when they said they wouldn’t support it. But the idea, which the agency couldn’t legally charge yet even if it wanted, doesn’t just bring in money to pay for transportation projects — it’s also a major way the agency’s plan proposed to slash emissions. Pulling it could put the region in legal jeopardy.

Hasan Ikhrata / Photo by Megan Wood

Hasan Ikhrata, the bombastic director of the San Diego Association of Governments, spent years sparring with conservative leaders of car-dependent North County over his attempt to charge drivers for every mile they drive. 

But as his agency was poised to approve the Regional Transportation Plan, a 30-year blueprint for transportation in the region that included the concept, it was progressive leaders of the region’s coastal and urban cities – would-be allies in Ikhrata’s quest to remake mobility in San Diego – who appear to have defeated the controversial proposal. 

Now, SANDAG and the elected officials on its board face a host of tangled questions that could place it in legal jeopardy with state regulators. The agency spent three years crafting a transportation plan expecting political support. Mayor Todd Gloria and fellow elected Democrats instead announced their opposition one week before the board was scheduled to vote on the outline of the region’s infrastructure priorities, and its strategy for reducing county greenhouse gas emissions to meet an aggressive state mandate. 

The “road usage charge” was supposed to address both causes: to raise money to improve the transportation system, and cut down on the number of cars on the road. The ambitious Regional Transportation Plan doesn’t only count on the money it would bring in to help pay for all the local road, highway and transit projects it envisions building. It also relies on the charge to discourage driving, one of the largest drivers of California emissions, to meet the state’s environmental goals. 

Since Ikhrata learned he didn’t have the votes, his staff has scrambled to find money and emissions reductions elsewhere. The Democrats who abandoned it have sketched a rough guide for removing one element of an inter-related proposal. Conservatives have warned supporters to remain vigilant. And all of the moving parts gloss over the far-from-certain outlook for the fee, even if it had been included. 

A deadline is looming. SANDAG must adopt a plan satisfying state edicts by year end. The vote is scheduled for Friday. 

A view of the Interstate 5 freeway near downtown San Diego during rush hour on March 5, 2020. / Photo by Adriana Heldiz

Prisoner of the White Lines on the Freeway

In May, SANDAG released the draft version of its 30-year transportation plan, a $160 billion outline for a 200-mile rail system, freeways run by a congestion management system like on Interstate 15 today and continued local road improvements and transit operations, along with all the local taxes and federal and state windfalls needed to pay for it. Every region in the state is required to update their long-term transportation plan every four years. 

That makes it speculative by nature. Many projects aren’t envisioned until 2050. Many revenue sources are expected from other legislatures by unspecified means. It is inexact by design. 

The road usage charge SANDAG proposed, conservatives hated and progressives walked away from, was actually two separate policies. It anticipated both a state charge and a local charge. A state fee would need a change to state law. A regional version would need to be approved locally. The debate now is over whether to assume both of those things will happen as part of a plan that will be updated at least one more time before either the state or SANDAG levied any fees. 

SANDAG assumes the state would impose the charge on drivers eventually, in part because gas-tax revenues are projected to decline over time as more fuel-efficient cars fill the road, buying fewer gallons of gas and therefore producing less money to repair and expand roads and highways.  

Initially, in its first draft, SANDAG assumed that state tax would begin in 2026, and would bring in about $17 billion, adjusted for inflation. 

The state – crucially – cannot charge such a fee right now. It has no legal basis and it’s not even clear how they would charge the fee and collect it. That could change: a state bill in 2014 created a pilot program to study the policy, and another bill in 2018 extended the work of a technical advisory committee that is refining how the state could eventually implement a fee to replace the gas tax. How and when drivers will begin paying the charge is up in the air, but there’s no doubt the state is working on it. 

Once the state started charging drivers for every mile they drove, though, SANDAG assumed that it would begin charging its own version of the same tax. That would also begin in 2026, and bring in $17 billion. 

Altogether, county residents would pay four cents for every mile they drive. 

That was still true in SANDAG’s final proposal, released this month, but the estimate of how much money it would bring in came way down for two reasons. 

One was that the agency delayed the date on which it expected both the state and local driving charges to go into effect. Instead of 2026, they pushed the expected date back to 2030. Those four years of lost collections brought down the total. 

The other reason, SANDAG Chief Economist Ray Major said in an interview, was that the state chimed in to tell the agency how much money to expect from its charge. 

The intersection of Friars Road and Frazee Road. / Photo by Dustin Michelson

“We got clarification from the state that this was a replacement for the gas tax,” he said. “So we had to subtract the gas tax out from that total.” 

Electric vehicles are slowly replacing gas-powered cars and that will impact the gas tax.  

And so the state tax would net SANDAG just $5 billion, between the two adjustments. 

Drivers would still pay four cents per mile, from 2030 through 2050, with half going to the state and half staying here. But for SANDAG, it brought the available revenue to pay for projects way down – from $34 billion (or 20 percent of all the money in the plan), to $19 billion (or 11 percent). 

The board’s direction to get rid of the road usage charge, though, is limited to the local version of the measure. The board can’t tell the state what to do, and SANDAG still plans to count the $5 billion of revenue as part of its plan. 

The Shape I’m In

SANDAG adopts a new regional plan every four years. In each one, SANDAG projects how much money it expects to come to the region – local tax measures passed by voters, major infrastructure bills passed by Congress, state revenue passed in Sacramento. The every-four-year updates cut against the speculative nature of the exercise. Ideally, there’s time to adjust once an expectation falls through. 

Asha Agrawal, director of the Mineta National Transportation Finance Center and a professor of urban and regional planning at San Jose State University, is part of the committee that’s helping shape a potential state road-user charge. 

The backlash to the idea of the charge is not limited to San Diego, she said. It’s controversial everywhere. And it’s not just anti-tax conservatives, or anti-transit car lovers who dislike it. Privacy questions over how it would be implemented have been a thorny issue, too. 

One way to implement a mileage tax would be to simply check a car’s odometer every year, and turn that into a charge drivers could pay in installments. On the other end of the privacy spectrum would be to install a device that tracks a car in real time.  

A lot of people prefer the annual reading, Agrawal said, because it has fewer privacy implications. But the simplicity presents a different problem: how does the state charge for out-of-state travel? That’s even harder with a local add-on tax, which would need to deduct out mileage traveled outside the county. 

A tracking system can be more precise, but presents obvious privacy issues that could create political impediments to an already-controversial issue. 

“If I had to guess, we will probably end up tracking the location of travel, but the state itself doesn’t collect the information, that there is instead a private third party,” Agrawal said. That’s already the case in Utah and Oregon, which have small pilot programs in place already. “So, it could be a company that collects data, and protects privacy.” 

Those could be auto-insurance companies, with which drivers already have personal accounts, or auto manufacturers, whose products often already have the necessary technology in place, and which may be collecting comparable data on drivers’ whereabouts without telling us. 

“This does not seem inevitable – I’ve been hearing people say this is inevitable for 20 years, and we haven’t made much progress,” Agrawal said. “It’s inevitable we have to replace the gas tax with something, and that doesn’t have to happen right away.” 

Indeed, SANDAG’s own plan expects to collect roughly $17 billion in city, state and federal gas taxes over the life of the plan. A 2018 study co-authored by Agrawal, for instance, projected that the state gas tax collections would fall to $8.6 billion in 2040, from $10.4 billion in 2020. Down, but now out. 

“The gas tax won’t collapse in the medium term, even though people assume it’s inevitable in the long term,” Agrawal said. 

Other options? The state could charge a simple vehicle ownership fee. We could increase reliance on sales taxes. States and counties could count on a cut of a new, federal carbon or energy tax. 

Meanwhile, in road usage charge world, proponents are beginning to drill into nuances. States could, for instance, charge different fees for different cars, reflecting that a Civic and a Hummer have different effects on the road and environment. States could combat regressivity by charging low-income people less per mile, as is already done with utilities. The charge could begin cheap and increase as drivers travel longer distances. 

“I think it would not be the wisest choice to go to all the trouble of introducing a road usage charge without taking the time to create a charge that either improves equity or encourages people to make more sustainable choices about what vehicle they buy or how much they drive,” Agrawal said. 

In the end, she said it would be ridiculous to count on road usage charges coming on line in the next three years. “But starting a decade from now? That seems reasonable,” Agrawal said. 

Cars drive down Third Avenue in Chula Vista. / Photo by Adriana Heldiz

The War Was Over and the Spirit Was Broken

But the road usage charge didn’t just create money. It cut emissions. If people have to pay for every mile they drive, they will drive less. 

“The most important thing about the road usage charge, is the fact that this is the most cost-effective measure to reduce greenhouse gas emissions, and vehicle miles traveled,” Ikhrata said in an interview. “There is no other measure in the plan that gets you that much.” 

The agency uses a complicated model to predict how the charge will affect residents’ behavior. By raising the cost of driving above existing costs like gas, car payments, insurance, and parking, a mileage tax makes driving less attractive. SANDAG’s model tries to specify how much, so it can turn that into an emissions reduction. 

That model says every time it gets one penny more expensive to drive a car, San Diego residents will collectively drive 490,000 fewer miles per weekday. A four-cent mileage tax, then, would cause San Diegans to drive 2 million fewer miles per weekday, according to SANDAG’s model. 

As of Friday, SANDAG could not say definitively how much removing the local charge would increase emissions, as a result of the miles driven that would be added back into the plan. 

The state requires a plan that demonstrates a 19 percent reduction in emissions per person, from 2005 levels, by 2035. The plan presented to the board – which Gloria and other officials are tinkering with – had a 20.4 percent emissions reduction. 

“We should make our goal of 19 percent,” Major said. “I believe we’re going to be able to get there, however it’s not going to be the 20.4 percent we thought it was going to be.” 

A road-user charge has such a dramatic countywide effect on emissions because it applies to everyone, across the board. Few other policies do. Planning a new, high-frequency bus line, for instance, generally only changes behavior for the people who live or work along that route. As a result, SANDAG would need to pay to build and operate 19 rapid bus lines to get the same reduction in driving as charging one penny per mile traveled. The agency’s plan would need to add 76 new bus lanes to cut emissions as much as the two road usage charges – and those lines would cost money, while the road charge generates it. 

But the road usage charge isn’t the only element of the plan that makes driving less attractive. There’s something else that discourages driving quite a bit too. 

The plan envisions building its transportation network around dense mobility hubs. Within those hubs, the plan also assumes that cities will make it much more expensive to park. Those assumed increases in parking costs discourage driving just as much as the road usage charges that have dominated discussion of the plan. 

The parking charges alone cut miles driven by county residents by four percent overall. They also single-handedly increase transit use by 17 percent. 

Such a Night

Last week, Gloria – along with fellow board leaders Catherine Blakespear, SANDAG chair and Encinitas mayor, and Alejandra Sotelo-Solis, vice chair and National City mayor – proposed yanking the road charge from the measure. 

That’s easier said than done. The regional plan needs to go through state-mandated environmental analysis, which requires posting the plan and all the scientific work that informs it for the public, who can then provide feedback to which the agency must respond. 

If lawyers determined that the version of the plan without the charge is substantially different than the one with the charge, SANDAG would have to re-do all that work. That would take months, not days. 

Meanwhile, the end-of-year deadline is bearing down on the agency. Without a plan adopted by the end of the year, the region could risk losing state and federal funds, exacerbating its problems. 

Gloria said he has heard a “resoundingly clear message” from constituents in recent weeks that the plan isn’t supported and is stressing out already-concerned people.  

Mayor Todd Gloria / Photo by Adriana Heldiz

“And to be completely honest, I share that sincere concern,” he said at last week’s meeting. “And right now, I don’t think this particular part of this plan is something that we should be considering. I think we need to be responsive to those community concerns.” 

Since the agency can’t remove the charge properly by Friday, he instead said the board should approve the plan as scheduled, while passing a subsequent motion directing staff to begin immediate work on an amendment to the plan that would remove it. That amendment could itself require a full environmental review, meaning “immediate” could take months, and the state would need to approve a plan that San Diego has already said it intends to change. 

To replace the lost revenue, Ikhrata pointed to the $1.2 trillion infrastructure package just passed by the federal government. That money, he said, could make up the difference. 

While the agency hadn’t counted on that package specifically when it wrote the plan, it had already counted on some $4.2 billion from the federal government in future revenues from the federal government through legislation, like the infrastructure package, that it assumed would come about at some point. 

In that respect, the infrastructure package isn’t new money, as much as it is added certainty for money the agency had already speculated would come. 

Ikhrata, though, said he’s not worried. Initially, Major presumed the region would bring in $2 from outside San Diego for every $1 it collects locally, even though historically, the region has brought in more like $2.40 for every $1 it collects in local taxes. 

Ikhrata wanted to be more conservative, after the agency before him had been mired in a scandal that cost his predecessor his job and instigated the state to pass legislation reforming the agency, due to overstated revenue expectations and understated cost expectations that allowed the agency to claim it would still build everything voters thought they were getting when they approved a 2004 sales tax. 

Now, he said, they’d just have to drop that conservative assumption, and count on bringing in more money from the federal government than the agency had initially expected. 

But that’s not all it will take. Decreasing the estimate of how much it can bring in from the mileage tax wasn’t the only change the agency made from its first draft to the one the board will vote on Friday. 

The agency also now expects local voters to pass three sales tax increases within the next decade. County voters are expected to pass a half-cent sales tax increase in the 2022 election (one is already in the works), and another on the 2028 ballot. In 2024, voters within the Metropolitan Transit System boundaries would also pass a half cent sales tax increase. 

Those three new measures would bring in $27.7 billion in new revenue.

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