Vermont Legislature SmartTranscripts:

[Speaker 0]: There it is. We're live now back here on Wednesday, 02/25/2026. And we have a returning witness in Patrick Murphy with Agency of Transportation specifically to discuss the mileage based user fee and rate setting and proposed language. And this is a pretty big piece. We took a lot of testimony, reminder to the committee, right, that we took a lot of testimony from the University of Vermont that was contracted by the agency to study the rate setting. And I think that's as far as I'm going to go for queuing it up. And welcome Patrick to committee. This is a hefty piece here for the next bit.

[Patrick Murphy (State Policy Director, Vermont Agency of Transportation)]: Yeah, thanks so much. Patrick Murphy, state policy director for the Vermont Agency of Transportation. Today, do have language for you to consider. And Damien's not here yet, but we'll walk through that when he gets here. I thought it was important to really go back. The central piece that you all will be approving is the race, and to make sure that you all are confident in how we got to that and the fairness of it. And so I put together a few slides to help with some of the questions that came up during UVM's testimony a couple of weeks ago. So this is just a reminder of how the agency was directed. Put together a rate we did, using elected federal and state money contract with UVM Transportation Research Center, to be able to take these parameters and come to you all with a rate that I felt fair. As you heard in testimony in our 2024 implementation plan that we submitted to the legislature, there were some slight differences in how the rate was calculated. Ultimately, if we had recommended at that time a rate of 1.78¢ per mile and this is what's being recommended by UVM TRC, as well as the agency's rate of 1.4¢ per mile. And this is to approximate what vehicle is paying, a gas vehicle is paying in fuel tax over the course of a year.

[Phil Pouech (Ranking Member)]: Representative Fouch. I just have to ask, when you contracted with UVM research group, was it left open that they determine whatever the rate should be or did wasn't any information? I guess probably this was given to them, which sort of says the average amount in there. I'm wondering, you know, how did they come about it to

[Patrick Murphy (State Policy Director, Vermont Agency of Transportation)]: shoot for this average here? Sure. So we wrote a scope of work for different entities to bid on. There were three bidders for this work. And it just defined the parameters in which they were being asked to. So, yes, they were given this language to kind of point them in the right direction. And we met on the other kinds of considerations that did come up during the legislative session. So as an example, we wanted them to look at a weight factor because in the Senate, there was discussion about, well, what if you included a weight factor in that? The vehicles. Yes. Yeah. So they've looked at a number of different considerations, and they came to their recommendation independently.

[Phil Pouech (Ranking Member)]: Okay, thank you.

[Patrick Murphy (State Policy Director, Vermont Agency of Transportation)]: Certainly with feedback from the agency. I thought it was important to sort of provide some context around things. Ford one fifty is one of the more popular vehicles in the state of Vermont. I took looking at your standard Ford F-one 150 in 2013, what that vehicle was paying when the gas tax was last updated, about $2.71. And across the board, looking at just 11,000 as the average miles traveled during the year. So $271 is what the average F-one 150 was paying twelve, thirteen years ago at a rate of about twenty five or two point five cents per mile. That same Ford now, given all the trends towards greater fuel efficiency, is paying only $185 at a rate of about 1.7¢ per mile. And then the hybrid version of that in 2025 is paying roughly about 1.4¢ per mile, which you'll recognize is what we're proposing for the average. So 23 miles to the gallon was calculated by UVM as the average fleet efficiency for the state of Vermont. And so just shows, with the infrastructure fee that we had in place last year, it's really not capturing the full amount of miles that people are traveling on average. So this is, for electric vehicles, roughly $154 per year. And it's important when you're comparing apples to apples to look at the per mile rate. And so that's where you get to 1.4¢ per buyout. Just for more context around, there was a lot of discussion about, well, what happens when you have a vehicle that travels out of state fairly often, whether it's New Hampshire, New York, Massachusetts. Well, they're also still paying a gas vehicle, still paying a state gas tax. They're just paying a different, slightly different amount. And these are the different amounts that you see in this region, with the caveat for New York and Connecticut that there's also a sales tax applied to that. So New York is effectively much higher at $0.37 roughly per gallon, Connecticut into the $0.40 per gallon range. Vermont is right in the middle of the pack for all United States at 32¢ per gallon. And that's based on a ranking that's looking just at the fuel excise tax. So it's not taking into account, say like New York that has that extra sales tax. It's not taking into account Connecticut, not taking into account sort of the local option taxes. Hawaii being an example that has a very low state rate. But in each of their regions, the effective tax rate is one of the highest in the country. So Vermont is very firmly in that middle group of states in terms of its effective gas tax. What we don't have around us are mileage based user fees for electric vehicles. We don't have a per kilowatt hour fee in other states. We don't accept closest state is Pennsylvania, where there is a per kilowatt hour fee. And even in Pennsylvania, if you go back to the earlier slides, Pennsylvania's gas tax is almost twice the amount of Vermont's. So when you're thinking about, well, what's fair in terms of an electric vehicle traveling into a different state, they're they're actually, you know, roughly equivalent to what the vehicle would be paying anyway, if it were a gas powered vehicle. This gives you a sense. So Vermont, it's not included on that last slide. But Vermont, as you've heard in testimony earlier this year, does collect marginal sales tax on electricity sold through public TV charging. And what this map is showing is despite that, Vermont is still one of the cheapest states to be able to purchase electricity at an EV, a public EV charger. This is 2025 data from AAA. Wanted to give you this comparison of the rate.

[Mollie S. Burke (Member)]: It for public charging? For public charging, yeah. Residential charging would be cheaper.

[Patrick Murphy (State Policy Director, Vermont Agency of Transportation)]: Residential charging is very much cheaper.

[Phil Pouech (Ranking Member)]: Say one of the more cheaper ones, it's just below the average.

[Patrick Murphy (State Policy Director, Vermont Agency of Transportation)]: Yeah, in relation to the rest of the states listed there, it's the lowest.

[Phil Pouech (Ranking Member)]: States listed, okay. The

[Patrick Murphy (State Policy Director, Vermont Agency of Transportation)]: other places where there is in fact a mileage based user fee to some degree, the rates are, they vary from state to state. Oregon's about 2¢ per mile with a proposal to go slightly over that. Virginia is almost $02 a mile. Hawaii is just $0.08 per mile. But again, the regional, that's based on a very low state gas tax. The regions have their own gas taxes, and they will, in fact, be able to implement their own minor space user fees. So the effective rate is going to be much higher for the average person driving in Hawaii. And then Utah recently lowered its per mile rate from 1.9¢ down to this 1.1 cents per mile.

[Phil Pouech (Ranking Member)]: Are these all the states that have it right now? Yes. So

[Patrick Murphy (State Policy Director, Vermont Agency of Transportation)]: I wanted to give you a picture of like, if you traveled 60% of your time within Vermont, but 40% in New Hampshire, what does that effectively mean annually in terms of what you're paying in taxes? And it's it's not very different. There's variation. Just as there's variation when you're traveling in a gas vehicle between states. So you pay slightly more in a state like New Hampshire that has a lower gas tax rate. And in New York, which has a higher one, you pay slightly less. But we're not in any way really double taxing anybody because there isn't around us any state that has a per mile fee that's being applied when you travel in their state. It's gonna affect your still representing with our rate the average amount that people are paying in state gas taxes, whatever state they're driving in.

[Speaker 0]: It's a double taxation in my mind if you're driving to Florida. Charts along the way, and you're paying a tax on that electricity. So you're paying a tax there, and then you're paying a tax for miles.

[Patrick Murphy (State Policy Director, Vermont Agency of Transportation)]: God bless you if you can get down to Florida on the EV.

[Speaker 0]: I'm sure there is. Bill said he's done 10 to do it. Seriously, how's that, that double taxation when you're charging Well,

[Patrick Murphy (State Policy Director, Vermont Agency of Transportation)]: not every state has that sort of

[Speaker 0]: An EV charging.

[Patrick Murphy (State Policy Director, Vermont Agency of Transportation)]: Every state has a tax for at EV charging. So that was a a slide that I showed before.

[Speaker 0]: Unless for this assumption, assume that you're stopping in the state that does have.

[Patrick Murphy (State Policy Director, Vermont Agency of Transportation)]: Yeah, so Georgia or Pennsylvania.

[Speaker 0]: All along the way, yeah.

[Patrick Murphy (State Policy Director, Vermont Agency of Transportation)]: Or depends, I mean, any of these states in blue. So that would be double taxation? Yes. Yeah.

[Speaker 0]: Is there any lawsuits or anything like that for the state that does

[Patrick Murphy (State Policy Director, Vermont Agency of Transportation)]: Virginia has a modified mileage based fees that does not distinguish between miles in state and out of state. And it was challenged. And it was found that there was a rational nexus between just charging for the overall mileage. So there wasn't any sort of legal issues that came up with that. Other jurisdictions outside of The United States, I don't always look to England for, as representative Burke knows, for an example. But they are implementing a mileage based user fitting, and it's based on the exact same way that we're doing it, based on odometer readings. And they have other jurisdictions. They're they're an island, but they have other jurisdictions that border them. And they found that just the majority of the miles tend to be traveled within the state, and there's not legal issues that have come up with that. Representative Burns?

[Mollie S. Burke (Member)]: Yeah. Maybe we've talked about this before, but it strikes me if we're trying to set an equivalent between the miles that are or the gas checks that people are paying now, we have EV users pay that. If we're switching to everybody eventually to mileage based user fee and the gas tax is not getting enough money for the transportation fund, How can we the mileage based user fee is not the solution to the declining transportation funds. Or is it?

[Patrick Murphy (State Policy Director, Vermont Agency of Transportation)]: Well, with the miles out, if I go back to here, let's go back to the first slide, more or less. You've got four trucks. They all have the same impact on our roadway network, more or less. There might be some weight differences, but that's been found to be negligible in terms of the impact. So more or less, the same truck traveling the same distance has the same impact upon roadway network. And yet you get all of these because it's based on fuel, which is just a proxy for how much you're traveling on the network. You have a range from 150 to $270. What a mileage based user fee is attempting to do is to eliminate a proxy and put in place an actual stand in for what the impact actually is upon the roadway network. And so that's you know, there are other things and other reasons why fuel taxes that are seen as positive because they they account for externalities around clean air pollution and the rest of it. But when the gas tax was put in place in the first place, it was to try and approximate the impact upon the roadway network. It was at a time when all of the fuel efficiencies were roughly the same because you had very few models. In one case, it's one model, Model t. And so you could make assumptions around if you traveled, use this much gas, it approximates to so many miles traveled. You can't do that anymore because there's such a variety of fuel efficiencies out there. And so this is trying to get back to that model where each vehicle is paying according to their use of the highway network. And because of that, a mileage based user fee is more sustainable in the long term because you're not seeing the fuel efficiency gains that erodes your revenue base, that has put us in the place that we are right now.

[Mollie S. Burke (Member)]: Just driving miles.

[Speaker 0]: That's right.

[Phil Pouech (Ranking Member)]: Thank you. Sure.

[Patrick Murphy (State Policy Director, Vermont Agency of Transportation)]: So that shows just sort of there's very little difference between the states even if you're driving a substantial amount in a different state.

[Phil Pouech (Ranking Member)]: I just remember your examples are these trucks. And if you drive a car that's 40, gets 40 miles to the gallon and only gets over 50. If that's 40, you're paying $88. There is a big range there.

[Kate Lalley (Member)]: Right.

[Phil Pouech (Ranking Member)]: Efficiency in it. I'll leave

[Damian Leonard (Office of Legislative Counsel)]: it at that. Representative Kate?

[Kate Lalley (Member)]: Wouldn't we just, like on gas vehicles, why don't we just go up a couple cents on tax? The government doesn't want to. I know that. But I mean, we why go through the hassle of dealing with the gas engines over a mileage based user fee when I think it's just easier just to bump the tax up a little bit? I agree that the electric vehicles need to pay their share, but the I don't see where you need to mess with the gas vehicles. I just don't see where you need to do it. If you need a little bit more then and put in for it and and ask for a little increase in gas tax. I I don't I don't know why why you you think it's so important to go after the gas vehicles. I just don't understand that. I'm just kinda

[Patrick Murphy (State Policy Director, Vermont Agency of Transportation)]: Well, so we're we're not proposing to go after the gas about it. Well, I I just clarify for the record that what we're proposing is a mileage based user fee for electric vehicles. So it had nothing to do with gas vehicles. Looking around the room at the faces, I'm not sure how easy it would be to increase the gas tax, but if that were the way to go, there are challenges to it. So we modeled this for the transportation funding study that we submitted last year. And what you see is, in effect, a declining impact over time because you're still having the losses due to fuel efficiency increases. So you can raise the gas tax. That's not what we're proposing to do. But over time, you're gonna see a diminished impact from that. There are challenges because the gas tax is regressive. People with lower incomes tend to drive less fuel efficient vehicles. And as a share of their household income, the gas tax and what is paid is a higher percentage. So you would be taking a fundamentally aggressive tax and making it more onerous and more aggressive. The shift that we're proposing in terms of electric vehicles paying a flat fee to electric vehicles paying on a per mile basis is to make things fair, to make things more approximate to what people are paying in gas vehicles, but also to attune the fee that is paid to the miles that are actually traveled. Because there are some people right now that may be paying $89 but traveling far fewer than the average, and and in effect, overpaying on a per mile basis. On the flip side, there are others that are traveling a lot more. They might be traveling eighteen, twenty thousand miles and are paying far less than what the average is expected. So it is not a perfect system that we're recommending, but given the variables that we've considered in making this recommendation, it is a fairer step and towards something that can become fairest still. So what we propose is beginning with a 1.4¢ per mile rate, and that looks at the average gas tax over five years. And then there's a distance weighted calculation for what the average fuel economy is based on the most recent data that we have. So that's how we get to the 1.4¢.

[Patricia McCoy (Member)]: You're on the level. So based on most, do we have a sense of how much this will collect? So,

[Patrick Murphy (State Policy Director, Vermont Agency of Transportation)]: it's probably about $2,000,000 in terms of fully electric vehicles. But the net effect of 2 and a half million or so. The net effect, given that we already have an EV infrastructure in place, is more like $1,000,000 additional in this first year because You're

[Patricia McCoy (Member)]: talking about the fee?

[Patrick Murphy (State Policy Director, Vermont Agency of Transportation)]: Because we will replace the fee, it's not in addition to. So the net effect will be about $1,000,000 in the first year. Currently getting this would

[Phil Pouech (Ranking Member)]: That's right. Yeah.

[Patrick Murphy (State Policy Director, Vermont Agency of Transportation)]: And so the tricky thing here is also that things are very dynamic. So the fleet is changing year to year. And that's where putting this in place for EVs right now is expected to have much bigger gains in the future as more and more EVs are adopted and become a part of your fleet.

[Speaker 0]: Were estimating your numbers on the actual number of EVs in service now.

[Patrick Murphy (State Policy Director, Vermont Agency of Transportation)]: Yes, yep. So this is the language that we've drafted up with Damien for that per mile calculation. And looking, it's pretty straightforward, dollars $0.01 4 per mile. And it's just applied on a per mile basis. So we've talked about the program. If there are questions about the mechanics of how the program will work, that's a different discussion, but happy to answer that. But basically, people will get an odometer reading through the inspection process. Based on that odometer reading on the inspection process, there can be estimates for the next year about how much will be owed. And the intent is to be able to provide users with a number of different payment methods. So all the payment methods that you currently have, whether it's cash, credit, and the like, but then and online as well. But then also to be able to pay at a frequency that more closely mirrors the gas tax. So whether it be quarterly, monthly, and potentially even a pay as you go model. Gotcha. Yeah.

[Phil Pouech (Ranking Member)]: So you're not gonna get into now how that happens. I could bring my car in for inspection. Yeah. And they say, go 11,000 miles. You can but I'm not gonna pay the car inspector.

[Damian Leonard (Office of Legislative Counsel)]: No.

[Patrick Murphy (State Policy Director, Vermont Agency of Transportation)]: Will I be billed by DMV? Yeah, so you'll be invoiced, but then you'll have the option of spacing out that invoice over a period of time. And the reconciliation in this whole process comes at the point of registration. So if it may be that in year one you begin with quarterly payments of x amount. And then there's a reconciliation based on the calculation of your mileage reporting period, how how many miles you went in roughly a year. And based on that, then you might have slightly overpaid or you might have slightly underpaid. And so the balance will show within my DMV, how much you owe or what credit you receive towards the next payment. And then before registering or renewing your registration, you'll have the ability to to pay that balance off and then proceed to registration. If you don't, if, you know, there is a Damian can get into this with the the language. But if there is a couple of things, if there's an absence of an odometer reading because you haven't got the vehicle inspected in the past year, then you would pay a default higher flat fee, and then you could proceed to registration. Or if you just haven't been paying as you go and you owe a higher amount, then you would pay that amount. If you didn't pay that amount, you wouldn't be able to proceed with registration.

[Phil Pouech (Ranking Member)]: So the registration point is when, I won't say come to Jesus, but that's when you've got to like pay the piper.

[Patrick Murphy (State Policy Director, Vermont Agency of Transportation)]: At the DMV.

[Phil Pouech (Ranking Member)]: Yeah, the DMV, right.

[Patrick Murphy (State Policy Director, Vermont Agency of Transportation)]: Just to narrow it down. We don't want to chase the piper down.

[Phil Pouech (Ranking Member)]: No, right, okay, so yeah.

[Speaker 0]: Mechanisms that you're working on, I'm assuming, are we anticipating that this will be ready for 01/01/2027? Are we getting close to prime time around nine months left?

[Damian Leonard (Office of Legislative Counsel)]: So we're working through comment on where you're at in that development of that

[Patrick Murphy (State Policy Director, Vermont Agency of Transportation)]: I can just comment that we're in the middle of contract discussions with our existing vendor to be able to implement this on a timeline that will hit January 2027.

[Kate Lalley (Member)]: Thank you. Yep.

[Phil Pouech (Ranking Member)]: Just sort of follow-up, I guess, it'll be in language. If you sell your car before the next registration Mhmm. Is there a true up then too?

[Patrick Murphy (State Policy Director, Vermont Agency of Transportation)]: Yes. So with the sale of a car before you go to renew your registration, there is a sort of odometer reading that's with the bill of sale. There is a it's an odometer disclosure form. And through that process, we'll be able to capture that last odometer reading and then be able to apportion correctly whose miles are are whose so that the former owner will still be on the hook for those miles that that he or she had traveled, and then the next owner will be on the hook for the miles that they traveled.

[Patricia McCoy (Member)]: So I have an electric vehicle, and my registration employee can expire 01/08/2027. I get my renewal, am I going to get a mileage based user fee? Like, how does it work? Am I going to drive the entire year of 2027 and then when my inspection is due in December of that year? Or is it my paying ahead and true about I

[Patrick Murphy (State Policy Director, Vermont Agency of Transportation)]: Yeah. What's likely so what what is in place right now is you would pay an annual infrastructure fee of $89 with the registration. Instead of that, you would have roughly an amount that you would be able to pay. It might be $150 But then you would be able to elect on what payment frequency you wanted to make those payments. And so then you could be just $12 per month or something. So you're not paying it all upfront at registration renewal. You're beginning to pay just for those as you travel. You're beginning to pay for those miles. And then a reconciliation would happen at your next renewal, where if there's any difference between what was estimated and what actually were driven, then you would be either credited that excess towards the next annual fee, or you would have to pay some marginal balance.

[Patricia McCoy (Member)]: I guess I shouldn't use the registration. The inspection is due, I'll say, January '27. So in that inspection is when they're gonna rate my mileage, or are they going to guesstimate that I traveled 11,000 miles in the previous year and then true it up January 2028? When I go for an inspection and say, Oh, you didn't travel 11,000 pounds, you traveled 12,000 pounds so you owe this much and we're going to base your next I'm trying to figure out how So you're

[Patrick Murphy (State Policy Director, Vermont Agency of Transportation)]: that piece hasn't been worked out yet, but it's likely that what you'll have is in the first year because although there's data that DMV has through the inspection records, that hasn't sort of been a part of the registration process. So it's likely that in the first year, you would have more of an estimate based on the average amount, $154, something to that effect. And then the second year, you'll have an actual number to be able to kind of more closely attune it to what kind of mileage that individual drives throughout the year.

[Phil Pouech (Ranking Member)]: Okay, thank you.

[Patrick Murphy (State Policy Director, Vermont Agency of Transportation)]: So I just want to make sure there's no more questions on that. Patricia, why you add to it?

[Candice White (Member)]: My really rough guess is that maybe eighty percent of cars in Vermont are infected. I think it's a secondary offense, people cannot be pulled over for an expired inspection. So have you thought about how we make sure all Vermont cars are getting inspected? Because I think this will be crucial to this working.

[Patrick Murphy (State Policy Director, Vermont Agency of Transportation)]: Yeah, so that is the thinking behind the registration suspension or denial. That if there's an absence of a reading and you haven't paid anything, then you won't be able to proceed with the registration. Renew your annual registration. If you have an absence of an odometer reading, though, there will be a much higher flat fee that would be pegged at 98, the 98 percentile what of Vermont would pay, which roughly equates to maybe, like, $375. So if, you know, if you're falling below that in any way, you have a real incentive to go and actually get your your vehicle inspected so that you've got an accurate odometer, and you only pay for those miles that you've traveled.

[Candice White (Member)]: And is that And then, I'm sorry. And then Damien will get into some of the other language that looks at penalties in addition to that. And just thinking about the whole, world the of cars, EVs, and internal combustion, are you thinking about maybe having that same kind of penalty on registrations for internal combustion engines to incentivize them to get their inspections done?

[Patrick Murphy (State Policy Director, Vermont Agency of Transportation)]: That is a good question for DMV. We've not discussed that. It's just sort of what we needed for the mechanics of this program to work.

[Kate Lalley (Member)]: Casey? I'm gonna well, thank for your say I'm a serviceman. Okay? I'm stationed, like, in South Carolina or something or Virginia or something. And I'm down there and I'm stationed. You know, I got my vehicle. It's registered in Vermont. It's electric. I managed to make it down there. And then the I drive around all the time. Are we gonna there there's not gonna be any way to sit there and back out his miles from when he's out of state. We're just gonna we're okay with that, really? Doesn't seem fair to me. I just Just the idea of going out of state, it's going be pass out. Just Yeah. I I what you're saying and how you put it all together, it's not that much, this and that. But it still doesn't seem fair. I don't know. I just I can't get past it. I think the electric power should pay something. I do, but I just if I'm on station, I'm gone for most of the year, and I come home. I got this big bill. I said, did you guys think that through at all, I wonder?

[Patrick Murphy (State Policy Director, Vermont Agency of Transportation)]: Or Yeah. So, I mean, if you want the electric vehicles to pay something I do. Then I guess the question is why? Because right now, there isn't a federal gas tax or federal per mile fee for electric vehicles, and there's not a, you know, per mile fee in wherever down south. So there's no if somebody is traveling all of their miles somewhere, station, Fort Bragg or wherever, they're not unless we have a mileage based user fee for a vehicle registered in Vermont, they're not paying that vehicle isn't paying anything. There's a state gas tax for every state in the in the country. And what I was trying to say earlier is that while they're not all approximate to what you would pay in Vermont, Vermont is in the average in terms of across The United States of what we pay in gas taxes. It's not necessarily that somebody traveling completely all of their miles in some other state is paying any more or less necessarily than a vehicle traveling within Vermont. And I think that is in keeping with the idea that the vehicles, wherever they are, should be paying at least something for the infrastructure that they're using. This case, for the time being, what it means is that Vermont will be capturing some portion of those miles that are traveled elsewhere and being able to put that towards our infrastructure here in Vermont that isn't otherwise being captured anywhere else.

[Kate Lalley (Member)]: But that shouldn't be our concern, what's captured

[Patrick Murphy (State Policy Director, Vermont Agency of Transportation)]: in the world. And there will be this is, again, this is the first phase of what we're proposing. We hope over time that the kind of technology that exists with telematics and other strategies will allow us to actually charge based on the miles that are driven within the state. Maybe it's even more narrowly to what's traveled on public highways. And we're just not there yet. Otherwise, we'd be paying for a solution that administrative costs might rise to 40% of what we would take in. So if it doesn't make financial sense right now to be concerned with the narrow number of cases that otherwise would have to pay something somewhere.

[Kate Lalley (Member)]: Don't care about fairness. I'll leave you alone.

[Patrick Murphy (State Policy Director, Vermont Agency of Transportation)]: Well, so, I mean, I just to reiterate from what I said, I think from the start is this is trying to make things fair. We do care about fairness, And I guess there's not much more to say beyond that.

[Speaker 0]: Representative Wells?

[Patrick Murphy (State Policy Director, Vermont Agency of Transportation)]: Thank you, chair. I believe in fairness too. And those electric cars have been freeloading on our highways for years without paying any tax. So I believe that there should be a back tax and that could be based on an individual basis. If you have nice electric owners like Mollie and Candice, you'd be fined $500 If you have mean drivers like Phil, they get taxed 1,000.

[Speaker 0]: I will ask you this.

[Patrick Murphy (State Policy Director, Vermont Agency of Transportation)]: Are there any exemptions proposed or considered at this time related to violent base injury fees? So we've left a section open for exemptions. We had in an earlier version of the language some exemptions that didn't quite fit for electric vehicles in terms of where the technology is right now, but it exists for some other vehicles. But that's something that we can talk to Damian about. You know, there's, like, exemptions for agricultural vehicles, for example.

[Speaker 0]: Trying to come to a spot where somebody may or may not request an exemption. So there is a spot for it, there's none currently being proposed.

[Patrick Murphy (State Policy Director, Vermont Agency of Transportation)]: That's right. It's sort of being left open because there might be things that we just haven't thought of. And you have. The vehicles that would be subject to those kinds of exemptions typically would be medium or heavier duty vehicles that aren't subject to this mileage based user fee. So that's why we didn't contemplate exemptions

[Damian Leonard (Office of Legislative Counsel)]: within this first phase. But you did consider you have it sounds like

[Speaker 0]: you have considered them. You've looked at them. You've got an open spot for it.

[Patrick Murphy (State Policy Director, Vermont Agency of Transportation)]: Yeah.

[Speaker 0]: Potentially down the road, we would look at exemption.

[Kate Lalley (Member)]: If I could

[Speaker 0]: lead back into the if that vehicle were stationed in somewhere else in all of their miles, they're registered in Vermont because they're servicemen. If I'm to understand what you're saying is that they're not paying an equivalent to the gas tax anywhere except in a couple of states then. And so the idea here is in the start that they would be paying something equivalent to a gas tax that they would be paying if it was gas, in effect, electric. And the way that handles right now is every state collects a gas tax. So we don't track where a car drives that way. And because every state collects it now, and it sort of is washed between states, we're gonna collect it in North Carolina for now. That work that might have been, or that driving that might have been done in North Carolina, that because they don't have one of these perhaps yet, or because it's not in there now. Is that what I'm trying to understand? That's what you've sort of been saying? That's right.

[Patrick Murphy (State Policy Director, Vermont Agency of Transportation)]: And so then it's anticipated that a next phase is going to evolve the program in a way that does become more fair. And so there may be with more volume of vehicles within a program, you can keep the administrative costs lower. And so there may be a pathway for someone to elect to have a more technology heavy device or solution that allows them to track mileage in and out of state. Right now, it would be cost prohibitive for the state to be able to take on that cost and probably cost prohibitive if it were just passed on to the user. It it would sort of more than cancel out whatever savings you see. But there is likely to be a time when that becomes more cost effective, and that we would be able to offer that implementation option. The other thing is that other states, as they begin to see states like ours, keeping in mind that Hawaii is the only other state to actually have a program that is working towards a mandatory program for EVs. Vermont, if it implements in January 2027, will be the first mandatory program for EVs. So once other states catch on that there are revenue sources that they are moving out on, there will likely become other states even within our region that want to do similar things. And then we have the ability to start working with those states on the interstate travel question, where right now, like for medium and heavy duty freight vehicles, you have a way to be able to apportion miles to a particular state and therefore start apportioning revenue in that way as well. There are a similar way could be devised for the light duty vehicle class.

[Chris Keyser (Member)]: Representative Keyser? I was listening to Matt Coated talk on Facebook or whatever it says there. He was talking about this topic, about what I was talking about driving out of state and stuff. He was saying something about there's a transponder that you can get for, like, $75.

[Damian Leonard (Office of Legislative Counsel)]: Have you heard that? Yes. That's what

[Patrick Murphy (State Policy Director, Vermont Agency of Transportation)]: I was just referring to. And so there's there is something you could have an onboard plug in device and that costs some money. So whatever it is, 75, however much, if it's being taken on by the state where that's a net loss in revenue. If it's being taken on by the user, you'd have to have a lot of miles and a lot

[Chris Keyser (Member)]: of miles out of state for it to become worth it. Is there any obligation from the state? Let's say that say Phil buys one for his vehicle. Is that what does the state have to worry about afterwards and what do they do? They have some sort of

[Patrick Murphy (State Policy Director, Vermont Agency of Transportation)]: The state would have to have a mechanism to be able to receive that data, and that would cost money to implement. And so there's a lot of back end IT development work that would have to happen to be able to make that a possibility. Then there's an ongoing cost to this. So it's not just you plug in a device and that creates a revenue source for DMD. There's ongoing monthly costs associated with that device itself that allows you to have that service that actually transfers the data to the state. So it's not as straightforward, as simple as when you just buy a device and then that's it. There is that ongoing cost and that is where we found it at this point in time to be too cost ineffective for us to to do that in this first phase. Did you hear how much on the states? And was it Yeah. So the city The Senate Transportation took testimony from Virginia, Utah, Oregon, all these places who have piloted programs and found administrative costs that exceed, in some cases, 40% of what some cases, they are still in the red with their programs for a mileage based user fee. That's not where we want to be. It is not solving a problem, which is lost revenue. This slide here gives a sense of the larger problem at play. So electrification is a piece of it, but it's just a piece of it. There's also fuel efficiency, which is a somewhat larger piece of it. And then inflation is the biggest piece of it. So, this gives you a sense of just, this doesn't even get into inflation. But if you look just at what is lost to inflation, or what could be lost to inflation, it is significant. It is more than the two of these, electrification and fuel efficiency combined. So that's why we think it's important to index this for the future. And what we've looked at, what had been modeled by the UBM Transportation Research Center, is the National Highway Construction Cost Index, which last year was roughly about 4%. And so there is language that Damian will walk through that would tie this to an annual adjustment so that there's not a need to come back to the legislature each year, But it would be an annual adjustment based upon, you know, the prior year's data. Doctor. Jim Burke?

[Mollie S. Burke (Member)]: Yeah. So what is the you know, given that the federal gas tax hasn't been raised since 1992, it's ridiculous. You know, how would that look different? I mean, it looked different at this chart, which taking into account that tax that got raised, ever got brightest.

[Patrick Murphy (State Policy Director, Vermont Agency of Transportation)]: This prior chart?

[Phil Pouech (Ranking Member)]: Yeah.

[Patrick Murphy (State Policy Director, Vermont Agency of Transportation)]: Yeah. So this is just looking at where the gas tax is now for the federal government and not assuming any increase to that. So it's holding those. But when you are bringing in sort of the less because of fuel efficiency and then less still because of electrification and then that smaller number, the purchasing power of that smaller number is far less because of inflation over time. And so that's why it's important, I think, to be able, once we put this in place, to have this index to some factor in what we're saying here is that one of the best fitting factors for our transportation program here in Vermont is the National Highway Construction Cost Index because it's looking at a variety of materials and labor, and it's based upon actual bids that are received from state DOTs and agencies.

[Patricia McCoy (Member)]: Thank you.

[Unidentified Member]: Given that it seems like the goal of the MBOT is to achieve some kind of parity of the gas tax, is the agency also proposing indexing the gas tax?

[Patrick Murphy (State Policy Director, Vermont Agency of Transportation)]: No, for reasons that I've said before. The gas tax is a regressive tax. By adding an inflationary factor to it, your point of burdens, more lower income households than if you just allowed a natural shift to happen towards the mileage based user fee. The natural shift in

[Unidentified Member]: terms of, like, a long term plan for all vehicles to be on their input? Or

[Patrick Murphy (State Policy Director, Vermont Agency of Transportation)]: what the administration has proposed is for electric vehicles, and then as the fleet generally shifts towards electrification, more and more vehicles will be subject to the myelospace user fee. But the legislature proposed in its intent language last year is that there be a shift entirely that transitions the myelospace user fee to all vehicles.

[Unidentified Member]: So the impact was also inherently progressive, so I'm not really sure. Maybe by a small margin, the gas tax is more regressive, but to me that doesn't outweigh the inherent unfairness of one type of vehicle's fees going up by 4% a year and the others being actually marked a cost ten years ago. So are there thoughts on how we're explaining that to Vermonters? Like, if you drive an electric vehicle, why your costs are going up every year, but for gas vehicles, they're stuck ten years ago?

[Patrick Murphy (State Policy Director, Vermont Agency of Transportation)]: Well, that's up to legislature to decide what it does with the gas tax. What we're proposing is to be able to recapture the lost revenue for electric vehicles. And we do think that indexing that is an important way to not lose ground over time. With more and more electrification, the gains that you will see from indexing the gas tax are going to be lower and lower, whereas the converse is true for electric vehicles subject to a modest base use of PE. You will see that grow and grow over time. Yeah.

[Unidentified Member]: And in the Vermont Transportation Research Center proposal, they had also modeled indexing the gas tax too. And I just am having a hard time with this proposal, which really disincentivizes and penalizes EV drivers if their costs are going up every year in gas vehicle.

[Patrick Murphy (State Policy Director, Vermont Agency of Transportation)]: Yeah. So I don't see it as disincentivizing or penalizing EV owners. When you look at what go back to this original slide what EV owners are paying versus what gas vehicle owners are paying. What we're proposing is to go up from 89 to $154 to get closer to what the average gas vehicle is paying. But that is not including federal gas tax that will not be paid under this proposal, which is 18.5¢ or so. It's not including the gas savings that you get from moving to an electric vehicle. So the gas tax, it's important to remember. Right now, based on where we are, let's say we've got dollars a gallon, the gas tax is just a little more than 10% of what those savings are. So for every gallon of gas that you avoid, you're going to avoid still 90% of that costs. So in terms of a disincentive, I just it's hard for me to think about it in that way when you're talking about a fraction of the cost savings are now coming back to the state to be able to build out a transportation network that benefits every vehicle.

[Unidentified Member]: Okay. Well, thanks, Patrick. I appreciate your responses I still have a significant concern, but I appreciate it.

[Phil Pouech (Ranking Member)]: There was a slide with national revenue trends. I don't know if you can go back to that, it was one before where you left out.

[Kate Lalley (Member)]: Yep.

[Phil Pouech (Ranking Member)]: And and is this this is the federal tax?

[Speaker 0]: Yes.

[Phil Pouech (Ranking Member)]: It's not a state tax.

[Patrick Murphy (State Policy Director, Vermont Agency of Transportation)]: It's not the state. I shared it because very similar things are going on at the state level.

[Phil Pouech (Ranking Member)]: So that was my question. Yes. So 75% of the decrease, 30 people get 13% versus three. It's about 75% is due to the gas tax revenue loss from efficiency. And it's 25% for EVs. I'm wondering, is that the same for the state, that ratio?

[Patrick Murphy (State Policy Director, Vermont Agency of Transportation)]: So I would say it's probably it's roughly the same for EVs. It's probably a little bit more for fuel efficiency, closer to 17%. So if you looked at it in terms of, you know, based on what we last when we last changed the gas tax in 2013, 2014, and then sort of what's been lost because of that now in, you know, $20.26 dollars, you're you're probably looking at around 3% because of, you know, two and a half, 3% because of electrification. Yeah. Maybe 17% because of fuel efficiency, and then maybe 25%, 26% because of inflation.

[Phil Pouech (Ranking Member)]: Yeah. I think That's just

[Patrick Murphy (State Policy Director, Vermont Agency of Transportation)]: like ballpark. Right. Yeah.

[Phil Pouech (Ranking Member)]: I think we all agree the inflation is really the biggest loss. And you're pointing out that efficiency is the next biggest loss. And then EVs are a loss that's probably, you know, is gaining over time.

[Speaker 0]: That's

[Phil Pouech (Ranking Member)]: right. But on the EVs, you wanna put that inflationary factor on, But you're not proposing at all an inflationary factor on in other things. And you're I think your argument was people who are driving EVs are saving more money by not buying gas.

[Mollie S. Burke (Member)]: And, you know, I would argue personally,

[Phil Pouech (Ranking Member)]: the reason I drive an EV is so that it doesn't prove we reach our climate goals, and it's more efficient. And so then put what I would describe as a regressive tax on just EVs with that inflationary factor just doesn't seem fair for those that are trying to do what what they believe is the right thing to do to move our state to meet their goals. Just

[Patrick Murphy (State Policy Director, Vermont Agency of Transportation)]: So I can't really say anything other than we have a funding crisis. We're losing money because of

[Phil Pouech (Ranking Member)]: We all agree with that. Yeah. So

[Patrick Murphy (State Policy Director, Vermont Agency of Transportation)]: we're losing money because of fuel efficiency, because of electrification and because of inflation. And the proposal that we have here is intended to do just that, to start filling in gaps that we have. Working away first at EVs, where there's probably a $2,500,000 gap, also including that inflationary factor as an example for potentially other policies. But I think it's, the fundamental flaw with the fuel tax right now is just that you can't reconcile those two things that you described. You can't do it with the fuel tax. You can't reconcile trying to support the transportation fund and also work away at the climate goals. Now you can do it in a different way outside of the fuel tax, but you just can't do it sticking to the fuel tax because you will forever be losing ground. So until until electric vehicles begin to actually pay on average what gas vehicles are, you're gonna be continue to lose ground because there is an expectation, despite what's happening at the federal level now, there is an expectation that more and more of our fleet will become electric. And the problem that you're facing now will become bigger and bigger.

[Phil Pouech (Ranking Member)]: But I just follow-up question. If we go with the mileage based user fee with the average tax, which is what's being proposed, doesn't that now bring them at a level ground of fuel tax versus marriage based user fee?

[Patrick Murphy (State Policy Director, Vermont Agency of Transportation)]: Yes, the intent.

[Candice White (Member)]: Representative White? So Patrick, I appreciate this presentation, and I think the inflation adjuster is responsible, because we've found, last year, added an adjuster for the state and highway funds because they weren't growing. So I think that makes a lot of sense. And I'm also in agreement with representative Pouech and Tomlinson that I think it needs to be balanced with the inflator on the gas tax as well. I understand that was not your charge, you're not here today to talk about it, but maybe in our committee we talk about inflators for both the mileage based user fee as well as the gas tax.

[Mollie S. Burke (Member)]: Patrick, what

[Speaker 0]: was the ramification of the idea that we're comparing an excise tax, tax to a user feed in terms of how it's managed and where it is in the DMV. We are talking about a gas tax, what they call a gas excise tax or something like that on fuel. And there's a significant I'm sure there's some level of significant difference between what a tax is and what a user fee is. I'm not sure how that gets discussed in there. I'm not sure you have a comment on that or not, what a difference between what a tax is and what a user fee is. But user fee is much more specific to the road, the activity that actually happened. And the excise tax on gasoline is about how much you pay it, whether you put it in your car or you put it in your lawnmower or you put it in your other vehicles that you're paying for gasoline. Either way, it has nothing to do with actually how much you may or may not have anything to do with how much you drive on the road. There's probably implications to the idea of a revenue excise tax and there is a user fee. Then you take the user fee and we implement it. It's what we've pushed for as a committee for quite some time. We're going in this direction. That's what all the laws that we've passed for around how many years now that we're trying to get to this. That's going to reside in the Department of Motor Vehicles. We have fees for work that's done in the DMV every day. Are any of those fees tied to inflation?

[Damian Leonard (Office of Legislative Counsel)]: No. I'd to get a commissioner to answer

[Patrick Murphy (State Policy Director, Vermont Agency of Transportation)]: that question, too. No, but there is a process for a three year review within statute to see what has changed, there's an ability then for adjustments to happen.

[Speaker 0]: I'd suggest that perhaps that's particularly challenging for some of our colleagues in the last time that that was reviewed. And I guess that is more of a question for the commissioner or the secretary of administration.

[Patrick Murphy (State Policy Director, Vermont Agency of Transportation)]: But you're right that the connotation of a user fee is somewhat different than taxing fuel. And it's to get closer to this idea of transportation network is a public utility. You're paying for how much you use, and that that relates to the impacts more closely than does the gas tax on that utility that's provided. And so in this case, we're saying that those costs to continue to maintain that utility that's provided to the public are going to increase year over year. And it's going to be more closely reflected in the National Highway Cost Construction Index than probably anywhere else.

[Speaker 0]: I don't know if I really

[Kate Lalley (Member)]: like the idea of a a tax being increased without coming talking to us first. I don't know if I like the idea of something automatically going on there. Is it going be inflation, the inflation number that decides that?

[Patrick Murphy (State Policy Director, Vermont Agency of Transportation)]: What's proposed in the language, and maybe shortly it'd be a good time to bring Damien up to discuss the language. But it's proposed in the language to adjust annually based on the prior year's data. And if that's the direction that the legislature adopts, it's the legislature making that decision.

[Kate Lalley (Member)]: Well, we're the ones who are going to hear about it, my constituents, if they This is how you work. It's One last thing there. Was just going say that I've never seen a tax that wasn't progressive or a fee or anything. I just always seem kind of regressive to me. I always feel little bummed about it when I hear a tax is going up. So we hear a lot of that lately. So just we're not

[Patrick Murphy (State Policy Director, Vermont Agency of Transportation)]: saying. Some can be progressive, and some are more regressive than others. So there's degrees of it.

[Speaker 0]: We have an entire committee next door that spends all their time talking about that, I suspect, or a big chunk of their time. Don't know. That's That's a big question.

[Kate Lalley (Member)]: I'm all set. Ready for Damien. I'm stop sharing. We're ready to switch.

[Speaker 0]: Appreciate it. Can you

[Phil Pouech (Ranking Member)]: go

[Patrick Murphy (State Policy Director, Vermont Agency of Transportation)]: sorry. Can you please go back back for to the Forward all the public inquiries that you got.

[Phil Pouech (Ranking Member)]: Two slides back, there was a graph there. Maybe I was spacing out steaming over here. I don't know if you could bring that up. I wasn't quite sure what the, it's showing the annual adjusting, inflation adjustment is effective. Oh, I guess, well the graph, the line. That's right, yeah.

[Patricia McCoy (Member)]: So that

[Phil Pouech (Ranking Member)]: blue line is showing me what the fee would be showing that it's gone down. Some years This it's gone

[Patrick Murphy (State Policy Director, Vermont Agency of Transportation)]: is the index. This is, and what you're seeing here are the points are because it's done every quarter.

[Phil Pouech (Ranking Member)]: Okay. And so it points out

[Patrick Murphy (State Policy Director, Vermont Agency of Transportation)]: So it goes up and down based on where

[Phil Pouech (Ranking Member)]: Probably mostly, but we know from 2009 when that recession started, that inflation was pretty flat. And then you can see when the pandemic hit, when inflation shot up.

[Patrick Murphy (State Policy Director, Vermont Agency of Transportation)]: That's right.

[Phil Pouech (Ranking Member)]: Is the language proposed that, and I'm not gonna lie to it, even if that's the way the language is. Is the language proposed that the mileage based user fee would go down if this inflation factor went down?

[Patrick Murphy (State Policy Director, Vermont Agency of Transportation)]: No. What's proposed is that if there was a negative number, which when you look at this, it's there aren't There aren't no negatives. There aren't many year you might see a year or two where there's negative, but it's not by much. What's proposed, as is the case in, as I understand, in other in other places in statute, it's you know, there's a floor. And so you're not gonna go lower than negative percent. But then if there is a higher amount, it would go up. And that's another discussion point for you all, too, is whether there's a cap that's put in place, or whether that's determined in a different way based on an average over a few years, or, you know, there's there's room there for for discussion on how you do it in a way that you see is fairest.

[Kate Lalley (Member)]: Any other thoughts? I have some questions.

[Speaker 0]: I don't think they're going your way for now. Okay. Thank you very much, Patrick. Thank you.

[Patrick Murphy (State Policy Director, Vermont Agency of Transportation)]: Could you imagine what the gas tanks would be if they had been tied in place in the last ten years?

[Mollie S. Burke (Member)]: Yeah.

[Damian Leonard (Office of Legislative Counsel)]: I already had a CFO what that would be.

[Speaker 0]: It was like about 70,000,000 cooling the gas or something around there. Oh, we did see a thing on that.

[Damian Leonard (Office of Legislative Counsel)]: You're

[Phil Pouech (Ranking Member)]: right. We did have a

[Speaker 0]: I don't remember it. I just asked the CFO that same question. We had a presentation at one time where they kind of

[Damian Leonard (Office of Legislative Counsel)]: said what the facts would be if they had been adjusted.

[Phil Pouech (Ranking Member)]: Well, I think you'd be on the books.

[Candice White (Member)]: Damian. Good

[Speaker 0]: afternoon. I was worried what time we were going to get here, and I'm glad you were the benefit of all that conversation and testimony and interrogation.

[Damian Leonard (Office of Legislative Counsel)]: I hope the seat cools down a bit now. You guys got all your questions out for Patrick.

[Speaker 0]: You know, haven't actually seen the you know, we haven't actually dug into the language yet. So that's

[Damian Leonard (Office of Legislative Counsel)]: Alright. Well, for the record, I'm Damian Leonard from the Office of Legislative Council. And just a moment here, I will pull up a what I would say we should all think of as a first draft of the mileage based user fee. You were already identifying some questions. I'll point out areas where I have some questions just based on comparing our language to what other states have, and we can start working from there. There's some placeholders in there that Patrick mentioned. So lots of different things to talk about. So what this would do is it would add just one section, to the, t bill or whatever bill you put it into. I'm assuming t bill. We'd create a new chapter 43 in title 23 called mileage based user fee. It would include a start with purpose section that provides that the purpose is to impose a mileage based user fee for battery electric vehicle pleasure cars. So this does not include Tesla trucks or other electric heavy duty vehicles, things like that. This is just battery electric light duty vehicles. That is approximately equivalent to the average amount collected by the state in fuel tax revenue from the use of non plug in electric vehicle pleasure cars registered in Vermont and the combined amount of electric vehicle infrastructure fee and fuel tax revenue collected by the state for the use of plug in hybrid electric vehicle pleasure cars. That should be plural. Oh, no. It shouldn't. Never mind. The one thing that I wanna highlight before we even move on from this language is there's already a discrepancy between the amount that the state collects from a non plug in electric vehicle pleasure car or internal combustion engine, traditional, whatever you wanna call it, and then a plug in hybrid electric vehicle because of the way the electric vehicle infrastructure fee and fuel tax work. And Patrick and Logan can get more into the numbers on that, but there's already a difference. So this is a piece of the language that you may wanna true up. But this tracks what we passed last year, so we've put it into the bill. And it it tracks the intense statement that was passed last year. In the definitions here, so the first definition is account manager. It's an entity that the agency of transportation or DMV contracts with to administer and manage the mileage based user fee. Annual vehicle miles traveled is the total number of miles that a battery electric vehicle is driven during the mileage reporting period. BEV is the abbreviation for battery electric vehicle. Rather than spelling that out, I'm using the abbreviation throughout. Mileage based user fee is the fee charged for the annual vehicle miles traveled by a BEV pursuant to section forty three zero two, which we'll get to in a second. Mileage based user fee rate is the rate per mile. It's proposed at 1.4¢ per mile in this bill, And we'll talk about that more in a moment. Mileage reporting period means the time between annual inspections or the time between the most recent annual inspection and a terminating event. And a terminating event is the act of either registering the vehicle in a different state or a change in ownership or a lessee ship of the vehicle or both. I see a question.

[Phil Pouech (Ranking Member)]: What what happens if you just you know, electric vehicles aren't at that point yet, but at some point, you're gonna say you're in the hall to the. So that's a term of 80. And then two, transfer station. Transfer station.

[Damian Leonard (Office of Legislative Counsel)]: Yep. So that's that is true. We do have provisions in statute for what happens when your car is a total loss and it's no longer registered in the state.

[Phil Pouech (Ranking Member)]: Okay. Refund for your registration. Yeah. Maybe we might be Alright.

[Damian Leonard (Office of Legislative Counsel)]: This is why it's a first draft. So if y'all don't mind, I'm just gonna take notes as we go. Alright. So, Section forty three zero two, which I've mentioned a couple of times already covers the assessment of the fee, how we calculate it, how it's paid, and the placeholder for exemptions. So for each battery electric vehicle registered in Vermont, the mileage based user fee would be collected within fourteen days of the mileage reporting period fourteen days after the conclusion of the mileage reporting period. As soon as practicable after calculating it, the commissioner shall mail to the registered owner or lessee a statement of the amount of mileage based user fee assessed pursuant to this section. As a reminder, last year, we adopted a definition of mail that includes electronic mail and other digital transmission as well as the old fashioned mail that gets delivered every second or third day. So the mileage based user fee assessed pursuant to this section is in addition to any other fees and taxes imposed by this title, and that's to cover things like registration fees, etcetera, purchase and use tax. Pay payment of the mileage based user fee, not more than 45 days after the user fee assessment is mailed, the owner or lessee has two options. They either pay the full amount as a lump sum to the commissioner or they enter into an agreement with the commissioner to pay the amount of the mileage based user fee in quarterly or monthly installments. Before I move on here, I wanna pause. So in hurrying to get this language drafted, there is language that was proposed by the agency about truing up, and you spoke with Patrick a little bit about truing up. And so one thing that we need to clarify in this subsection is whether you're going to pay based on the prior year or whether you're going to pay an estimated amount of true up at the end of the year. And if you're paying an estimated amount, truing up at the end of the year, you would draft this differently. I didn't have a chance to talk to Patrick at 11:00 last night when I was drafting this. And so I drafted this for simplicity and left this as something to highlight for you that you will need to clear up. So, calculation is, at 1.4¢ per mile traveled, for calendar year 2027. So this is mileage reporting periods commencing in that calendar year. So essentially, what I've done with this draft, and again, you may want to adjust this, is it's looking at when is the first inspection in your mileage reporting period, and then your rate is tied to that. You can also tie it to when the last inspection is or some other factor, but that's that's how I've set it to trigger the rate that you're gonna pay, and then that rate adjusts by calendar year going forward.

[Mollie S. Burke (Member)]: Yeah. Maybe this is something further on, but if you pay the registration fee, like, in July, it starts in January, then you get a refund?

[Damian Leonard (Office of Legislative Counsel)]: So the way this is set up, I don't have a transition period provision to address what's gonna happen for folks who have paid their their infrastructure fee. Yeah. And then in the middle of that registration that they paid an infrastructure fee, the mileage based user fee kicks in. And I know for for some folks, especially if you bought a used vehicle, you may have a car where your inspection date is in a different part of the year than your registration date. Typically, a new vehicle, I think they're pretty much the same unless you've fallen behind. But with a used vehicle, it can often be months different. So that's another thing to keep in mind. And that's something that is not addressed in this draft, but that's worth thinking about. We would probably put in a transition provision for the initial year, but you may also want to think about if we're truing up at registration, how do we deal with that offset inspection? And that's these are questions that we'll need to work through with the agency as you develop this language.

[Patricia McCoy (Member)]: Representative McCoy? Yeah. That's that's what I'm trying to figure out in my brain because if you purchase a vehicle in December and it's going to be registered in January, you don't have any mileage per se, you have one month worth of the mileage, so when you go to have it inspected, there's no appreciable mileage, it seems like this first year we would have to kind of like average out. If the average is 11,000 miles, then that's what we assess for that year and true up.

[Damian Leonard (Office of Legislative Counsel)]: Right.

[Patricia McCoy (Member)]: I don't know.

[Damian Leonard (Office of Legislative Counsel)]: If if you're paying on an estimated rate, one of the things that will need to be in a transition provision is how do you estimate for the first year before you can true up. If you're paying on a backward looking, these are the miles I traveled during my last mileage reporting period, and now I'm paying for it, whether it's in a lump sum or staggered amounts, you know, monthly or quarterly payments, then there's less of that. But there's the question of, you know, if the payment is tied to registration, what if your mileage reporting period ends a month after you register renew your registration? And so there there are some questions about the logistics. But there I think there are probably several different ways to approach this. It's probably worth looking a little closer at how the other states that have implemented something like this are approaching this and what their their model is.

[Kate Lalley (Member)]: Representative Casey? Start now. Say the law say this all passes and is getting ready to go. Would wouldn't you start out with somebody looking at your odometer? And then

[Damian Leonard (Office of Legislative Counsel)]: So the way this is designed right now is it's you're looking at the odometer either at the inspection time. So they're they're recording the odometer reading when they inspect the vehicle. Or to end the mileage reporting period when you transfer the vehicle, You have your odometer report or disclosure, and that's what the they'll use To start out with? To track that mileage reporting amount. The that's for all of these periods here. If I'm driving exactly 10,000 miles a year in year one, maybe when I buy the new car, they'll see zero. And then at the end, when I get my next inspection, they'll see 10,000. And then they'll multiply that out. I think the tricky pieces here are when do you take the first odometer reading? When do you take the second one? And how does that tie back to registration? And if those two are at different times, what do you do about the months that are in between? Are you paying an estimated amount? Think there's a couple of different ways that we might be able to get there, but it's probably worth starting to work through that with the agency. They've done a lot of homework on this. And I know we've also that there's been testimony that in the building, I don't know how much this committee has had from other states about what they've done to address some of these issues as they've implemented their pilot programs and so forth. And so that might be worth looking at too. Like, what do they do if the two don't true up? Some of those states may or may not have inspections. I don't know what what the details are for each of these states.

[Kate Lalley (Member)]: And I have one more thing there on per mile traveled by each BEV. Shouldn't it say per mile traveled within the state of Vermont?

[Damian Leonard (Office of Legislative Counsel)]: So no. Right now Let's try it. Right now, as proposed, this just looks at the the mileage reporting period. I know I did want to know while you were I would never characterize it that way. Oregon does have language in their statute around this that allows people to show that a portion of their miles was not within the state. They also are one of the states that are piloting with different vendors, if I remember correctly, various GPS sort of transponders that will geofence your car. You can monitor that. But that's something that you could consider. There is language out there on that, and that's something that we could consider looking at in a future draft. I'll just pick it on the mover. That's fine. Okay. The next section, this was also something that you raised questions about earlier. This is the annual adjustment. This is a policy choice for you. So there are different opinions in this building as to whether the legislature should adjust fees and taxes or whether it should set them so that they self adjust based on a policy the legislature decides. So this proposes to on each January 1 to update the mileage based user fee by the percentage change in the National Highway Construction Cost Index. And it looks back, so you're taking the year ending on September 30 of the preceding calendar year. So what that means is if we're looking at 01/01/2028, it would take the year, the twelve month period that ended on 09/30/2027, and say, what was the change in the national highway construction cost index in that year? This is the exact same way we index the minimum wage for inflation and a number of other things. We look at a particular inflation index and we look at the most recent report of it and take that percentage. And then there's language in here that provides that if the percentage change is zero or negative, the rate would remain the same as the preceding year. That is also a policy choice. There are rates that adjust up and down, and there are rates that only go up or stay the same. So this, as currently proposed, would be tied to a national index and would only go up or stay the same. You can always set it so that they have to come back to the legislature and ask for a change and or so that it could go up or down. So those are other options for you. There are also other indexes, but this one is specifically tied to state government highway construction costs, which is why it was selected by AOT as I understand it. Two

[Phil Pouech (Ranking Member)]: questions. One, I don't know the answer to. Who is the organization that does this?

[Damian Leonard (Office of Legislative Counsel)]: This is prepared by the I believe it's the What's that? Yeah. Highway Administration.

[Phil Pouech (Ranking Member)]: Employees there that could do this as far as we know. Is this the same rate change that we put out in the municipal?

[Damian Leonard (Office of Legislative Counsel)]: No, that is the I believe that's the CPI. And the CPI has been going up at a lower rate than the NHCCI.

[Phil Pouech (Ranking Member)]: Thank you. Represent Warren?

[Candice White (Member)]: Yeah. Just further on that notion, I mean, think our general understanding is that federal highway construction costs have gone up by about 60% since 2020. So thinking that if we had this in place, these fees would have more than doubled. And again, with no indexer on the gas,

[Unidentified Member]: it

[Candice White (Member)]: feels inconsistent. Representative.

[Phil Pouech (Ranking Member)]: Yeah, and maybe, you might not know this, Damian, but we were told by the UVM research group that there are some states that have an inflationary on their gas banks, and I'm wondering what they use as their inflationary thinking.

[Damian Leonard (Office of Legislative Counsel)]: I I don't know off the top of my head. Yeah. I I can certainly look into that or work with with JFO if they may know more. Same with the AOT. But I off the top of my head, I wouldn't be able to tell you what they're using. CPI is probably the most common one we see in statutes, but there are others that appear like the NHCCI and others that are used in different places because they either more closely track what you're looking at or and this gets into the sort of academic economics arguments. There are economists who prefer certain indexes over others because they think the basket of goods that it's looking at the cost for is a better reflection of the actual economy. And don't ask me to be able to explain the differences, but I do remember when I was still working on minimum wage, hearing a lot about what the proper inflator should be.

[Phil Pouech (Ranking Member)]: And there were several different proposals. Think it makes sense not to face it necessarily on the price of bread, But it seems like this one has really skyrocketed recently and it may be one if we tracked it versus other measures might be a little steeper because of the things in it.

[Speaker 0]: If we wanted to see some language that would have a cap on that increase each year, that'd be easy for you to do.

[Damian Leonard (Office of Legislative Counsel)]: Very easy. So that that actually brings up another potential option. Something we frequently see minimum wage is a great example of this. 5% or the percentage increase, whichever is less is so that's tied to there's a capped increase. If you do get runaway inflation, the idea with that to go back to my old job was if you did get runaway inflation, you wouldn't have wage shock for employers on top of everything else. There's always a balance with these things because the buying power obviously goes down, but you also don't get the sticker shock. So but, yes, that very easy to do. And if the committee wants in the next draft, I can have cap put on there and I can either put in a placeholder percentage or just leave it blank and that can be filled in.

[Speaker 0]: I don't know if we're ready to put it in there yet. I guess

[Damian Leonard (Office of Legislative Counsel)]: it would ask. It has a couple of options available to us

[Kate Lalley (Member)]: should we choose to explore it.

[Damian Leonard (Office of Legislative Counsel)]: Yeah. Thank you for bringing that up. I forgot to mention that.

[Speaker 0]: What's next? We got about

[Damian Leonard (Office of Legislative Counsel)]: So the next

[Speaker 0]: ten minutes left. It is saying, if we don't get through it, we'll have to pick it up

[Damian Leonard (Office of Legislative Counsel)]: on, I believe, on Friday. Yeah. So the next requires just reports back to the department. Inspection mechanic has to report the mileage at the completion of the inspection. And at the occurrence of a terminating event, the owner or lessee has to report the mileage in the manner required by the commissioner. And the inspection mechanic report would be through the AVIP system. As Patrick mentioned before, the report of mileage when you're transferring ownership would be through the odometer disclosure. It's possible that there are other forms in the future. So this language is broad. You could get more specific to those particular systems. Failure to report or pay fee when due penalties. So there's a late fee for failing to file the report, which would be $10 This is something that I think as a committee, makes sense to ask what are the reports here. This was language that was included in the draft and attracts our tax language these next few sections. I think one of the things that you'll just want to ask questions about this may be the right way to go forward or it may not, is that the draft here takes a lot of language from our gas and diesel fuel taxes, where you're looking at distributors filing tax returns. And that may or may not make sense in this context. I know looking at other states' user fee programs, they have less of the sort of language we're going to get into here. And it's a little bit I don't know what the right word is to describe it, but there's less regulation around this because it's more of a you're disclosing your odometer or you have a tracking device and it's more just penalties for, you know, for example, avoiding payment or committing fraud. So there is an interest provision here. Again, this is based off of the tax. It would provide that if you fail to pay the fee, you get assessed interest at 1.5% per month on the amount that remains unpaid with a penalty once it goes past thirty days past due equal to 5% for each month up to a cap of 25 percent. Again, this is based on our tax provisions. So this may or may not be something that makes sense, but this was in the basic draft that was pulled from those tax provisions.

[Phil Pouech (Ranking Member)]: I

[Patricia McCoy (Member)]: mean, when we heard from Patrick, we were talking about one paying all at once, quarterly or monthly. I'm assuming if you set up a payment schedule, there's

[Damian Leonard (Office of Legislative Counsel)]: not gonna be Right. Unless you just didn't pay. Yes.

[Patrick Murphy (State Policy Director, Vermont Agency of Transportation)]: Okay.

[Damian Leonard (Office of Legislative Counsel)]: Yeah. So Check. And this may all need to be cleaned up depending on what payment schedule you approve. Like I said, this is a first draft with some initial language in here. So the penalty rate here that Patrick spoke to, if the commissioner is unable to determine the annual vehicle miles traveled because a person failed to report, the commissioner shall calculate the mileage at the ninety eighth percentile for the battery electric vehicles whose mileage reporting periods ended in the prior calendar year. So basically, mileage reporting periods, you know, ninety eighth percentile of those. And then another penalty if you, the commissioner, can suspend or refuse registration. If after notice an opportunity for a hearing, the owner or lessee or the commissioner determines that they failed to file a report or that they intentionally misrepresented, misstated or omitted material information or that they're delinquent in the payment of an amount due at the time of registration renewal. The other piece here is the notice and opportunity for hearing is you have to have fifteen days notice and the opportunity for hearing and the opportunity to be represented by counsel if you want. Again, this all comes from the tax law. So there is just something to consider here is whether you wanna tie this more to what we typically do with fees as opposed to what we do with taxes, which is usually a little bit less of a a sort of formal procedure and penalty. The next section requires owners to keep and retain records for not less than three years if needed to substantiate mileage reports, for example, when you transfer the vehicle and allows the commissioner or the commissioner's agents to examine those records on four days notice. And four days notice is a placeholder that I just chose last night, so there's no magic to that number. That's a number that you can adjust. I see a question.

[Phil Pouech (Ranking Member)]: Yeah. I'm I'm wondering, as one who has gone from keeping every possible now I don't keep any records at all because it's all online. What records would a known have had? Like, I guess I could keep a copy of my odometer disclosure statement, but I've given it to the state. I'm wondering what records at all I would have.

[Damian Leonard (Office of Legislative Counsel)]: As I mentioned, the proposed language was drawn largely from the existing gas and diesel fuel tax, which relates to dealers. So there again, like with fees, you may want to consider whether this makes sense in this context or not. As I understand it, the language that Patrick and I had fairly limited time together was drawn in large part from the existing taxes there and just trying to mirror it. And so this is the the first draft. And again, like I mentioned before, most of the other states that have a road usage charge or mileage based fee have some different requirements here because you're tracking it through automated systems for your inspections or an onboard device. And then, again, the next language here allows if someone is out of state that this would allow the commissioner to charge the owner for the cost of sending someone to that state to inspect the records if they didn't wanna furnish copies to the commissioner. Again, this comes from the tax law. The powers of the commissioner here, this is getting out of that general authority to administer and enforce the chapter and additionally authority to adopt rules, prescribed forms, contract with an account manager, and then enter into agreements with other states, the District of Columbia and Canadian provinces, providing for reciprocal enforcement. This gets back to some of the questions from representative Casey and others about what happens when you go out of state. So this would allow our state to enter into an agreement with other states so that if people travel between states, you can apportion the user fee appropriately between the states. Fold hearings, again, that's tied to sort of the appeal structure that was up above. If you're not going to have hearings, this won't be necessary. Compel attendance of witnesses. Again, if you're not going to have hearings, this won't be necessary. And then examination under oath, also tied to hearings. Compulsory process, this allows would allow the commissioner to ask a judge to require someone to attend. If you don't have hearings, you don't need compulsory process. This all comes from the tax law here. These last four powers. Proceedings to recover unpaid amounts. This you do have for both fees and taxes. And this allows the attorney general to proceed on behalf of the state and court to recover amounts that are unpaid if someone tries to avoid payment. It also allows for a lien based on the collection of lien for unpaid taxes. Like I said, this with the other previous section, this ties back to basing the enforcement on the taxes model rather than the fees model. And then also the use of private collection agencies. This is something that's based on the underlying tax law. It's a policy decision as to whether you want to authorize the use of collection agencies. Judicial review. Any person who wants to appeal a final decision would have a right to an appeal in the superior court. And that's something we can discuss in more detail when there's more time. And that would be it for the section. As I mentioned to representative Burke, you may need a transition provision or other provisions like that to get my program up and running. So that's it for the walkthrough. Any questions? I know you guys have to go to the floor. Yep. So I spent an hour

[Speaker 0]: and forty five the space usually for you. And that's pretty important. And people probably look to put it back on the agenda or put it again on the agenda Thursday or Friday to let everybody sit with it and then come back with questions or peace. We're adjourned