Vermont Legislature SmartTranscripts:

[Unidentified Committee Member]: We

[Matt Walker (Chair)]: are. Good morning. Wednesday, 03/11/2026. Starting a few minutes later. My apologies. And, we are focused on mileage based user fee this morning. And we have our alleged counsel in the chair. And on Zoom, I believe, Patrick Murphy from the agency who presented mileage based user fee language, which is a 10 page draft the last we saw it. And it is a proposed addition to the T bill at this point. And we want to go back through it and dig into the process of how it will work and how it would be viewed by Vermonters and then what are the inner workings of it. And so I'm looking for kind of a reminder step through, and then I guess our usual, what we're best at, lots of questions along the way, and go down a few rabbit holes. Okay. Good morning, and thank you for joining us, Patrick and Damian. Let's get into it. 10 Alright. Got 10 there's a 10 page version.

[Phil Pouech (Ranking Member)]: Yep. We'll go from there.

[Damian Leonard (Office of Legislative Counsel)]: Okay. For the record, my name is Damian Leonard from the office of legislative council. Patrick, do you wanna introduce yourself?

[Patrick Murphy (State Policy Director, Agency of Transportation)]: Sure. For the record, Patrick Murphy, state policy director for the agency.

[Damian Leonard (Office of Legislative Counsel)]: So I'll pull up the draft, the current version of the draft here. There's only one change since the last version you looked at, and I realized, when I sat down in the seat that, I sent you a version that didn't have an updated draft number. So for those of you watching out in the world, there's a new draft that also says it was prepared on February 24.

[Unidentified staff/participant]: Oh, so it

[Unidentified Committee Member]: should say two point one?

[Damian Leonard (Office of Legislative Counsel)]: Should say February 09:08AM, which is right as we started. But your your file will actually say version two, and the stamp at the bottom says version two, but I forgot to update the stuff.

[Phil Pouech (Ranking Member)]: The language is right. It's just that. Yep. Okay.

[Damian Leonard (Office of Legislative Counsel)]: Yep. Yep. Everything should be correct. But so the what this bill does is it creates a new chapter 43 mileage based user fee. This is similar to what we do for gas tax and diesel tax, which each have their own chapter in title 23. So that's consistent with our approach to other user fees for for motor vehicles. Within section forty three zero one, there was, I believe this was noted last time, but I wanted to highlight it again. The second half of the sentence, which we added as purpose last year. Thank you so much. The reality monetarily is that the dollar amount for the fuel tax that an internal combustion engine vehicle pays is not equivalent to the amount of infrastructure fee and fuel tax that a plug in hybrid electric vehicle pays. And in addition, when you have that plug in hybrid electric vehicles, the the average isn't necessarily reflective. So if you have a plug in hybrid electric f one fifty, that is much lower mileage than a plug in hybrid electric Prius, for example, and then you they're across the board. So one thing you yeah.

[Phil Pouech (Ranking Member)]: I'm following the what you're So the

[Damian Leonard (Office of Legislative Counsel)]: idea here is is this states that your purpose is to impose a mileage based user fee that's approximately equivalent to the average amount collected by the state and fuel tax from internal combustion and the average amount, and the combined amount, average amount of EV infrastructure fee and fuel tax for plug in hybrids. Internal combustion and then the EV infrastructure fee and plug in hybrids, those dollar amounts aren't equivalent. And then even within the plug in hybrid realm, that's changed enough in recent years that those amounts are very differently from the average. So you're not necessarily getting equivalencies. So you may want to look at this language here.

[Phil Pouech (Ranking Member)]: I'm not sure we've seen data on that other than it's hard to nail down because a plug in electric, if you own one and your work is 15 miles away, you could be electric pretty much all the time. If you're not and you're driving 50 miles, then you are paying gas tax. I'm not sure we can say what I I haven't seen any data that says that. I'm

[Damian Leonard (Office of Legislative Counsel)]: not Right. And I I don't have

[Phil Pouech (Ranking Member)]: one way or the other.

[Damian Leonard (Office of Legislative Counsel)]: Don't have hard numbers, but my understanding is that these this amount, the plug in hybrid electric vehicle combined infrastructure fee and gas tax is not necessarily equivalent to the average internal combustion engine gas tax. So it could be more, it could be less. Right. And so the difficulty here is you're saying you want the mBUF to be equivalent to two numbers that are not necessarily equivalent with each other.

[Phil Pouech (Ranking Member)]: Okay. Alright.

[Damian Leonard (Office of Legislative Counsel)]: Sorry. That should have been where

[Matt Walker (Chair)]: it was going.

[Damian Leonard (Office of Legislative Counsel)]: That was a weedy explanation. One of the simple pieces, you have two numbers that are not necessarily equivalent. And you're saying your intent is that the mBuff is equivalent to these two numbers that might be different. So how do you do that?

[Timothy R. Corcoran II (Vice Chair)]: Represent McCoy and then represent White.

[Unidentified Committee Member]: Within the internal combustion engine, there's big differences as well.

[Damian Leonard (Office of Legislative Counsel)]: If so

[Unidentified Committee Member]: you're driving an F-three 50 or a Volkswagen Beetle. Or a Corolla. Somebody's spending a heck of a lot more than I am. So, you know, don't know how we would ever get I to a

[Damian Leonard (Office of Legislative Counsel)]: think even it does say average. So it takes that into account. So maybe my thinking about the range is very big with respect to where it falls and then where the average is in the middle. But even so, the average internal combustion cost versus average plug in hybrid costs are not necessarily equivalent. And then a question is, if you want the MBUF to be equivalent to these two numbers that are not necessarily equivalent to each other, how does the department and agency carry out the legislative intent?

[Unidentified Committee Member]: So you're saying that the hybrid, in the end, will pay more than internal combustion engine? No.

[Damian Leonard (Office of Legislative Counsel)]: Basically what I'm saying is regardless of what they pay, if the internal combustion engine pays, let's say, $10 a year, which is picking out numbers, and the plug in hybrids are paying 12 when you factor in the, let's say, gas gas costs and gas taxes go down, then that'd be great. And so the infrastructure fee now outstrips the cost of gas. So then you're basically saying we want the mBUF to be equivalent to $10 and $12 Do you see how that can be difficult?

[Unidentified Committee Member]: Yeah, and we're just talking state sales tax, not federal tax. Internal combustion is also paying a federal tax. So I'm not quite sure if your average is based on just the state tax or the state plus federal.

[Damian Leonard (Office of Legislative Counsel)]: Right. I think getting away from the details, the issue is there are the question is, do you want it to be the average of all those other vehicles that are not subject to AMBUF? All the other pleasure cars that are not subject to AMBUF? So plug in hybrids combined with internal combustion because that would work. My question is

[Unidentified Committee Member]: when you're averaging the internal combustion average, are you including the federal gas tax in there?

[Damian Leonard (Office of Legislative Counsel)]: I don't know. So that's because And does

[Unidentified Committee Member]: it take into consideration? This

[Damian Leonard (Office of Legislative Counsel)]: says collected by the state. It does not consider federal taxes for this, the intent here. So I do know, let me correct my testimony, that I think the issue here is that the way it's worded, it's not clear if you're looking at the average of all of these vehicles together or the average of one and the average of the other, which may not be equivalent. And so if you're saying we've got an average of $20 for one group of vehicles and an average of $25 for the other, how does the agency determine what's equivalent to those two? And so this is based on your legislative language. You could combine them together and get to $24 or something like that after you work out the numbers and so forth. Right.

[Unidentified Committee Member]: But in the end, people who are driving internal combustion engines are paying into the federal gas tax. And in exchange, we're getting money from the federal government for a fund, which benefits every electric vehicle on the road that is not paying a federal highway gas tax.

[Damian Leonard (Office of Legislative Counsel)]: So that's understood.

[Unidentified Committee Member]: And if MBUF is trying to bridge an average of what an electric vehicle or plug in hybrid is not paying as compared to an internal combustion. I don't know if we can get an average of what state plus federal gas tax it costs in internal combustion. Is that fair? Because still, an electric vehicle is not paying for a federal tax to ride the state highways that, like, I don't know how many, what the percentage is of federal monies coming into the state that provides for repair of these roads. So that's just level thinking on that.

[Damian Leonard (Office of Legislative Counsel)]: So this purpose language was based on what we adopted in prior T bills. And so how you structure the mBuff, whether it's capturing also the federal dollars or whether it's just capturing the lost state revenue. The intent that you adopted in prior bills was that it was just capturing the lost state revenue in these cases. Regardless of that, I think the highlight here, and I'm sorry that I kind of dragged us into the ditch by the side of the road here, if you will.

[Unidentified Committee Member]: We've been there before. Yeah.

[Damian Leonard (Office of Legislative Counsel)]: And the question here is, does it make The intent here creates a situation where it doesn't create clear guidance for the agency and the department. And so the question here that's being raised is really what is your intent? And then can we clarify this to better reflect that in a way that can be carried out? Because the risk that you run is that if your intent does not equate to what the agency or department is doing, then folks can say that they're not following legislative intent. You can have, for example, the rules can be challenged on that basis and so forth. So having clear intent that can be carried out is helpful for them. You don't need to have a purpose section, though. If you wanna just take it out, you can do that. So that that's another option here, but the the language as it is creates a situation whereas revenues change from the fuel tax, the amount the amount for the plug in hybrids is not the average amount for plug in hybrids is not necessarily equivalent to the average amount for internal combustion engines, especially as the types of vehicles that have those changed too. And so you've it's this situation where these two could diverge or they they could crisscross and sometimes be equivalent and sometimes not. So maybe there are different ways to approach this, but it's something to think about if you want to keep an intense statement in here. Just make it something that the agency can execute because think otherwise would change state tax since 2014 to 2012.

[Unidentified Committee Member]: We also could put in big rainbows at this every couple of years or something. But can somebody remind me, is our state's gas tax higher than the federal gas tax Yes. On

[Timothy R. Corcoran II (Vice Chair)]: '18 versus 32. The federal's 18. 18.

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

[Matt Walker (Chair)]: Representative White, the director of the ballot?

[Candice White (Member)]: I do find this first section extremely confusing, and I think that we should simplify the language considerably so it says something to the effect of the intent is to have electric vehicles pay into management of the roads, similar to how ICE internal combustion engines pay for the roads with the gas tax. Further, the UVM PhD students, I think, spend a lot of time trying to pool together data to recommend a proposed per mile fee, taking into account all the different types of EV and plug in EVs out there. So I feel like they were charged to try to find a proposed cost that was fair.

[Phil Pouech (Ranking Member)]: Yeah, I mean, I think that last word, fair, is the piece that's in there. I mean, UVM, the plug in electric with their infrastructure fee is an attempt to sort of balance it. And it's never going to be even. It's never going to be even because gas tax depends on the gas mileage you get. So that's not even either. But this one may be the most one you could call the fairest because UVM sort of said, what's the average gas tax that people pay per mile? And they came up in the middle and they said this equates to a truck, F-one 150, new efficient truck, which is like right down the middle. So I would argue the $0.14 that was proposed by that group It's about the It's the most fairest, the most number that you could come up with. Because it's right in the middle of all the others. So that's the term, I think it should say, that when you're trying to find a fair amount.

[James "Jim" Casey (Member)]: You want to skip?

[Matt Walker (Chair)]: Casey, then Representative Tomlinson, and back over on this side, the Reynolds and Keyser. I don't

[James "Jim" Casey (Member)]: remember the UBM people saying anything about the other vehicles. I I do remember I asked about what about, you know, the the the plug in hybrids? What about, what's the other one there? Internal combustion? Or No. No. There's there's Mild hybrids? There's there's, like, three types

[Damian Leonard (Office of Legislative Counsel)]: of electric cars. Yeah. So, there's

[James "Jim" Casey (Member)]: I asked about the other two. They they were basically working on all electric and so I just, I don't remember him saying anything but it's all there's just I don't remember I asked. I don't remember him saying anything. Well, this is what we were asked. I seem to remember him saying something about, we were asked to work on just electric. So, well, I don't remember him saying anything about the other ones. And so my other question was, if we do try to figure out a way to do the other two types to put some sort of a fair tax on them, that's gonna

[Phil Pouech (Ranking Member)]: be tough.

[James "Jim" Casey (Member)]: That's logistic. I think that's gonna be really

[Damian Leonard (Office of Legislative Counsel)]: tough To figure be clear, the issue I was highlighting was not whether you put the mileage based user fee on hybrids. Since they're also paying gas tax and they have the infrastructure fee that you all enacted, the request for the agency was to come up with the mileage based user fee just for EVs. Mhmm. And this is the draft of the legislation they put forward to do that. So the the purpose, though, that they were given was to come up with a fee that was equivalent to the average of what you collect for internal combustion engine cars. So, you know, regular car and then and also equivalent to the combined amount that you collect in that EV infrastructure fee and the additional gas tax for the hybrids, regardless of whether it's a mild hybrid that you can't plug in or a plug in hybrid. So this language here isn't necessarily going that next step, which would be nothing in the draft in front of you contemplates extending the mileage based user fee to the hybrids or the plug in hybrids at this time. So that if the agency was just asked to come up with how do we get the electric vehicles to start paying by use.

[Unidentified Committee Member]: Yeah. I never hear the. Yeah. So Patricia McCoy? I'm just looking back at

[Patricia McCoy (Member)]: the Transportation Research Center's report that they presented, and it appears to me that their recommended mileage fee rate is based only on the approximate amount that drivers of gas and diesel cars pay. So this intent language doesn't seem aligned with that recommendation. It might just be simplest to remove that portion about plug in electric vehicles because that, I think, just isn't a part of the intent or how the Transportation Research Center recommended setting the face. Was that the UDM? Representative, Chief.

[Phil Pouech (Ranking Member)]: Okay. And thanks. And I

[Timothy R. Corcoran II (Vice Chair)]: think I'm going to reflect a lot of the confusion in this thing. And I hate the wordsmith. But when I read this, it says, blah, blah, blah, approximately equivalent to the average amount collected by the state in fuel tax revenue, got that, from the use of a non plug in electric vehicle pleasure curve, of a non plug in electric vehicle, it's confusing And to what I'm saying is that what we ought to do is put a period in the Senate somewhere and just break it down and say in a more global terms that we want to make an equivalent charge to what the state gathers in the fuel tax revenue from a gasoline or fossil fuel vehicle, whatever

[Unidentified staff/participant]: We you want to

[Damian Leonard (Office of Legislative Counsel)]: call it internal combustion, or a gas vehicle.

[Timothy R. Corcoran II (Vice Chair)]: So that's good. So if we want the purpose, I just think we ought to just put a period in there and be done with it.

[Matt Walker (Chair)]: Representative Boyle and his representative passed away.

[Unidentified Committee Member]: So if we're going to have a purpose, I think the generic purpose that Representative White presented was.

[Phil Pouech (Ranking Member)]: Yeah, think we can, I I don't, since this is its own chapter and it's only on mileage based user fee, I don't even know if we need to even talk about plug in hybrids and all that? That's in the plug in hybrid registration fee, the added infrastructure fee, that's an attempt to do the same thing. I think we just say we're trying to come up with a fair or equivalent to ICE vehicle. And that's exactly what UVM came up right in the middle.

[Matt Walker (Chair)]: I guess I would say if we can, our intent here is to implement a mileage based user fee to, as short as where Representative White was headed, that is so that they'll be paying for a portion of their roof, however you want to put that. Our intent is bend in the direction that we're going to implement a mileage based user fee on electric vehicles by 01/01/2027. That's what we've been working for as a committee for several years now. And as the administration or the transportation agency have been working on it for several years. People agree. It really is our intent that electric vehicles pay based on how many miles they drive on the road. Something much shorter and less very simplified as our intent is that we expect to pay. And most of what we hear in this committee is that they're expected to pay to help pay the roads. So I'm not trying to blame, I'm trying to put a tone in that. I'm trying to say we're simplified on to simplify overall intent is bar order. So if that's the first paragraph on 10 pages,

[Phil Pouech (Ranking Member)]: have an

[Matt Walker (Chair)]: event that I'm going to for a little while. You guys will carry on. That's why we built a longer break because there's a chance that break's gonna shorten

[Damian Leonard (Office of Legislative Counsel)]: substantially. I will rewrite that paragraph. And hopefully, the next time I go through it

[Unidentified Committee Member]: has Representative White would check that.

[Matt Walker (Chair)]: Go back

[Unidentified Committee Member]: to the the tape.

[Matt Walker (Chair)]: Go back to the video and Alright. Head through that pair that that sentence suggested by representative White. I I apologize. That's okay. We're moving on.

[Damian Leonard (Office of Legislative Counsel)]: Took us on a slow construction detour there. Okay. So the next piece in here, this was a change you requested when we went through it the last time. I can't remember which which of you realized that we'd left out when registration is terminated. So this could be that the car is too old and you're taking it off the road. It could be that you had an accident and the car has been totaled. It yeah. It could be any number of reasons. One little note on the termination of registration that came up is and this we'll get to this with the exemptions too, is it is possible that you have an on road vehicle that is its registration for highway use is terminated and it's registered as a farm truck or farm vehicle after that point. So you could say termination of the of its registration for highway use or something like that. But that otherwise, this this just adds that additional instance that was left out. Alright.

[Phil Pouech (Ranking Member)]: Let's see

[Damian Leonard (Office of Legislative Counsel)]: here. My notes so within the the next question that the committee had or the next discussion point that was in here was so after the calculation of the mileage based user fee, there's an annual inflation adjustment. I remember there was a great deal of discussion on this. So the question would be in the next draft, do you wanna keep the annual inflation adjustment? And if you do, do you want to set a cap on it and or allow it to go negative? So right now it can go positive or zero. And so this, again, is the proposal from the agency that it would always either stay the same or go up depending on inflation with the National Highway Construction Cost Index. And then the question is if you wanna keep it, is that model what you want, or do you wanna say, like, with minimum wage, we have a 5% cap on how much it can increase from year to year. And with other indexes, we allow it to go down when prices decrease. Representative Pouech.

[Phil Pouech (Ranking Member)]: Yeah. So let me let me be very clear here. I'm not voting for this. If we put up an inflationary factor on what I think is a very fair number, 1.4, I could make a good argument that electric vehicles are far more efficient than a new truck, but we have this 1.4. We're trying to make it fair. I think that's a very fair amount. But if we're going to put an inflationary factor on that and not on the gas tax, that is very unfair. And I'd have a hard time supporting that at all. I think this should just be stripped right out.

[Candice White (Member)]: Would like to add.

[Matt Walker (Chair)]: You're up, yep. Then I

[Candice White (Member)]: would like to add language saying that this inflationary

[Unidentified Committee Member]: proposal

[Candice White (Member)]: would be in effect when we have a similar inflationary proposal for the gas tax. I think that I agree with Representative Pouech that as long as the gas tax doesn't have an inflator, I think it's unfair. I think it's good policy to write it in this way, but I feel like the gas tax inflator should be tied to this. And I would support that, but I wouldn't support the inflator without a gas tax inflator.

[James "Jim" Casey (Member)]: Representative Casey is next, and then Representative Teyser. The basement off of construction costs, I think that's a very good idea. I mean, I've been in construction my whole life and I've seen things jump like crazy. Mean, a windstorm happened somewhere and I'm gonna use plywood as an example, but plywood's a roller coaster. Sit there and I try to bid on a house. It's like I tell the people, it's like, I can guarantee that bid for two weeks because of the market. And I just think it's a real bad idea to use the construction costs. That's a terrible We've all seen how construction costs have come up with road stuff. I mean, in the last few years, it's so that particular part of it, I don't know what happens with the rest of it, but that particular part, I think that's a bad idea to use that. I would think maybe just a cost of living. I don't know. Something different than that. I don't know what you would use, but a structured cost. I think we'll jump up big time. There

[Phil Pouech (Ranking Member)]: are

[Damian Leonard (Office of Legislative Counsel)]: a variety of inflators. The one that's most commonly used in our statutes is the consumer price index. That tracks, you know, consumer goods that a household would purchase, and it tends to be or at least in recent years, it has it has gone up at a much slower rate than the NHCCI. We would still get say, right? It would still come through here every

[James "Jim" Casey (Member)]: once in a while so we get some say on it. This is set

[Damian Leonard (Office of Legislative Counsel)]: up so that the legislature doesn't have that. It automatically increases, same way the minimum wage does. So each year, the with the minimum wage, the Department of Labor takes the CPI at a certain point in time, looks at how much it's increased in the last twelve months. And then they they figure out how much that's gonna move up the minimum wage, and they give businesses about forty five days notice that on January 1, the minimum wage is going up to this amount. Yeah. And unless there's a big adjustment to the minimum wage, the legislature doesn't get involved in that process. That's how it typically works with inflators.

[Chris Keyser (Member)]: Representative Keyser? Yeah, couple of comments. First off, the rate construction code we saw went up 27% this year. And I think that would be a hell of a hit, wouldn't it? So anyway, that's one point. I agree with Representative Pouech to some degree about the fact of an inflation adjuster. There is one in the gasoline tax. There's a portion of the gasoline tax, which goes up or down, up or down, based on what the prior quarter is as far as the gas prices. In fact, what's going to happen next two, in six months, I believe, we will see a big bump because gasoline prices will. Now, is that equivalent to a 27% increase in the highway construction cost? Of course. But what we have, I believe, is a system that is, we're trying to make equivalent, but we have to accept that it's never going to be equivalent. And to have an index, I'm going to have to agree with the representative Pouech.

[Logan (Joint Fiscal Office analyst)]: Thank you.

[Matt Walker (Chair)]: I would throw out a piece that I guess is sort of what you're getting at, including the construction, and watch the plywood go up and down as the hurricane season goes up and down. That is the reality of what all of our towns and all of our construction projects are dealing with. Now, that doesn't mean we can expect the consumers to react at 27% or some other huge number. But the reality is that the people that are trying to maintain our bridges and our infrastructure and our roads are getting that bill whether we increase the revenue or not. That, I guess, is sort of the other side of this that I don't know whether it's in defense of, but in recognition of our town highway foreman and our project leaders on every project are they're going pay this bill whether we find a revenue to keep up with that or not. So whether we don't have an inflator or we have a really high inflator or somewhere in the middle, and whether we do get to gas tax or not, we can't stop. We can stop we can limit the revenue or keep it flat, but we can't change the fact that the expense is going up that high. And that drives a conversation in this building that we've been having for quite some time is, even with the work we've done, you go out a year, even still a year, but two years and three years and four years and five years, transportation is still on an incredibly poor revenue direction to match that massive increase in expense. So I think that everybody understands that, but I want to say we're going to limit the revenue, we have no control over limiting that level of expense. I don't throw that part of it out. Representative McCoy and then represent Bouch and then represent Tomlinson.

[Unidentified Committee Member]: Historically, look at fees, supposedly we look at fees every three years in this building. If the gas tax is looked at quarterly, as

[Timothy R. Corcoran II (Vice Chair)]: a percentage There's of about a 4¢ swing in there. Up and down.

[Unidentified Committee Member]: Guess I don't know if we somehow word this section that we somehow revisit this every three years or every two years or something and adjust accordingly based on the average gas tax, say inflationary, and add that to it. I mean, if in fact there is an inflationary factor on gas tax, then I think there should be an inflationary figure on this one. But as representative Keyser said, 27%, no. But based on what we're currently doing for gas, and I'm not quite sure what that average is every six months. Is it a penny? I don't know what it is. And then you calculate a fee. I don't know if that's too cumbersome to do, though, on an every two year basis that when you get your MBUF in the mail, every two years or every three years, you'll see a slight increase. I don't know. Obviously, powered vehicles are seeing that every six months. But if the average over two years is a decrease, then there is a unit that doesn't change. Because as Representative Pouech said, it's fair, it will be, you know, what we're trying to propose is fair based on what the union study does. I don't know. It's just my thinking.

[Matt Walker (Chair)]: I was trapped with Rivers of Lalley. How's going? We don't want to leave. Just

[Kate Lalley (Member)]: trying to sort of like think about more upstream of this issue, Chair Walker's comment about

[Matt Walker (Chair)]: After you're done. I'm sorry. I just didn't see that. I don't if they had been there. Bet.

[Unidentified Committee Member]: Yeah. Go ahead. You're going. Okay.

[Kate Lalley (Member)]: The needs at the town level are I'm thinking about that. And also with that, my town is in a fortunate position of not having to be super concerned about flood resiliency just by the accident of our location. But I know that that's not the case in an awful lot of places in Vermont and very mindful of the testimony that we heard about what is almost like managed retreat away from that's just what they're facing. So I just want to throw this out for everyone's consideration. I'm almost thinking that everybody should be maybe paying some kind of an infrastructure fee for the road use. And I don't

[Candice White (Member)]: know how that would work.

[Kate Lalley (Member)]: It just seems like we've got to bring in more revenue. That there's a logic to that, particularly with EVs because of their weight and the impacts that they create on the roads. But if we're not looking at raising the gas tax, then I think that that's something that we might need to be considering. Because how are we going to help our towns prepare for a very different climate circumstance that arriving on our doorstep. So that's probably not tethered to this conversation, but I just wanted to throw it out there as something for us to think about as we try to figure this out. And something that would

[Unidentified Committee Member]: bring

[Kate Lalley (Member)]: revenue towards that category, just infrastructure generally, that's not on the priority list of the agency we use the federal dollars for.

[Candice White (Member)]: Which is all of our town roads, basically.

[Phil Pouech (Ranking Member)]: Bennington?

[Patrick Murphy (State Policy Director, Agency of Transportation)]: Thank you, Mr. Chair. I appreciate Representative Lalley's comments. To sort of ground this conversation in why we're here, which is to address decreased revenues and increased costs. The rationale behind use of the National Highway Construction Cost Index is because the majority of our costs in the transportation program are construction. I know that there's been discussion about various figures, and there have been steep increases in the past several years, but UVM estimated that last year's figure for for the year was 4%, and that is what they used to model the revenue projections that you saw in their report and in their policy brief. So it really is to get at, so the National Highway Cost Construction Index is not based on some sample of random goods that might not be applicable our actual budget in transportation, the FHWA is looking at real costs that are coming in through solicitations across the country. So these are actual costs that are being experienced, that's in part why we felt it was more reflective of what the actual needs are in transportation. Inflation generally, when you take a step back so there isn't a there is not an inflation adjustment right now for the gas tax. Bless you.

[Unidentified Committee Member]: Bless

[Patrick Murphy (State Policy Director, Agency of Transportation)]: you. Is and maybe Logan or some others can speak to this specifically, but there is a part of the gas tax that adjusts with gas prices and there's caps to that, but it isn't an adjustment annually for inflation. I showed you maybe a week or two ago a couple of charts that looked at what has been inflation's impact on the transportation fund, and it's been the most significant of all the three things that we've talked about. Greater fuel efficiencies comes in second, and then electrification third. The problem that we're trying to solve is both with electrification because we expect even with federal retreats from EV friendly legislation, we expect EV adoption to grow. There is still the model that UVM has used for this particular report preceded all of the Biden administration's efforts to increase fuel efficiency standards, so this is going back to sort of a more conservative trajectory for EV adoption, and still that model, the MOVES model shows that a significant number of vehicles are expected to become EVs over the next several decades. So that is what we're trying to do, get in first to fix a problem that is expected to grow exponentially. The second piece of that is inflation. If you look at know, JFO's report last year of, you know, what has happened to the purchasing power in $20.25 dollars for the gas tax revenue. It's 32¢ now, but when it was last adopted, it's somewhere just over 40¢ in terms of purchasing power, and when you kind of combine, apply that to 6,000,000 miles or 6,000,000,000 miles, it's quite significant, so that is the rationale that we have been working under to have an inflation index, but also for this specific inflation index. I do think that there's been talk in the Senate Committee on Transportation about what are the next steps beyond electric vehicles within this program? How do we transition to more and more vehicles, as representative Casey had talked about just earlier? And so there could be some compromise language, I think around triggering an inflation adjustment based upon the inclusion of more vehicles within the program, but I think it really is important for the long term sustainability of the transportation fund, what we're trying to do in the first place to be able to have some language here that points in the direction of an inflating adjustment, so that we aren't coming to this again in ten years' time saying what happened? Where are the revenues that we expected?

[Matt Walker (Chair)]: I'm going make sure I didn't miss had my hands up before, but otherwise I'm going to go to Tomlinson to wait if we didn't have somebody who was

[Damian Leonard (Office of Legislative Counsel)]: up hand up before that, Patrick.

[Phil Pouech (Ranking Member)]: Thank you, Patrick. So just to be clear, I'm for an inflation factor and I think the one based on construction is probably a good one to use because it's gonna reflect the hole we're gonna have in transportation funding that continues to grow. That chart by UVM was very clear that inflation is eating away more than electric vehicles and efficiency of vehicles. So I'm in agreement with that, having an inflation factor. I'm not in agreement of having an unfair inflation factor only on one type of vehicle and not others. I think it would be good maybe to get Logan to sort of describe the adjustment that happens to the state tax numbers. And I think it's really not really an inflation factor, it sort of jumps back and forth. It doesn't continue to go up with inflation. And I think tying a mileage based user fee to that piece, I think would again, trying to be fair, would be fair for battery electric vehicles. But it might be good to have both of give us that quick willow one, two of exactly how that works. But I would argue that's not really an inflation adjuster. It's a slight adjustment to the price that kind of goes back and forth. It never goes up anymore.

[Matt Walker (Chair)]: I think that we have had that. Maybe I just think it's not based on inflation overall. It's only based on the price of the gas itself. So the gas itself is only the only factor, not in overall inflation. That's why it does go up and down, doesn't go up over time, because price of gas has not

[Phil Pouech (Ranking Member)]: It has a cap.

[Matt Walker (Chair)]: Right. And the price of gas has not gone up by inflation level than it has been. So it is only related to the price of gas. I guess it would be the part that I'm saying it's not related really. It is not, as you said, it's not inflation, it's the price of gas. Price of

[Damian Leonard (Office of Legislative Counsel)]: gas does not necessarily change by inflation. And it has limits.

[Phil Pouech (Ranking Member)]: They're limited for a

[Matt Walker (Chair)]: period of review, yes. But I think regardless of the details, your point is still silly in terms of one has some review and one would be substantially different to one type of vehicle versus another.

[Unidentified Committee Member]: Is what you're saying? Representative Tomlinson, you're up.

[Patricia McCoy (Member)]: So I just wanted to note, I think an inflator purely for electric vehicles is just simply misaligned with the intent of what we've laid out to have a fee that equates to the state gas tax. It does then hold that provision where if the MBUF was rolled out to

[Unidentified Committee Member]: all

[Chloe Tomlinson (Clerk)]: vehicles, in that case, I think it could be appropriate and aligned with the intent if we want the fee to be as consistent as possible across all vehicle types to have an inflator in that case. So I think I would support some language that would indicate the intent to have an inflator when and if the MBOTs were rolled out to all vehicle types, but would not support an inflator simply for electric vehicles. And I think that while I agree that we need to think about the rate of inflation relative to construction costs in terms of the hole we need to fill in the T fund, My understanding from past testimony was that currently it's projected with the MBUF we'd be generating approximately $1,000,000 in additional revenue from EVs. And I think an inflator on that is not going to fill our hole in our transportation fund. So I think we need to be considering other tactics for that.

[Matt Walker (Chair)]: We're over here.

[Candice White (Member)]: Yes, and I'll be brief. Thank you. So I'm looking at a chart that was supplied by the Joint Fiscal Office on gas tax. And I just want to point out that in May 2013, we were charging $0.18 a gallon for gas. And right in December 25, it was $0.11 So it's gone down considerably. I believe there are several gas taxes. So I also think, Damian, if you or perhaps Logan in the room could just take us through a brief reminder of the different gas taxes and how they fluctuate, that could be helpful to this conversation.

[Damian Leonard (Office of Legislative Counsel)]: So the gas tax itself is there's a flat tax of 12.1¢ on each gallon of gasoline. And then that gets an additional assessment of the greater of 3.96¢ or 2% of the tax adjusted retail price of each gallon of motor fuel sold by the distributor. So it's at the distributor level. Then a fuel tax assessment, which is the greater of 13.4¢ per gallon or 4% of the tax adjusted retail price or 18¢ per gallon, whichever is less. So in other words, that one ranges from 13.4 to 18¢ per gallon upon each gallon of motor fuel sold by the distributor. And then the tax adjusted retail price is the average of the retail price for regular gasoline collected and determined. The three decimal places and published by the Department of Public Service for the three months in the preceding quarter after all federal and state taxes and assessments. And the petroleum distributor licensing fee applicable in each month have been subtracted from that month's retail price. So basically you look at the average price, you subtract the taxes assessments, both state and federal and the distributor licensing fee from that retail price for those three months and you figure out the average, that becomes your tax adjusted retail price. And then the adjustments are based off of that. So there is a base of 12.1, then there's that 3.96 or 2%, whichever is greater. And then there's the 13.4 to 18¢. Additional adjustments. Did I miss anything?

[Logan (Joint Fiscal Office analyst)]: Technically correct. Yes.

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

[Unidentified Committee Member]: Somebody say that in my language.

[Damian Leonard (Office of Legislative Counsel)]: So it it's easier if you look at it as an equation, but it it's it's it's complicated. It's a page of provisos and ors and ands and so forth in the statute. It's much easier if you do it mathematically. But yeah.

[Phil Pouech (Ranking Member)]: It would be good, I think, for this committee to see an example. Like, what's the history in the last ten years of the gas tax when it's gone up and down? And maybe what happens when gas is $3 a gallon? What happens if it's $4 a gallon? What happens if it's $5 a gallon? And then we could see what it is and understand it better.

[Logan (Joint Fiscal Office analyst)]: For the record, while we're to join FISB, just comment briefly, and then I have a presentation that we want to get into as we can. Might be easier with some visual aids. There's the fixed portion and then there's the variable portion. There's a 4% variable and there's a 2%. Let's talk about the 4% per annum. We collect a 4% on the tax adjusted retail price of fuel from the previous quarter. So we average up the price of gas from last quarter, you subtract out the taxes, you get a number. You times that number by 4%, that's what the 4% assessment is. There's a minimum and maximum on that assessment. A minimum of 13.4¢ and a maximum of 18¢. So it can fluctuate in between them depending on what's your tax adjusted average prices for the last quarter. Roughly speaking, if gas is below $3.87 at the pump, the price you pay, we are collecting the minimum, the 13.4¢. If it is above $5.08 at the pump, we're collecting the maximum, the $08 So until gas at the pump gets above $3.87 the state is collecting the minimum amount that we can. Once you get above that, then we start to get that fluctuation up to that cap. But until it reaches the end, it's the same amount of money. And we can walk the map and go through the history of it and we'll get

[Unidentified staff/participant]: any more detail. I think that's good for now.

[Timothy R. Corcoran II (Vice Chair)]: At this point, we're gonna move along a little bit.

[Logan (Joint Fiscal Office analyst)]: And then we'll revisit this topic when the

[Timothy R. Corcoran II (Vice Chair)]: chair gets back. But there might be a motion.

[Damian Leonard (Office of Legislative Counsel)]: I will. Yeah, so we're gonna we'll table the annual adjustment. The next piece on here where there was a placeholder is for exemptions. I might my understanding is that the there were some exemptions in the original draft from the agency. We didn't have time to finish looking at those. And I think Patrick may have some additional comment on the placeholder. So I'm gonna let him speak for the moment. Stop sharing my screen here so that Patrick can speak.

[Patrick Murphy (State Policy Director, Agency of Transportation)]: Thanks, Jamie. Yes. We had a few exemptions. I think the most relevant, and I'd have to pull up the language, but essentially the federal vehicles and agricultural registrations would be exempted. This is something that has been followed in the state of Hawaii as well. I think federal vehicles are constitutionally exempted, and then we would also advocate for agricultural use vehicles to be exempted.

[Phil Pouech (Ranking Member)]: So federal vehicles don't, aren't registered in the state of Oman anyways, right? Some of them are.

[Damian Leonard (Office of Legislative Counsel)]: Many federal vehicles carry federal registration, federal license plate, but the state can issue registrations and license plates at no charge to other states and to the federal government. And so you can have federal vehicles that have Vermont state registration tags. This has come up a little bit in the context of undercover law enforcement. So both state and federal law enforcement can have undercover vehicles that have a Vermont regular green Vermont tag. And that's something that has come up in recent discussions. But the state can also issue registrations for other purposes. But I believe most federal vehicles are registered through one of a couple of federal agencies that are given that authority under federal law.

[Phil Pouech (Ranking Member)]: So this seems like it would be an exemption we need to have in there. Otherwise, we're going up against federal law. And it seems like it's such a small piece of the pie. Really

[Unidentified Committee Member]: doesn't matter.

[Phil Pouech (Ranking Member)]: As far as revenue goes.

[Damian Leonard (Office of Legislative Counsel)]: We frequently exempt the federal government from certain state requirements, and we can't tax the federal government. Otherwise, would That would be a lucrative opportunity. So that's what Patrick's getting at, is language that basically says, is broad and basically says that this tax won't be imposed in any manner. That's unconstitutional. We want to do what we can't do. Exactly. And if the law changes around that, the tax can change too, and we don't have to update the statute. The other piece that he mentioned is agricultural vehicles. And so that would be equivalent to like off road diesel. So the dyed off road diesel is not subject to a gallonage tax, but you can't put it in a highway vehicle. Did I miss anything, Patrick? No.

[Patrick Murphy (State Policy Director, Agency of Transportation)]: I I think that's it. I mean, I think we also had possibly language in there about public state and municipal vehicles, but we might need to explore that more.

[Damian Leonard (Office of Legislative Counsel)]: So, yeah, that's something where there's really a question for the committee on policy. Do you want to charge the mileage based fee to state municipal vehicles or do you wanna exempt state municipal government vehicles from that charge? Would have

[Phil Pouech (Ranking Member)]: to Just to clarify, state and municipal vehicles when they buy gas, pay gas tax.

[Damian Leonard (Office of Legislative Counsel)]: Yeah. So there is within the diesel tax, the let's just see. So because the gas and diesel taxes are assessed on the distributors, I don't see a refund for municipalities, but I'd have to double check-in the statute. I know we exempt them from registration fees in some instances or provide reduced registration fees, but I don't Logan, yeah, I'm looking to Logan because he's more familiar with the taxes than

[Logan (Joint Fiscal Office analyst)]: As Dan mentioned, taxes are likely at the distributor level. There's no exemptions for gasoline tax. There's for diesel tax. There are some exemptions.

[Phil Pouech (Ranking Member)]: So I'm not quite sure why we would exempt them from battery electric, ionized based user fee, unless you can't collect it because they got to be inspected too. It seems like why you carve that out as being exempt if we want this to be fair. And

[Patrick Murphy (State Policy Director, Agency of Transportation)]: so just to be clear, we weren't proposing that. We just that, that was something that had come up.

[Damian Leonard (Office of Legislative Counsel)]: Yeah. So with the diesel tax, there are, five exemptions provided. The first is the what Patrick alluded to uses the taxation of which would be precluded by the laws and constitution of The United States in this state. Uses for agricultural purposes not conducted on the highways of the state. Uses by any state municipal school district, fire district, or other governmentally owned vehicles for official purposes, uses by any vehicle for off the highways of the state, and uses by any vehicle registered as a farm truck under subsection three sixty seven F. So farm trucks that are registered and then off highway vehicles, and it does appear that we allow municipalities to get a credit for diesel. I don't think that there is a similar exception in gas tax, but let me just double check. Yeah. I don't see a similar exception. There's unfortunately, they're structured slightly different, so I can't just click on the same section. But yeah. So that we in some instances, there's ability to get a credit for taxes and others, there's not. So it becomes a bit of a policy choice.

[Phil Pouech (Ranking Member)]: It seems it's going be a long time before fire trucks or any municipal vehicles that are using diesel, which they apparently can get a rebate for before we're going to even have to deal with it. I I would say it's ten years away. So it seems like we wouldn't need any exemption in there.

[Damian Leonard (Office of Legislative Counsel)]: So as what I'm hearing from the committee at the federal government and agricultural vehicles and off highway vehicles to this? I will mirror the language in the diesel tax to the extent it makes sense too. See. Share my screen again.

[Candice White (Member)]: I'm unsure about So if some diesel taxpayers right now get a rebate, but no normal fuel taxpayers get a rebate, Do we even want to consider, I don't know whether we need to do any of that.

[Timothy R. Corcoran II (Vice Chair)]: I guess

[Candice White (Member)]: Because I mean, the is to make this as similar to the gas tax as possible. And so it sounds like there's a subset, the diesel, that there are some exemptions, but we're just talking about electric. I think I would hold back on adding any exemptions, unless there's a real argument for doing so, which I don't know if I

[Phil Pouech (Ranking Member)]: can get federal one is one. We can't.

[Damian Leonard (Office of Legislative Counsel)]: Right. So we can't do the feds. The agricultural uses, that's a policy choice.

[Candice White (Member)]: So I don't think there's any agricultural use of

[Unidentified Committee Member]: electric vehicles at this point.

[Damian Leonard (Office of Legislative Counsel)]: I couldn't speak to that.

[Candice White (Member)]: So I mean, this is something that a future legislature could go back and update the language if in five years we see that all of a sudden there are a lot of electric corn pickers going off.

[Damian Leonard (Office of Legislative Counsel)]: There is a question though about vehicles that are registered for non highway use. So, yeah, they they have a state registration. So like an ATV, for example, something like that. Right now, they would pay tax on gasoline that they purchase. But they're, you know, limit they're using potentially using some town highways in a limited basis. Farm trucks are allowed to be on the highways when they're transporting agricultural goods or materials necessary for the farm, but otherwise they're not on the highway. So it really is a policy question for you, and it's up to the committee you would address that.

[Candice White (Member)]: But am I right that a future legislature could commit?

[Unidentified Committee Member]: Absolutely.

[Kate Lalley (Member)]: Yeah.

[Damian Leonard (Office of Legislative Counsel)]: Nothing you do today prevents a future legislature from So

[Candice White (Member)]: I would suggest that we don't consider exemptions right now, because I don't think there's enough evidence that they're necessary.

[Damian Leonard (Office of Legislative Counsel)]: What's the direction from the committee?

[Timothy R. Corcoran II (Vice Chair)]: Think the direction right is no decisions are probably gonna be made.

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

[Phil Pouech (Ranking Member)]: I'm sure it's not here.

[Logan (Joint Fiscal Office analyst)]: But it's just just highlight it. You know,

[Timothy R. Corcoran II (Vice Chair)]: is is the the federal pieces in there currently, right? Mean, we're

[Damian Leonard (Office of Legislative Counsel)]: It's not yet, but it will be.

[Logan (Joint Fiscal Office analyst)]: Alright. So maybe you could just put that one in, highlight it, and

[Timothy R. Corcoran II (Vice Chair)]: then that'll spark the conversation for because I don't think there's any argument for not putting the ads in. So we'll just leave that one.

[Unidentified staff/participant]: There

[Damian Leonard (Office of Legislative Counsel)]: we go. No notes on the next section. The section forty three zero five. So oh, before I I go on, there are just one other note here. And if it's okay with the committee, I'll add draft language. Patrick highlighted when we spoke yesterday morning that there is transition language missing for how do you transition from the right now, if you drive an electric vehicle, when you register renew your registration, you pay the infrastructure fee. So the transition language, the initial draft is would basically provide that at your next registration after the effective date, you would pay an estimated mileage based user fee, and then that amount would be adjusted and prorated based on your once you get the actual mileage from your inspections. And so I can put language in there for you to consider that would allow that transition, but there are there are other ways to do it. But that's just something that was missing from the first draft.

[Phil Pouech (Ranking Member)]: Yeah. It'd be interesting to hear, Patrick. So, you know, I paid my registration and my infrastructure fee, and then six months down the road or, yeah, six months down the road, I have an inspection. Then they take the mileage, I guess, but I don't pay any mileage based user fee until the next inspection. And yeah, it seems like this could get very confusing. And I wonder if we're not talking a lot of money here if we just sort of say, you know, once the thing kicks in, it and after that registration, that infrastructure fee is then paid for whatever it is a year or it could be two years. Then at that point, the mileage based user fee kicks in. I know just to sort of keep it simple, but it'd be interesting because there's so many options there of like, you know, my registration. I did it now and then I get it the next month or I don't get it for eleven months or I've got a two year registration I paid for, I'd be, you know, Patrick, how is this all gonna work?

[Patrick Murphy (State Policy Director, Agency of Transportation)]: Yeah. So I wanna clarify, and this came up at the end of the afternoon yesterday as well, that no one will be paying at the inspection. So the inspection station owners, they're not going to be involved at all in collecting payment in any way. That is really just the point at which the state will receive the data about how many miles have been traveled. So in the case of someone who doesn't have that data because they've just purchased a new vehicle, whatever it is, if it's before the implementation date of January 2027, and somebody's paid an infrastructure fee in November or what have you, and doesn't have an inspection until after this takes effect, then what you'll have is basically that you'll have data then in past 2027 that's inputted that we then can see, okay, X amount of miles have been traveled, and the payment will be reconciled at the point of registration renewal. So this isn't, it's, the program is sort of going to be rolled out on a gradual basis where it's, it's aligned with how people have been registering their vehicles on their schedule and the inspection schedule. So for some people, it may be a year and a half before they even see a MIOS based user fee because they've already paid, you know, two years in in advance with the EV infrastructure fee. But, you know, what we're proposing is just a simple system where if you've paid an infrastructure fee, then that will just be applied to what you will owe in the future for a mileage based user fee. So for the miles that you've traveled, past the implementation date. So everything will happen at the point of registration renewal, people will elect to pay on a particular frequency, whether it be all upfront or on a monthly or quarterly basis, and then any any payment that has already been made will be credited to that that invoice that that happens at the point of registration.

[Phil Pouech (Ranking Member)]: So just to clarify, you've paid the infrastructure fee and then this thing kicks in and now you start to collect that mileage. At the next registration, they say, oh, you traveled, you know, the estimated mileage or or actual mileage is x. Therefore, you owe this amount, but you've paid the infrastructure fees, so you only owe this amount. And then at some point, it transitions just the mileage based user fee.

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

[Phil Pouech (Ranking Member)]: And really the the challenge there is the estimated mileage, but you have that anyways. Somebody buys a new vehicle or whatnot, you know, money actually comes in. You may not always have that initial mileage number.

[Patrick Murphy (State Policy Director, Agency of Transportation)]: No, I mean for the initial estimate, it's going to be based just on the, you know, when you go, I hate to go back to the half hour discussion on purpose, but when you you're basing it basically on what the average gas vehicle is paying. Right. No. No. We No. So that's your rate.

[Phil Pouech (Ranking Member)]: We set the rate and now you you've gotta estimate the miles in some cases.

[Patrick Murphy (State Policy Director, Agency of Transportation)]: Right, so that would then be based on average miles within the state of Vermont. And then as new data is pulled in year after year, there there would be an ability within the system to to sort of align it with what your actual usage has been, so you'll be able to see you'll have a history within your account to be able to see, and then those estimated payments will be based on that history rather than just an average. But for the first couple of years of this, there won't be any history within the system, and so it will have to be based on an average for that initial fee.

[Phil Pouech (Ranking Member)]: An average of miles driven?

[Patrick Murphy (State Policy Director, Agency of Transportation)]: Yes, so you have a rate that's been determined based on an average, but then you have what your expected mileage based user fee would be. So at a rate of 1.4¢ per mile and an average of 11,000 miles, your initial estimate is going to be somewhere around $154

[Phil Pouech (Ranking Member)]: So during this transition period, the 1.4 would just put that aside because that's not changing. You're going to not have actual miles in And some so then the DMV will apply the average miles driven by the average person. Is that what you're saying?

[Patrick Murphy (State Policy Director, Agency of Transportation)]: Yes. And so then at that point that

[Phil Pouech (Ranking Member)]: Yeah. That that again seems unfair. Right? It's like, you know, somebody might not drive anywhere near those miles. And once the data starts getting collected at inspections, then you're going to find out what the actual mileage is that's driven. But, you know, I sort of go back to this transition period. You're filling it in with applying an average what the average miles are

[Patrick Murphy (State Policy Director, Agency of Transportation)]: driven to somebody who don't know their mileage, and that just doesn't again seem fair. So then they have the possibility of electing at what payment frequency they want to choose. And so, you know, you're you're basically saying over the next twelve months, you'd be paying $12.13 dollars per month, and then that gets reconciled at the end of the year when you go to renew your registration. And whatever balance is, if there is a balance that's been overpaid, then that's just credited to your next annual mileage based user fee. There's there's no there's no way without a history of how much somebody has traveled, there's no way to be able to appropriately estimate, what their mileage is going to be.

[Phil Pouech (Ranking Member)]: It might be helpful to have like four or five examples. Four examples that says, okay, registered here, here's how the ping, how it'll work. If you register here, here's how it'll work. It's understandable. I don't wanna get tracked down and not quite seeing how it would work. But having a couple of examples might be helpful.

[Timothy R. Corcoran II (Vice Chair)]: Representative Keyser? So Patrick, so it sounds to me as if you are collecting the tax prospectively in the first year, but then retrospectively in every year afterwards. Is that true?

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

[Candice White (Member)]: Your honor, you're muted. Yeah.

[Patrick Murphy (State Policy Director, Agency of Transportation)]: So I think it's gonna depend on where people are in their inspection and registration cycles. So in an earlier example, somebody's paid a just paid an EV infrastructure fee that's essentially going to then be applied to Ford against whatever they're determined to owe in the following registration renewal. So the the the payment will always be for mileage that has happened, not for mileage expected to happen.

[Timothy R. Corcoran II (Vice Chair)]: Even in the first year?

[Patrick Murphy (State Policy Director, Agency of Transportation)]: Well, in the first year, it might be just a flat fee, and then it's reckoned. That's what I'm trying to say.

[Timothy R. Corcoran II (Vice Chair)]: That's and and I'm just making the distinction that that in the first year, we're going to collect it upfront, but every other year, every year going forward, from the second year forward, we would be using actual mileage from what has been driven.

[Patrick Murphy (State Policy Director, Agency of Transportation)]: Yeah, and just to be clear, it's not necessarily collected upfront if somebody elects to pay on a monthly basis, as an example, so that's, yeah, it's not quite prospectively.

[Timothy R. Corcoran II (Vice Chair)]: Okay, thank you.

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

[Phil Pouech (Ranking Member)]: It still would be good to have a couple of examples, You know, like, so to say, I got a vehicle I inspected, you know, I registered in November. This thing kicks in in January. And I get it inspected in July. Now you have mileage. Well, How will that go? Maybe have two or three examples. Someone's gonna have to explain this on the floor too. And I don't wanna be the one. And somehow I think somebody's gonna point and say, Phil should be the one. I think we would need this example, a couple examples, if that's possible, Patrick.

[Patrick Murphy (State Policy Director, Agency of Transportation)]: Yes. We we can get the examples to you so you can explain it on the floor. Okay.

[Unidentified Committee Member]: Next

[Damian Leonard (Office of Legislative Counsel)]: item. This is where we get into so if you think back to before the break, when I walked you through this the first time, I mentioned that the sections forty three zero five, forty three zero six, and 4,308 are all drawn from the gas and diesel tax, where what you're dealing with there is a tax that is on a relatively small number of dealers and distributors who are licensed by the state and file reports every month on the number of gallons that they have sold or delivered. What we're dealing with in the mileage based user fee is a different model where you have a large number of users and we're looking at an annual measurement of how much did you travel in the past year. So in 4305, which I pulled up here, there is in the diesel fee language provides that anyone who fails to file that monthly report when it's due shall pay a fee of $10 as partial compensation for the added administrative costs. So that's where this administrative penalty was drawn from in the initial draft. And then in addition to that, there's interest on diesel tax and gasoline tax that is not paid on a time at a rate of one and a half percent per month, which comes out to 18% annually. That's our maximum statutory tax. And then for amounts that are thirty days past due, there is a 5% of the balance due penalty that's added. So this is is a penalty that's on dealers and distributors who are paying relatively large amounts. Forty three zero six provides a a similar penalty, which is something that was discussed in prior years, if you'll remember right, where if you don't take the actions necessary for the state to know your mileage, the state assumes that you drove the ninety eighth percentile mileage of vehicles in the past year. So they look at all the reported mileages and they say, well, we're just gonna assume you took you drove whatever mileage that is. So that penalty rate would give you a particularly high mileage based user fee for your next registration. So this is if you didn't get inspected, you didn't file your odometer disclosure when you sold the vehicle, or you didn't take the other actions necessary if the registration was terminated to get your mileage or at least an estimate of it to the commissioner. So there what you've essentially got are two penalties that, in some ways, duplicate each other here. One is the mileage the the high assessment of mileage based user fee if you don't get your annual inspection or or report your odometer, both of which are currently required by law. The other one is this other more tax based penalty. So I'm highlighting this because this initial draft was drawn a little bit from the gas and diesel tax, but it does raise some sort of funky enforcement provisions here. And it does raise kind of a question for the committee of, as a committee, what do you think is the appropriate way to enforce payment and to assess penalties for basically not taking those actions? Other thing to just note is similar to registration fees. So if you don't pay your registration fee, your registration gets suspended. There is also in 4307 the ability for the commissioner to suspend your registration after a hearing if you haven't paid your fee. So you get a fifteen day notice for a hearing and then an opportunity to be heard, but then your registration can be suspended. And that's what we do if you don't pay your registration or your mileage based user fee right now. Or I'm sorry, your EV infrastructure fee. Gosh. Been a long morning already.

[Phil Pouech (Ranking Member)]: So I I see two penalties here. One is the state DMV, I guess, says, we've calculated how much you owe. Here's what you owe. And you choose not to pay it or you don't pay it. So then there's this interest tax added. Interest is added based on what you should have paid. Then there's another penalty, not an added penalty necessarily, a second place where you might get penalized is if you haven't reported your miles. And if you haven't reported your miles, we're gonna assume this amount of miles, a painful amount of miles. It would be good to know what that number is, because I imagine some people drive up 98%. I don't know if they're doing 50,000 miles a day a year, a 100,000 miles a year. I don't know what that percentage is. It would be good to just have an idea on what that number is. The two penalties seem reasonable, two different types. You know what you owe and you choose not to pay it or you're not following the rules and reporting the miles through the different systems, then here's your penalty. I'd like to know what the 98 percentile is and estimate. My question is, if I don't pay my registration fee, do those interests, is that interest applied?

[Damian Leonard (Office of Legislative Counsel)]: No. Your your registration is suspended until you pay

[Phil Pouech (Ranking Member)]: us. This could also suspend my registration too. If I if I'm told I I owe $80 in mileage based user fees and I haven't paid it, I'm starting to pay interest on it, then that seems reasonable. Awesome. And my registration could be debunked. Now I wanna you know, taken away. Now I wanna do the right thing, and I pay the registration, new registration, and I pay the interest fee. So now I can get back to being registered. But if I own a gas vehicle and I didn't pay for my registration, which we suspect that a lot of people are doing. And then, you know, the DMV says, oh, your registration is now, you know, debunked. It's not, you know, there's your penalty. It's not registered to drive in an unregistered vehicle. And then six months or nine months later, I say, oh, now I'm gonna come in and register it. And I come in and register it. Where's the penalty? Where's the interest for what I owe, I guess? Or do I have to pay a purchase and use tax again? I guess I just wanna make sure it's apples and apples, the the the penalties.

[Damian Leonard (Office of Legislative Counsel)]: So from what I can see in the statute, the when you there there is a penalty for driving an unregistered vehicle. So that's a separate penalty. So if you get pulled over and the officer asks you for your license and registration and it turns out your vehicle is not currently registered, there is a penalty for driving an unregistered vehicle. And so that's dealt with through the traffic violations that are in the statute. I can't remember the exact penalties off the top of my head.

[Phil Pouech (Ranking Member)]: So you have the same penalty unless something changed if you were driving a battery electric vehicle unregistered. You'd still have that same penalty.

[Damian Leonard (Office of Legislative Counsel)]: It applies regardless of vehicle. So within the registration, if you, for example, one, you can't renew your registration if you don't pay the fee. And you're gonna in the motor vehicle bill that's coming to you, there's a cleanup of the language for what what happens when you're late, when your check bounces or your electronic funds, where the proposal from the DMV is to add electronic funds. So if you put it through and the bank says pending, but then your balance goes down to the point where they actually reject the transaction three days later, it allows the DMV to come back to you. And then if you haven't made good on the amount due, they can suspend your registrations within a reasonable period of time. That's a law

[Phil Pouech (Ranking Member)]: that hasn't passed yet. And that would apply

[Damian Leonard (Office of Legislative Counsel)]: for all

[Phil Pouech (Ranking Member)]: vehicles. It

[Damian Leonard (Office of Legislative Counsel)]: applies for all vehicles. And it does apply if you pay by check currently.

[Phil Pouech (Ranking Member)]: Okay. Yeah.

[Damian Leonard (Office of Legislative Counsel)]: Just doesn't apply if you pay by credit card.

[Phil Pouech (Ranking Member)]: My question is, there's this fee of interest for what you owe

[Damian Leonard (Office of Legislative Counsel)]: That is not in the registration statute. That is in the tax statute. So that's on the gas and diesel fuel tax statute.

[Phil Pouech (Ranking Member)]: And that would apply to battery electric vehicles who haven't paid their tax. But there's no that fee doesn't apply to more regular vehicles. I just feel

[Damian Leonard (Office of Legislative Counsel)]: Yeah. And it it doesn't apply to someone who's paying the gas tax because the gas tax is actually paid by the distributor or the dealer that's licensed to sell the gasoline or diesel fuel at wholesale. So it's paid before it gets to the pump, and it's just built into the price you pay at the pump. So the only real equivalent is that if you only have $20 and you can't afford to pay more, you just get $20 worth of gas. But you don't get you don't pay interest to the state because you couldn't afford to buy the extra gallon. You just don't get to buy the extra gallon. In this case, because the state is looking at how many miles did you drive, and now we're going to charge you for the miles that you drove during that reporting period.

[Unidentified staff/participant]: The

[Damian Leonard (Office of Legislative Counsel)]: what basically happens is you're you're getting a bill from the state, and you have a certain amount of time to pay that amount. And then the way this is built in, you are unable to pay that amount before your next registration based on the payment plan. So you can pay a lump sum or you can pay quarterly or monthly. If you're unable to pay that amount or you're delinquent on it, then your registration won't be able to renew until you come good. And so that's that penalty is also built in here, and that's that's in a later section. So you basically have three provisions here. One is you're not providing the right data because you either didn't get inspected or didn't provide the right disclosure to the department. And the inspection and odometer disclosure are already required by law for when you what annual inspections for cars under current law. And then the odometer disclosure is anytime you transfer ownership of the car, you have to do an odometer disclosure. The one that's not provided is when you terminate your registration. So if your car gets totaled, you can terminate your registration. If you're taking your car off the road for whatever reason, you can terminate your registration. You know, it could be that it's the car that, you know, your your parent drives and they're no longer safe to drive. So you're taking it off the road. At that point, the commissioner is going to have to have a way for folks to report their registration, but that's the other option where you could get this penalty rate for the mileage based user fee that is at a higher amount. It's only if you fail to pay that amount due that the interest and possible additional penalty fees and the suspension or the inability to renew your registration would kick in. The penalty fees are are there for the wholesale distributors of gasoline and diesel. They're not there for the users of an internal combustion engine.

[Phil Pouech (Ranking Member)]: Added this interest penalty fee in here for battery electric. It does exist, but it's at the distributing level. Right. Right. And so you're trying to say, hey, wait, we have it here to distributor level. We should apply the same, I'm assuming it's the same penalties if you haven't paid your tax.

[Damian Leonard (Office of Legislative Counsel)]: So the language that the initial draft that came over from the agency included this language. I can't speak for the agency on their position on it. My role here is not to say that this is good or bad. That's up to all of you. It's just to highlight that this is different from what a driver of a vehicle that's not subject to the mBuff would experience because they are not paying that tax directly to the state. Does that make

[Timothy R. Corcoran II (Vice Chair)]: sense? Patrick and then representative.

[Patrick Murphy (State Policy Director, Agency of Transportation)]: Thank you. Damien and I didn't have a chance to talk about this yesterday, I think the agency would be fine to remove this as not a good fit, $10 penalty. The primary means of obtaining compliance and having somebody go and actually get an inspection is that higher flat fee, default flat fee of at a 98 percentile. And so representative Pouech had asked earlier what is that? You know, it's roughly about $375 based on odometer reading data that we have through the safety inspection process, and so that might shift over time based on, you know, how people's travel patterns change, but that's just to give you a rough idea of how high it might be, 375 or so.

[Phil Pouech (Ranking Member)]: I guess that would be a lot more. Well, I I guess I got stopped once my car wasn't inspected. I think it costs $120 for, you know, forgetting to get my car inspected. So this is 300% how much?

[Logan (Joint Fiscal Office analyst)]: It

[Phil Pouech (Ranking Member)]: does seem a bit steep, but you know, I guess.

[Patrick Murphy (State Policy Director, Agency of Transportation)]: Well, so just to keep in mind, you get pulled over for, you know, not getting not you personally, but maybe another representative gets pulled over for not getting their vehicle inspected. If that costs $105 that's just the incremental amount. So you sort of like, you know, 375 minus 105, you're you're getting, you know, a $270 fee, but that's covering all the mileage that you may have gone, and we just have no way of estimating it because you didn't go and get an odometer reading. So you avoid that by actually making the choice to go and get an inspection and making sure that your odometer reading is in there before the point of registration renewal.

[Timothy R. Corcoran II (Vice Chair)]: Representative White, and we're short on time. We have twelve minutes before Damien has to leave, so

[Unidentified Committee Member]: Okay. Looking at it

[Patricia McCoy (Member)]: feels to me like there are a

[Candice White (Member)]: lot of penalties here. And again, I'm just trying to think, thinking about we want this to be similar to a gas tax and not all of a sudden penalize electric vehicle drivers. So I think it's a good suggestion, Patrick, to get rid of the $10 late fee. There's interest that is baked in here. If you don't pay on time, that seems like a reasonable penalty that people are used to. Can you remind me, apologies if you said this, but can I renew my registration if I have not gotten my inspection?

[Damian Leonard (Office of Legislative Counsel)]: Yeah. They don't look at your inspection sticker when you renew your registration. So that's it's a separate piece.

[Patricia McCoy (Member)]: Yeah. It seems like that would I mean, that's kind of like

[Candice White (Member)]: a whole other conversation, but we've been talking about there are a number of cars that aren't inspected. Well, if it were tied to registration, number one, we'd catch those cars. We'd also catch EV drivers who are not, if they're trying to re register and they haven't gotten their inspection, that will be flagged that they need their odometer read. So I'll stop there.

[Phil Pouech (Ranking Member)]: That's not a good point. Maybe a new

[Timothy R. Corcoran II (Vice Chair)]: computer system, that's probably something that's not gonna do that. Right, I don't know where a good spot for you to stop. You have to leave here in a little bit. So

[Damian Leonard (Office of Legislative Counsel)]: Yeah. So we're actually pretty close to the end. So we got There we go. Alright. So we talked about the penalty rate.

[Unidentified Committee Member]: You're not on the screen.

[Damian Leonard (Office of Legislative Counsel)]: Yeah. I'm just I'm I'm getting caught up to where we are. The there we go. So the suspension or refusal to renew registration, we were just talking about. I just wanna highlight there are two other things that are included, failure to file a report. So this would be the disclosure, something like that. That may or may not necessarily apply to folks who are renewing their registration because the reports that the individual would file are the odometer reading when they're selling the vehicle or transferring ownership and or the other disclosure of mileage if the registration is being terminated, however that gets structured. But filed a report containing an intentional misrepresentation. This actually tracks with our existing registration. So if you include any intentionally false information or misleading information when you apply for registration or a license, the commissioner can revoke or suspend your license or registration if they discover that. And then delinquent on payment is the other piece here. And then consistent with those other provisions, the owner or lessee has fifteen days notice of the intent and the ability to appeal.

[James "Jim" Casey (Member)]: The

[Damian Leonard (Office of Legislative Counsel)]: records retention, this is Can I

[Unidentified Committee Member]: Yeah? So what is the if this is similar to your gas powered vehicle, what is their

[Damian Leonard (Office of Legislative Counsel)]: They have a so if you so with your with an internal combustion engine, if you file paperwork, application, or other information required by the the department that it contains an intentional misrepresentation or false statement

[Unidentified Committee Member]: Yeah.

[Damian Leonard (Office of Legislative Counsel)]: The commissioner can suspend or revoke your registration or licenses as applicable. Okay. Is there a fee penalty? So there's there's a fee to get your get reinstated with your registration or your license, and that's set out elsewhere in statute when you're reinstating. And it a lot of it depends on the circumstances aren't legit with revoked. There are different fees. For example, if the registration or the license suspension is tied to a violation of the ignition interlock program or something like that. So there are other ways you can get your license or registration suspended too. For example, the commissioner can suspend the registration of a vehicle that the commissioner deems to be unsafe for operation on the highway or suspend the license and registration of an individual that the commissioner deems to be a threat to public safety.

[Unidentified Committee Member]: I think this is strictly in relation to giving false information.

[Damian Leonard (Office of Legislative Counsel)]: Right. That's the false information.

[Unidentified Committee Member]: I would like to know what I mean, for the penalty not to exceed 25%.

[Damian Leonard (Office of Legislative Counsel)]: That is the section we were talking about a minute ago. That's the language that's based off the facts. Okay. We're on 4307. Yeah.

[Unidentified Committee Member]: Okay.

[Damian Leonard (Office of Legislative Counsel)]: Yeah. So the Yeah. And the tax penalty the question for the committee is whether you want to have any sort of late fee structure if folks aren't paying the mileage based user fee on time, whether that's interest, a flat fee, etcetera. This is based on what is done for the distributors of gas and diesel. And I believe Patrick indicated a minute ago that the department is okay with modifying that language or taking out portions of it. This language here is specific to with the exception of the failure to file a report, which seems like it wouldn't really apply to someone who's renewing their registration. The other two are you haven't paid your fees as due. And so it's basically a way to make sure people come up to date on the amount of mileage based user fee they're required to pay. And then the intentional misrepresentation, misstatement is consistent with what we do for any vehicle. Basically, if you're lying to the department, the department can suspend your registration.

[Unidentified Committee Member]: Okay. Thank you.

[Damian Leonard (Office of Legislative Counsel)]: And then the hearing is also consistent with that. The next section, forty three zero eight, which is bottom of page six, this is records retention. This again gets into language that applies to that we historically have applied to large dealers and distributors of gas and diesel fuel, where they file these monthly reports that say this is how much I sold and distributed last month, 15,000 gallons or 100,000 gallons, whatever it is. And they're required to keep records that are necessary to substantiate those amounts so that the department can go back in and audit and confirm that, yes, you actually did distribute a 100,000 gallons and you paid the tax on that. So we know you're okay. The question here is whether this makes sense in the mileage based user fee structure. So when you're renewing your registration, it's done through the inspection system. So the user wouldn't have that report. With the odometer disclosure, you're required to file that with the department and the department would have that when you sell the vehicle. The only other report is the possibility of some sort of estimate or other way to figure the mileage on a vehicle where you're terminating the registration. But again, the department should have that and it's just one piece of information. It's not like the dealers and distributors who may have dozens of invoices from all the gas stations they've delivered to.

[Timothy R. Corcoran II (Vice Chair)]: Representative Keyser? Yeah. Having lived through the distributor side of this, You have a commercial enterprise who is rather sophisticated in what they're doing, and now they're doing it. And so I would think that you'd want to tone this down to be more consumer friendly, and where a consumer could understand, well, I don't pay this, I get a $25 fee. I'm not suggesting anything, but just very straightforward and not the layering on of different fees, and that's just because it's a consumer issue and not somebody as sophisticated in the way of the world, so to speak. Reporterhouse, Representative Wood.

[Phil Pouech (Ranking Member)]: Just on this, I'm not even All the records that are generated, if you're doing it correctly, the DMV has. And so if I am not submitting the records, then there's penalties or whatever. Get in trouble. But I can't imagine somebody's going to say, hey, you haven't had your car inspected for three years. Give us the records. They're going to say, here are your penalties. I'm not sure this record I mean, it makes sense for the distributors of fuel and all that to have all these records. But the records are you've submitted them. And then the DMV has them. And if you haven't submitted them, then, do I get a chance to now say, oh, I have the records and now I just want to pay what I should have paid before? No. Mean, I'm not sure it's needed.

[Damian Leonard (Office of Legislative Counsel)]: And I should say I discussed this with Patrick yesterday. He has his hand raised, so he may want to weigh in on behalf of the agency on this side.

[Matt Walker (Chair)]: Sure, we'll

[Timothy R. Corcoran II (Vice Chair)]: just go because you've got to leave. Candice, if you have a question for-

[Candice White (Member)]: That's in line with representative Pouech that if we're getting our inspections, those inspectors are sending information to the DMV, it's all on file. This feels duplicative.

[Timothy R. Corcoran II (Vice Chair)]: Okay, I guess, Patrick, you wanna take this?

[Patrick Murphy (State Policy Director, Agency of Transportation)]: Thanks. Yeah, what we discussed yesterday is that the agency would be fine to strike this. Agree with the comments that were just made. Going back to the section before though, I just want to put a little more detail on that. What is different is that with the mileage based user fee, we are looking at being at, and this goes to representative Keyser's earlier question to some degree, we are looking at a user being able to also report their own odometer readings if they choose. So they'd be able to use, you know, take a photo capture of odometer readings and then send that and pay as they go, which is more akin to how people pay for the gas tax, and so that the section on reporting does come into play if somebody has in any way altered their self reporting of odometer readings, And so that is one section I think that you would want to keep in there.

[Damian Leonard (Office of Legislative Counsel)]: I do need to go. I do want to just comment the current draft would need to be updated to reflect a pay as you go model. So that may be something additional that we wanna add in. There are a couple other things that I haven't had time to get to. So when I get a chance to come back

[Timothy R. Corcoran II (Vice Chair)]: I'm sure we'll have to pay you two minutes yet. All All right. I think we have Jeremy Reed's. Oh, yeah.

[Phil Pouech (Ranking Member)]: Just comment. I appreciate the committee and allowing me to have, you know, not take over that, but I have a lot. It's a lot of questions and I appreciate the time to ask those questions.

[Timothy R. Corcoran II (Vice Chair)]: Great, great question. So we have Jeremy Reed up next, but we're going

[Logan (Joint Fiscal Office analyst)]: to take

[Timothy R. Corcoran II (Vice Chair)]: a break.