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SALT LAKE CITY — Recent car manufacturing, purchasing and community trends indicate electric vehicles are the future of transportation.
For instance, Zion National Park announced this week it was shifting its shuttle service to an electric fleet over the next few years. Salt Lake City recently passed a resolution to shift its vehicle fleet to electric over the next few years as well.
General Motors CEO Mary Barra said last week that the major U.S. car manufacturer aims to convert all its vehicles to electric by 2035.
Advocates for electric vehicles say they're a better option for the environment because the vehicles don't tack on tailpipe emissions — a large factor for carbon emissions across the globe. But a shift to electric vehicles could cause issues for Utah when it comes to funding road projects.
In the midst of growth in electric vehicle use, a Utah legislator proposed a bill that would increase yearly registration fees 150% to 400% for electric or hybrid vehicles. The bill passed a House transportation committee this week with a narrow 6-4-2 vote following a passionate discussion over whether the bill levels the road fee playing field or damages the market for a product that could benefit Utah's air quality issues.
Creating road use equity?
HB 209, sponsored by Rep. Kay Christofferson, R-Lehi, seeks to raise the current registration fees for electric, plug-in hybrids and hybrid vehicles.
If passed, the yearly registration fee for electric vehicles would increase from $120 to $300; plug-in hybrids would jump from $52 to $260 while hybrid vehicle fees would jump from $20 to $50 in 2022. It equates to a 150% tax increase for electric and hybrid vehicle owners and a 400% increase for plug-in hybrid owners. The fees for all three options already increased 33% from 2020 to 2021.
Sen. Wayne Harper, R-Taylorsville, the bill's floor sponsor, said a portion of the fees go toward building infrastructure for electric vehicle charging stations, propane and natural gas stations.
No other fees would be touched as a result of the bill. The registration fee is currently $44 for every motor vehicle under 12,000 pounds and $46 for every motorcycle.
Harper presented the bill during a House Transportation Committee meeting on Monday because Christofferson, who is also the committee's chair, was still recovering from COVID-19. Harper agreed to be the bill's floor sponsor this week.
During his presentation, Harper argued that without an increase of fees for electric or hybrid vehicles, the state's collection of road use fees would diminish, adding that the bill tries to "create parity" within the state's road user fee system. All fees, charges and taxes from vehicles go toward Utah roads and other vehicle-related items, the Office of the Legislative Research and General Council points out.
"The intent is to allow for people to go through and say they want to pay for the additional fee collected at the time of registration or they can go participate in the road-user charge program, whichever they want to do," he said. "At no point in the road-user charge program will you pay more than the registration fee even if you drive more miles."
Rusty Cannon, vice president of the Utah Taxpayers Association, argued in favor of the bill. The organization believes the bill will ultimately even the playing field for all vehicles traveling on Utah roads.
The association found that the average electric or hybrid vehicle owner currently saves anywhere from $219 to $294 per year compared to gas-powered vehicles when it comes down to registration fees and gas taxes combined. Should the bill pass, they would still save but the deficit would be less. The association estimated savings ranging from $81 to about $189.
"This bill is not about environmental quality, we think that's a separate issue. This bill is about equity and fairness in using the roads," Cannon told the committee.
He added that the average Utah driver pays $381 per year in federal and state gas taxes based on the average cost of fuel, as well as data provided by the Utah Department of Transportation for miles driven by a Utah driver and the average miles per gallon of a vehicle in the state.
About 98% of drivers in the state fall under this category, he continued. The money isn't paid in a lump sum but through every trip to a gas station.
"You don't realize in that $2.25 (per gallon) you're paying at Maverik right now, 50 cents of that is roughly in tax," Cannon said. "And so if you have a 15-gallon tank, you're paying $7.50 every time you fill up — and it goes throughout the year. Can you imagine if we had to pay our income tax once per year or if we had our sales tax once per year? We'd lose our minds."
That said, there is a purpose behind cheaper fees for electric and hybrid vehicles. Rep. Ray Ward, R-Bountiful, pointed out that the incentives were put in place to make it easier for those who wanted to create a better market for zero or low-emission vehicles.
What would happen to electric vehicles?
Ward opposed the bill because he doesn't believe the electric vehicle market is at a point of self-sustainment to survive a large spike in yearly fees.
He and Rep. Suzanne Harrison, D-Sandy, were among committee members who raised questions about how the bill would impact global climate concerns or air quality concerns that exist heavily within the state's population core by the Wasatch Front. Those are primary motivators for residents and government entities that began the switch to electric options.
"We have some of the worst air quality in the nation here and this bill would increase (electric vehicle) fees to the highest in the nation," Harrison said, as she directed a question toward Harper in the meeting. "My concern is that the data you're using is based on the data from gasoline vehicles, not EV vehicles."
Representatives from the Healthy Environment Alliance of Utah, Western Resource Advocates and Utah Clean Energy were among those who spoke against the bill during the hearing.
Ward questioned if raising registration fees would erode that future market. House Minority Whip Karen Kwan, D-Murray, added that similar moves in other states resulted in a drop of electric vehicle purchases.
0, contended that since motorists impacted by the bill only equate to about 2.5% of registered vehicles in the state, those drivers weren't taking much away from the total road use tax and fee accumulation. She, like others who opposed the bill, feared the change could kill the potential for that number to grow.
"Claiming that this creates equity in regard to just who uses the road is a bit narrow of this word equity because it would actually build more barriers to accessing these vehicles to begin with," she said. "We believe there are other alternatives to address the concern of gas versus non-gas vehicles on the road."
At the same time, Harrison argued that since electric vehicles are more expensive, the state would have already collected more from electric vehicle owners in sales taxes than gas-powered vehicle owners. For instance, Quartz reported in 2019 that the average cost of an electric vehicle had fallen but was still $55,600 at that point. That was well above the median price for all vehicles, which was $36,600.
She also questioned if it would make more sense to increase fees on larger vehicles that contribute more to road damage.
Harper countered that larger vehicles already pay their own fee collected at the pump, which is on top of the annual inflation increase in that tax that alternate vehicles don't have — although those fees wouldn't increase as much as the proposed change to electric vehicles.
He added that in the end, he believed that electric and hybrid vehicles were "lifestyle" and "environmental" choices, asserting that it may seem weird that he — a hybrid vehicle owner — would support a bill to increase taxes on himself. His view came down to how transportation projects are funded.
"I think in the line of air quality, it's important to have these vehicles but in the line of equity and maintaining our roads, that's really important because … somehow we've got to pay for (road projects)," he said. "I believe what came down on this is, yes, we gave people a reduction for the first three to four years of this program. Now is a time to bring that up so it's equitable for all. That's the real question of this bill."
Road Usage Charges and future growth
Some of the supporters of the bill argued this week that HB209 could pave the way for better economic incentives for electric and hybrid vehicle users who use enough of the road.
Cannon said vehicle owners could save money if they opted into UDOT's Road Usage Charge program for alternative fuel vehicles and drove over 8,000 miles. UDOT is expected to release data tied to the program later this year, which might provide better information on how electric vehicles are used in the state.
He added that there were still "massive" federal tax incentives that exist, which could persuade someone into purchasing an electric or hybrid vehicle.
Rep. Jeff Stenquist, R-Draper, also asserted during the meeting that while the change would impact a small portion of drivers, he didn't believe it would crush the market because he believes all the indications point to the electric and hybrid market "growing rapidly." If more manufacturers switch to solely producing electric vehicles over the next decade, the market could be primarily electric within a decade or two.
For him, it's easier to figure out road use policies while the market is small in the state rather than wait until a rush of electric vehicles in the coming years to enact a policy.
Still, not everyone was convinced that the fees need to be raised now. Kwan said during the meeting that she understood the reasoning behind the bill but believed it was too strong and would cut into the benefits of moving away from gas-powered vehicles.
"I think there's a sweet spot in there but I don't think we've hit it with this bill," she said.
Olscamp also argued that it would be more beneficial to make road usage charges the standard with incentives to opt out of the program.
"Instead of shocking the system with increased fees that would prevent most citizens from ever affording these vehicles, we should be making evidence-based decisions to ensure the longevity of this important and still yet emerging market that the state has already made significant investments in," she said.
After about an hour of discussion, the committee advanced the bill with a 6-4 vote Monday. Since then, it was marked for the second reading in Utah's House of Representatives. It would still need to pass the House and Utah Senate and be signed by Gov. Spencer Cox before it would go into law.