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Frequently Asked Questions

Why should we consider distance-based fees (DBF)?

Minnesota, like most states, is largely reliant on the motor fuel tax to fund our state’s highways. Because vehicles are increasingly using less or no gas, a gas tax alternative will be needed in the future so our roads and bridges don’t become underfunded, inadequate, and unsafe.

  • Motor vehicles today get two or three times the gas mileage of those in the 1970s.
  • The public is driving more but paying less for use of the roads.
  • We are seeing gas tax revenue flattening because this tax is not automatically adjusted for inflation and this will result in an increasingly acute problem in the future.
  • Electric and other alternative fueled vehicles are forecast to become a more significant part of the fleet exacerbating the revenue collections problem.

As newer vehicles use significantly less gasoline or no gasoline, a distance-based fee is one potential way to ensure everyone is paying their fair share for the cost of roads and bridges.

Why not just raise the gas tax instead?

Policymakers are concerned about the long-term viability of the gas tax as more vehicles are able to drive further using less or no gasoline. The result of this is that we are driving more miles and paying less tax for maintaining our roads at a time when an aging system needs serious investment. Sustaining the “user benefits-user pays” philosophy for funding roads is important. That’s why this distance-based fee approach is being studied, because it ensures that all road users contribute to funding the system, including drivers of vehicles that use little or no gasoline.

What currently is Minnesota doing to address the problem?

With funding from the federal government, a team led by the Minnesota Department of Transportation (MnDOT) is operating a distance-based fee demonstration project involving car-share fleet vehicles like HOURCAR and Zipcar.

The purpose of the project is to show how the car-share platform could be used as a model to one day collect distance-based fees. The car share platform, with embedded telematics that enable efficient, safe and secure recording and reporting of miles traveled, is likely to be a standard feature on most new cars. Already, many manufacturers are equipping vehicles with that capacity. As part of this project, MnDOT will also evaluate the feasibility of assessing a per-mile fee on automated (driverless) vehicles. Data from these vehicles will be evaluated for reporting, calculating, assessing and potentially paying distance-based fees.

Is this a new tax added on to the gas tax?

No, Minnesota's approach assumes keeping the current gas tax for the large majority of vehicles on the road today.

In this demonstration project, no money changes hands, so it's not a tax at this point. It is a limited simulation that is using electronic data transmission on fleet vehicles for learning purposes only.

Fleet users likely will notice little to no difference in their experience. No additional actions by users will be required. This is a limited simulation that is using electronic "play money" for learning purposes only.

Why focus on car-sharing companies?

Car-sharing and automated vehicles and fleets present a unique opportunity for using distance-based fees. First, more Americans will be using these options in the future. Second, compared to a system focused on all vehicles, distance-based fees focused on car share fleets have the potential to be easier to collect and manage when charged via the car-sharing companies.

  • On-board and embedded technology will help to ensure user privacy and data security.
  • Evasion can be reduced or eliminated.
  • Reconciliation of fees will be managed to ensure that users are not double charged for use of the road.

This demonstration project will help us learn the extent to which the DBUF approach applied to car-sharing fleets and automated vehicles is practical and feasible, and how best to structure it if it were used in the future.

How will privacy be protected?

This system is designed to maximize existing legal privacy protections. First, personal data is collected by the shared mobility providers in ways that customers have already consented when they initially enrolled, and none of that information is sent to the state. Second, these providers deploy technology that provides state-of-the-art security. Finally, and perhaps most importantly, the only data reported to the State is the aggregate distance traveled by the vehicles in the fleet, not time, location, or any personal information.

Have any other places attempted to implement user-based fees in place of gas taxes?

Furthest along is Oregon with the permanent, but voluntary, OReGo program. Recently, the state of Utah joined Oregon to become the only states with programs to implement actual financial transactions. Virginia is expected to implement a system in 2022.

Minnesota and other states have been studying potential applications of a mileage-based tax, distance-base fee or road-user charges for the past decade.

Read summaries of Minnesota’s research

Read summaries of research and pilot projects in other states


Federal Highway Administration

Minnesota reports to the FHWA on its Distance Based Fee (DBF) Demonstrations under the Surface Transportation System Funding Alternatives (STSFA) Program.

The Surface Transportation System Funding Alternatives (STSFA) Program was authorized by the Fixing America's Surface Transportation (FAST) Act of 2015. The program is administered by the Federal Highway Administration (FHWA) and provides grants to states to demonstrate user-based alternative revenue mechanisms that utilize a user fee structure to maintain the long-term solvency of the Federal Highway Trust Fund. Minnesota's DBF efforts have largely been funded with grants from the STSFA program.

Visit STSFA Website »

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