Business Needs to Engage as Oregon Charts a New Direction on Transportation
Oregon is about to undergo a seismic shift in how it funds its transportation system, and business leaders are starting to take note. Faced with state and federal mandates to reduce carbon emissions by moving away from internal combustion engines to a fleet powered by electricity, the days of relying on gas tax revenue as a principal source of funding for highway construction and maintenance are numbered.
Initiated by HB 2017 during the 2017 legislative session and revised in 2021 with HB 3055, the Oregon Department of Transportation is moving rapidly to develop alternative revenue sources including charging drivers based on vehicle miles travelled (VMT) and the use of tolls to reduce congestion and provide revenue for project construction.
Tolling is set to begin on all lanes of Interstates 5 and 205 in the greater Portland area in 2026. A recent Westside Transportation Study report also called for tolls on Highway 26 west of Portland and Highway 217. ODOT may also use tolling anywhere else in the state to boost revenue. Salem and Eugene will be the next areas likely to experience the tolling buildout.
Business interests have not been a major contributor to this plan as state and county officials have mapped the path forward. The tolling plan in particular has drawn the ire of citizens in the south metro area where it will first be instituted. The first tolls were to begin later this year, but Governor Tina Kotek ordered a pause until 2026 which would give the Legislature an opportunity to re-evaluate the current plan during the 2025 session. However, it appears ODOT and its partners are attempting to rebrand the current plan rather than pursue other funding options. In the absence of any organized effort by businesses to provide alternative solutions, the current plan is likely to be the default option.
A number of business leaders are hoping to form a coalition to engage the Legislature and ODOT on developing alternatives to the current direction for the 2025 session. They are particularly concerned about the efficacy of using tolls as a dependable funding mechanism. Unlike the gas tax, where revenue is collected at point-of-sale and delivers an efficiency level near 99%, the cost of collecting tolls can amount to as much as 40%. And then there is the public demand to provide exemptions or reduced tolls for lower income drivers.
The Oregon Transportation Commission has already approved exemptions or reduced fares for those who make less than 200% of the federal poverty level. That’s another 25% of all metro-area residents. There is also a significant push to continue exemptions or reduced fees for families of four making less than $111,000 a year. Add to this the cost of mitigating impacts on diversion routes, and pursuing those who refuse to pay their charges, it is possible that little revenue would actually remain for use on the highways.
Environmental groups have also expressed concerns about using tolls to finance highway construction rather than utilizing limited, more targeted tolling approaches to reduce congestion that are not constrained by a need to maximize revenue collection throughout the state.
Local governments have not chartered a uniform lobbying effort to pause and rebuild the current ODOT plan. Instead, they are expressing specific concerns about mitigating their local traffic impacts and advocating for exemptions for their own community members rather than addressing a comprehensive retooling of the tolling blueprint.
Once this path is blazed, changing policy direction will be nearly impossible and the Governor’s temporary reprieve will have been wasted. Time is of the essence. Business depends on an efficient, well-funded transportation system where costs are equitably distributed and employee retention is not hindered by disproportionately impacting employees commuting to and from work.When it comes to those offering thoughtful, impactful alternatives, the void is palpable. Business leaders interested in learning more about helping to fill that void can contact metsger@pwlobby.com for more information. Oregon’s transportation system is about to undergo a radical transformation. Business needs to be pro-active in providing alternative solutions or be paved over by the inertia of the current plan ODOT and the legislature have set into motion.