Rollback on the roads: TDOT lowers yearly electric vehicle fee proposal to $274

The fee increase has been a controversial sticking point in the larger Transportation Modernization Act
Posted at 8:29 AM, Feb 28, 2023
and last updated 2023-02-28 09:29:03-05

NASHVILLE, Tenn. (WTVF) — After negotiations with automakers, the Tennessee Department of Transportation will propose a slightly lower yearly registration fee for electric vehicle drivers than initially planned.

The fee, if approved as part of the larger Transportation Modernization Act, would begin at $200 and then increase to $274 in two years, according to the latest bill amendment filed (pg. 33-40). Electric vehicle drivers currently pay $100 for their yearly registration.

Right now more than 22,000 Tennessee drivers have gone electric, according to Drive Electric Tennessee. The group of more than 60 electric vehicle stakeholders predicts that number will increase nearly ten-fold in the next five years.

A major draw for drivers to make the switch is avoiding costly trips to the pump.

"That (one) customer, from the car they traded in, they saved $700 a month in gas," said Denna Geppi, who co-owns a lot that sells used electric vehicles. "The car essentially paid for itself."

Her company, Hybrid and Electric Car Sales, opened in Franklin in June. But demand has been so high, the small operation that sells 20-30 vehicles per month is already talking about expanding.

"The cars are going off the shelves," laughed their Director of Operations Basyir Nasution. "Which makes it a little harder to stock them."

Staff say almost all of their cars cost under $40,000, with a couple priced under $10,000. They offer car maintenance and can scan the battery to determine how much life it has left.

"A second generation Prius (for example), we can scan it and tell people 'this car is going to last you another 200,000 miles,'" Nasution said.

As the market for electric grows, the government revenue from drivers wanes. Because when drivers don't pay for gas, they also don't pay gas taxes. Problematic, TDOT says, because along with registration fees, gas taxes make up 60% of road project funding statewide. TDOT CFO and Deputy Commissioner Joe Galbato says revenue hasn't significantly declined yet, but if some EV projections are met, the state is already looking at a $35 million hole in the next five years.

"If we want to keep growing and keep financially viable, we need to address congestion, we need to expand rural interstates, we need to deliver beyond the Improve Act, we need to take care of the state of good repair," he said.

Galbato says increasing yearly fees on electric cars is not about bringing in significant sums today. It's about laying a roadmap for a time when more Tennesseans charge up than fill up.

"At some point here in the future most cars being sold and driven will be electric," Galbato said. "What we're trying to do with the EV fee is again looking to the future."

But the change would eventually lead to the highest electric vehicle fee in the country, with the potential to further increase due to inflation and market factors.

"What sticks out to me is it’s the highest in the country," said Geppi. "I don’t know if that’s what we want to be at the forefront of."

When asked about it, Galbato said TDOT reached the number in a compromise with carmakers after consulting with researchers from the Baker Center for Public Policy at the University of Tennessee.

"Two hundred seventy-four is the number that we have agreed upon," he said.

Researchers deduced that the average Tennessee driver pays $274 a year in gas taxes, with $164 going toward state taxes and $110 toward federal.

But unlike the gas tax, the federal government does not collect fees from electric vehicles. TDOT says that portion of the total will instead be divided by the state and local governments.

At the car lot, Geppi thinks the fact that there are thousands of dollars in federal tax credits up for grabs will help stop the fee increase from deterring buyers.

"I don’t get the sense it's going to discourage people, but it's something we want to stay on top of," she said.

She thinks Tennessee should simultaneously find ways to encourage EV ownership, as other states have done, with HOV lane exceptions and free access to future toll lanes. "Choice" lanes are a large part of the Transportation Modernization Act proposal.

"Hey if we're paying $200 more, maybe we can get in that lane on I-65 as a single driver," she said.

It's a possibility, says Galbato, but no guarantees. That would be up to the companies that agree to build those new lanes.

"When you have the choice lanes it's going to be an economic proposition: how many vehicles are going to go into that lane, how much is it going to cost to build it and who will be allowed in that lane for a fee verses free of charge," he said.

For now, TDOT is focused on pressing the gas, or more appropriately, the on-switch on new revenue from electric.

Staff will present the latest TMA proposal before legislative committees in the Tennessee House and Senate Tuesday and Wednesday.

NewsChannel 5 reached out to both car manufacturers in Middle Tennessee for their thoughts on this story.

Nissan replied saying, Nissan supports efforts to improve Tennessee’s transportation infrastructure and recognizes that EV drivers should pay their share for infrastructure costs that are typically covered by gas taxes. As the legislation continues forward, we are encouraged that the state has expressed a commitment to meeting its infrastructure needs, while not unfairly targeting EV drivers."

General Motors declined to comment.

Another group involved in the negotiations was the Tennessee Road Builders Association.

They replied, "The Tennessee Road Builders Association appreciates Governor Bill Lee's prioritizaton of infrastructure and the commitment to expand rural interstates and reduce urban congestion. TRBA supports the Transportation Modernization Act and urges the General Assembly to approve the Governor's request of $3.3 Billion to build and maintain our roads and bridges to support the ever-expanding population and commerce in the Great State of Tennessee. We applaud the increase that begins to put electric vehicles on par paying for Tennessee's roads and bridges as gas and diesel powered vehicles long have."