Implementable Strategies for Shifting to Direct Usage-Based Charges for Transportation Funding
Sep 25, 2009
Assessing the Path Forward
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For nearly a century, federal and state gasoline and diesel taxes have provided the main source of revenue for funding the nation's road network. But such taxes—typically levied on a cents-per-gallon basis—must be raised periodically to keep pace with inflation and improved fuel economy. With the rise in antitax sentiment over the past several decades, elected officials have grown increasingly reluctant to take on this unpopular task. Thus, fuel tax receipts, measured in real dollars per mile of travel, have fallen precipitously, leaving insufficient revenue to maintain, let alone expand, the road network. This decline will likely accelerate in future decades as conventional vehicles become more efficient and as alternative fuel options (e.g., electric cars) are introduced and gain market share.
Against this backdrop, many believe the nation should replace fuel taxes with a system of user fees based on vehicle miles of travel, or VMT. (VMT fees are also known as mileage-based user fees, or MBUF.) Because VMT is expected to grow faster than fuel consumption in the coming decades, VMT fees should provide a more stable source of revenue. Since 1980, with gradual gains in average vehicle fuel economy, VMT has doubled, while fuel consumption itself has increased by just half. Long-range projections for fuel consumption and VMT from the Energy Information Administration (EIA) suggest that this trend will continue. According to EIA projections, federal fuel tax revenue (assuming current per-gallon rates) should increase by about 10 per-cent between 2015 and 2030, growing from $36 billion to $39 billion (2009 dollars). If, instead, federal fuel taxes were replaced with VMT fees in 2015 at an initially revenue-neutral rate, receipts should increase by 33 percent over the same period, growing from $36 billion to $47 billion.
Beyond providing a more stable revenue stream, VMT fees could support many other goals. Rates could be structured to help reduce congestion and harmful emissions, metering devices could provide value-added services (e.g., safety alerts, real-time traffic information and routing assistance, and the ability to save money with pay-as-you-drive insurance), and the system could generate rich travel data for improved transportation planning.
In a two-phase study for the National Cooperative Highway Research Program for the Transportation Research Board, a team led by RAND researchers first assessed alternate mechanisms for implementing VMT fees in the near term and then outlined a plan for large-scale system trials to further evaluate the most promising concepts.
Drawing on recent programs, studies, and proposals, the RAND team assessed the eight VMT metering options shown in Table 1. The first three (light gray) rely on odometer checks to determine VMT fees. The middle two (medium gray) use relatively inexpensive automatic vehicle identification (AVI) devices—such as radio-frequency identification (RFID) tags—combined with supporting infrastructure deployed along the roadways and/or at fueling stations. The last three (dark gray) options involve sophisticated on-board units (OBUs) that incorporate a connection to the vehicle's on-board diagnostic (OBD) port, cellular communications, and/or a GPS receiver. Beyond metering options, the researchers also examined complementary options for collecting fees (with registration, with fuel purchase, with debit cards, or with automated billing), preventing evasion, and protecting privacy.
In assessing these options, the researchers first considered metering capabilities: the ability to track, measure, or estimate mileage, area of travel, route of travel, time of travel, and salient vehicle characteristics. These capabilities affect the ability to pursue alternate pricing policies (e.g., fees that vary by jurisdiction or higher fees for peak-hour congested travel), offer location-sensitive value-added services (e.g., downstream traffic incident alerts), and collect travel data for improved system planning. GPS offers the greatest flexibility, while odometer checks offer the least; other options fall between these two.
|Self-reported odometer readings||Drivers report current mileage each year as part of annual registration process.|
|Required odometer checks||Drivers submit to periodic (likely annual) readings at certified stations as basis for assessing mileage fees.|
|Optional odometer checks||Drivers are assessed an annual fee based on estimated mileage for the vehicle class; those driving significantly less than estimate could submit to annual odometer readings.|
|Fuel consumption-based estimates||Vehicles are equipped with an AVI device that transmits vehicle fuel economy rating to the fuel pump; this is multiplied by gallons purchased to estimate mileage, and resulting fee is added to the price.|
|RFID tolling on a partial road network||Vehicles are equipped with an AVI device that communicates with gantries set up along the most heavily traveled segments of the road network to enable facility-based tolls.|
|OBU with OBD II||Vehicles are equipped with an OBU connected to the OBD port to estimate mileage.|
|OBU with OBD II/cellular||Same as above, but vehicles are also equipped with cellular communication technology to determine area of travel.||OBU with GPS||Same as above, but vehicles are also equipped with a GPS device to determine specific route of travel.|
Because each option faces one or more limitations, identifying the most promising implementation mechanisms to examine in trials requires policy trade-offs. For example, is it more important to reduce implementation costs or support a broader range of functionality? While such questions can be informed by careful analysis, policymakers must ultimately make the decisions.
Lacking clear consensus among policymakers about the requirements that a VMT system should satisfy, the RAND team relied on recommendations from the National Surface Transportation Infrastructure Financing Commission's 2009 report. These recommendations argue for examining metering devices that can determine the location of travel (e.g., GPS) to support the broadest possible range of system functionality, along with multiple options for collecting fees, preventing evasion, and protecting privacy.
But such guidance still does not address a much broader set of questions related to the appropriate design for large-scale system trials, such as questions related to the trials' scope (e.g., policy issues to examine, duration of the trials, number of participating motorists, and number of states involved) and organization (e.g., who should oversee, manage, and be involved in conducting the trials). To gain insight on such questions, the researchers conducted an extensive set of interviews with stakeholders and subject-matter experts and then an expert panel workshop.
Although the interviewees and workshop participants agreed on many issues, they had widely divergent opinions on certain questions, stemming from disparate views about how the transition to VMT fees would likely (or should ideally) unfold. In particular,
This divergence led the RAND team to develop three conceptual frameworks, or visions, about how the transition to VMT fees might be pursued and, in turn, how the trials could be scoped and organized in support of that vision. Table 2 summarizes the frameworks along with their strengths, limitations, and risks.
||Could be easier to gain public acceptance for VMT fees in an individual state than at national level, thus increasing odds of actual implementation||Would not, in near term, help address federal transportation funding shortfalls; could pose risk that the systems developed in different states would not be interoperable; would reduce opportunities to drive down costs through economies of scale|
||Would directly address need to augment federal transportation revenue; would maximize opportunity to reduce costs through economies of scale; would ensure interoperability||Would require some degree of national consensus to implement national VMT fees, a significant challenge to surmount; would likely involve some form of mandatory adoption, compounding the difficulty of gaining public acceptance|
||Would reduce government cost for collecting VMT fees; would maximize the social value of the investment in metering devices by providing value-added services; could circumvent public acceptance challenges through the voluntary opt-in period||Assumes an unproven market for value-added services; would require an initial set of interoperability standards and corresponding certification process to be developed in advance of the trials|
While these frameworks attempt to capture alternate conceptual pathways to the implementation of VMT fees, they need not be viewed as mutually exclusive. It would certainly be possible, for example, to blend elements from the frameworks in the trials or pursue one framework to examine VMT fees for passenger cars and another to examine VMT fees for commercial trucks. Still, considering the frameworks and making an explicit choice among them would help to clarify trial goals.
Using the insights gained during the interviews and workshop, along with supporting analysis where helpful, the researchers distilled a set of options for scoping and structuring the trials to ensure that they would be as productive as possible. The researchers also identified how certain elements of the trials might be modified in subtle but important ways to more directly support any of the specific frameworks. The following describes an approach, consistent with the research findings, for scoping and structuring the trials in an effective manner:
While the envisioned trials would require considerable investment, they would also play a critical role in helping to prepare for the potential implementation of VMT fees by states or the federal government in the next five to ten years. The prospect of designing, implementing, and transitioning to a system of VMT fees poses numerous technical, institutional, and political challenges, and many uncertainties remain. The trials are explicitly intended to reduce or resolve such uncertainties to inform the policy debate and support the design of a capable, cost-efficient, and publicly acceptable system of VMT fees.
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