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41 BREAKOUT SESSION 5 Vehicle Miles Traveled The Next Funding Frontier? Adrian Moore, Reason Foundation (Moderator) Paul Hanley, University of Iowa Jack Wells, U.S. Department of Transportation Richard Baker, Texas Transportation Institute Dick Mudge, Delcan Adrian Moore of the Reason Foundation moder-ated Breakout Session 5 and observed that the National Surface Transportation Infrastructure Financing Commission concluded that the status quo for transportation funding in the United States is not sustainable. The most likely solution would be a shift away from the motor fuel tax to a vehicle miles traveled (VMT) fee as the primary source of surface transporta- tion funding. The design and implementation of a VMT system will be driven by public perception and whether it is able to raise more money than the motor fuel tax. The following presentations address aspects of this change. leSSonS learned from tHe national vmt demonStration Project Paul Hanley provided background information on the VMT pilot conducted by the University of Iowa. The program uses an onboard odometer unit that provides information on the vehicleâs location as it moves between jurisdictions. Data are stored on the unit and transmit- ted over a cell phone connection once per month. The system was tested in two rural locations, two urban areas of moderate size, and two large urban areas. The first tests concluded in August 2009 are now being replicated. The study involved an aggressive recruiting campaign. More than 81,000 motorists volunteered to participate in the study. Of those volunteers, 1,207 were enrolled in the first year, with 1,152 ultimately completing the program. The second year of the study had 1,446 origi- nal participants, with 1,370 completing the program. Between January 2009 and April 2010, the participants collectively drove a total of 20.5 million miles, or an average distance of 1,033 miles per month per driver. The revenue generated by the test conducted from Janu- ary to July 2009 at 2.3 cents per mile totaled $229,691, which was approximately 12.2 percent less than the cur- rent motor fuel tax would have generated from federal and state taxes collected at the pump. The technology performed properly for 92.9 percent of the miles traveled. The system missed recording 1.4 million vehicle miles, which equated to 7.1 percent of all miles traveled. Out- ages often occurred with short trips, but the study was able to interpolate 6.6 percent of the miles traveled; 0.6 percent remained uninterpolated. The demonstration proved that the current technology is robust, and it is improving. With regard to ease of use of the system, 74 percent of users did not need technical support. Of the remaining 26 percent, 9 percent required extensive assistance, and 0.3 percent had to return multiple times to have equipment retrofitted. Opinions of VMT trial participants shifted over time, with participants either liking the program more or less. Attitudinal surveys revealed that older, more educated, and higher-income participants were more likely to have a positive opinion of the trial. The trial used two types of invoices: one provided only the monthly total of miles traveled, and the other showed all vehicle movements. While participants got used to either system and began to trust it over time, there were trade-offs between preser- vation of privacy and the ability to audit, with opinions on both sides. As part of the research, a national random digit tele- phone survey of 1,700 people was conducted concern-
42 FINANCING SURFACE TRANSPORTATION IN THE UNITED STATES ing knowledge and opinions on transportation funding. Fifty-one percent of the participants thought that the fuel tax should be increased, and 45 percent were in favor of instigating a VMT fee. However, support for a VMT fee dropped to only 26 percent if the technology used to collect the mileage traveled involved Global Positioning System (GPS) satellites. imPlementation coStS for a vmt SyStem Jack Wells of the U.S. Department of Transportation (DOT) indicated that road user charges are perceived to have signif- icant advantages over fuel taxes as a financing mechanism, but there are concerns about the high cost of collecting the fees. U.S. DOT has investigated the costs of administering a VMT fee by using video tolling technology, automatic vehicle identification (AVI) transponder-based systems like E-ZPass, GPS technology, and variations within those tech- nologies. The research found that different technologies performed better depending on the application. There are strong economies of scale for systems of this size. For 10-mile corridors, GPS is the less costly solu- tion, with costs totaling 4 to 5 percent of revenues. AVI collection technology would require 16 to 25 percent of revenues, and video tolling would be the most expensive, requiring 33 to 50 percent of revenues. For a longer cor- ridor of 1,000 miles, the costs would vary on the basis of the number of exits and tolling locations. GPS and AVI technologies would require 2 to 3 percent of revenues, while video tolling would be more expensive at 3 to 5 per- cent of revenues. The cost of collecting cordon pricing fees was also investigated, but the findings were not expressed as a percentage of revenues. AVI and GPS technologies would both cost approximately $2.1 million per year for 10 entry or exit points. Operation of a similar video toll- ing system would cost approximately $4 million per year. U.S. DOTâs research concluded that AVI and video tolling technologies would be inappropriate for collect- ing a national VMT tax. The only solution for this type of application would use GPS technology, and the cost of collecting the fees would be largely dependent on the type of onboard unit used. While transaction costs would be low at 0.07 percent of revenues, capital costs would be comparatively high, ranging from 7.9 percent of revenues if less costly onboard units were used to 33.2 percent if more expensive units were deployed. The less expensive units cost $195 each but introduce greater privacy concerns. These devices use mapping software with data off-loaded to a host computer and have higher data transmission costs. The more substantial units cost approximately $650 each and generate fewer privacy concerns but require more complex mapping software. The U.S. DOT study concluded that administrative costs would be feasible if the least expensive onboard unit was used but that they would still be significantly higher than administering the fuel tax. The added costs could only be justified if there were significant benefits beyond revenue collection. Current GPS has imperfect in- location accuracy, especially in cities, but it will improve as new GPS signals become available. The key issues are privacy concerns and the cost of the onboard units, which could be greatly reduced if they were installed in cars during the manufacturing process. tranSitioning to mileage-BaSed uSer feeS: an aSSeSSment of inStitutional iSSueS Richard Baker reported on work that the Texas Transpor- tation Institute (TTI) has undertaken on the institutional issues associated with implementing a VMT fee in lieu of the motor fuel tax. The research has involved the use of focus groups to explore framework issues and arrive at a workable approach. Implementing a VMT fee would involve navigating predevelopment issues including pro- gram goals, public acceptance, and definition of public and private roles, as well as the challenges of developing a system architecture and administrative procedures. Mr. Baker stated that TTIâs research has found that the biggest challenges are the lack of public awareness of how transportation is funded, the role of the existing motor fuel tax, and distrust of government. To imple- ment the VMT fee, he believes that the public sector should establish goals and standards for system opera- tions and privacy. The private sector should develop the technology for the onboard unit, enforcement systems, and data transmission systems as well as the data man- agement and billing platforms and any other value-added services to be offered in conjunction with the VMT fee. According to Mr. Baker, policy goals need to be defined at the onset and will have an influence on technology choices. The primary program goal has to be revenue generation and the ability to increase the revenue base. Additional decisions will be needed concerning the pric- ing of various facilities, charges by vehicle type, and the distribution of fees once they are collected. Three steps are involved in the assessment of the VMT fee. First, roadway use is determined by collecting odom- eter data, speed information, and time and location information from the GPS. Then the data are processed to determine the amount of the fee charged. Finally, the data are transmitted to the back office for billing pur- poses. Important administrative issues also need to be finalized, such as whether the program will be voluntary or mandatory, whether implementation will be immedi- ate or gradual, whether cash payments will be used, and who will run the back office. Mr. Baker observed that the VMT fee would also introduce important equity issues. Would rural drivers
43VEHICLE MILES TRAVELED: THE NEXT FUNDING FRONTIER? who must travel longer distances be unduly burdened? Could this be mitigated by charging by facility type or level of congestion and allocating additional funding to rural transit? Would this remove the incentive for people to drive environmentally friendly vehicles? Could this be mitigated by pricing by vehicle weight or emission rates? Research conducted by TTI has focused on public opin- ion. The public appears to prefer basic odometer reading systems; charges would be paid at the gasoline pump, and there would be an option to migrate to more sophis- ticated technologies in the future. Mr. Baker stated that transparency is essential, as is the ability to audit the charges. truck vmt feeS: a Practical Way to generate revenue, reduce traffic congeStion, and imProve freigHt moBility Dick Mudge of Delcan discussed the option of using truck VMT fees as a means of generating revenue and providing other opportunities. He stated that it may be easier from a public acceptance perspective to begin with truck-only VMT fees, given the lower installa- tion costs and reduced privacy concerns. One approach would be to make the truck VMT fees revenue-neutral by removing or altering other fees levied on trucks. Sim- plicity is always desirable, but truck VMT fees could vary by class of truck, class of road, time of day, and congestion. Although truckers have limited flexibility with regard to delivery times, only 4 percent of truck VMT occurs in congested urban areas. It would also be helpful to develop a system by working with a small number of motor carriers with a variety of operations and using their input to build support within the truck- ing industry. Use of a truck VMT fee could result in a reduction in the fees collected from truckers. Half a dozen truck companies have expressed interest in participating in a voluntary demonstration program involving real money at risk, which could start as early as late 2010. The cost of implementing a pilot project is still being worked out. Truck companies already pay communication fees, and the VMT fee system could provide benefits by allowing companies to know where their trucks are at all times. queStionS and anSWerS Question: How was the cost of the onboard units cal- culated? Answer: It was amortized over 20 years. Question: How can enforcement issues be best addressed with onboard units? Answer: There are multiple ways of confirming whether onboard units are active. If they are part of the original equipment, vehicle owners could not easily dis- connect or tamper with them. Question: Is there a risk that VMT could diminish in the future as baby boomers drive less? What would be the revenue risk associated with VMT fees? Answer: It does not matter because the gasoline tax would decrease even more. It would be easier to increase the VMT fee a fraction of a cent than it would be to gen- erate a comparable boost in fees from the motor fuel tax, which would require an increase of 5 cents per gallon.
