Monday, 22 April 2013

Mileage Based User Fees - what's going on in the US?

Mileage Based User Fees (MBUF), Vehicle Mileage Taxation (VMT), distance based charging, distance based road user/usage charges, these are all different terms for essentially the same thing, which to me is simply road pricing with the base chargeable event being distance.

I attended and spoke at the IBTTA's Transportation Finance and Mileage-Based User Fee Symposium in Philadelphia a week ago (which explains the gap in blogging). Whilst the presentations from that Symposium will shortly be available here, I thought I'd give a quick summary on some of the interesting points I picked up from the occasion.

It's worth noting that the Mileage Based User Fees Alliance (MBUFA) has a new website with some useful content including "five myths".  It should be a useful platform for updates on the development of distance based road pricing in the United States, as various states pursue different approaches to this solution for raising revenue to pay for roads.  I met Barb Rohde, Executive Director, who is enthusiastic about MBUFA, and I sincerely hope it shows the baton of developing such systems is moving more clearly from Europe to the United States, which faces some different challenges (as in Europe many such systems have been in addition to existing charges and have only been applied to heavy vehicles).

I obviously did not go to every session, so my summary really only notes a few points I wasn't previously aware of.  As usual, if anyone has a different recollection or believes the statements below are not true, I'd appreciate any comments:

30 June 2013 is key for Oregon, as it will be the point by which the state legislature ought to have passed the bill to authorise the introduction of distance based charges for ultra-fuel efficient vehicles (all vehicles with fuel efficiency of greater than 55MPG).  If it does, then Oregon is on the way to being the first state in the US to introduce distance based taxes for cars.  If not, then it is expected that further work will be done on the proposal (as it is not significantly controversial at present).

More people are killed in road accidents in California due to poor road maintenance, than from alcohol or drug use while driving combined (not directly a fault of road pricing, but ought to cause some serious rethoughts of the state's governance of highways).

Pennsylvania is increasing fuel tax by 5c/gallon (1.3c/litre) per year for the next five years, all of which is to be dedicated to transport funding.  78% to roads, the rest to public transport.  This in itself wont be enough, and will be supplemented by tolls where feasible.

The Pennsylvania Secretary of Transportation, Barry Schoch, said that he would surrender 12c/gallon in gas tax if he could be allowed to toll the interstate highways in the state.

Former Governor of Puerto Rico, Luis Fortuno, said that the territory did not look to the United States to provide a model of PPP type funding for highways, but rather Canada, the UK and Australia provided the most relevant and useful experiences.  I've written previously about Puerto Rico's radical approach to privatisation of its tolled highway network.

Sweden is currently looking at using existing interoperable DSRC toll tags in foreign vehicles travelling in the country to apply the congestion taxes of both Stockholm and Gothenburg to foreign vehicles.  In both cities, foreign registered vehicles are exempt.  Many Norwegian registered cars have toll tags (given Norway's extensive toll road network).


Overall, a lot is riding on Oregon, with Washington State following close behind and increasing interest from the likes of California.  Whilst work has been done in Minnesota and Colorado, it doesn't appear that either state is very close to making progress in distance based charging.   The biggest conclusion I derived from the event was that quite a lot of states are interested and following what is happening, but few are willing to do more than investigate options at this stage.  Certainly one trick few have noticed is that distance based charging could be lucrative in charging transit traffic.

A few states have moved on increasing "gas tax" or using other taxes to help plug the gap, but the bigger trend does appear to be more use of what I would call "conventional" tolling - using tolls to help fund new infrastructure by tolling the new infrastructure itself.  There is also interest in using existing toll facilities to cross subsidies adjacent roads.

If Oregon presses forward, I expect momentum to come from Washington state and possibly California (although it is far more difficult there).  I also expect other states to start to show serious interest in distance based charging as an option.  If it stalls, the problem of revenue will remain, but I still expect many states to expand the use of tolling regardless.  That remains an option for many (and most states still have more scope to use tolls) and states such as Texas and Florida remain at the forefront of expanding tolls.

What is sadly lacking in all of the debates around revenue for roads in the US is discussion about governance, delivering better value for money in road maintenance and construction programmes and moving to distance based pricing because it is fairer and will result in more efficient economic outcomes (even ignoring charging by time and place).

Moving to charging motorists directly according to usage and away from proxies like fuel tax means some serious additional questions need to be asked:

1.  What should be the basis for the level and schedule of charges?  The default has been to match existing gas tax levels, but it would make far more sense to understand what levels of revenue are needed to maintain and improve highway networks, and how to allocate the cost of doing this amongst groups of road users.  That debate simply doesn't happen, and currently means significant transfers between different taxpayers/road users on grounds that are far from efficient.

2.  What should decide on what such revenue should be spent on?  The default has been to assume that the predominantly engineering based assessments of what is needed is an efficient and appropriate measure of future spending.  This seems difficult to sustain given that these assessments are not based on market or commercial measures of optimising expenditure, returns or costs, but rather bureaucratic/political measures which in most other sectors it would be recognised as being inferior.   Giving motorists confidence that they are getting value for money is critical to building support for user charges, and to do that there needs to be greater involvement of the private sector, more commercial imperatives in decision making and a withdrawal of politics from decisions on specific projects.  Longer programmes of expenditure, dedicated budgets over multiple years and performance based contracting and asset management systems (all of which are the norm in some other developed countries) could save up to 20% of the costs of maintenance.  Motorists and taxpayers are right to ask if money is well spent, I'd be astonished if a serious investigation into applying global best practice didn't show scope for significant savings in spending on US highways.

3.  What sort of entities should be operationally responsible for US highways in the future?  This follows the previous question, but comes about when there is a new relationship between road users and road providers.  When people are charged directly for road use, they will expect customer service, they will make queries and complaints.  They will want a better service than they currently get for licensing vehicles and drivers, and it is an opportunity to use the feedback from that relationship to improve how roads are managed.  I doubt very much whether traditional DoT structures are the best way to achieve that, and that the possible options include looking at establishing separate stand alone agencies, with independent boards supervised by DoTs, as a first step to developing fully professional providers of highway services.

Meanwhile, there is plenty of cause for the US to be proud that it is having this debate.  There remains a climate of denial over declining fuel tax revenues in Europe.  In Australia the debate has emerged, but hasn't quite progressed as far (although Australia's governance of highways and system of setting charges is more sophisticated than what is seen in most US states).

May the debate continue, may Oregon progress and may more US states start to ask the hard questions about revenue options, but also the more difficult questions I have listed above.  You cannot separate revenue raising, from charge setting, expenditure management and highway governance and expect to make transformational changes.

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