Thursday, 14 October 2021

US Federal Government looks to fund more state pilots and a Federal RUC pilot : Part Two - A National RUC pilot for the USA

Following on from proposed additional funding for state led RUC pilots is the proposal for what is called the National Motor Vehicle Per-Mile User Fee Pilot (NMVPMUFP!). It is always intriguing how Americans can generate new terms for what could just be called a National Road Usage Charge Pilot (although I’ve also heard that officials in one state didn’t like the acronym RUC because it rhymed with a well-known pejorative). 

Objectives

The Infrastructure Investment and Jobs Act would establish a pilot program to demonstrate a national RUC system. The objectives of RUC are stated as being:

· To restore and maintain the long-term solvency of the Highway Trust Fund; and

· To improve and maintain the surface transportation system.

This is all very well, but there is no way it can restore the solvency of the Highway Trust Fund without setting fees that are substantially higher than what is paid now with the Federal Gas Tax, because it hasn’t been increased since 1993. To make the Highway Trust Fund solvent, it will need to be increased by more than inflation over the next decade or so. It seems unlikely there is much political will for that. To improve and maintain the surface transportation system is laudable, and presumably means raising enough funds to spend on the network. However, it could also improve it by subtly using tools around pricing, particularly around heavy vehicles and configurations, by encouraging more road-friendly configurations. It seems highly unlikely that location and time of day pricing would be explored (which would really make a difference).

The objectives of the national pilot are stated as:

(A) to test the design, acceptance, implementation and financial sustainability of a national motor vehicle per-mile user fee;

(B) to address the need for additional revenue for surface transportation infrastructure and a national motor vehicle per-mile user fee; and

(C) to provide recommendations relating to the adoption and implementation of a national motor vehicle per-mile user fee.

Elements

This largely parallels other programmes, which is fine, although the second objective is somewhat tautological. Other interesting elements of the proposal are:

· Multiple methods of measuring miles travelled will be tested.

· Volunteer participants will be sought from ALL states and DC, and even Puerto Rico;

· The distribution of participants will be an equitable geographic distribution (although it is unclear how this will factor in population size);

· Both “commercial vehicles” and “passenger motor vehicles” will be included, so not just light vehicles, but also trucks and potentially buses.

· The pilot will co-ordinate with states pursuing pilots, to consider using the components of their systems or pilots.

All of this seems largely sensible, although one unanswered question is the scale of the proposed pilot program, which seems likely to be in the thousands of vehicles.

It’s unclear whether the pilot will collect money (either from those that pay no gas tax or by crediting gas tax paid), or will just generate mock invoices, but the Bill states that the Secretary of Transportation will set rates for the pilot and the amounts may vary between vehicle types and weight classes (which is dead right for heavy vehicles) to reflect estimated impacts on infrastructure, safety, congestion, the environment, or other related social impacts.

Infrastructure is obvious, but safety seems odd, as nowhere charges differentially based on safety ratings of vehicles. Congestion is only possible if there is location and time of day measurement as well as distance, which limits technical solutions (but is likely to generate huge benefits if feasible). Environment could be reflected in different rates for levels of emissions. Related social impacts is unclear but would need to be explored further. Let’s be clear though, the gas tax does none of this well.

Technology

Tools for measuring distance are mentioned in the Bill, specifically:

· Third-party OBD-II devices (plug-in devices, suitable for most light vehicles up to a certain age);

· Smart phone applications;

· Automaker installed telematics;

· Data collected by car insurance companies;

· Data from States that have piloted RUC under the FAST Act;

· Data obtained from fuelling stations; and

· Any other method considered appropriate by the Secretary.

Interestingly this does NOT include commercial vehicle telematics, widely used for truck fleet management. It also doesn’t include more manual options, but of course there is scope to include these obviously. 

A Federal System Funding Advisory Board will be set up to develop recommendations related to the structure, scope and methodology for developing and implementing the pilot programme, carrying out the public awareness campaign and developing a report to Congress. That report will be on whether the pilot has achieved its objectives, how protections for participants were complied with and some estimate of administrative costs and equity impacts.

Members of the advisory board will include representatives of:
  • State Departments of Transportation
  • Entities that led pilots under the FAST Act
  • Representatives of the trucking industry (note, these have been vehemently opposed to RUC for many years)
  • Data security experts with expertise in personal privacy (though I would have thought it needed legal expertise as well)
  • Academic experts on surface transportation systems
  • Consumer advocates, including privacy experts
  • Advocacy groups focused on equity
  • Owners of motor vehicle fleets
  • Owners and operators of toll facilities
  • Tribal groups or representatives
  • Anyone else deemed appropriate by the Secretary
This is potentially recipe for an utter mess, but is demonstrative of the US approach to public policy, which is to consult with whatever interests are seen to be relevant (interestingly it doesn't include railroads, doesn't include automotive manufacturers, doesn't include telematics system suppliers, doesn't include customers of transportation systems, doesn't include bus or coach operators, doesn't include agriculture or business).  

Conclusion

This is potentially a BIG deal, and has the potential to be quite some success, but also the potential to fail spectacularly due to complexity, scale and overlapping objectives. It seems likely to be much more appropriate to first undertake a desktop study of options for RUC and to then consider why a pilot is a good idea. There are really only two main reasons in this case, given pilots are underway at the state level:
  • To build public acceptability by demonstrating that RUC would be unobtrusive and not cost more than the Federal gas tax;
  • To test how a Federal system might interact with State ones.
US$10 million per annum is being proposed to fund this pilot, which is a great deal of money, but likely to be necessary.  However it begs a lot of questions particularly around scale, duration and how a wide range of participation will be enabled and ensured. What matters most of all is ensuring that a national pilot can avoid being dominated by negative publicity and negative narratives, which requires a lot of work to be done around communicating objectives to a public that is highly sceptical.

The US needs more rational debate and discussion about how roads are paid for and are managed, and this ought to help. It just needs to be done with a great deal of thought and care, because the world is littered with countries that have tried to advance road user charging on a wide scale (see the Netherlands, UK and Finland) and have failed, due to public backlash.

Tuesday, 12 October 2021

US Federal Government looks to fund more state pilots and a Federal RUC pilot : Part One - More state and local RUC pilots to be funded

The Infrastructure Investment and Jobs Act, currently before the US Federal Congress, would “establish a pilot program to demonstrate a national motor vehicle per-mile user fee to restore and maintain the long-term solvency of the Highway Trust Fund and achieve and maintain a state of good repair in the surface transportation system”.

It is also continuing the successful partnership between state and Federal Governments to fund investigations into RUC.

So this is big news in the world of road pricing.  It effectively means that there could be a National US RUC pilot, but it also supports the continuation of the past few years of funding state based RUC pilots.

So what does this mean?

That first is a continuation of the FAST Act programme by which the Federal Government funded States investigating “user-based alternative revenue mechanisms” which includes RUC.  That programme has been funding pilots in the US since 2015 and most recently announced funding in March for California, Delaware, the Eastern Corridor Coalition (seven states), Hawaii, Kansas/Minnesota, Ohio, Oregon (for RUC West), Texas and Utah to progress a range of projects.

The Act would provide additional funding so States, local government or metropolitan planning agencies can pilot RUC, with some specific objectives:

  • To test the design, acceptance, equity, and implementation of user-based alternative revenue mechanisms, including among--
                            (i) differing income groups; and
                            (ii) rural and urban drivers, as applicable.
  • To provide recommendations regarding adoption and implementation of user-based alternative revenue mechanisms.
  • To quantify and minimize the administrative costs of any potential user-based alternative revenue mechanisms.
  • To test a variety of solutions, including the use of independent and private third-party vendors, for the collection of data and fees from user-based alternative revenue mechanisms, including the reliability and security of those solutions and vendors.
  • To test solutions to ensure the privacy and security of data collected for the purpose of implementing a user-based alternative revenue mechanism.
  • To conduct public education and outreach to increase public awareness regarding the need for user- based alternative revenue mechanisms for surface transportation programs.
  • To evaluate the ease of compliance and enforcement of a variety of implementation approaches for different users of the surface transportation system.
  • To ensure, to the greatest extent practicable, the use of innovation.
  • To consider, to the greatest extent practicable, the potential for revenue collection along a network of alternative fueling stations.
  • To evaluate the impacts of the imposition of a user-based alternative revenue mechanism on—
(i) transportation revenues
(ii) personal mobility, driving patterns, congestion, and transportation costs; and
(iii) freight movement and costs.
  • To evaluate options for the integration of a user-based alternative revenue mechanism with-
(i) nationwide transportation revenue collections and regulations;
(ii) toll revenue collection platforms;
(iii) transportation network company fees; and
(iv) any other relevant transportation revenue mechanisms.

This is quite a list of objectives, indicating exactly the issues around RUC that exercise politicians in the US.  Concerns about whether RUC might be less fair on people on low incomes (although this needs to be compared to the gas tax and paying for roads from general taxes such as sales taxes), and concern that paying by distance hurts rural communities ignores past work that indicates that this is largely not the case (and sometimes the contrary). 

Other issues around administrative costs, enforceability, privacy, use of the private sector to collect revenue. There is the odd case of a system based on paying through “alternative fueling stations” which appears to be code for taxing electricity charging stations, which is not a good idea at all.

One boost is the proposal that funding be 70% of the costs of a proposal put forward by an entity that has previously received funding, and 80% for a new one. This is clearly designed to incentivise states and other entities that have not pursued such studies in the past.  For each year from 2022-2026 US$15 million will be available to be spent on such studies or pilots. 

Expect more states to study and pilot RUC, but also expect more implementations.  

So far in the US, only Oregon and Utah have revenue-collecting operational RUC systems for light vehicles (Oregon, New Mexico, Kentucky and New York all have weight-mileage taxes for heavy vehicles), although there are mandates for RUC in Virginia and Connecticut as well.

The US Federal Highways Administration has a useful list of ALL of the grants given to states under the FAST Act so far. It has been for the following states:

California (US$6.68 million) 

Colorado (US$0.5 million)

Delaware/Eastern Transportation Coalition (Seven states plus DC) (US$13.513 million)

Hawaii (US$4.248 million)

Kansas (US$3.25 million with Minnesota)

Minnesota (excluding Kansas US$1.3 million)

Missouri (US$4.8 million)

New Hampshire (US$0.25 million)

Ohio (US$2 million)

Oregon (US$9.412 million)

Oregon for RUC West Consortium (US$5.42 million)

Texas (US$5 million)

Utah (US$3.245 million)

Washington (US$13.972 million)

Wyoming (US$0.25 million)

In my next article, I'll write about the prospective US National pilot


Monday, 4 October 2021

Road pricing is the answer, but it is best to start from first principles

The costs of maintaining and developing a road network are often not calculated on the same basis as other infrastructure or other assets. In many jurisdictions roads are not given a capital value, whether it be replacement cost or (more usefully) economic value as an asset generating wealth. The concept of depreciation is not applied, so there isn’t an economic basis to calculate the life-cycle costs of a road. Capital spending on roads is frequently just “written off” when it is spent, unless the road is debt funded and perhaps supported by tolls. 

Traditionally justifications for road funding have been based on engineering assessments alone, rather than looking at service to end users and optimisation of costs.  Cost optimisation would see depreciation taken into account, so that maintenance is undertaken on a long-term optimal basis, rather than just reactive to emergencies or to political demands. It’s grossly inefficient to take the latter approach, as it inflates costs over the long-run, offering few chances to spend more upfront on renewal of road sub-structures and surfaces for a longer life, and to manage the asset pro-actively.  Equally as important, reactive approaches are not conducive to quality of service. It is not often that politicians or civil servants talk of road users as “customers” or of providing a high standard of service to them, yet this is what they are.

So the primary objectives around spending on road maintenance and renewal should be about sustaining an appropriate level of service for those using it. Any additional capital should be about improving levels of service, whether it be improving safety, reducing congestion, allowing larger or heavier vehicles to use a corridor valuable for freight, reducing journey travel times etc. and should reflect some analysis as to whether it is both economically justifiable and if it addresses road users’ priorities.  

 Ideally, once there is a clear forward-looking strategy, with the right incentives to deliver improved levels of service to road users, then the question as to who pays and how much should be considered in some detail.  Who pays, by how much and by what means can follow on from that. 

 The article correctly reflects the problem, which is that fuel taxes are not longer sustainable proxies for “user pays” to pay for roads in many jurisdictions.  In jurisdictions where fuel taxes bear no relationship to what is spent on roads (see the UK and most other European countries), it is a wider pressure, noting that taxes on fuel are used to bolster general government spending.

Plug In America, a lobby group for electric vehicles, not surprisingly argues that road user charging on EVs would both hinder the transition to such vehicles and not raise enough money.  Both of those claims need further scrutiny at a later date.  

 Another claim is that EV owners already pay enough taxes for road maintenance through other means, like general sales taxes on new vehicles. It quotes a questionable report from Arcadia Center in 2018 that this indicates that such owners pay more than owners of vehicles with internal combustion engines. The only basis by which this makes any sense is for Massachusetts which hypothecates sales taxes for new motor vehicles into the Commonwealth Transportation Fund.  So this is not applicable for jurisdictions that do not do this, but it is also worth noting what a bizarre policy that is. Imagine if sales taxes on electrical appliances were used to fund maintenance of the electricity distribution network, or sales taxes on mobile phones to pay for cellular networks.  The tax is legally avoidable by buying a vehicle out of state and registering it there, and it is inequitable as it bears zero relationship to how much of the road network is used. Sure this applies to ALL types of vehicles, but it is hardly a solution that is efficient or equitable.

The CleanTechnica article proposes several solutions:

Increasing the gas tax is an option, but is dismissed rightly because although it would accelerate a transition to electric vehicles, it would be unfair to those who cannot afford them. Increasing the gas tax is only appropriate if it is part of equalising across what all vehicles pay, not just those paying the gas tax.

Fixed fees for EV owners: This is dismissed as being higher than what some owners of other vehicles pay in gas taxes, which will be true for some, albeit that any fixed fee is good for those who drive a lot, and is not good for those driving a little. In any case, although there is a case for recovering some road costs from fixed fees (because of the proportion of road maintenance costs that are fixed), there is a better case to recover more from usage-based fees in order to recover the most from those that use the network the most (and to help address externalities).

Taxing the electricity EVs use: The Arcadia Center article proposes this, but it lack merits. The CleanTechnica article notes it is technically difficult and could hinder take up of EVs. Technical difficulty (and difficulty to enforce in some cases) is entirely valid, although the idea it might hinder take up of EVs seems no more valid than applying it to other types of fee. If the problem is paying for the roads, then objecting to any measures because they may put off purchases of EVs, means a balance has to be struck. Regardless, surveys indicate for most people one of the main reasons not to buy an EV is upfront cost, which suggests that any tax breaks or subsidies are best placed at purchase. In other words, Massachusetts would encourage MORE EV sales if it exempted them from the sales tax, and implemented a distance-based road user charge, than trying to recover the same revenue from taxing the purchase of the vehicle.

Road pricing: Four types are listed:

·      Flat rate per-mile: This is the classic road user charge, but the article suggests it could vary by weight (yes for heavy vehicles), fuel consumption (why?), emissions (yes, this can be done) and damage done to the road network (well that’s weight really).

·      Geographic/toll-based charging:  This really isn’t a solution to replace the gas tax for EVs, as it is route or location specific.  The description is more like a congestion charge, which is fine, although that has a different purpose and shouldn’t be confused with RUC.

·      Time-based rate:  The idea that you are charged a fee by minute has never been implemented anywhere.  It has one major negative externality, it rewards excessive speeding and running through red-lights.  It’s not a good idea.

·      Dynamic rate:  Dynamic rate of what?  This could just be a dynamic distance-based rate, which is basically applying congestion charging to RUC.  It is described like using a toll tag, which wouldn’t be useful on a network wide basis.  So this isn’t really useful to replace the gas tax, unless it is just a further evolution of RUC.

Now this article is positive, as it advances the value of road pricing and suggests a whole set of principles which are largely worthwhile and agreeable, but I want to suggest that the problem (not enough money to pay for the roads) should start with identifying exactly what it is money is needed for, how that is assessed and then to work out who should pay what.  

This means having asset-management systems for roads, it means accounting for roads in the same way as other assets, and developing a cost-responsibility approach to work out who should pay for what costs (and there are multiple options to address that), alongside the means to recover those costs. Fuel taxes have been easy for a long time, but their time is running out.  Fees based on distance, vehicle characteristics, and some element of location are likely to be better, but any such system should seek to balance the need for price signals vs. the need for a relatively simple way to charge user fees.  One reason for this is simply to gain acceptability from road users.  It isn’t just about raising money, it should be about delivering better outcomes for those who pay.

Friday, 1 October 2021

Tel Aviv to introduce congestion charging

After New York (crossing fingers), Tel Aviv looks like being the next city to introduce congestion pricing after the Israeli Government seems to have agreed, notwithstanding opposition from the Transport Minister and tepid support from the Finance Minister, to a plan for a triple cordon around the city. 

Why?  

To raise money AND reduce congestion. The scheme is motivated by the usual combination of a desire to significantly reduce traffic, but also raise a lot of money. It seems the latter is very important, although the indicative concept is definitely intended (due to the geography and the time of operation) to make a sizeable dent on congestion (although no data on what impact it will have has been released). 

What sort of scheme? 

A triple cordon. I haven’t been able to source maps of where the zones MIGHT be (yet), but basically it is described as an inner city ring, a second ring 3-7km from the inner ring and a third ring 7-12 km from the inner ring, all bounded by a series of major roads. Ben Gurion Airport will be within the outer ring.  I've never had the good fortune to visit Tel Aviv so my geographical knowledge is very limited.

These ring locations are yet to be finalised, but have been described as follows:

The inner ring will include central and south Tel Aviv. The middle ring will include Ramat Gan, Givatayim, Bnei Brak, Holon and Bat Yam and Azur. The outer ring will include Herzliya, Petah Tikva, Kiryat Ono, Givat Shmuel, Ganei Tikva, Yehud Monoson, Or Yehuda, Rishon Lezion and Beit Dagan. 

This appears to be quite a large scheme in terms of physical scale, covering vast areas of Tel Aviv, so it will have quite a significant impact.

When will it operate and what types of vehicles will it apply to?

It is intended to operate weekday peak times from 0630-1000 and 1500-1900 and will apply to cars, trucks and motorcycles. Buses, taxis, emergency vehicles and cars with disabled parking badges will be exempt. Trucks will be charged twice the fee of cars. No discount or exemption for residents living within any of the cordons has been announced.

This is largely sensible from a policy point of view, although exempting taxis may be more to avoid protests from that sector than any economic rationale. Taxis are, after all, cars that carry people for hire. Double the fee for trucks makes sense from a road space occupancy perspective, and having minimal exemptions is a good idea to minimise costs.

How much will the fees be?

Various reports have indicated that the fee schedule will see a maximum charge of NIS 37.50 per day (US$11.62), with the standard fees ranging from NIS 2.5 (US$0.77) for the outer ring, NIS 5 (US$1.55) for the middle ring and NIS 10 for the inner ring (US$3.10). These will be applied separately for inbound and outbound travel. 

What technology?

The primary technology to be used will be Automatic Number Plate Recognition, although one report indicated that drivers with accounts (and implicitly a toll tag) would be charged less (NIS 2, 3.5 and 7 respectively). 

How much revenue will it raise?

The proposal is expected to raise NIS 1.3 billion (US$400 million) after costs. Which is reasonable, although another report indicated it would raise NIS 2.7 billion (US$840 million), which surely can't mean it will cost NIS 1.4 billion to run (but may reflect a change of forecasts).

What will it be used for?

The net revenues are to be used to help fund the Tel Aviv metro project, which has a construction cost of NIS 150 billion (US$46.5 billion). However, the metro construction isn’t expected to start until 2025 and be completed in 2032, so it is will be interesting to see the public reaction to motorists paying for a project many wont be able to use for some time. 

What will be done in advance?

 This isn’t the only public transport project though, as by the time the congestion charge is live, significant improvements to bus services and at least one of three light rail lines will be open (two more are under construction) to help support modal shift. 

When will it be in operation?

2024.

Who will be responsible?

The Israel Tax Authority will be legally responsible for collecting the charge, but the actual management, operations and collection will lie with Netivei Ayalon, a company that operates under the auspices of the Transportation Ministry and which I believe is already responsible for managing highways around Tel Aviv include toll lanes. The role of the new company will be to plan, build, operate and maintain the necessary funds to charge the congestion charge.

What do the politics look like?


The charge will be introduced despite the opposition of Minister of Transport Meirav Michaeli, who sees it as a regressive tax, which will hurt the less well off. In the end, senior Ministry of Finance budget division officials prevailed in their determination to include the congestion charge in the Economic Arrangements Bill. The officials prevailed even though Minister of Finance Avigdor Liberman himself said he was not prepared to fight for the charge.

It will take at least 30 months before the infrastructure will be in place to implement the charge. The Tel Aviv congestion charge will have to survive a Knesset vote and the long time until it comes into effect.

Two days later, the Jerusalem Post has reported that the Minister of Transport has "now embraced it as a quick short-term solution to Tel Aviv’s traffic problems, and as a source of funding for other transportation projects".

It looks almost like officials have said "you need to do this, you have no choice (fiscally)".  However, it makes perfect sense that this has been announced just after the new rotation government was formed on 13 June 2021, because the sooner this can be placed into law the better, given how fragile Israeli politics is.

Conclusion?

Good luck to Israel and Tel Aviv, it seems like a very bold proposal, but congestion in Tel Aviv is reportedly endemic and as we all know, simply building more transport supply is NEVER enough, whether roads or public transport. The world needs more good examples of congestion pricing.  Regardless of whatever happens around the details, I hope something happens. I fear three cordons may be going too far, but at least two are likely to be needed to have a meaningful impact, and half of that impact (given the experiences of Stockholm and Singapore) will be time of day shift not modal shift. There is a lot of work to do, but beyond congestion, it seems hard to see how fiscally the Tel Aviv metro can be afforded (or even attract enough patronage) without such a measure.