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Road User Fee Pilot Project Report
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Road user fee pilot shows "per mile" fee viable
Nov. 20, 2007
For more information, contact Patrick Cooney (503) 986-3438 or Jim Whitty (503) 986-4284
After a one-year pilot conducted in the Portland area with more than 280 volunteers, the Oregon Department of Transportation reports that a mileage fee could feasibly replace the gas tax as the principal revenue source for road funding. The experimental program, which ran from April 2006 through March 2007, found that all of the major areas of concern could be properly addressed, including the requirement that the program be as seamless as possible for consumers. At the conclusion of the pilot, some 91 percent of the participants said they would agree to continue paying the mileage fee in lieu of the gas tax if the program were implemented statewide.
“The results showed the mileage fee concept is viable,” said Jim Whitty, manager of ODOT’s Office of Innovative Partnerships and Alternative Funding, which coordinated the multi-year effort to develop plausible ideas for generating revenue for road construction, maintenance and repair.
“This first phase was a long journey. We learned a lot, but there’s more work to do.”
In 2001, the Oregon Legislature established a Road User Fee Task Force to research revenue collection options for Oregon roads. Oregon’s gas tax hasn’t been raised since 1993 and is not indexed to inflation. Over the years, it has lost much of its buying power. After considering 28 different funding ideas, the task force recommended that ODOT conduct a pilot program to study the concept of a mileage fee.
The final report shows that a mileage fee could be phased in gradually, alongside the gas tax, and that it could work with other systems already in place. The findings also show that congestion pricing could be implemented (where different pricing zones are applied, based on congested areas and rush hours) and, at the same time, privacy can be protected (specific travel data is not stored or transmitted). Finally, the pilot shows that there would be a minimal burden placed on businesses to conform to the program, that the potential for evasion is minimal, and that costs for implementing and administering the program would be low.
“Many organizations have indicated their interest in the results of this pilot,” Whitty said. “Prior to statewide adoption, however, a second phase must be undertaken to refine the technology so that it is commercially viable.”
As other states, and even countries, consider how to provide stable funding for growing transportation needs, Oregon has been in the forefront with its mileage fee pilot. Based on the study’s findings, transportation experts will now begin investigating specific areas that would need further work before any implementation could take place.
QUICK FACT SHEET BACKGROUND
The 2001 Oregon Legislature established the Road User Fee Task Force “to develop a design for revenue collection for Oregon’s roads and highways that will replace the current system for revenue collection.” After considering 28 different funding ideas, the task force recommended that the Oregon Department of Transportation conduct a pilot program to study two strategies called The Oregon Mileage Fee Concept:
(1) the feasibility of replacing the gas tax with a mileage based fee collected at fueling
stations; and
(2) the feasibility of using this system to collect congestion charges.
ODOT launched a 12-month pilot program in April 2006 designed to test the technological and administrative feasibility of this concept. The program included 285 volunteer vehicles, with 299 motorists, and two service stations in Portland. The cost of the six-year Road User Fee Pilot Program effort was $2.936 million (federal funds: $2.164 million; state funds: $772,000).
ROAD USER FEE PILOT PROJECT KEY FINDINGS
The pilot program showed that, using existing technology in new ways, a mileage fee could be implemented to replace the gas tax as the principal revenue source for road funding.
The pilot program showed that the mileage fee could be paid at the pump, with minimal difference in process or administration for motorists, compared to how they pay the gas tax. Like the gas tax, collection of the mileage fee can be embedded within routine commercial transactions, with the bulk of it pre-paid by the distributor in the form of the gas tax. By including the mileage fee in the fuel bill, cash or credit payments are accommodated, just like the gas tax. Although many of the prototype components used in the pilot program did not, by definition, meet the standards of commercial products, the next stage of technology development would take the technology to commercial viability.
- The mileage fee can be phased in
The study showed that the mileage fee could be phased in gradually alongside the gas tax, allowing non-equipped vehicles to continue paying the gas tax, while equipped vehicles could pay the mileage fee. Retrofitting vehicles with mileage-calculating equipment appears expensive and difficult.
- Integration with current systems can be achieved
The study demonstrated the ability to integrate with two main existing systems: the service station point-of-sale (POS) system and the current system of gas tax collection by the state.
- Congestion and other pricing options are viable
The study showed that different pricing zones could be established electronically and the assigned fees could be charged for driving in each zone, even at particular times of day. This proves the mileage fee concept could support not only congestion pricing but also assessment and collection of local revenues and other “zone-oriented” features. Furthermore, the area pricing strategy applied in the pilot program produced a 22 percent decline in driving during peak periods.
Many levels of privacy protection can be implemented in a system similar to that used in the pilot program. There is a trade-off between privacy and information stored for enforcement and dispute resolution. ODOT developed the system used in the pilot program with specific engineering requirements to maintain as much privacy as practicable while still allowing a feasible way to audit and challenge billings. Key privacy related requirements for the pilot program were:
- No specific vehicle point location or trip data could be stored or transmitted
- All on-vehicle device communication must be short range
- The only centrally-stored data needed to assess mileage fees were vehicle identification, zone mileage totals for each vehicle and the amount of fuel purchased
- The system would place minimal burden on business
While distributors and gas stations bear some new accounting burdens, administration is essentially automated and can be integrated easily into existing transaction processes.
- Potential for evasion is minimal
Tampering with the on-vehicle device would result in default payment of the gas tax. The difference between gas taxes and mileage fees would likely be very small, providing very little incentive to try to evade the basic mileage fee. The eventual fee level, on-vehicle engineering, fee structure, fuel tax rates and penalties for tampering will determine the degree to which equipment tampering will occur.
- Cost of implementation and administration is low
Costs originate from three areas: service stations, on-vehicle and DOT administration. Service station capital costs include installing the mileage reading equipment while operating costs include communications of the mileage information with a central database in order to calculate mileage fees and modifications to the station’s point-of-sale system. On-vehicle capital costs will be determined by auto manufacturers and included in the price of new vehicles. ODOT will incur operating costs for auditing and providing technical assistance to service stations and motorists. Auditing should cost $1.0 million annually, a small fraction of expected annual mileage fee revenue.
NEXT STEPS
Additional development and testing would have to take place to prepare for full implementation.
- ODOT would have to work with technology firms and automobile manufacturers to refine on-vehicle technology, and work with the fuel distribution industry to insure ease of mileage fee transactions at the fuel pump.
- ODOT would have to expand the concept to include home fueling collections and multi-state integration.
- ODOT would have to develop cost estimates for implementing the full program, which could occur within the next 10 years.
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