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The Long Haul To a Road User Fee

July 23, 2012 | 8:30 a.m.
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Now that the furor over the highway bill has died down, transit guru Rep. Earl Blumenauer D-Ore., senses a moment of reflection is upon us. With some two years to play with until the highway trust fund runs completely dry, policymakers have a chance--but not too much of one--to act on what Blumenauer sees as a fundamental truth: "Transportation reform is what we have to do."  That means the gas tax is going to have to go away and be replaced with a "road user fee"--a more sophisticated way of charging people to drive on the roads based on mileage rather than gas usage.
 
Oregon is in its second year piloting a project to test how such a road fee would work, and its director will be in Washington next week to discuss the experience. The hope, according to Blumenauer, is that policymakers will realize they are out of options other than this one.
 
The idea of precisely tracking miles has raised security concerns, but Oregon's pilot study will explore a variety of options: a device that simply tracks all miles traveled without location information, one that synchronizes with a smartphone; and another that includes a GPS unit. Blumenauer also suggested another: letting drivers simply check in annually and pay some per-mile fee.
 
Is there potential for action on a road user fee? What is to stop Congress from simply putting its head in the sand until the "cliff" is almost here? Is the technology there? Can the privacy concerns be overcome?

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July 27, 2012 1:44 PM

It's about Political Will

By Patrick D. Jones

Executive Director & CEO, International Bridge, Tunnel and Turnpike Association

As usual, the questions this week are thoughtful and provocative. My colleagues in the expert blog have provided wonderfully thoughtful and textured responses. I compliment all of them. Therefore, I will try to respond to the questions directly and literally.

IS THERE POTENTIAL FOR ACTION ON A ROAD USER FEE? Yes.

WHAT IS TO STOP CONGRESS FROM SIMPLY PUTTING ITS HEAD IN THE SAND UNTIL THE "CLIFF" IS ALMOST HERE? Not a whole lot. Of course, we pray that thoughtful and visionary minds will prevail in the Congress. Minds like that of Cong. Earl Blumenauer who makes two startlingly simple yet important conclusions:

The federal gas tax is no longer adequate to maintain the transportation infrastructure in the U.S. Our national economic fortunes rise and fall with the quality of our infrastructure, so it is time to stop relying on the outdated and outmoded systems of the past and embrace change with a serious eye toward the future.

IS THE TECHNOLOGY THERE? Yes.

CAN THE PRIVAC...

As usual, the questions this week are thoughtful and provocative. My colleagues in the expert blog have provided wonderfully thoughtful and textured responses. I compliment all of them. Therefore, I will try to respond to the questions directly and literally.

IS THERE POTENTIAL FOR ACTION ON A ROAD USER FEE? Yes.

WHAT IS TO STOP CONGRESS FROM SIMPLY PUTTING ITS HEAD IN THE SAND UNTIL THE "CLIFF" IS ALMOST HERE? Not a whole lot. Of course, we pray that thoughtful and visionary minds will prevail in the Congress. Minds like that of Cong. Earl Blumenauer who makes two startlingly simple yet important conclusions:

  • The federal gas tax is no longer adequate to maintain the transportation infrastructure in the U.S.
  • Our national economic fortunes rise and fall with the quality of our infrastructure, so it is time to stop relying on the outdated and outmoded systems of the past and embrace change with a serious eye toward the future.

IS THE TECHNOLOGY THERE? Yes.

CAN THE PRIVACY CONCERNS BE OVERCOME? Yes. Which brings us to Cong. Blumenauer’s startlingly simple yet challenging and important THIRD conclusion:

  • We have the technology; all we need now is the political will.

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July 25, 2012 11:20 AM

Pursuing Innovative Solutions

By Rep. Earl Blumenauer, D-Ore.

Member, House Ways And Means Committee

The federal gas tax is no longer adequate to maintain the transportation infrastructure in the U.S. That much is apparent to anyone who follows transportation policy in an even cursory fashion. The higher fuel efficiency standards that are driving this change are unquestionably a net positive for our country. They produce benefits ranging from increased health, water, and air quality to long term energy independence and security, as well as helping consumers save money. Since we are not going to roll back the advances we have made in fuel efficiency standards, we must chart a path forward to both create a sustainable future and to fully fund our transportation infrastructure. Testing concepts broadly across different constituencies and circumstances, such as the pilot project we are implementing in my home state of Oregon, leads us in the right direction.

Oregon actually established the nation’s first gas tax. Today, as in the rest of the country, the majority of funding for Oregon’s transportation infrastructure comes from the gas tax. However, more than a ...

The federal gas tax is no longer adequate to maintain the transportation infrastructure in the U.S. That much is apparent to anyone who follows transportation policy in an even cursory fashion. The higher fuel efficiency standards that are driving this change are unquestionably a net positive for our country. They produce benefits ranging from increased health, water, and air quality to long term energy independence and security, as well as helping consumers save money. Since we are not going to roll back the advances we have made in fuel efficiency standards, we must chart a path forward to both create a sustainable future and to fully fund our transportation infrastructure. Testing concepts broadly across different constituencies and circumstances, such as the pilot project we are implementing in my home state of Oregon, leads us in the right direction.

Oregon actually established the nation’s first gas tax. Today, as in the rest of the country, the majority of funding for Oregon’s transportation infrastructure comes from the gas tax. However, more than a decade ago, forward thinkers in the Oregon Legislature recognized that the gas tax is not a long term solution and created the Road User Fee Task Force (RUFTF). The RUFTF created a pilot program to test the viability of a road-user charge to replace the gas tax as a source for transportation funding. Such a system is inherently fairer because it allows users to contribute to the pool based only on how much they are using the public roadways, rather than how fuel efficient their car is. For instance, under certain tests, a farmer or rancher, driving only on their own property, would not face any tax.

While there are challenges inherent in the system, such as determining what methods and technologies will be most useful in measuring miles travelled, I am confident a flexible system that puts choices in the hands of Oregonians will create enough options that all motorists will be able to find the right fit. This pilot program will commence with the participation of 50 Oregon drivers in October of this year, and they will be joined by other drivers in Washington and Nevada. I am excited to see the results.

In order to maintain a strong economy and a high quality of life, the nation requires a safe, efficient transportation system with a stable sufficient funding source. I see no reason why pilot programs such as Oregon’s could not be rolled out across the nation. Oregon gave us the gas tax; it could be the first state to get rid of it as well. Our national economic fortunes rise and fall with the quality of our infrastructure, so it is time to stop relying on the outdated and outmoded systems of the past and embrace change with a serious eye to toward the future. We have the technology; all we need now is the political will.

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July 24, 2012 4:47 PM

Could industry offer M-B road-use fees?

By Gabriel Roth

Research Fellow, The Independent Institute

There is (to quote Emil) a “broad consensus” among respondents to this important question that motor fuel taxes no longer serve as effective prices for the use of roads. There also seems to be consensus that progress in switching to mileage-based user fees is more likely to arise at the state than at the federal level.

To help these “Hundred Flowers [to] Bloom”, might industry devise and offer alternatives to the present system? Interested states could follow Oregon and invite proposals from private firms. The states could then allow road users to voluntarily test them. Those volunteers would pay the suggested mileage-based road-use fees and, in return, be given financial inducements, such as not having to pay annual vehicle licensing fees.

Such tests would enable road users to assess important aspects of new proposals (e.g. the privacy safeguards) and new opportunities associated with them, such as mileage-based insurance premiums. And governments could assess administrative and enforcement issues.

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July 24, 2012 2:20 PM

Early Stages of Transition

By Robert L. Darbelnet

President and CEO, AAA

AAA has long supported the user-fee based approach to funding the nation’s transportation system and believes any successor to federal and state gasoline taxes over the long term should be a revenue generator in that same construct.

The potential for action on a mileage-based user fee is limited by many of the same challenges confronting consideration of a gas tax increase – including lack of political and public support, opposition to tax increases in general, and concerns about the economy. Mileage-based user fees have the added hurdle of being new, combined with privacy, security and administrative concerns that must be addressed. Technology seems to be the least of its challenges. Pilot tests like those in Oregon, Minnesota, and elsewhere around the country will continue to test different models (from low tech to high tech) and gauge public acceptance. It is important that these pilot tests continue. They represent a great opportunity to get a real sense of what people want, don't want, expect, and fear in a mileage-based user fee arrangement. ...

AAA has long supported the user-fee based approach to funding the nation’s transportation system and believes any successor to federal and state gasoline taxes over the long term should be a revenue generator in that same construct.

The potential for action on a mileage-based user fee is limited by many of the same challenges confronting consideration of a gas tax increase – including lack of political and public support, opposition to tax increases in general, and concerns about the economy. Mileage-based user fees have the added hurdle of being new, combined with privacy, security and administrative concerns that must be addressed. Technology seems to be the least of its challenges. Pilot tests like those in Oregon, Minnesota, and elsewhere around the country will continue to test different models (from low tech to high tech) and gauge public acceptance. It is important that these pilot tests continue. They represent a great opportunity to get a real sense of what people want, don't want, expect, and fear in a mileage-based user fee arrangement.

In the meantime, we need to leverage the positives contained in MAP-21 to continue to make the case for increased investment in transportation. We haven’t been able to garner support or interest in paying more for transportation through the gas tax, so convincing the public and/or policy makers to support a new system that will cost more (both to administer and in terms of charges) is difficult at best.

With passage of MAP-21, Congress deferred discussion of a sustainable transportation funding solution for another two years. Many Members of Congress believe the gas tax is obsolete due to increases in vehicle fuel economy and the emergence of electric vehicles and hybrid cars - but they don’t know where to go from here. AAA does believe that over the long term we need to transition to a new funding model, but we also know that an immediate increase in the existing federal gas tax is necessary to fund maintenance and construction needs in the short term. We hope to be able to have productive discussions in the coming months about how to sustain long term transportation investments for the benefit of safety, mobility and the economy.

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July 24, 2012 10:00 AM

Help States Raise Revenue

By Joshua Schank

President and CEO, Eno Transportation Foundation

The Federal Government seems unwilling to deal with the long-term funding situation for the federal surface transportation program. While this is disappointing, it is understandable in the sense that it is challenging for people to appreciate the national role in funding transportation when transportation is seen as such a local issue. People tend to be more concerned with their daily commute than some vague notion about whether goods can be shipped across the country efficiently.

But this does not give the federal government a pass. If federal funding levels are going to stagnate (and essentially decline in real terms), the federal government must play a stronger role in assisting states in developing their own sources of revenue. These could be tolls, VMT-style user fees, or even sales taxes or other general sources of tax revenue. There is no need to pick winners in terms of the exact way that revenue is raised - the federal government simply needs to use some of the federal gas tax funds it has left to reward states that raise their own revenues. Even a small amount ...

The Federal Government seems unwilling to deal with the long-term funding situation for the federal surface transportation program. While this is disappointing, it is understandable in the sense that it is challenging for people to appreciate the national role in funding transportation when transportation is seen as such a local issue. People tend to be more concerned with their daily commute than some vague notion about whether goods can be shipped across the country efficiently.

But this does not give the federal government a pass. If federal funding levels are going to stagnate (and essentially decline in real terms), the federal government must play a stronger role in assisting states in developing their own sources of revenue. These could be tolls, VMT-style user fees, or even sales taxes or other general sources of tax revenue. There is no need to pick winners in terms of the exact way that revenue is raised - the federal government simply needs to use some of the federal gas tax funds it has left to reward states that raise their own revenues. Even a small amount of "free" federal money can overcome substantial political barriers to raising revenues for transportation at the state and local levels. Witness the Urban Partnership Agreements, which encouraged states to manage demand with pricing strategies by offering funding for transit. Thanks to that program, cities all over the country have implemented congestion pricing mechanisms that speed the flow of traffic AND generate revenue for transportation.

The federal transportation program needs to shift away from the current focus on funding capital, which made sense when there was plenty of federal gas tax revenue floating around, and move towards a strategy that makes sense in the modern era of dwindling gas tax revenues. Providing more incentives for states to raise their own revenue for capital is an essential component of such a strategy.

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July 23, 2012 3:58 PM

Let A Hundred Flowers Bloom

By Emil H. Frankel

Visiting Scholar, Bipartisan Policy Center

There is a broad consensus that motor fuels taxes no longer serve as effective proxies for use. Moreover, dwindling political support has made it difficult to increase them to rates that are adequate to support appropriate investment in the nation's transportation system. These circumstances would seem to demand reform, in order to establish a sustainable revenue stream for transportation, but the political will in most places -- certainly, at the federal level -- is lacking.

While it is quite unclear that there will be a "grand bargain" about the nation's budget deficits and rising national debt any time soon or that such a grand bargain, if it were to be achieved, would include addressing user-based revenue for transportation investment, it seems clear to me that the transportation funding issue will only be addressed in the context on the resolution of these broader fiscal matters.

Even then, the shift to more direct and sustainable forms of user-based revenues, such as a vehicle miles traveled (VMT) fee, would seem to face daunting political challeng...

There is a broad consensus that motor fuels taxes no longer serve as effective proxies for use. Moreover, dwindling political support has made it difficult to increase them to rates that are adequate to support appropriate investment in the nation's transportation system. These circumstances would seem to demand reform, in order to establish a sustainable revenue stream for transportation, but the political will in most places -- certainly, at the federal level -- is lacking.

While it is quite unclear that there will be a "grand bargain" about the nation's budget deficits and rising national debt any time soon or that such a grand bargain, if it were to be achieved, would include addressing user-based revenue for transportation investment, it seems clear to me that the transportation funding issue will only be addressed in the context on the resolution of these broader fiscal matters.

Even then, the shift to more direct and sustainable forms of user-based revenues, such as a vehicle miles traveled (VMT) fee, would seem to face daunting political challenges. It is hard to believe that a Congress that has not increased the federal gasoline tax for 20 years -- and won't even mention the issue today -- will be any more prepared to put in place a federal VMT charge, than it is to raise the gasoline tax. The political and technical hurdles would seem to make this transformation unlikely in the next few years.

However, in this federal system of ours, one can imagine that such a funding reform might occur "bottom-up," rather than "top-down." As noted in the question, experiments, demonstrations, and pilot programs are now underway in some states (even if very limited in size and scope). Just as the gasoline tax was first introduced at the state level, and only later implemented by the federal government, a similar trend may occur with VMT fees. Indeed, I am optimistic that, while there will be political challenges and hurdles at the state (as well as at the federal) level, many states will begin, step-by-step to transform their revenue and funding streams. They will do so, because they will have few, if any, reasonable alternatives.

So, if this is to be the trend, what is the role of federal policy? Most importantly, the federal government should "get out of the way" of such exercises of state discretion and demonstrations of state initiative. Federal barriers to the introduction of user-based revenue measures at the state, metropolitan, and local levels (such as the prohibition on tolling Interstate highways and discouraging the impositon of user fees on existing capacity) should be removed or, at least, substantailly reduced. Indeed, national tranpsortation policy should encourage these innovations at the state level through federal incentives and bonuses to reward such actions.

Road user fees are, necessarily, the wave of the future, but only if we are serious about building upon, and taking advantage of, the strengths and the spirit of innovation that have characterized our federal system of government.

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July 23, 2012 1:39 PM

The Most Likely Funding Scenario

By Ken Orski

Publisher, Innovation Briefs

With a road user (mileage) fee garnering little support in Congress (indeed, the House has approved an amendment to the FY 2013 appropriations bill that would block the exploration of a Vehicle Miles Traveled (VMT) fee), and with no other money-raising mechanism anywhere in sight, there is a growing sense among seasoned observers that the days of long-term surface transportation authorizations may be over. The prevailing fiscal and political climate will make it difficult if not downright impossible to raise hundreds of billions of dollars in a single legislative package.

For example, at FY 2013-14 (MAP-21) levels of expenditure, a six-year transportation authorization would require approximately $300 billion in funding. Highway Trust Fund tax revenue and interest over the same time frame is expected to bring in only $210 billion, leaving an unfunded shortfall of $90 billion.

Faced with this dilemma, Congress is likely to embrace short-term bills as the only practical solution. Short-term authorizations, such as MAP-21, will only require relatively modest injectio...

With a road user (mileage) fee garnering little support in Congress (indeed, the House has approved an amendment to the FY 2013 appropriations bill that would block the exploration of a Vehicle Miles Traveled (VMT) fee), and with no other money-raising mechanism anywhere in sight, there is a growing sense among seasoned observers that the days of long-term surface transportation authorizations may be over. The prevailing fiscal and political climate will make it difficult if not downright impossible to raise hundreds of billions of dollars in a single legislative package.

For example, at FY 2013-14 (MAP-21) levels of expenditure, a six-year transportation authorization would require approximately $300 billion in funding. Highway Trust Fund tax revenue and interest over the same time frame is expected to bring in only $210 billion, leaving an unfunded shortfall of $90 billion.

Faced with this dilemma, Congress is likely to embrace short-term bills as the only practical solution. Short-term authorizations, such as MAP-21, will only require relatively modest injections of general funds and, if recent experience is any guide, Congress will always find ways to offset modest revenue transfers with "creative" accounting gimmicks .

To be sure, the transportation community will contend that longer-term (i.e. five- or six-year) authorizations are necessary to allow for the orderly planning and implementation of major capital investments. But to the extent that large highway capital projects still figure on the State DOTs agendas, tolling, private capital and credit instruments such as TIFIA, can probably offer an adequate substitute for the funding stability inherent in a long-term federal authorization.

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