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June 2007
Special Research Conference Issue: Plenary Sessions
Oregon's pilot program suggests promise—and hurdles—for road user fees
James Whitty
Mileage charging is a concept that works, said James Whitty of the Oregon Department of Transportation, but making it a reality will require a long transition time and a change in public attitude. Whitty, manager of ODOT’s Office of Innovative Partnerships and Alternative Funding, described Oregon’s pilot program at the opening plenary session of the 18th Annual CTS Transportation Research Conference.
The ODOT Road User Fee Pilot Program ran from April 2006 to March 2007. The idea for the experiment arose six years ago, Whitty said, when state legislators became concerned with the growing “revenue erosion” caused by increasing fuel efficiency and use of alternative fuels. Oregon economists predict a permanent drop-off in real gas-tax revenue by 2021, he said. “It will be a long, slow slide, but an assured slide.”
Another weakness of the gas tax is that it is not directly connected to the wear and tear vehicles place on the system. “More miles traveled don’t mean more revenue,” Whitty said.
Faced with these issues, the legislature created a task force and charged it with developing a new design for revenue collection. After discussions, the task force (made up of legislators, former DOT commissioners, and citizens) in turn gave a directive to ODOT: create a new road revenue system mirroring as closely as possible the advantages of the gas tax (such as ease of payment and administration) but with fewer disadvantages.
Mileage reader at the pump
ODOT’s solution was the mileage fee, a per-mile charge based on vehicle-miles traveled. In the pilot system, a GPS satellite transmits location data (divided into three zones) to an on-board device. When the vehicle pulls into a gas station, a short-range mileage reader on the fuel pump records the mileage totals and feeds the data into a point-of-sale system and a central computer. (To guard privacy, location data are wiped clean.) The central computer calculates the proper fee by zone and relays it back to the pump for payment.
Consumers pay either the fuel tax or the mileage fee, but not both. “This is an important issue,” Whitty said. Retrofitting the various vehicle makes and models doesn’t work well, he explained, so the equipment needs to be installed pre-sale or at manufacture. This would require a long period of transition—approximately 20 years—as the mileage fee gradually becomes predominant.
Integration with the existing fuel-tax collection system is critical for several other reasons, he said. The retail station reimburses both taxes to a wholesale distributor, which then pays ODOT, keeping collection simple. Integration also provides a safeguard against system failure and tampering and ensures that motorists from other states and countries are able to pay. Plus, “you maintain the gas tax as the underlying principle,” he said.
Oregon’s mileage fee raises “substantial revenue,” Whitty said, “initially as much as the gas tax and then more.” The on-vehicle device used in the pilot cost about $140, and state operating costs are estimated at $1.6 million annually. The main expense is retrofitting the service stations, he said, which would be bonded at $35 million over 20 years.
Preliminary results from the pilot show the zone differentiation and the mileage counting worked very well. Vehicle retrofits caused some difficulty, but most cars achieved 100 percent accuracy. ODOT is now conducting an assessment of the technology, administration, and user behavior (including a participant survey) and identifying implementation issues. A report is due in September 2007.
On-vehicle device display
A key next step is to gain support from auto manufacturers. “If they are not on board,” Whitty said, “we can’t proceed.” To do so, support from the FHWA or USDOT is needed to “bring them to the table,” he said. A multi-state initiative, especially with a large state such as California, could serve as a critical pathway for deployment. “Companies see a burgeoning market for the technology,” he noted.
Another big issue for the future is collection from plug-in hybrids. Payment could be added to homeowners’ utility bills, he suggested.
“The big elephant in the room is rate structure,” Whitty cautioned. Possibilities include a flat rate or varied multiple rates based on vehicle weight or fuel efficiency, for example. (The pilot used a flat tax and retained the state’s weight-distance tax for heavy vehicles.) The ODOT project doesn’t determine what the rate should be.
The pricing system also could be used to charge differing rates in more zones or to charge higher rates at peak periods. “These are political issues that state and local [leaders] have to wrestle with,” Whitty said. “It is a viable option. It was tested in Oregon, and it worked.”
A final critical factor is public acceptance—and at this point, the concept doesn’t have it, Whitty said. “The public doesn’t understand the revenue erosion problem we’re trying to fix,” he said, “so they won’t accept the solution...It will come grudgingly.” He recommended learning more about the public’s understanding of transportation funding and correcting misperceptions. “But we won’t [gain acceptance] until they experience the difficulty of falling gas-tax revenue,” he concluded.