summit 2021 transportation elkins stern hendren poole

Discussing transportation issues at the Legislative Summit were, from left, moderator and Minnesota Representative Steve Elkins (D), Carter Stern of the autonomous vehicle company Cruise, Patricia Hendren of the Eastern Transportation Coalition and Robert Poole of the Reason Foundation.

The Future of Transportation: User Fees, Autonomous Fleet Vehicles, Public-Private Partnerships

By Lesley Kennedy | Dec. 1, 2021 | State Legislatures News | Print

As the transportation landscape continues to quickly evolve, states are taking a serious look at everything from distance-based user fees to autonomous vehicles to improving infrastructure with public-private partnerships.

These areas were all discussed during an NCSL Legislative Summit session titled “Future of Transportation.”

Patricia G. Hendren, executive director of the nonpartisan Eastern Transportation Coalition, a partnership of 17 states and Washington, D.C., focused on solving transportation problems, said that while conducting pilot programs to study public interest in distance-based fees, her group found participants often said they didn’t realize how much they drove or how transportation is funded.

“A big benefit of these pilots is actually educating the public and engaging them and engaging key stakeholders, as well,” she said.

We have to make sure we have really transparent agreements and are clear about what the data is going to be used for and what it’s not. —Patricia G. Hendren, Eastern Transportation Coalition

The issue of privacy is at the forefront. Hendren said although the public may be OK with always having a cellphone on, or using a watch that reports steps or heartrate, many are concerned about the notion of putting something in their car to determine how much they drive.

However, during the coalition’s pilot programs, those concerns dropped significantly.

“That means that we have an opportunity to get past that gut reaction of, ‘Heck no, I’m not going to do this’ and to say, ‘OK, what is it you’re concerned about? What are we going to do with your data? How do we protect your privacy?’ ” Hendren said. “It’s not the government in your car; it’s the private sector, typically, and that may or may not make people comfortable. So, we have to make sure we have really transparent agreements and are clear about what the data is going to be used for and what it’s not.”

A second key barrier to using a distance-based approach, rather than a fuel tax, to fund the transportation system, according to Hendren, is the belief that it will hurt rural communities.

“That makes total sense,” she said. “Rural drivers typically go farther distances in order to go about their daily lives for the work that they do, so you think that that would be true.” But, she added, data shows that when you switch from a fuel tax to a distance-based fee, rural communities will likely pay less and people in urban and suburban areas will pay more—due in part to the larger, more fuel-inefficient vehicles often used in rural communities.

Another barrier to distance-based fees, Hendren said, is the idea that they could hurt the adoption of electric vehicles. But she points to Oregon, a state with one of the longest-standing existing mileage-based fee programs. “Over a third of their volunteers are EV owners,” she said. “So that tells you that EV owners are willing to help contribute to the roads that they are driving on.”

The truth is, distance-based fee programs are coming, according to Hendren. “How it’s going to come and when it comes is up to us to figure out, and we have an opportunity to do it well or do it in the smartest way possible,” she said. “It’s not going to be one path—we’re not going to do it all the same. … But I think we know we’re trying to get to that link between what you use, you should pay for.”

Autonomous Vehicles a ‘Huge Leap’

Another trend when it comes to the future of transportation is the use of autonomous vehicles, said Carter Stern, senior government affairs manager for Cruise, an all-electric autonomous vehicle company with the goal of operating fleets of self-driving vehicles that provide a ride-help service like Lyft or Uber, as well as goods delivery.

Currently testing publicly in San Francisco and in Arizona, Cruise is still in the research and development phase, but Stern said autonomous vehicles are “a huge leap in terms of what we are able to do from a technical perspective and, perhaps more importantly, there’s an important dialogue that needs to go on with members of the public around safety and around how the service works, because this is such a new thing.”

The reason AVs are so important, in my opinion, is because they have a lot of opportunity to cut down on a lot of the death that happens on roads as a result of inattention, drunk driving, poor design, etc. —Carter Stern, Cruise

According to Stern, electrification of transportation is the future. “And the reason that becomes a huge front-of-mind issue for us is that it would be very easy to take these vehicles and get them fueled up at the local filling station,” he said. “It is a much different matter to build out electrical infrastructures and charge them.”

But while there are incentives available for personal electrical vehicles, that’s less often the case when operating a fleet that is available to the public at large, he added.

“In California, for example, we’re working with local farmers on tax credits that allow us to charge a fleet, put money back in the community, and ensure that we are greening out that entire supply chain from production of electricity to that vehicle,” he said.

Stern said Cruise works closely with local law enforcement as well as road safety experts.

“The reason AVs are so important, in my opinion, is because they have a lot of opportunity to cut down on a lot of the death that happens on roads as a result of inattention, drunk driving, poor design, etc.,” he said. “But we need other third-party stakeholders, government officials, regulators to hold us accountable to those promises and so we have a lot of dialogue about safety.”

He said state-level regulations are needed to allow companies such as Cruise to run autonomous vehicle fleets.

“If we want to electrify a greater number of miles traveled in cities, wherever that city is, whatever part of the country it is—red, blue, purple and different—we need to not just give people the ability and the incentives to purchase their personal electric vehicles, if that’s the route they want to go, but also make sure we’re keeping an eye on the folks who cannot afford a brand-new car, for whom a second, very used car is a huge expense,” he said. “And for those folks, they’re more likely to buy a 20-year-old vehicle that is hugely inefficient, that is powered by a gas engine.

“It’d be great if there was a very low-cost electric vehicle, but we’re not quite there. And so incentivizing these fleet operators to come in and provide a ride for the cost of an Uber or a Lyft for less to replace what might be a trip containing an internal combustion engine, we more rapidly facilitate that transition to electric miles in our community.”

Public-Private Partnerships Offer Up-Front Financing

When it comes to funding large-scale transportation projects that involve design, build, financing, operation and maintenance in one package, some states are turning to P3s, or public-private partnerships, according to Robert Poole, director of transportation policy at the Reason Foundation.

While the state still owns the facility, the contracted party is “responsible for dealing with customers and making sure it’s properly maintained throughout its life cycle, at least of the term of the agreement,” he said. “Now, these are big projects—you’re talking about billion-dollar-scale projects in many cases.”

So, where does the money come from? There are two funding paths, according to Poole. One is user-based. “If it’s a brand-new project, you have to have the ability for the project to charge user fees,” he said. “Or, if it’s an existing facility that needs to be modernized, it may have user fees already that can be allocated to the project.”

The bigger the project, the more likely they are to have cost overrun—and risk of cost overruns is transferred from the state, from the taxpayers ultimately, to the P3 company. —Robert Poole, Reason Foundation

The other option is availability payments, where the state is willing to put up annual payments that are tied in some extent to the performance of the company, he added.

“P3s are not a new funding source,” Poole said. “They’re a method of procuring and managing big complex projects that are financed up front. But financing requires a revenue stream—either a user fee or a dedicated stream of payments from the government.”

Poole says there is a big problem in many states with deferred maintenance and one way to guarantee that a large, complex facility is properly maintained for its whole life is to have this kind of stewardship.

“The main advantage is financing up front, which we don’t use a whole lot in transportation,” he said. “That means that if you have a need now for a big project, you don’t have to wait while you try to accumulate funds or, if it’s a road, build it in many segments over 20 years. You would finance the whole thing up front and build it when it’s needed and get it done sooner.”

Another important benefit to P3s is risk transfer, he said.

“The bigger the project, the more likely they are to have cost overrun—and risk of cost overruns is transferred from the state, from the taxpayers ultimately, to the P3 company,” Poole said. “And the investors who put into these are willing to take those risks in exchange for the possibility—not a guarantee—but the possibility of earning a return on their investment.”

Financing is non-recourse, Poole said, meaning that if a company should go bankrupt, which, he added, has happened a few times in the United States and in Australia where the P3 model is very common, the state is not liable. “There has not been a single bailout in the United States or Australia of a bankrupt P3 company,” he said.

Poole said his foundation recommends that states interested in P3 projects create a specialized P3 office and noted that Colorado, Puerto Rico and Virginia all have well-respected P3 agreements that can be looked at as models. “Up-front financing,” he said, “is a very big thing that is not used enough for major projects in transportation.”

Lesley Kennedy is a director in NCSL’s Communications Division.

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