State Road User Charge Pilot Results and Legislative Action

Road User Charge Fact Sheet: Missouri

State: Missouri.

Publication Date: Oct. 30, 2020.

History: Missouri’s Department of Transportation (MoDOT) received three grant awards over three years totaling $4.8 million from the federal Surface Transportation System Funding Alternatives (STSFA) program. These grants enabled MoDOT to study an alternative revenue mechanism designed to address payment inequities in the state’s fuel tax structure. Specifically, MoDOT designed a proposed miles per gallon (mpg)-based registration fee to replace its current registration fee structure, along with a financial model assessing the potential impacts of such a transition, and a platform for a full-scale implementation strategy with Missouri’s Department of Revenue (MoDOR).

STSFA Awards

Federal Fiscal Year	Grant Amount	Description
2016	$250,000	Study a new annual registration fee schedule based on estimated mpg and determine concept feasibility.
2017	$2,772,000	Conduct public outreach on concerns related to equity and data security issues.
2018	$1,782,000	Deploy innovative strategies such as annual vehicle registration fees varying by vehicle fuel economy along with other user-based charges.

Legislative Activity:

In 2017, Missouri’s General Assembly adopted HCR 47, which established the “21st Century Missouri Transportation System Task Force.” This task force was a 23-member bipartisan panel consisting of participants from the private sector and legislative and executive branches.  A report was published in 2018 “with recommendations regarding the state transportation system and the funding of that system.” One recommendation called for legislative changes to approve a new annual registration fee structure based on a vehicle’s mpg instead of a vehicle’s taxable horsepower.

According to MoDOT, legislation is required to implement an mpg-based registration fee structure. The Missouri General Assembly has considered five pieces of legislation over three years that would have implemented the proposed revenue mechanism supported by MoDOT. However, none of these bills had been enacted as of October 2020.

In 2018, HB 2600 would have established a base vehicle registration fee totaling $29 for all vehicles with an Environmental Protection Agency (EPA) fuel economy under 30 mpg. Vehicles achieving an EPA fuel economy of at least 30 mpg would have paid an incremental fee per mpg, an amount set by administrative rule. This bill was referred to the House Transportation Committee but did not advance beyond that point.

In 2019, HB 500 and SB 201 would have replaced the current registration fee structure with one based on the combined city and highway mpg rating using the fuel economy label by the EPA or a rating obtained using vehicle identification numbers. The House Transportation Committee held a hearing in Feb. 2019 but did not advance the proposal beyond that point. The Senate Transportation, Infrastructure and Public Safety (TIPS) Committee voted its bill out of committee in Feb. 2019, but it was not subsequently considered by the full Senate. The new base annual registration fee would have been $24 and, for each additional mile per gallon over 29 mpg and up to 60 mpg, the fee would have increased by $6. Plug-in hybrid and electric vehicles would have been subject to an mpg-based annual registration fee totaling up to $204.

In 2020, HB 2301 and SB 906 also would have replaced the horsepower-based registration fee structure with one using mpg ratings and set annual fees based on such ratings.  The House version was referred to the Transportation Committee but did not receive a hearing. The Senate TIPS Committee held a hearing in March 2020 on its version, but the proposal was not advanced beyond that point.  Vehicles with an mpg of 19 or less would have paid $25, 20 mpg to 29 mpg would have paid $32, 30 mpg to 39 mpg would have paid $39, 40 mpg to 49 mpg would have paid $46, 50 mpg to 59 mpg would have paid $53 and 60 mpg or more would have paid $75. Additionally, plug-in hybrid and electric vehicles would have been subject to fees of $112.50 and $125, respectively.

Project Details:

Missouri’s registration fee is currently based on a vehicle’s taxable horsepower, a calculation determined by a vehicle’s cylinder dimensions. MoDOT studied the feasibility of transitioning its registration fee structure from taxable horsepower to a vehicle’s combined mpg rating. An operational framework was developed to implement the amended structure. The proposed revenue mechanism is not meant to replace current fuel taxes and is also not a per-mile charge based on road usage. Additionally, a technical memorandum was produced to identify each passenger vehicle with the appropriate EPA fuel economy rating. The project found that “by charging vehicle licensing fees, the state would be able to maintain the Highway Trust Fund revenue stream while simultaneously addressing the existing payment inequity between high and low-efficiency vehicles. Specifically, low-efficiency vehicles would be charged a smaller registration fee than high-efficiency vehicles, as lower efficiency vehicles carry a larger motor fuel tax burden.”

Project Status:

MoDOT completed pre-deployment activities on Aug. 15, 2018. These activities involved testing the feasibility of transitioning to a fee schedule based on the combined mpg rating of vehicles and coordinating with MoDOR to develop a full-scale implementation strategy to replace the existing registration fee structure. Since then, MoDOT has worked with the General Assembly regarding alternative funding mechanisms for transportation infrastructure. This has included an outreach campaign to lawmakers about the need for alternative funding, as well as new technologies. A State Innovation Forum was also organized in which stakeholders presented their ideas on possible solutions to transportation funding problems.

MoDOT’s phase two STSFA award provided $2.7 million to investigate attributable revenues in rural and urban areas. Furthermore, MoDOT received a third STSFA award of nearly $1.8 million in federal fiscal year 2018 to design and implement mpg-based registration fees. According to MoDOT, two studies were conducted. One study sought to understand highway use on a per-year, per-mile and per-driver basis to determine highway impacts and the fees paid by non-gasoline and non-diesel vehicles. This study concluded in September 2019 and its results will support a policy that benchmarks mpg-based registration fees according to highway use and the amount of fees presently paid into the highway system.

The other study explored fees paid by rural and urban drivers under a potential mpg-based registration fee structure while addressing commuting patterns and vehicle types. This study concluded in June 2019, with results indicating that rural drivers are effectively subsidizing urban drivers. MoDOT notes its primary project goals from the studies were twofold. First, MoDOT seeks to “generate revenues consistent with technological trends in the motor vehicle market,” and second, MoDOT is committed to “ensure privacy and security for drivers while using current adaptable technologies to collect and administer the fee.” 

Additional Resources:

• MoDOT Gets Federal Grant for Alternative Funding Study, Jefferson City News Tribune, Feb. 14, 2019
• Missouri to Test New Fees to Pay for Highway Projects, St. Louis Business Journal, Feb. 13, 2019
• 21st Century Missouri Transportation System Task Force (2018) 

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Road User Charge Fact Sheet: Washington

State: Washington

 

 

Publication Date: Dec. 15, 2020

History: The Washington State Transportation Commission (WSTC), in partnership with the Washington State Department of Transportation (WSDOT), has received three grant awards totaling approximately $14 million over three years under the federal Surface Transportation System Funding Alternatives (STSFA) program. The WSTC is a seven-member body of citizens appointed by the governor for six-year terms and has been the convener of discussions on-road usage charge (RUC) activities. One of WSTC’s roles is to conduct studies and projects for the Washington Legislature.

State allocated funds enabled Washington to conduct early studies of a RUC program beginning in 2012 following the passage of state legislation. In 2015, WSTC was awarded federal grants from the FHWA Value Pricing Pilot Program to further explore RUC. In 2016, the WSTC received funding under the STSFA program to design and develop a RUC prototype system. In 2017, WSTC received a second STSFA grant to complete an operational 12-month RUC pilot, collect data, evaluate the performance of the pilot system and prepare a final report and recommendations for a future RUC system.

STSFA Awards 

Fiscal Year	Grant Amount	Description
2016	$3,847,000	Test and evaluate an RUC system as a replacement to the gas tax; conduct the first international interoperability test of a RUC system between the U.S. and Canada; conduct the first test of interoperability between two states (Washington and Oregon) where actual RUC payments from drivers were collected, transacted, and reconciled between the two states using the first-ever “HUB” clearinghouse approach; explore opportunities to leverage the capabilities of third-party enterprises to reduce mileage reporting costs; developed and tested an owner-controlled smartphone app to accurately report out-of-state mileage and control when GPS was turned on or off.
2017	$4,600,000	Carry out and evaluate a 12-month pilot that tests five concepts of mileage reporting to collect feedback from users regarding methods for assessing user fees, and to collaborate with other states to test and develop organizational and operational capabilities for implementing a RUC program.
2019	$5,525,000	Explore six tasks designed to probe and address implementation challenges discovered during the recently completed RUC Assessment and Pilot Project. Research topics will include an assessment of equity impacts and mitigation options; modeling the impacts of future mobility models including increased ride-share, telework, etc., and assessing new mileage collection methods.

Legislative Activity

In 2012, Washington’s Legislature enacted HB 2190, which made a biennial $775,000 appropriation to study the feasibility of transitioning from the gas tax to a RUC system. The law directed WSTC to convene a steering committee to provide direction and guidance on road user assessments and transitioning to an RUC system. The RUC steering committee included members from the trucking industry, environmental groups, localities, public transportation, technology industry and the motoring public.

The legislature made a biennial $450,000 appropriation in 2014, SB 6001 (enacted), to develop a work plan and concept of operations. The same budget also directed WSTC to conduct a detailed financial analysis and to seek federal funding for a statewide pilot project. The analysis covered moving away from the gas tax, while introducing a RUC on a portion of vehicles and using the gas tax in the interim as a pre-payment mechanism to reduce collection costs and evasion. It also addressed setting RUC rates fairly for out-of-state drivers. 

In 2018, SB 6106 (enacted) required periodic reporting on the RUC pilot to the RUC steering committee. HB 1160 of 2019 (enacted) required a final report on the RUC pilot by January 2020. The law also directed WSTC to continue researching the impacts of RUC on low-income households, vulnerable populations and displaced communities. WSTC was further directed to seek federal funds, update recommended RUC operational concepts and business cases and develop a detailed plan for phasing in RUC.

Project Details

In July 2018, WSTC initiated a pilot project to test an operational RUC program using a flat per-mile rate, derived from taking the state’s average vehicle mpg of 20.5 and dividing it by the state gas tax of 49.4 cents per gallon. Specifically, the RUC pilot offered five mileage reporting options, with each option using electronic invoicing for drivers: 

Automated distance charge, which is calculated using one of these methods:

• A mileage permit, which is a permit issued when a driver pays a flat fee upfront for a block of miles such as 1,000, 5,000 or 10,000. Drivers report odometer readings electronically via photo or in-person every three months and purchase additional permits as needed.
• Vehicle odometer readings, a post-pay approach where drivers drove for three months and then submitted odometer readings electronically via photo or in-person with support from a vehicle licensing office. 
• Automated distance charge, which is calculated using one of these methods:
  • A plug-in telematics device with GPS.
  • A plug-in telematics device without GPS. 
  • A smartphone app to record and report mileage, which allowed users to decide whether to enable location-based services. 

STSFA grants funded the final design, recruitment and implementation of the 12-month RUC pilot, as well as surveying pilot participants, conducting focus groups around the state and evaluation planning. The grants also funded a smartphone innovation challenge that used a crowdsourcing approach at the University of Washington to build a beta smartphone app designed for the RUC pilot. The RUC pilot tested a theoretical 2.4 cents per mile charge for light-duty, non-commercial vehicles such as gasoline-fueled, hybrid and electric vehicles. More than 5,000 drivers volunteered for the RUC pilot, with 2,000 vehicles ultimately selected to participate. Participants represented diverse geographic and demographic groups across the state. There were no financial transactions for the RUC pilot and participants received mock invoices throughout its duration. The pilot ended in January 2019.

Project Status 

Washington completed all of the activities funded by STSFA Phase I grants. These activities included a 12-month RUC pilot with 2,000 participants, as well as participant surveys, focus groups, agency interviews and case studies. A concept of operations was produced for the pilot. This explored RUC operational concepts including a mileage permit, self-reporting and automated distance charging, tested whether there was a business case and identified implementation issues such as privacy, data security and enforcement. This also involved RUC steering committee-facilitated discussions on policy, public acceptance and technical issues. After studying RUC over several years, the RUC steering committee and WSTC determined that a RUC system was feasible and could out-produce the gas tax long-term to fund transportation needs. 

The pilot prototyped a RUC system that closely modeled a full-scale system and the results informed next steps for an operational RUC system using a phased-in approach. One element was designing a system that could still collect gas taxes yet ensured drivers were not subject to both. Thus, drivers were credited for gas taxes paid at the pump, which then reduced the amount of RUC charges due. 

A second element was studying out-of-state driving patterns to develop a multi-state RUC revenue reconciliation system, referred to as “the HUB.” The HUB acted as a financial clearinghouse that successfully processed the miles submitted by participants from Washington, Oregon, Idaho and British Columbia. Since 90 drivers from Oregon and 30 from Washington agreed to pay real money for their miles driven, the HUB provided a testing ground to process actual financial transactions and remit RUC revenues to each state according to miles driven. Notably, the WA RUC HUB was the first field test of a multi-jurisdictional RUC transaction processing system in North America. 

A third element was to gather participant and public feedback. The top concerns raised were privacy, simplicity in reporting miles and other dimensions of equity, including vehicle weight, per-mile rates based on emissions and a driver’s ability to pay.   

The WSTC announced 16 recommendations in December 2019 detailing how Washington can manage the transition from a gas tax system to a RUC system. Recommendations were to allow drivers to try the RUC system, test new personal privacy protections, conduct additional research regarding RUC rates and driver, vehicle or infrastructure characteristics and reduce the cost of collection through public-private partnerships (P3s). Furthermore, WSTC’s final RUC report in January 2020 called on the legislature to consider its 16 recommendations and included support for “a gradual and deliberate transition to a RUC system.” The report recommended phasing in RUC over the next 10 to 25 years, which is when all outstanding bonds that pledged gas tax revenue will have been paid off or restructured. Other recommendations were to begin a RUC program where electric and hybrid vehicles would pay a RUC, including state-owned vehicles, dedicating RUC revenues to highway purposes as required by the 18th Amendment of Washington’s Constitution, enacting laws that protect personal privacy and working with other states to narrow RUC compliance gaps. 

The WSTC and their partner WSDOT recently received a $5.5 million STSFA grant to study issues discovered during the pilot that need to be resolved before a wide-scale RUC system can occur. The Forward Drive project reflects the next phase of RUC financial, policy,  operational and technology development. At the outset, the first four tasks of the Forward Drive project will be conducted concurrently in preparation for small-scale field tests.

• The first task is financial modeling that considers advancements and future adoption of autonomous, connected, electric and shared vehicles as a growing component of roadway miles. 
• The second task is to conduct an in-depth equity analysis, which will identify and measure potential disparate impacts of RUC to communities of color, low-income households, vulnerable populations and displaced communities. The project will also develop impact mitigation strategies. 
• The third task will include updated mileage reporting methods such as identifying and testing new technologies, as well as enhanced in-person mileage reporting options. The in-person mileage reporting options may include entering into partnerships with a wider range of businesses to offer mileage verification services to the public. The P3 approach was first tested in the WA RUC Pilot Project, with promising results. 
• The fourth task entails collaborating with other states to explore strategies to reduce the administrative costs of collecting RUC. 

Once the four primary tasks are completed, Forward Drive will develop a detailed plan to incorporate advancements into a test plan followed by smaller RUC prototype “subtests.”  These are small-scale tests of the new mileage reporting methods, equity policies, collecting RUC from ride-hailing vehicles such as Uber and Lyft and testing cost reduction techniques. Finally, it will include a detailed RUC roadmap on how Washington and other states can right-size a RUC policy and system. A specific deliverable will also offer a framework on how transportation policy and funding choices can be reexamined in light of increases in RUC revenue.  

Additional Resources:

• Washington Road Usage Charge Pilot Project and Assessment
• WA RUC: Road Usage Chart Assessment Final Report

 

NCSL Kicks Off Project to Expand Understanding of Road User Charging

Since the early 2000s, states have been at the forefront of discussions to explore possible replacements for the motor fuel tax (MFT). States are heavily reliant on MFT revenue as a source for transportation funds. According to the National Association of State Budget Officers’ 2019 State Expenditure Report, “Motor fuel taxes represented the largest revenue source for transportation funds at 39.8%.”

Motor fuel tax receipts are projected to continue to decline as vehicles become more fuel-efficient and the surge of new electric vehicles continues to spark interest among buyers. The announcement that the nation’s most populous state, California, will end all sales of new gas-powered vehicles beginning in 2035 is one indicator of the momentous changes the transportation system and industry will undergo in the next few decades. An analysis published by Bloomberg predicted that 10% of all new car sales will be electric by 2025, increasing to 22% by 2030, and could be even higher as electric cars become more affordable.

Not only are vehicles revving entirely independent of gasoline, but internal combustion engine vehicles are simultaneously becoming more fuel-efficient. The most recent data by the U.S. Bureau of Transportation Statistics reported that the average light-duty vehicle in the U.S. achieved 22.3 mpg in 2017, up from 20 mpg in 2000 and 14.9 mpg in 1980. The U.S. Energy Information Administration predicts a 19% decline in gas consumption through 2050.

CDM Smith, a global engineering and construction firm, predicts a $9 billion annual decline in fuel tax revenues beginning in 2020 when considering what had been expected by 2015 revenue estimates and the fiscal impact of more fuel-efficient vehicles and new electric vehicle sales. This is forecast to accelerate by approximately $12 billion over the next five years, totaling $21 billion annually at that time.

Thus, the fallout is already hitting states as they investigate alternative sources of transportation funding. It is worth noting that revenue reductions are not one-time, but cumulative, recurring and deepening every year. CDM Smith’s 2040 revenue forecast, using the same variables and accounting for inflation, shows lower fuel tax revenues totaling as much as $66 billion annually. For state transportation agencies, this could mean fewer resources for new construction and bridge projects, repairing crumbling infrastructure and maintaining the existing network of highways, roads and bridges.

Given these two major pressures on the MFT, states have begun to actively study, explore and pilot road user charge (RUC) systems as the most likely long-term replacement for declining MFT revenue. Also known as Vehicle Miles Traveled (VMT) charges or Mileage Based User Fees (MBUF), these efforts have been supported by the federal government via the Surface Transportation System Funding Alternatives (STSFA) grant program.

Created as part of the 2015 FAST Act, the most recent federal surface transportation reauthorization, STSFA has granted over $50 million to states to deploy pilots designed to help identify potential alternatives to the gas tax. The objective is to identify alternative revenue mechanisms that utilize a user fee structure to help fund the nation’s systems of highways, roads, bridges and mass transit.

Thus far, 11 states have received STSFA grant awards: California, Colorado, Delaware (the Eastern Transportation Coalition serves as the project lead representing Delaware, New Jersey, North Carolina, Pennsylvania and Virginia), Hawaii, Minnesota, Missouri, New Hampshire, and Oregon (overseeing two grants including one to the Oregon Department of Transportation and the other to RUC West (consisting of Arizona, California, Colorado, Idaho, Hawaii, Montana, Nevada, Oklahoma, Oregon, Utah and Washington), Utah, Washington and Wyoming.  

NCSL is collaborating with the Federal Highway Administration (FHWA) to provide NCSL’s legislative constituents, RUC pilot administrators and other transportation policy stakeholders with insight on how the RUC pilots have fared thus far, lessons learned and areas in need of further inquiry. NCSL will develop a number of fact sheets on state actions and common challenges for RUC programs. NCSL will convene an in-person meeting in the future to bring RUC stakeholders together.  To visit NCSL’s RUC webpage and read the first fact sheet on Missouri’s RUC efforts, click here. More fact sheets and resources will be added in the months ahead.

States Ramp Up Road User Charging Pilots and Studies 

Statehouses have been at the forefront of considering road user charges (RUC) since Oregon enacted the first bill to study RUC as a potential replacement for the gas tax in 2001. This is perhaps fitting given Oregon created the nation’s first gas tax over a century ago in 1919. 

Former NCSL President and ex-Oregon State Senator Bruce Starr helped lead the efforts to develop the RUC system that is now operational in Oregon. For the past 10 years, NCSL has been actively researching RUC and convening state lawmakers and legislative and state department of transportation staff to discuss challenges and opportunities related to the development of operational RUC systems. 

State legislatures continue to debate RUC legislation. In 2019 and 2020, at least 19 states—Hawaii, Idaho, Illinois, Iowa, Kentucky, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Mexico, New York, Oregon, Texas, Utah, Vermont, Virginia and Washington—considered 34 pieces of legislation addressing RUC. Of which, at least seven states—Maine, Nevada, New Mexico, Oregon, Utah, Virginia and Washington—have enacted eight pieces of legislation. Five states—Illinois, Massachusetts, Michigan, New York and Vermont—currently have seven pending pieces of legislation, including carryover bills from 2019.

A few of the most recent notable state actions to study and establish RUC programs include:  

• The Nevada legislature directed (AB 483) the state Department of Motor Vehicles to conduct a pilot program on annual vehicle miles traveled charging, as adjusted by type of vehicle and fuel system.

• Oregon lawmakers modified (HB 2881) eligibility and other requirements in 2019 to enroll in their voluntary RUC program, known as OReGO, by exempting vehicles achieving at least 40 mpg from an additional registration surcharge of $33 and by exempting electric vehicles from a registration surcharge of $110 if they enroll in OReGO. The legislature also increased the minimum fuel economy that new vehicles participating in OReGO must achieve, from 17 mpg to 20 mpg. OReGO’s enrollment cap was also removed and the per-mile rate charged to participants was adjusted to 5% of the per-gallon license tax. Currently, the per-mile rate is set at 1.8 cents per mile, according to OReGO.

• Utah’s legislature established (SB 72) an RUC program that went live on Jan. 1, 2020. The legislation also requires the Utah DOT to submit annual reports on Utah’s RUC program and submit a plan to enroll all vehicles by Dec. 31, 2031. Eligible vehicles include full electric vehicles, plug-in hybrid vehicles and gasoline hybrid vehicles. Participation is voluntary and eligible car owners must opt-in. By doing so, they agree to pay a 1.5 cent per mile charge in lieu of an alternative fuel vehicle registration fee of $90 in 2020, which will rise to $120 beginning in 2021.

• The Virginia General Assembly directed (SB 890) the Virginia Department of Motor Vehicles to establish a mileage-based user fee (MBUF) program in 2020. Drivers of any fuel-efficient, alternative fuel, or electric vehicle may enroll in the MBUF and not pay a newly created annual highway use fee. Additionally, owners of other fuel-efficient vehicles, defined as vehicles with a combined fuel economy of at least 25 MPG, may enroll. 

• The Washington legislature required (HB 1160) the state Transportation Commission to submit recommendations that considered the impacts of RUC on low-income households, vulnerable populations and displaced communities. The law also established an RUC working group and required a final report on implementation that was submitted in Jan. 2020 to the governor, legislature and the Federal Highway Administration. The report addressed topics such as privacy, rate-setting, compatibility with tolling systems and out-of-state drivers and had a recommendation to assess equity impacts of RUC on certain communities, including low-income residents, elderly and persons with disabilities and rural and displaced populations.

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