Report NCSL Road Usage Charges Summit Report

Welcome and Introduction

Doug Shinkle, NCSL’s Transportation Program director, kicked off the event by thanking the meeting’s sponsors, which included the Federal Highway Administration, CDM Smith, the International Bridge, Tunnel and Turnpike Association (IBTTA) and the Reason Foundation. Representatives from each organization attended and participated in the summit.

He then provided some context and history related to states’ reliance on the motor fuel tax.

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 represent the largest revenue source for transportation funds at 39.8%.”

Motor fuel tax receipts are projected to decline as vehicles become more fuel-efficient and as the surge in the production and purchase of new electric vehicles continues to decrease revenues generated for state transportation systems.  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) or Mileage-Based User Fees (MBUF), discretionary grants awarded by the federal government to states have supported research as well as pilot demonstrations.

In 2015, Section 6020 of the Fixing America’s Surface Transportation (FAST) Act established the Surface Transportation System Funding Alternatives (STSFA) grant program.  Thus far, 14 states and regional pilots—California, Colorado, Delaware, Hawaii, Kansas, Minnesota, Missouri, New Hampshire, Ohio, Oregon, Texas, Utah, Washington, and Wyoming—have received federal grants to explore alternative funding mechanisms such as road usage charges.

Perfect Storm: Electric Vehicles, Increasing Fuel Efficiency and the Impact on State Revenues

Jim Whitty, CDM Smith road pricing specialist, provided opening remarks regarding the current state of transportation revenue and funding in the U.S. He underscored that taxation of motor fuels is a major source of transportation funding in this country, paying for around half of all road spending nationwide. The electrification of America’s fleet of passenger vehicles and general improvement of fuel economy diminish the revenues generated based on fuel consumption while road usage continues to grow. Whitty emphasized the revenue lost to fuel efficiency and shared a few options states have to manage lost revenue: do nothing, frequently raise the gas tax, frequently raise other vehicle fees for registration or licensing, or implement road usage charging programs.

Whitty stated RUC systems in the U.S. are now viable for operation under two systems:

1. A high technology option (uses an account for each vehicle to collect mileage data via automation, usually operated by the private sector).
2. A low technology option (often builds on existing DMV systems, can involve manual reporting of odometer readings).

Concerns that have emerged about RUC systems include privacy protection, data security, exemptions and refunds, cost of administration, fleet management and user experience. Whitty explained privacy has been the biggest hurdle, and he identified five ways states can calm concerns: restrict government access to data, use account managers, strategic choice of data reporting, data protections and legal privacy and designs to protect data.

According to Whitty, next steps for states include joining a RUC research coalition; passing legislation for a RUC pilot or a voluntary RUC program; beginning transition planning; applying for federal grant funding; examining mileage data reporting at vehicle safety inspections; creating a coalition to engage automakers; and adopting the model RUC privacy protection act.

The Federal Role in Road Usage Charging

Ben Husch, director of NCSL’s Natural Resources and Infrastructure Committee, spoke on the role of the federal government in RUC programs across the nation. He gave a brief history of RUC and explained how NCSL has supported the exploration of alternatives to the gas tax. For example, NCSL efforts contributed to the establishment of the STSFA, the $95 million discretionary grant program funded through the Fixing America’s Surface Transportation Act (FAST Act). While the FAST Act does not represent the first grant program to award funds to explore RUC, STSFA represented the first grant program specifically dedicated to supporting the deployment of pilot demonstration projects focusing on alternatives to the gas tax.

Two new grant programs established under the Infrastructure Investment and Jobs Act (IIJA) of 2021 reflect Congress’ continued support for exploring RUC as a viable replacement to the gas tax. Section 13001, the Strategic Innovation for Revenue Collection repealed and replaced the STSFA program. While slightly less grant funding was provided, a total of $75 million over five years, the federal share provided by the federal government was increased from 50% to 80% for a new project. Section 13002 of the IIJA established The National Motor Vehicle Per-Mile User Fee Pilot. This program encouraged voluntary participation for studying road usage fees in all 50 states, providing $10 million annually over five years. He explained the bill also created an advisory board to help guide development of a national pilot that could lead to a federal program by providing recommendations on structure, scope and method.

State RUC Programs Overview

Angela Fogle, transportation specialist with the Federal Highway Administration, moderated a discussion on current state RUC programs (Virginia’s program launched on July 1, 2022). Maureen Bock, Oregon Department of Transportation chief innovation officer; Nathan Lee, Utah Department of Transportation director of technology; and  Scott Cummings, Virginia Department of Motor Vehicles assistant financial commissioner participated in the discussion.

Bock opened by explaining that state transportation funding is old, as Oregon introduced the first state fuel tax, as well as the first RUC program in the nation in 2013. Lawmakers in Oregon recognized the current transportation funding system was in decline and would no longer be effective in the long-term due to declining purchasing power caused by increased fuel efficiency. She gave a brief Oregon legislative history, from the first RUC bill passed in 2013, the launch of the first operating RUC program in the country (OReGO) to the failed 2021 bill which would have created the first mandatory RUC program in the country. She stated that the policies underlying the statutes included that people would pay either the fuel tax or RUC fees, not both. The motor fuel tax should be credited but not refunded, medium duty vehicles should continue to pay the fuel tax for now and the RUC rate should be indexed to the fuel tax.

According to Bock, the OReGO program, as well as the completed enhancement studies conducted by ODOT demonstrate that people found the RUC program to be affordable, did not change their driving behavior and reinforced that education changes opinions about the program. The key lessons from Oregon’s experimentation with RUC are that transportation is important to the public, education matters, public experts should implement seamless delivery if possible, emerging technologies are disruptors and standards are being developed that enable road usage charging.

Nathan Lee continued the discussion by underscoring that Utah also found that periodic gas tax increases were not working, and in 2015 the state began looking for alternatives to the gas tax. Mr. Lee explained that the current voluntary RUC system that is operating in Utah is growing, and the key to enrollment is simplicity. The most recent bill passed in Utah, 2021 HB 186, aimed to further accelerate enrollment by decreasing the per mile rate. A key point made by Mr. Lee was that no matter how enrollment looks, it has to be synchronized with DMV systems. He underscored that 35 states use the same vehicle interface DMV software, making the path to implementation straightforward for those states.

Scott Cummings wrapped up the discussion by detailing Virginia’s journey towards a RUC program. Scott explained that Virginia implemented a workgroup to study transportation funding losses. The findings projected declines in future fuel tax revenue due to fuel economy improvements, electric vehicles and hybrids. The study found that addressing electric vehicles alone would not address the problem. Virginia then implemented a voluntary mileage use program in which users pay a per mile rate rather than a compulsory flat “mileage choice” fee. The state uses the same commercial account manager as Oregon and California that relies upon, using a pre-paid wallet tied to customer cards with the option of using non-GPS devices for privacy purposes. Cummings stated that education and outreach were also key aspects of Virginia’s “mileage choice” program, aiming to get the word out and test the public’s responses to outreach.

RUC Payment and Reporting Options for Drivers

The fourth session of the summit was a conversation moderated by Minnesota Representative Steve Elkins (DFL) between Travis Dunn, RUC discipline leader at CDM Smith and Mark Muriello, policy and government affairs director at the International Bridge, Tunnel and Turnpike Association (IBTTA) about payment and recording logistics for RUC programs.

Travis Dunn identified the nine essential functions of a RUC system:

• Identify subject vehicle & owner/lessee–connect with vehicle registry & set up account.
• Generate road usage data for subject vehicle over designated time–report data.
• Access road usage data–receive reporting of road usage data.
• Apply per-mile charging rates–process data to determine amount of charges.
• Provide invoice to owner/lessee–issue notice of the charge.
• Collect payment–provide one or more ways to pay.
• Issue acknowledgement of payment–create a receipt.
• Enforce payment–apply mechanisms for ensuring everyone pays.
• Remit revenue to appropriate fund–integrate revenue collection with financial systems.

He noted that state agencies already have significant experience with seven of the nine essential functions of a RUC system but lack experience regarding collecting and reporting on mileage data, specifically generating road usage data for a subject vehicle over a designated time and receiving reporting of road usage data.

Dunn explained the options for mileage reporting and their considerations, including privacy, cost, simplicity, compliance, accessibility, interoperability and ease of administration. The first option Dunn explained was odometer reporting. The pros are that it is low in cost, on par with vehicle registration, is simple for vehicle owners and works easily with DMV systems. According to CDM Smith and NCSL research, 15 states already collect annual odometer readings. Challenges exist related to odometer reporting, including the potential for fraud, long payment intervals and inability to distinguish miles by location, such as miles driven out-of-state or on private roads.

Another option for payment and reporting is smartphone apps, although they are not quite operational yet. A smartphone app would satisfy interoperability and accessibility goals; however, it would be susceptible to gaps in reporting and would require short payment intervals and a smartphone. In-vehicle devices are another option which provide user control over privacy, can distinguish miles by location, prevent fraud and are not dependent on vehicle registration. The final option discussed by Dunn was automaker telematics, for which there is not enough information to know about the outcomes of concern yet. Dunn recommended when contracting for RUC reporting and payment to not pick a single technology or a single vendor for long contracts, do not wait for the federal government to figure out how to proceed and to work with other states.

Mark Muriello from IBTTA, which represents toll operators in 20 countries across the world, said the key to overcoming RUC challenges is gaining political support and public acceptance. It is also important to clearly determine basic functions and roles, which are very similar to tolls—so RUC programs should leverage information from the 30+ years of electronic tolling. The issue of interoperability in RUC could be solved using similar mechanisms to those used by tolling systems, such as using a single technological standard and private account managers.

Muriello explained that customer expectations are growing, and people expect more speed of delivery and more choices, which really favors a single platform. He also said partnerships will be critical to RUC success, to use technology already in development and to manage options and flexibility. Technology is not the obstacle, as 97% of cars sold in the U.S. this year come with GPS units and cellular modem, so mileage data is available, but it is currently owned by car companies.

How to Ensure Privacy in a RUC System

As part of the fifth session of the summit Adrian Moore, vice president of the Reason Foundation, moderated a discussion between Utah Rep. Raymond Ward (R) and California Road Charge Program Manager Lauren Prehoda. Moore introduced the topic, explaining that privacy remains a concern related to RUC systems. The RUC West consortium has focused on privacy architecture but also to develop data protection safeguards and processes, as privacy does not address if your data gets hacked.

Lauren Prehoda discussed how California has handled the issue of privacy in its RUC studies and pilots. She described California’s approach to RUC privacy as a three-layer cake. The first layer is data security, putting safeguards in place to protect against the bad actors, and ensuring state agencies are in line with industry best practices. The second layer is privacy policies, regulating the good actors and making sure they use data in an appropriate way. The third layer is giving people options for how they report their mileage, ranging from low-tech to high-tech, so they make the decision between privacy and efficiency for themselves.

She said that the public often trusts business more with their data than the government, so governments must handle issues of data security and pass effective privacy policies. Another key feature, according to Prehoda, is giving people more control over how their data is used. California passed the first data privacy act to give people more control over how their data is used. There is a trade-off between efficiency and privacy in RUC systems.

Ward, a member of Utah’s House Transportation committee and a sponsor of RUC legislation, continued the conversation by discussing other options to give people more control over how their data is used. Ward believes it is essential to give drivers an option that does not include location tracking. Offering an annual flat fee, as Utah does, rather than a per-mile fee, can enable drivers to avoid the government tracking their mileage and may alleviate some privacy concerns. He said the rates Utah is currently charging for the Utah RUC program can’t last forever—the annual flat fee must consider both federal and state tax revenue losses. The primary issue with the flat fee is that it does not meet equity considerations for charging people for how much they actually use the road.

Equity in a RUC Program

The summit continued with a discussion of equity in a RUC program moderated by Deputy Executive Director of Operations for the Metro Transportation Commission Andrew Fremier. Speakers included Reema Griffith, executive director of Washington State Transportation Commission and Joel Skelley, director of policy for the Kansas Department of Transportation.

Fremier noted that low income citizens own older vehicles and hold on to them a lot longer and that some stakeholders believe income should play a role in pricing strategies. On the flip side, there is a need to change driver behavior in areas struggling with traffic congestion, and pricing is an option to manage road demand.

Griffith, who has managed all of Washington’s RUC pilot demonstrations to date, explained how Washington determined the state was ready for a small-scale program, stating that RUC programs have the potential to harmonize transportation funding and climate policy objectives that are at odds. She said RUC offers savings for low-income drivers which are not provided by the gas tax. In the nation’s first real cash transactional test performed with Oregon, drivers mostly selected plug-in devices with or without GPS out of five different mileage tracking options. Drivers who participated took a survey which found that 61% of drivers want to implement RUC now or in the next five to 10 years. Griffith claimed that continually raising the gas tax would shift the burden on people who are least likely to be able to afford it—people who can’t transition to a more fuel-efficient vehicle. Griffith also stated rural and low-income drivers would pay less under a RUC system.

Skelley pointed out that states have a lot of similarities, so they can benefit from collaborating on RUC related efforts. In Kansas specifically, Skelley said they focused on rural communities, the agriculture industry and commercial trucking. Kansas is implementing a pilot program which includes talking to industry and stakeholders and working on designing and testing a RUC program. The pilot partnered with 10 Midwestern states to help determine what the considerations may be in other contexts. In the survey and outreach portion, the program found rural respondents were concerned about paying RUC, underscoring the importance of outreach and ensuring equity in RUC systems. Skelley said Kansas is aiming to learn if someone who drives five times as much gets five times the benefits through their pilot program.

Public Communication: Explaining the Why and How of RUC to the Public

Baruch Feigenbaum, senior managing director of transportation policy for the Reason Foundation moderated a discussion about public communication between Trish Hendren, executive director of the Eastern Transportation Coalition (TETC) and Tammy Lee, Hawaii Department of Transportation Highways Division administrative services officer.

Feigenbaum introduced the session by outlining the five components of good communications: audience, messengers, messaging strategy, information content and communication methods. Feigenbaum’s main recommendations included creating a detailed plan for communications, using a comprehensive approach, engaging in careful and consistent messaging and using multiple medias.

Hendren discussed how critical it is to communicate effectively on this topic, because the public will not support a strategy they do not trust. She explained that the Eastern Transportation Coalition is a consortium of 17 states and DC as well as more than 200 agencies that work together. The TETC has several RUC pilots underway or completed pilots that have included states such as Delaware, New Hampshire, North Carolina, Pennsylvania, Vermont and Virginia. Hendren encourages considering values when developing a communications strategy. The public does not see transportation funding as urgent and thinks everything is okay, so Hendren encourages communicators to show there is a problem. Another key aspect of communication is choice—as Hendren said, “If there’s a tagline for our country, it’s that we like choices.” Hendren also said fairness is an important piece of the message around RUC communication. For example, if someone has a 2009 versus a 2019 Toyota Camry, one person is paying more in the fuel tax simply because they did not have the resources to purchase the more efficient version of the car. Hendren pointed out that the Eastern Transportation Coalition created a personal calculator to show consumers how RUC might impact them directly.

Lee continued the discussion by explaining how a RUC program in Hawaii would help the state achieve its environmental commitment to 100% renewable energy by preserving revenue but also working towards that energy objective. She Lee also underscored the importance of implementing a RUC program by explaining that although 1.9% of passenger vehicles in the state are electric vehicles, that is increasing every year, which is going to have a huge impact on transportation revenues in the state. The Hawaii RUC (HiRUC) advisory group developed a community engagement strategy and mailed out surveys for which they are wrapping up the final report.

According to Lee, HiRUC framed RUC as a replacement for the gas tax, and also focused on showing individuals where the revenue from the fuel tax goes by providing links so people could see projects in their particular neighborhood. The HiRUC study found that people held misconceptions about the gas tax—they did not understand how much they were paying, and they thought that transportation funding was increasing because they saw projects on the road. Lee said that the lessons learned from the HiRUC study were that real life concrete examples increase support and people want to see things in simple terms.

Legislative Panel

The final session of the summit was a legislative panel moderated by NCSL’s Transportation Director Douglas Shinkle. Lawmakers on the panel included Utah Sen. Wayne Harper (R), Hawaii Sen. Chris Lee (D), Washington Sen. Rebecca Saldaña (D) and North Carolina Sen. Vickie Sawyer (R).

Lee kicked off the session by discussing how Hawaii relies almost exclusively on imported fossil fuels, making gas incredibly expensive in the state. He said Hawaii has already been experimenting with how to reduce costs but maintain revenue sources, and the state is looking at launching a RUC program in the next year or two. Saldaña stated a RUC program would be a more responsible way of raising transportation revenue in Washington. Harper explained that Utah started their RUC program in 2019, and it now boasts around 4,000 cars, adding that Utah handles privacy concerns in the program by using an outside company.

Sawyer set the scene in North Carolina by explaining that the state struggles to communicate to constituents why they should give the Department of Transportation more funding. Shinkle asked if her constituents understood the urgency of the depletion of motor fuel tax revenue. Sawyer and Harper said their constituents understood. Saldaña said regular folks don’t see the transportation revenue depletion as an urgent thing, and the cost of fuel is on people’s minds, but they don’t translate that into revenue. Lee said selling the urgency to his constituents in Hawaii has been easy due to the high cost of gas, a bad safety record, congestion and potholes.

Shinkle asked the panelists if they had any qualms about having a system in which people actually know what they pay, considering constituents don’t appear to understand how much they pay in gas taxes. Sawyer said she would like to do RUC charges at the pump in order to keep the status quo by collecting the fee at the time of usage. Harper compared RUC to property taxes when done as a one-time payment, because people notice it, whereas the fuel tax is more like income taxes because people pay it little bits at a time. He also noted he was surprised how equitable a RUC could be for rural drivers.

Shinkle then asked the panelists about keeping it simple to start, maybe by just charging electric vehicles. Lee said Hawaii’s pilot program wanted to start with electric vehicles, and eventually come back and apply RUC to everyone, but this upset electric vehicle owners. Lee said this underscored the need to clarify that RUC can be fair, and electric vehicle owners won’t be getting a worse deal.

Finally, Shinkle asked the panelists how we can make sure lawmakers have access to relevant experts and information with regards to RUC. Lee said forums, such as the RUC summit, are key, especially if they can bring in outside stakeholders.

Conclusion

In conclusion, the NCSL RUC Summit provided attendees, which included many state legsialtive leaders with jurisdiction over transportation revenue considerations, an overview of current and future transportation revenue shortfalls. The eight sessions provided an explanation of RUC systems and policies and provided opportunities for interactive discussions related to the necessity and benefits of a per mile use fee system. Overall, the legsialtive attendees recognized that increased fuel efficiency and the increase in electric vehicles will diminish the ability of motor fuel tax revenues to support the highway trust fund. Attendees expressed interest in RUC programs for their states to varying degrees, but questions and skepticism remain regarding how to improve public understanding of the transportation revenue shortfall, technical and interoperability considerations (particularly for states with a high percentage of out-of-state drivers) and collection costs for a RUC system. NCSL will continue to track state RUC legislation and developments and provide opportunities for in-person engagement with legislators. NCSL has provided testimony on RUC and transportation funding generally to several states over the past few years and has answered research requests from various legislatures. Lawmakers have expressed interest to Shinkle that NCSL continue to convene with their peers to be briefed on RUC policy considerations.