“We focus on mileage-based user fees as if they are an end, but they are really just a vehicle to an end,” Jack Basso, chair of the Mileage -Based User Fee Alliance, told the audience at what the group hopes will the first of an annual series of conferences. While everyone in the audience could agree with that statement, there was a sharp division over what should be the real purpose of such fees.
For Robert Atkinson, who recently chaired the National Transportation Infrastructure Financing Commission, the purpose of such fees is to give transportation users incentives to use the transportation system efficiently and transportation providers incentives to manage it efficiently. Such fees, he pointed out, would make it easy to use congestion pricing to relieve or eliminate the waste of traffic jams. Moreover, creating a “platform” for such fees would allow a variety of new groups to manage roads. Private parties could build and toll roads in congested areas. Neighborhood associations could take over street maintenance.
Atkinson is no libertarian, having been associated with center-left groups for most of his career. But he is an economist and appreciates the use of market forces to improve efficiency.
Many at the conference, however, regarded Atkinson’s view as hopelessly visionary. They saw mileage-based user fees (or what the Antiplanner calls vehicle-mile fees and others call road user charges) as simply one of many ways of raising money to pay for construction, reconstruction, and maintenance of transportation infrastructure. IF that’s all it is, then the elaborate, GPS-based technological system that Atkinson and others (including the Antiplanner) propose is unnecessary. Instead, all that is needed is some way for people to report their odometer readings and pay a fee based on those readings.
In fact, some at the conference weren’t even interested in that. James O’Keefe, of the Alliance of Automobile Manufacturers, warned that auto companies are not interested in becoming tax collectors and will resist any efforts to mandate that fee technologies be built into new cars. Mileage-based user fees, he said, are a “very elegant and complex solution” whose costs are not worth the benefits. He noted that Oregon Representative Peter DeFazio has proposed a new gas tax that would be indexed to both inflation and average auto fuel efficiency, so that as fuel economy increases the gas tax does as well.
William Chernicoff, of Toyota, seemed to agree, saying that congestion and similar issues should be addressed through other policies. The only issue he cared about seemed to be road maintenance, but he noted that most maintenance problems were caused by heavy trucks. A 5,000-pound SUV that travels 15,000 miles a year, he asserted, caused no more highway damage than a 2,500-pound car that travels 10,000 miles a year. So he proposed that states charge all auto owners an annual access fee while the federal government collect vehicle-mile fees from heavy trucks.
Obviously, not everyone agreed with this. But those who define the problem narrowly as finding new revenues to replace gas taxes that are declining because of inflation and more fuel-efficient cars, it’s hard to escape the conclusion that there are simpler ways of raising funds than mileage-based user fees.
Yet increasing revenues are not the only purpose of mileage-based user fees. One problem with gas taxes is that they are collected mainly by the federal and state governments, but most cities and counties have to rely on general funds to build and maintain roads. It’s no coincidence that local roads and bridges tend to be in worse shape than state ones. A mileage-based user fee system would allow local governments to piggy-back and end their subsidies and improve the condition of their roads.
Mileage-based user fees also provide elegant solutions to things that O’Keefe and Chernicoff seemed to regard as side issues, such as the traffic congestion that costs Americans well over $100 billion a year, overly political fund allocations, and the potential for privately funded roads. As Atkinson noted, adoption of the wrong half-way measures, such as an odometer fee or annual access fee, would result in the “QUERTY problem,” that is, a dead-end solution that can’t evolve into something better.
The most refreshing presentation of the day came from Oregon’s own state Senator Bruce Starr, who persuaded the state legislature to start an ambitious pilot test program involving 5,000 motorists. “Ultimately, this issue will be solved at the state level long before anything happens at the federal level,” he said. “After we have tens or hundreds of thousands of Americans test this in a dozen or two dozen states, we can find the best practices and implement them at a national level.”
Some people fretted that, if the states each go their own way, they’ll end up with systems that are incompatible with one another. Trey Baker of the Texas Transportation Institute pooh-poohed this problem. More and more cars are being built with built-in computers and GPS systems. People with such cars, or who have smart phones, will be able to work with any state’s system simply by downloading an app to their on-board computer or smart phone. At worst, people might need to have 50 apps for all 50 states.
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As Starr, Baker, and others envision it, states will make mileage-based systems available to people as an option at first. Starr eventually wants to mandate that cars that get more than 50 mpg join the system. Over time, this threshold would be reduced, and perhaps new cars that come with on-board electronics would be required to join the system as well. For many years, then, the gas tax and mileage-based systems would co-exist.
Naturally, there was a lot of discussion about the privacy issue. The only comment the Antiplanner made all day was to point out that the privacy issue is largely a red herring, as no privacy advocates were heard to complain when the National Highway Traffic Safety Administration proposed to mandate that all new cars come with vehicle-to-vehicle communication systems, which will provide people with no privacy protection at all (except not to drive). Edward Regan, a toll expert with CDM Smith, pointed out that, “In the toll industry, almost every toll agency offers a privacy option–and almost no one takes it.”
In any case, there are lots of ways to design systems that absolutely protect people’s privacy. As Starr said, the Oregon system will record how much people owe but not track where they go.
The last major speaker of the day was Peter Rogoff, formerly the Federal Transit Administrator but recently bumped upstairs to be “acting under secretary of transportation for policy.” Rogoff outlined the Obama administration’s plan to spend almost twice as much money on transportation as revenues, but offered little information about the administration’s view of mileage-based user fees.
When pressed during Q&A, Rogoff said, “We left a user-fee system in 2008,” when Congress began appropriating billions of dollars each year to supplement gas tax revenues to the highway trust fund. “One of the pitfalls of a user-fee system,” he added, “is all the users want the money they pay to come back to the facilities they use, which prevents cross-subsidization between modes and states.” This is an incredible admission even for someone representing a left-wing administration.
It’s true that Congress has had to transfer nearly $55 billion in general funds to the highway trust fund since 2008. But that’s only because Congress insists on spending about $10 billion more per year than the revenues to that fund. If Congress cut back spending to revenues, states would have the incentive to find local revenues to pay for roads and other transportation.
Unfortunately, as several speakers pointed out, the highway trust fund is about to run out of money again. Under Congressional rules, if the trust fund (which has normally had a balance of about $20 billion) falls below $4 billion for the highway side and $1 billion for the transit side, then the Department of Transportation will be restricted in how it can give the money to the states. The states contract out work in anticipation of getting federal funding for that work, and if the funds aren’t available, the states will have to default on their contracts.
Current estimates are that the highway fund will fall below $4 billion in July and the transit fund will fall below $1 billion in August. This means Congress will have to infuse another $10 billion or so into the fund before the August recess.
Does this mean, as Rogoff says, that we are no longer under a user-fee system and we can throw out all notions of such fees? Hardly. The advantages of a user-fee system over a politically driven system are so great that we should make every effort to return to such a system. User-fee driving programs tend to be more efficient, their infrastructure is better maintained, and resources tend to be allocated where they are needed rather than to the politically powerful. From the administration’s point of view, however, spending lots of money that we don’t have is a way of consolidating political power because it makes states, contractors, unions, and others beholden to the party doing the spending.
In short, Rogoff served the valuable purpose of showing what will happen if we don’t go to a mileage-based system. Mileage-based user fees won’t be implemented soon enough to avoid the July funding squeeze, but the president’s plan to make a one-time addition of $150 billion to the highway trust fund merely postpones the problem to another administration.
One thing that I didn’t hear anyone point out is that the federal problem is different from the state problem. For many members of Congress as well as the president, the federal goal is to create political favors. For them, it doesn’t matter where the money comes from. For most of the states, the goal is to create a self-sustaining system that provides both highway providers and highway users with good incentives. For them, where the money comes from is absolutely critical.
Thus, Senator Starr’s prediction that the states will solve the problem first seems likely to come true. That solution, however, would be delayed if Congress agrees to something like the president’s proposal, which would nearly double federal funds going to the states, because it would take the pressure of the states to find a more permanent alternative to the gas tax. For those like Atkinson who want an efficient system, gridlock at the federal level would actually be a good thing.
The question as to whether or not the gas tax will be repealed if the new mile fee system is instituted. Probably not, once again the political class will make the decision that the gas tax will serve to pay as an externality fee associated with the consequences of using gasoline (pollution, foreign oil, etc.) and use that money to their hearts extent. After all if the ”Car Lovers” have found a way to finance their highways, they won’t mind the gas tax being used to finance the use of transit. So drivers will get stuck with an even bigger bill paying directly for highway use and paying for the financial mismanagement of huge boondoggles like Subways, light rails and monorails. And transit riders remain oblivious to the fact their being heavily reimbursed. Of course on the local level transit agencies will suffer from funding shortages since about a third or more of their money is spent on personnel. Automotive enthusiasts need to fight for the right to keep their money.
LazyReader wrote:
After all if the ”Car Lovers” have found a way to finance their highways, they won’t mind the gas tax being used to finance the use of transit. So drivers will get stuck with an even bigger bill paying directly for highway use and paying for the financial mismanagement of huge boondoggles like Subways, light rails and monorails.
Transit operators (and the unions that represent their workers) are forever carrying-on about “dedicated” or “additional” or “stable” funding sources for their systems and services, and I think they see this as the mother lode – an unending stream of money for the new and expanded passenger rail lines they all seem to crave, plus wages and benefits that are far beyond what most U.S. blue collar workers get now.
And transit riders remain oblivious to the fact their being heavily reimbursed.
Correct. They complain about their fares being “too high” and various kinds of lousy service.
Of course on the local level transit agencies will suffer from funding shortages since about a third or more of their money is spent on personnel. Automotive enthusiasts need to fight for the right to keep their money.
A third? Try more like 2/3’s or higher.
The Antiplanner wrote:
The states contract out work in anticipation of getting federal funding for that work, and if the funds aren’t available, the states will have to default on their contracts.
There is nearly always a provision in such contracts that covers that sort of situation – if the state does not have the money to pay the contractor, then the work must be suspended or terminated, so there is technically no default.
User-fee driving programs tend to be more efficient, their infrastructure is better maintained, and resources tend to be allocated where they are needed rather than to the politically powerful. From the administration’s point of view, however, spending lots of money that we don’t have is a way of consolidating political power because it makes states, contractors, unions, and others beholden to the party doing the spending.
I agree with most of the first sentence above.
But consider cases like N.Y. MTA Bridge and Tunnel, with its extremely high toll rates to cross its bridges and tunnels – and most of that toll revenue goes to subsidize the MTA’s money-losing transit operations and does not benefit the persons and companies paying the tolls.
And there’s the matter of small municipalities with major highways running through them. In the past, more than a few have set-up abusive speed limit enforcement to collect revenues (recent example in Florida here). Under MBUF, what is to stop these jurisdictions from levying outrageous per-mile fees on passing traffic so their own citizens do not have to fund the cost of municipal government?
In my opinion, before we get serious about MBUF, there needs to be a serious discussion about how to make sure those revenues benefit the people that pay them, and to protect against diversion. I have not heard much about either.
“One of the pitfalls of a user-fee system,” he added, “is all the users want the money they pay to come back to the facilities they use, which prevents cross-subsidization between modes and states.”
Like I said, the Administration views this as a bug, not a feature.
One concern I have about MBUF is compliance. With a gas tax, there really is no way to avoid paying your fair share. With MBUF, there would be big incentives for cheats to hack their cars’ systems to avoid paying the tax/fee. And if the system relied on self-reporting, the problem would be much worse. You would have to create some type of auditing mechanism, to at least deter some amount of cheating, possibly at multiple levels (state, local, etc.) But of course auditing will only catch a small part of the cheating. And while I’m sure, with today’s electronics, it’s not as simple as disconnecting a speedometer cable, ways will be found to avoid accurate reporting of mileage. The biggest problem with the gas tax is political, that politicians have failed to index it for inflation and average fuel efficiency. Yes, hybrids and non-petroleum-fueled vehicles are an issue, but an alternative method of taxes/fees could be applied to those vehicles alone.
How many places would realistically use congestion pricing via GPS recorded mileage? I suppose some inner cities like Boston and NYC might want to try, but they already charge bridge and tunnel fees that pretty much give them congestion pricing.
A broad congestion fee, such as all highways in the DC Metro area during rush hour, would be a hard sell. Would it actually improve anything, or just collect more money?
If MBUF replaced the gas tax, a lot of the incentive to drive a high mileage car is eliminated.
In many cases, people give up a lot for better mileage (smaller or fewer seats, less cargo space, scarier to drive on highways with large trucks, etc.).
So if they pay the same MBUF as the guy in the next lane with a 6,000 pound SUV, why should they bother?
This is not progress.
“A broad congestion fee, such as all highways in the DC Metro area during rush hour, would be a hard sell. Would it actually improve anything, or just collect more money?”
From Wiki:
There’s no incentive for employers to change from the traditional 9-to-5 business hours, but if rush hour becomes more expensive for workers, perhaps they will apply pressure to employers to change or offer different working hours.
Re: eliminating the incentive to buy high-MPG cars: One way around this would be to provide different per-mile rates based on the vehicle’s MPG rating. But I wonder how much of an issue this is, since a relatively small part of the cost of fuel (in the US anyway) is taxes. Lower overall fuel costs would still provide an incentive towards high MPG cars, plus the CAFE standards force the issue anyway.
Re: congestion charging: I saw an article a few years back in TollRoadsNews about the results of congestion charging in Stockholm. The proceeds from the charge were used to provide additional transit service, but the increase in ridership was a lot less that the decrease in car trips, probably meaning that a lot of trips that would have been made otherwise weren’t being made (I don’t recall if changes in ped/bike trips were measured, but I’d doubt many car trips would be replaced by ped/bike trips). For this reason I’d expect some backlash about implementing congestion charging here on the basis of equity, since those most likely to be deterred from making trips would be the less affluent.
kens wrote:
Re: congestion charging: I saw an article a few years back in TollRoadsNews about the results of congestion charging in Stockholm. The proceeds from the charge were used to provide additional transit service, but the increase in ridership was a lot less that the decrease in car trips, probably meaning that a lot of trips that would have been made otherwise weren’t being made (I don’t recall if changes in ped/bike trips were measured, but I’d doubt many car trips would be replaced by ped/bike trips).
The Stockholm Congestion Tax is also being used to fund this. More information here.
CPZ wrote:
The Stockholm Congestion Tax is also being used to fund this. More information here.
The links you provide states that 80% of the cost of the project will be financed by the Congestion Charge. But it is not clear whether they’re referring to the existing Congestion Charges or new revenues from the traffic using the facility. If the latter, the Stockholm region can’t expect only modest new traffic, since congestion charges would greatly reduce induced traffic as tolls have on the Intercounty Connector in Maryland.
On the other hand, if there aren’t new congestion charges for the new stretch of road, certainly Marchetti’s Constant will kick in and the project would result in a lot of new VMT that otherwise wouldn’t exist. In either case, European fuel taxes alone if there were 140,000 ADT over entire length would probably cover around 20% of the project’s carrying cost (~$4.3 billlion @ 6.39 kroner/US$1.00, http://www.xe.com/currencyconverter/convert/?Amount=1&From=SEK&To=USD.
It is also not clear if the 140,000 figure is the ADT for the entire project length, or the number of total vehicles using the facility at various points, e.g., not all traveling the full length resulting in ADT of perhaps 70,000-90,000 per day. This would be relatively uncongested for a six lane facility, and presumably a result of tolling at very high rates of around $4.00 per trip (projected trip length not clear; if this is 60% of project length, rate would be around $0.50 per vehicle mile).
msetty wrote:
The links you provide states that 80% of the cost of the project will be financed by the Congestion Charge. But it is not clear whether they’re referring to the existing Congestion Charges or new revenues from the traffic using the facility. If the latter, the Stockholm region can’t expect only modest new traffic, since congestion charges would greatly reduce induced traffic as tolls have on the Intercounty Connector in Maryland.
According to the Swedish National Transport Board (roughly like a U.S. state department of transportation), 80% of the cost is from the existing Stockholm Congestion Tax (it is legally a tax and not a “charge”).
20% of the cost is from money provided by the Swedish government. Not clear beyond that what the source is.
The Bypass Highway itself will not be tolled.
Regarding “induced” traffic on Maryland’s InterCounty Connector, when it was first completed between I-270 and I-95, it was operated without tolls for a two week period. Still ran congestion-free for some reason.
On the other hand, if there aren’t new congestion charges for the new stretch of road, certainly Marchetti’s Constant will kick in and the project would result in a lot of new VMT that otherwise wouldn’t exist. In either case, European fuel taxes alone if there were 140,000 ADT over entire length would probably cover around 20% of the project’s carrying cost (~$4.3 billlion @ 6.39 kroner/US$1.00,
Marchetti’s Constant is about commuter travel. This highway is not being routed in such a way to serve many activity centers in Stockholm’s suburban areas (much of the road will pass through “suburban” areas that are within the corporate limits of Stocholm itself). It is to divert traffic away from Esslingeleden, the congested north-south motorway that runs near the center of Stockholm, and unlike many U.S. freeway projects, the number of entrance and exit points is being strictly limited.