More efficient cars creating challenges for highway funding

Most highway construction and maintenance today gets paid for at the pump, in the form of gas and diesel taxes, both state and federal. So how will electric cars pay their share?

For now, they are driving for free, save for license and registration fees. And that’s something that advocates of mileage-based user fees believe they can use to their benefit as they push for a restructuring of highway financing.

With minor modifications, GPS and other existing technology can enable governments to implement mileage-based user fees. Public acceptance, however, remains distant, said speakers at a recent Texas Transportation Institute conference held in Breckenridge.

Ed Regan, of Wilbur Smith Associates, a transportation and infrastructure consultancy, said he expects the first pilot projects involving interstate tolling to begin by 2015, followed by more managed lane traffic situations, such as is found in the so-called Lexus Lane along Interstate 25 in Denver.

Gradually, Regan predicted, user fees based on distances traveled will be adopted, becoming ubiquitous by 2025. And the states will lead the way, he said, because they are most at risk.

For the last century, fuel taxes have carried nearly the full weight of building and maintaining the nation’s vast network of highways. A pivotal agreement came in 1956 when federal legislators, led by Sen. Albert Gore Sr., of Tennessee, forged a compromise that enabled the federal government to pay 90 percent of the cost of constructing the nation’s interstate network, which cost $425 billion in 2006 dollars.

Completion of the last segment of interstate highway, I-70 through Colorado’s Glenwood Canyon, was celebrated in 1992 – coincidentally the same year that Colorado last increased the gas tax. The last increase in federal gas tax was in 1993. The last increases on diesel fuel occurred at about the same time.

In January 2011, motor gasoline taxes averaged 48.1 cents per gallon across the nation and diesel fuel taxes averaged 53.1 cents per gallon.

State and federal taxes combined were once about 50 percent of the total cost of fuel, but now they’re just 17 percent, said Allaudin Khan, from the Nevada Department of Transportation. “That tells a compelling story,” he said.

Proponents of mileage-based user vehicle taxes, also called vehicles-miles-traveled taxes, also point to the improving fuel economy of cars, now mandated to increase to an average of 35.5 miles per gallon.

As revenues from fuel taxes have stagnated, costs of construction, operation and maintenance have spiked.

Congress has taken to subsidizing highways with transfers from the general fund, $70 billion altogether between 2008 and 2010, counting expenditures embedded in stimulus bills, according to an October 2010 report from the Rand Corp. titled “System Trials to Demonstrate Mileage-Based Road Use Charges.”

With sagging revenues, 16 states have now looked at mileage-based revenue sources, although bills – all of them defeated — have been introduced in just four states. In a fifth state, Missouri, a bill was proposed to expressly prohibit mileage-based fees, according to Nick Farber, of the Denver-based National Conference of State Legislatures. That bill, too, got nowhere.

All have died, the most recent being an Oregon bill that proposed to apply mileage-based fees to electric vehicles. It was opposed by the auto industry.

While academics, bureaucrats and even some politicians are starting to talk about alternative revenue structures for highways, the public isn’t sold – or even persuaded there’s a problem.

“It doesn’t matter how many Rand studies or commissions suggest a new way of doing things. At the end of the day, a congressman or senator has to go back home and explain to his constituents the need for a new device,” said Alex Herrgott, an aide to U.S. Senator James M. Imhofe, R-OK.

In Texas, an exploratory study conducted by state officials found broad public resistance. In one small town, local residents stressed that “government doesn’t belong in my car,” said John Sabala, of the Texas Department of Transportation. The attitude, he joked, was similar to the one that “government keep its hands off my Medicare.”

The many concerns expressed by residents all add up to “no VMT in Texas, at least for now,” said Sabala. To sell it to the public, he endorsed the idea of a pilot program based on electric vehicles, to overcome concerns about privacy, equitability and a fundamental distrust of government.

Constituency groups are leery, or at least cautious. Darrin Roth, director of highway operations for the American Trucking Association, said truckers support a gas tax increase but fear a mileage-based user system might be engineered to assess higher charges for special cargoes, such as hazardous fuels.

Jill Ingrassia, representing AAA, the giant consumer automobile group, said her group and others support consideration of new financing mechanisms, but has concerns about the privacy, cost, accountability and transparency of mileage-based fees. Despite steady efforts by AAA and others during the last decade, the public doesn’t understand the current funding system, doesn’t trust that revenues are being invested wisely, and is unconvinced of the need to pay more.

She expressed “cautious” support of a pilot program that targets electric vehicles. “I do believe that this effort is more likely to be evolutionary rather than revolutionary,” she said.

Technology does not seem to be a major barrier. Insurers have already begun to collect data about driver use, in order to better assess risks and offer benefits. Drivers who refrain from driving after midnight on Saturday, for example, could be offered lower rates. Insurers can collect much more information about driver behaviors – including locations and time of day – than they currently are willing to use, because of Big Brother concerns about privacy.

Research conducted by the University of Iowa, however, indicates that privacy concerns are not insurmountable. The study profiled 2,511 people in the United States who matched age, travel and other demographic characteristics of the broader population. The experiment installed mileage-tracking devices in their vehicles for use in 22 million miles of traffic.

The practical experience won over many users. At the outset, 42 percent were favorably disposed toward mileage-based user fees. At the end, it was 70 percent. Contrary to perceptions, older people were no more worried about privacy than younger people – although a third want minimal travel data collected, said Paul Hanley, director of the school’s Transportation Policy Research Group.

Instead of a split between rural and urban residents, the Iowa study found more support among those who drive little, no matter where they live, and opposition from higher-mileage drivers.

But rural drivers do tend to drive more. A Congressional Budget Office study earlier this year found that rural drivers averaged 44 miles per day, compared to 11 miles per day for urban drivers, said Terri Binder, who chairs the transportation committee of Club 20, the Western Slope advocacy group in Colorado. She also noted that rural incomes are generally lower and the distances to doctors from such towns as Naturita, west of Telluride, are often 100 miles or more. She also fretted about impacts to tourism.

Still, states are giving the idea a harder look. A blue ribbon panel appointed by former Colorado Gov. Bill Ritter sifted through 38 revenue-increasing ideas, including mileage-based fees, but recommended only that a pilot study be conducted. The Colorado Department of Transportation and other Colorado agencies were well represented at the conference.

Oregon has already conducted such a study, and Minnesota in August will launch a $4.1 million rubber-meets-the-road test of mileage-based taxes. The 500 participants will be given stipends of $200, and then they will have to pay, based on the mileage recorded on their odometers via smart phones attached via blue toggles. Information will be dispatched to a cloud-based data warehouse. They will “pay” 5 cents a mile, but lesser rates for travel on interstates, late at night, and other situations.

All the hardware is off the shelf, with the major work being in software development. “There’s no reason that a Blackberry or an iPhone or any other smart phone couldn’t do this,” said Bennet Pierce, project leader of the Battelle Co., a research and development charitable trust that has contracted to conduct the experiment.

Minnesota officials are keenly interested in administrative costs. Hardware costs are minimal. “This is a very real world demonstration,” Pierce said.

Advocates can also turn to several other places in the world for experience. Switzerland, Austria, Germany, the Czech Republic and Slovakia have introduced automated truck tolls based on travel distance and vehicle size or weight. New Zealand has introduced a system that applies to trucks as well as diesel-fueled cars.

A challenge is avoiding the expensive installation of equipment on existing vehicles. Its takes about 15 years for vehicle fleets to be replaced. But already, 17 percent of vehicles in the United States are equipped for electronic tolling, and that should reach 40 percent by 2025, even without mandates, said Regan, the consultant.

Looking forward, advocates see a key challenge being to persuade the public that highways are not free. “There are no free roads, but if in fact you talk to anybody in the general public, other than toll roads, they see any road as a free road,” said Mark Muriella, assistant director of the Port Authority of New York and New Jersey.

Others say mileage-based fees must be kept simple, at least at the start. While the existing technology could be used to assess drivers based on time of day and road segment, something called congestion pricing, that’s not the place to start, said Muriella.

Pricing needs to be the last thing brought to the public’s attention, said Bruce Schaller, deputy commissioner, planning and sustainability for the New York City Department of Transportation. It should be all about benefits to drivers,” he said of the messaging.

Many of the 100-plus attendees expressed support for targeting electric vehicles, even if that conflicts with broader societal goals more easily achieved by vehicle electrification.

Participants also agreed broadly that, similar to energy transformations, efforts should be focused on the state level, with the presumption that eventually the government will be forced to institute standards to allow common platforms across multiple states, which is called interoperability.

States may also want to share pilot projects because, as a representative of the Colorado Department of Transportation pointed out, C-DOT has only $600,000 appropriated annually for research. If 10 or 15 states get together, they could pool their research efforts, he said.

And, concluded another: “We can’t start this conversation about taxes. It has to be about benefits.”

Allen Best is editor/publisher of Mountain Town News.

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