Mileage Based User Fees or Road Usage Charges’Some Thoughtful Commentary

The August/September issue of Thinking Highways (North American edition) includes a pair of articles by Jack Opiola and colleagues from D’Artagnan Consulting on the subject of road usage charging (RUC), otherwise known as mileage-based user fees (MBUFs). One article explains points of similarity and difference between traditional tolling and RUC, primarily with the former typically being facility-based while the latter is envisioned as system-based (as in a whole state’s roadway system).

But what I especially want to call to your attention is their other article, “Let There Be RUC.” That one was written as a response to a previous article that argued for fuel tax increases rather than starting the transition away from paying per gallon to paying per mile. In this article, Opiola and colleagues take on a number of arguments being raised against what I will continue to refer to as MBUFs. Of the seven points in the article, I will focus on three that I think most need wider understanding.

First, why should we start the transition now rather than waiting until alternatively propelled vehicles start achieving large market shares? The main reason, write the authors, “is to keep infrastructure revenues on pace with the rapid increase in fuel efficiency of the internal combustion engine.” For model year 2013, the average mpg reached 24.7 mpg, on the way toward the 34.5 mpg required by federal CAFE standards by model year 2016. And assuming they are not rolled back, the 2025 standards require 54.5 mpg for cars and 40 mpg for trucks. Thus, by 2025, the average new car will go twice as far on a gallon of gas as today’s average new car. Unless you think it is politically realistic to double fuel taxes between now and then, highway funding is in big trouble.

A second key point is that a variety of affordable, adaptable off-the-shelf technologies for implementing MBUFs is available today-and I don’t mean mandated GPS boxes in every vehicle. A good illustration is the current Oregon pilot program (on which Opiola and company have served as advisors). It offers a number of options, beginning with a no-technology version in which one can opt for the maximum annual miles (set at 98th percentile) for a flat annual fee. Another is a simple device that plugs into the diagnostic port and records total miles traveled-but not where or when. A third option is a smart-phone app that report odometer data, using cell phone towers to distinguish between in-state miles and out-of-state miles. A fourth option is to use built-in telematics (if the vehicle is so equipped) such as GM’s OnStar or Ford’s SYNC to record and report mileage. These options are selected by the vehicle owner, not imposed by the DOT.

A third critically important point is that the cost of collection will not be anywhere near the alleged 10 to 20 times the cost of collecting fuel taxes. A simple mileage-based system would not require any new infrastructure on the roadway, and it would not require “a whole new government bureaucracy” for billing and collections. Large-scale, very low-cost billing and collections services are widespread in our economy, for credit cards and telecommunications in particular. And the authors cite the important 2012 Reason Foundation study by Daryl Fleming, et al., finding that the true cost of fuel-tax collection is closer to 5% of the revenue collected than the widely believed 1% and that the cost of all-electronic tolling (using a streamlined business model) is approaching 5% of the revenue collected. And Opiola points out that New Zealand already has a functioning MBUF system for 500,000 diesel cars, whose cost of collection is less than 5% of the revenue collected.

There’s a lot more in this article than I have summarized here, so I commend it (and the companion piece) to your attention.

This article also appears in Robert Poole’s Surface Transportation Newsletter # 121