Commentary

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

Robert Poole is director of transportation policy and Searle Freedom Trust Transportation Fellow at Reason Foundation. Poole, an MIT-trained engineer, has advised the Ronald Reagan, the George H.W. Bush, the Clinton, and the George W. Bush administrations.

Surface Transportation

In the field of surface transportation, Poole has advised the Federal Highway Administration, the Federal Transit Administration, the White House Office of Policy Development, National Economic Council, Government Accountability Office, and state DOTs in numerous states.

Poole's 1988 policy paper proposing privately financed toll lanes to relieve congestion directly inspired California's landmark private tollway law (AB 680), which authorized four pilot toll projects including the successful 91 Express Lanes in Orange County. More than 20 other states and the federal government have since enacted similar public-private partnership legislation. In 1993, Poole oversaw a study that coined the term HOT (high-occupancy toll) Lanes, a term which has become widely accepted since.

California Gov. Pete Wilson appointed Poole to the California's Commission on Transportation Investment and he also served on the Caltrans Privatization Advisory Steering Committee, where he helped oversee the implementation of AB 680.

From 2003 to 2005, he was a member of the Transportation Research Board's special committee on the long-term viability of the fuel tax for highway finance. In 2008 he served as a member of the Texas Study Committee on Private Participation in Toll Roads, appointed by Gov. Rick Perry. In 2009, he was a member of an Expert Review Panel for Washington State DOT, advising on a $1.5 billion toll mega-project. In 2010, he was a member of the transportation transition team for Florida's Governor-elect Rick Scott. He is a member of two TRB standing committees: Congestion Pricing and Managed Lanes.

Aviation

Poole is a member of the Government Accountability Office's National Aviation Studies Advisory Panel and he has testified before the House and Senate's aviation subcommittees on numerous occasions. Following the terrorist attacks of Sept. 11, 2001, Poole consulted the White House Domestic Policy Council and the leadership of the House Transportation & Infrastructure Committee.

He has also advised the Federal Aviation Administration, Office of the Secretary of Transportation, White House Office of Policy Development, National Performance Review, National Economic Council, and the National Civil Aviation Review Commission on aviation issues. Poole is a member of the Critical Infrastructure Council of the Los Angeles Economic Development Corporation and of the Air Traffic Control Association.

Poole was among the first to propose the commercialization of the U.S. air traffic control system, and his work in this field has helped shape proposals for a U.S. air traffic control corporation. A version of his corporation concept was implemented in Canada in 1996 and was more recently endorsed by several former top FAA administrators.

Poole's studies also launched a national debate on airport privatization in the United States. He advised both the FAA and local officials during the 1989-90 controversy over the proposed privatization of Albany (NY) Airport. His policy research on this issue helped inspire Congress' 1996 enactment of the Airport Privatization Pilot Program and the privatization of Indianapolis' airport management under Mayor Steve Goldsmith.

General Background

Robert Poole co-founded the Reason Foundation with Manny Klausner and Tibor Machan in 1978, and served as its president and CEO from then until the end of 2000. He was a member of the Bush-Cheney transition team in 2000. Over the years, he has advised the Reagan, George H.W. Bush, Clinton, and George W. Bush administrations on privatization and transportation policy.

Poole is credited as the first person to use the term "privatization" to refer to the contracting-out of public services and is the author of the first-ever book on privatization, Cutting Back City Hall, published by Universe Books in 1980. He is also editor of the books Instead of Regulation: Alternatives to Federal Regulatory Agencies (Lexington Books, 1981), Defending a Free Society (Lexington Books, 1984), and Unnatural Monopolies (Lexington Books, 1985). He also co-edited the book Free Minds & Free Markets: 25 Years of Reason (Pacific Research Institute, 1993).

Poole has written hundreds of articles, papers, and policy studies on privatization and transportation issues. His popular writings have appeared in national newspapers, including The New York Times, The Wall Street Journal, USA Today, Forbes, and numerous other publications. He has also been a guest on network television programs such as Good Morning America, NBC's Nightly News, ABC's World News Tonight, and the CBS Evening News. Poole writes a monthly column on transportation issues for Public Works Financing.

Poole earned his B.S. and M.S. in mechanical engineering at Massachusetts Institute of Technology (MIT) and did graduate work in operations research at New York University.