Testimony

Funding Transportation With User Fees

Testimony Before the Subcommittee on Highways and Transit, U.S. House Transportation and Infrastructure Committee

I will not belabor you with the nth detailed analysis of the increasing frailty of fuel taxes as the primary user fees for funding transportation programs. Suffice it to say that national energy and environmental policies, the market for gasoline and diesel, and technological advancements in automaking are leading to more people purchasing more fuel efficient vehicles. Since more fuel efficient vehicles use the same amount of infrastructure but pay less in user fees through fuel taxes, the system is increasingly unsustainable. One consequence already witnessed is the transfer of roughly $30 billion in general funds to backfill transportation spending not covered by highway trust fund revenues.

I do not join the great majority of those you will hear from at this hearing who argue that the federal government needs to spend more on transportation. User fee levels of recent years are adequate to fund a federal transportation program focused on the system directly serving the genuine national interest of promoting interstate commerce. It is not sufficient, however, to fund the state and local transportation programs that have increasingly come to rely upon it. It is long past time we recognize that most of the current need to invest more in transportation systems is at the state and local level, and those levels of government should solve those problems themselves with user fees, and not look to the federal government to bail them out yet again. Instead, Congress should strive to remove any barriers that exist for state and local governments pursuing known solutions, and in some areas partnering with them to discover and develop new ones.

User fees are financially and economically superior means of paying for services compared to taxes and indirect charges. Our transportation system has traditionally been funded overwhelmingly by user fees, and this has served us well. As fuel taxes become a less effective form of user fee, we should be seeking a replacement that is even better.

I was honored to serve on the National Surface Transportation Infrastructure Finance Commission created by Congess in the last transportation authorization. We invested the majority of our time as a commission considering all possible mechanisms for funding the federal transportation program. No suprise, we confirmed that there are no silver bullets-they all have advantages and disadvantages. Our report provides a detailed analysis of our comparison of mechanisms. But we unanimously concluded that one mechanism, according to all of our criteria, clearly had the most promise for the future. That mechanism is mileage-based user fees. They can be more effective, economically sustainable, and flexible than the current system, and at least as equitable.

But mileage-based user fees need some time to develope as a viable way to pay for transportation. And right now Congress is focused on prioritizing transportation spending to fit within anticipated revenues as part of dealing with the deficit, not with reworking the federal transportation user fee system. But a number of states are interested in working on mileage-based user fees as potential future funding mechanisms for their states. And following up on the work of the Finance Commission, I and Reason Foundation, are part of the Mileage-Based User Fee Alliance, created to advance the state of the practice of mileage-based user fees and consisting of a number of state agencies and other transportation groups and companies. In this reauthorization Congress can, and should, make a modest investment in helping to develop the next generation of user fees for funding transportation.

Specific Recommendations

In this authorization, Congress should partner with state and local governments to conduct large-scale trials of mileage based user fees and evaluate those trials as well as direct research to be conducted to advance our understanding of the technical, administrative, and financial feasibility of mileage-based user fees.

a. Mileage-Based User Fee Trials

Arguably the most important next step to understanding if mileage-based user fees will work is large-scale trials. The federal government should work with state and local governments, universities, and private firms to conduct a few such trials. Ideally teams led by state or local governments would compete for federal grants to conduct these trials. The Department of Transportation should ensure the trials are of high quality, that everyone benefits from what is learned from them, and that key national interests such as interoperability, protection of privacy, and protection of interstate commerce are preserved.

NCHRP Web Only Document 161: System Trials to Demonstrate Mileage-Based Road Use Charges National Cooperative Highway Research Program, authored by a team from Rand, provides the best current assessment of how to conduct such trials and should be a resource for setting them up.

The trials should focus on answering identified questions about mileage-based user fees and exploring options for their use rather than focusing on narrow mechanisms or specific technologies. They should test different technologies and administrative architectures, and include a variety of geographic and demographic participants.

The point of the trials is to answer the many questions about mileage-based user fees. The biggest concern people have is the protection of privacy and security of information. It is crucial that the trials put an emphasis on these issues. The selection process for choosing which trials to fund should emphasize effective trials that answer as many questions as possible, including:

  • Protecting privacy
  • The costs of collection
  • How to reduce the costs of collection
  • Interoperability
  • Structures to avoid double payments of mileage fees and fuel taxes
  • Voluntary systems and incentives for adoption
  • Equity
  • Attitudes of participants before, during, and after trials.

Evaluation of all that is learned from the trials must be thorough and objective and widely disseminated.

b. Research and Development

Some of the questions and concerns about mileage-based user fees can be best addressed by research and development rather than trials. Research should complement the trials. Some key research and development topics include:

  • Cost of implementation at large scale
  • Technologies or security systems that can provide users with control over their personal travel information
  • Administrative systems for collecting revenue and apportioning according to jurisdiction, where appropriate
  • Methods for rebating or deducting fuel taxes
  • Emerging metering technologies
  • Preventing evasion.

Conclusion

This authorization period is a chance for Congress to preserve the user fee principle of funding transportation, empower state and local governments to take the lead in developing means of making these user fees work, and take significant steps towards making the next generation of user fees viable in time to replace fuel taxes before the current system becomes untenable.

Adrian Moore

Adrian Moore, Ph.D., is vice president of policy at Reason Foundation, a non-profit think tank advancing free minds and free markets. Moore leads Reason's policy implementation efforts and conducts his own research on topics such as privatization, government and regulatory reform, air quality, transportation and urban growth, prisons and utilities.

Moore, who has testified before Congress on several occasions, regularly advises federal, state and local officials on ways to streamline government and reduce costs.

In 2008 and 2009, Moore served on Congress' National Surface Transportation Infrastructure Financing Commission. The commission offered "specific recommendations for increasing investment in transportation infrastructure while at the same time moving the Federal Government away from reliance on motor fuel taxes toward more direct fees charged to transportation infrastructure users." Since 2009 he has served on California's Public Infrastructure Advisory Commission.

Mr. Moore is co-author of the book Mobility First: A New Vision for Transportation in a Globally Competitive 21st Century (Rowman & Littlefield, 2008). Texas Gov. Rick Perry said, "Speaking from our experiences in Texas, Sam Staley and Adrian Moore get it right in Mobility First." World Bank urban planner Alain Bartaud called it "a must read for urban managers of large cities in the United States and around the world."

Moore is also co-author of Curb Rights: A Foundation for Free Enterprise in Urban Transit, published in 1997 by the Brookings Institution Press, as well as dozens of policy studies. His work has been published in the Wall Street Journal, Los Angeles Times, Boston Globe, Houston Chronicle, Atlanta Journal-Constitution, Orange County Register, as well as in, Public Policy and Management, Transportation Research Part A, Urban Affairs Review, Economic Affairs, and numerous other publications.

In 2002, Moore was awarded a World Outsourcing Achievement Award by PricewaterhouseCoopers and Michael F. Corbett & Associates Ltd. for his work showing governments how to use public-private partnerships and the private sector to save taxpayer money and improve the efficiency of their agencies.

Prior to joining Reason, Moore served 10 years in the Army on active duty and reserves. As an noncommissioned officer he was accepted to Officers Candidate School and commissioned as an Infantry officer. He served in posts in the United States and Germany and left the military as a Captain after commanding a Heavy Material Supply company.

Mr. Moore earned a Ph.D. in Economics from the University of California, Irvine. He holds a Master's in Economics from the University of California, Irvine and a Master's in History from California State University, Chico.