Chapter 1. Alternative Transportation Funding Solutions – An Overview

This chapter provides an overview of the efforts of Federal and State governments and multi entity coalitions towards exploring alternative transportation funding solutions that is the subject of this evaluation report.

Why Explore Alternative Transportation Funding Solutions?

As vehicles are becoming more fuel-efficient, the reliability and adequacy of gasoline tax as a primary source for transportation infrastructure funding is coming into question. Recognizing this trend, the Fixing America’s Surface Transportation Act of 2015 established the Surface Transportation System Funding Alternatives (STSFA) Program. The purpose of this program is to provide grants to States or groups of States to demonstrate user-based alternative revenue mechanisms that utilize a user-fee structure to maintain the long-term solvency of the Highway Trust Fund.

The Fixing America’s Surface Transportation Act provides that $15 million in fiscal year (FY) 2016 and $20 million annually from FY 2017 through FY 2020 be made available for grants for demonstration projects. Section 6020 provides express authority to enter into a grant with a State or groups of States, with no more than 50 percent of total proposed project costs being Federal funds and the remainder coming from non-Federal sources.

The stated goals of the STSFA Program are to:

• Test the design, acceptance, and implementation of two or more future user based alternative mechanisms.
• Improve the functionality of the user-based alternative revenue mechanisms.
• Conduct outreach to increase public awareness regarding the need for alternative funding sources for surface transportation programs and to provide information on possible approaches.
• Provide recommendations regarding adoption and implementation of user-based alternative revenue mechanisms.
• Minimize the administrative cost of any potential user-based alternative revenue mechanisms.

Surface Transportation System Funding Alternatives Program – Phase Ⅰ

In Federal fiscal year (FFY) 2016, the U.S. Department of Transportation awarded eight STSFA grants to seven lead States (California, Delaware, Hawaii, Minnesota, Missouri, Oregon [project lead for two grants], and Washington) totaling $14,235,000. The types of proposals contained both pre-deployment and deployment activities, and two represented multi State partnerships. This constituted Phase Ⅰ of the STSFA grant program.

Program Evaluation

The Federal Highway Administration (FHWA) worked with an independent team to evaluate the eight grantee sites that received funding in FFY 2016. Staff from FHWA headquarters in the Office of Operations have the overall responsibility for administering the program and conducting the independent evaluation. FHWA division office staff provide direct support by overseeing the program in participating States.

By supporting pilot demonstrations, the Federal Government seeks to understand whether a user-fee structure, such as a road usage charge (RUC), is a viable substitute to the gas tax, and if such a structure can be implemented nationally at some time in the future. Topics addressed include lessons learned from initial pilot and planning efforts, the role of education and outreach, the potential for any negative impacts on constituents, and initial findings on administrative fees, among others.

Site-specific detailed evaluations are available as individual reports summarizing activities and detailed findings from each individual grantee site. This report presents cross-cutting findings from all Phase Ⅰ STSFA project sites. The report is limited in scope to evaluating activities that were directly executed with STSFA funds. However, wherever relevant, references are made to how the STSFA-funded activities fit within the overall approach of the grantee site to examining alternative revenue sources.

Terminology

Of the eight 2016 STSFA grantees, six grantees—Oregon, Washington, California, Hawaii, Eastern Corridor Coalition¹, and RUC West—are exploring or continuing to explore the concept of an RUC that assesses a fee based on mileage driven for individual drivers/users of the transportation system. Minnesota is exploring an approach that establishes an RUC for shared fleet vehicles, while Missouri is exploring a vehicle registration fee structure that accounts for vehicle fuel efficiency. However, different pilot sites refer to the same or similar concepts by different names, as noted in Table 2.

Given a lack of standard definitions, these terms were defined within the context of each grantee’s program vision and activities. Please note that, while the evaluation team adopted the terminology used by the specific grantee site for the individual site evaluation reports, this report preferentially uses the term “RUC” to present cross-cutting findings because a majority of sites use this terminology.²

Table 2. Preferred terminology for alternative transportation revenue approaches centered around a user-fee based on distance traveled.

Phase Ⅰ Pilot Site(s)	Preferred Terminology for a User-Fee Based on Distance Traveled
Eastern Corridor Coalition	Mileage-based user fee
Minnesota	Distance-based user fee
Road Usage Charge West and participating States, including California, Hawaii, Oregon, and Washington	Road usage charge

Overview Of Phase Ⅰ Programs And Pilots

This section presents an overview of the Phase Ⅰ programs undertaken by the eight STSFA grantees that are the subject of this report.³

California

As part of the STSFA Phase Ⅰ Program, the California Department of Transportation (Caltrans) conducted activities to enhance their recently completed pilot.⁴ Caltrans examined four specific program enhancements in detail:

• Organizational structure design: Assessing which agencies could administer a statewide road charge program.
• Cash-flow model: Developing a road charge revenue flow model that can be used as a tool to assess costs and benefits of a new program.
• Enforcement and compliance strategies: Identifying elements of an enforcement program and associated strategies for ensuring compliance.
• Pay-at-the-pump/charge point: Investigating technologies for paying a road charge at gas stations or (electric) charge points.

Additionally, Caltrans conducted public perception research to determine what information the public needs to better understand and make informed decisions about road funding. The research measured the level of knowledge of transportation funding, California’s road infrastructure, instability of the fuel tax, and road charge as an alternative to the fuel tax. The research also tested core messaging related to these topics.

Delaware/Eastern Corridor Coalition

The Delaware Department of Transportation and the Eastern Corridor Coalition (hereinafter referred to as Eastern Corridor Coalition) planned and deployed a focused mileage-based user fee (MBUF) pilot in the Coalition States.⁵ For this effort, the Coalition built upon the lessons learned from the MBUF explorations on the West Coast as well as from toll interoperability experience within the Coalition States to explore potential synergies between mileage-based fees and tolling. With this focused pilot, the Coalition brought the effort to explore alternative revenue mechanisms to the East Coast.

To achieve their stated goals of addressing regional issues, increasing public awareness, and creating a low-cost framework to administer MBUF, the Eastern Corridor Coalition conducted the following key activities:

• Planning and pre-deployment: Activities to lay the foundation for a State to explore the MBUF concept in a low-risk environment. The scope of these planning activities was from a “multistate” perspective to promote regional consistency and compatibility.
• Deployment, operation, and evaluation of State-specific focused MBUF pilots: In addition to the planning effort and pre-deployment activities, the Eastern Corridor Coalition also proposed a number of initial MBUF pilots. These focused pilots were to be based on the Operational Concept Document developed as part of the planning effort. As a result of the planning effort and discussions with the partnering States, the pilot was identified as a “focused pilot in Delaware with regional and national stakeholders.”

Minnesota

The Minnesota Department of Transportation along with the University of Minnesota’s Humphrey School of Public Affairs (hereinafter referred to as Minnesota) proposed to design and ultimately deploy a user-based fee mechanism by partnering with a mobility-as-a-service (MaaS) provider (e.g., car-sharing services). Minnesota’s concept is based on the premise that the future of personal travel is captured in the new and evolving MaaS business model, which is rapidly redefining personal transport around the world. Embedded technology onboard these fleets is becoming the standard on new vehicles and enables the efficient administration and collection of user-fees while maintaining user privacy and data security. This provides a platform to explore a practical and implementable path toward wider deployment of distance‑based user fees. Additionally, this platform and model may be transferable to other fleet applications in the future.

The goal of Minnesota’s distance-based user fee (DBUF) project is to design and demonstrate a viable model to collect user-based fees on shared mobility provider fleets. The project assumes retention of the fuel tax and will demonstrate a means to backfill revenue lost due to increasing fleet efficiency.

The foundational assumptions of Minnesota’s approach, as defined through their STSFA Phase Ⅰ efforts, include the following:

• A DBUF should operate in parallel to existing surface transportation revenue collection mechanisms and not seek to replace currently efficient methods.
• The DBUF approach should take advantage of the trend toward increasingly available onboard telematics in new vehicles, which is particularly true for the shared mobility fleet of vehicles.
• Electric, hybrid, alternatively fueled, and other highly efficient vehicles should be charged a proportionate share for use of the roads. Under the current fuel tax approach, these vehicles are not paying their fair share towards the maintenance and upkeep of the transportation system.

Missouri

Motor vehicle and driver’s license fees comprise approximately 21 percent of Missouri’s State funding, but many of the fee structures have not been changed or increased rates since 1984 (and in some cases 1969). Current rates do not reflect actual infrastructure needs or support sustainable programs of asset management to preserve the bridge and highway system Statewide. Missouri Department of Transportation’s (MoDOT; hereinafter referred to as Missouri) current vehicle registration fee structure is based on taxable horsepower. Taxable horsepower is computed, not from actual engine power, but by a formula based on cylinder dimensions. Missouri is the only State still using this metric to assess vehicle registration fee and it does not relate to the real power or impact the vehicle has on the transportation system.

The objective of Missouri’s pre-deployment STSFA Phase Ⅰ project was to test the feasibility of transitioning the vehicle registration fee schedule from taxable horsepower to the combined miles per gallon (MPG) rating of the vehicle. The State considered this type of strategy to be a fairer and equitable measure to assess the fees paid to operate a vehicle in Missouri. All pre-deployment activities were completed on August 15, 2018.

As part of the STSFA Phase Ⅰ Program, Missouri used the Federal grant money to conduct pre‑deployment activities, including:

• Developing a platform for new registration fee schedules to capture fuel-efficient vehicles. Missouri proposed a new registration fee structure based on the vehicle’s estimated fuel efficiency (measured in MPG). As part of this activity, Missouri planned to work with other State agencies to develop a full-scale implementation strategy to amend the existing registration fee schedule. This new schedule was intended to capture the lost gas tax revenues of modern fuel-efficient vehicles (i.e., vehicles that average greater than 20 MPG). While this is not a fee based on vehicle-miles traveled (VMT), similar to what other STSFA pilot sites are exploring, it is an attempt to “level the playing field” by reducing the inherent inequity of the gas tax.
• Education and outreach to the Missouri General Assembly regarding alternate funding and new technology for transportation infrastructure. Missouri recognized a need for a custom-tailored approach to reach out to the State General Assembly. The pre‑deployment activity involved a full-scale outreach campaign to educate the legislators about the need for alternative funding and new, innovative technology to advance transportation interests in the State.

Oregon

As part of RUC program enhancement efforts, the Oregon Department of Transportation (ODOT; hereinafter referred to as Oregon) used the Federal grant money to expand and improve the functionality of its ongoing RUC program, conduct outreach to further increase public awareness, provide recommendations to the Federal government and other States about RUC, and streamline processes to minimize the administrative costs of its existing program. These activities were planned to prepare the State for program expansion while acting as an example for other States, as well as the nation, for how to implement and administer an RUC program. It specifically targets four objectives:

• Expand technology options: Including an analysis of how Oregon attempted to and succeeded in overcoming challenges of certifying more technical options, which require enhanced system operations and improved interfaces.
  • The activity documented findings and recommendations to increase technology options in the RUC marketplace.
  • As part of this objective, Oregon analyzed improvements to the RUC open market.
  • Developed a manual reporting option (to accommodate users and participants that are not able to use the existing mileage reporting technologies and/or do not have internet access).
  • Explored partnerships to streamline RUC services and share transportation data.
• Increase public awareness: Oregon pre- and post-tested public opinion on a range of road charging topics and concepts to determine whether the education program has improved public acceptance.
• Evaluate compliance mechanisms: Oregon tested new compliance processes with current account managers as much as possible. However, it cannot implement a new compliance mechanism until legislation passes to provide the necessary statutory authority.
• Explore interoperability: The RUC Summit was conducted in September 2017. Oregon summarized lessons learned and next steps.

Western Road Usage Charge Consortium

Founded in 2013 and previously known as the Western Road Usage Charge Consortium, RUC West has tackled many of the policy, organizational, technological, and operational challenges for finding a new way to generate and collect revenue to fund transportation infrastructure. At the time of submitting the grant application, the Coalition included 14 States. As part of the STSFA Phase Ⅰ program, RUC West planned to define a regional system to promote and establish RUC consistency, interoperability, and compatibility throughout the western United States. At the time of the grant application, four of the RUC West member States had legislative approval to conduct RUC pilot tests (Oregon, California, Utah, and Washington).

The two key project accomplishments for RUC West’s Phase Ⅰ efforts were:

• Creating a high-level concept of operations (ConOps) that all 11 participating States agreed on. The ConOps outlined the basic principles of how a regional RUC system will function for future pilots.
• Creating detailed system and business requirements based on California and Oregon pilots.

Washington

One of the primary goals at the outset for the Washington State Transportation Commission (WSTC) was to collaborate with relevant agencies within and beyond Washington. This would be a necessary step in testing and building the organizational and operational capabilities necessary to implement an RUC system, which, WSTC recognized, would need to be capable of scaling to and interacting with multiple jurisdictions (e.g., local, Federal, State, and international).

The Phase Ⅰ grant funded the following activities:

• Final design and pilot test set-up: Included activities such as developing the technical design, conducting testing, managing pilot participants, establishing interoperability, and developing a pilot application and other pilot resources. This activity resulted in a ConOps for the pilot and other related documents, such as the interface control document and the system requirement specification document.
• Public attitude assessment: Involved a Statewide telephone survey and focus group meetings. This effort resulted in a public opinion summary report documenting the findings.
• Evaluation planning and activities: Involved developing the evaluation plans, principles, measures, and methods.
• Recruitment and communications: Included inviting and recruiting approximately 2,000 volunteers for the pilot test, thus ensuring geographic and demographic diversity.
• Execution of a smartphone innovation challenge event: Evolved into a competitive capstone course with teams of university students participating.

Organization of This Report

Chapter 2 describes the mileage reporting approaches explored by Phase Ⅰ sites and discusses their attributes related to implementation by public agencies and ease of use for drivers.

Chapter 3 describes the program structure for administering RUC that is being employed by the various sites and the implications for the cost of administering an RUC.

Chapter 4 describes the interoperability potential and the efforts conducted by Phase Ⅰ sites towards achieving interoperability.

Chapter 5 describes the data security and privacy considerations of typical RUC programs.

Chapter 6 summarizes the public outreach, messaging, and communication efforts and lessons learned by Phase Ⅰ sites.

Chapter 7 describes the typical equity considerations for an RUC program and efforts by Phase Ⅰ sites towards understanding public perception of alternative transportation revenue approaches.

Chapter 8 provides recommendations for future analysis into alternative transportation revenue approaches.