Surface Transportation System Funding Alternatives Phase I Evaluation: Pre-Deployment Activities for a User-Based Fee Demonstration by the Minnesota Department of Transportation

Chapter 1. Introduction

As vehicles become more fuel efficient, the motor fuel tax (MFT) has become less reliable as a primary source for transportation infrastructure funding. Recognizing this trend, the Fixing America's Surface Transportation (FAST) Act³ of 2015 established the Surface Transportation System Funding Alternatives (STSFA) Program, which provides grants to States or groups of States to demonstrate user-based alternative revenue mechanisms to maintain long-term Highway Trust Fund solvency.

The Federal Highway Administration (FHWA) Office of Operations headquarters staff have the overall responsibility for administering the program. The office was also directed to conduct an independent evaluation of pilots deployed. FHWA Division office staff provide direct support by overseeing the pilots in participating States.

By funding road user charge pilots, the U.S. Congress and FHWA seek to understand whether a user fee structure, such as a road usage charge (RUC), could be implemented nationally in the future. The FHWA conducted an evaluation of seven of the eight grantee sites that received funding in Federal fiscal year (FY) 2016, which will be referred to as Phase I of the STSFA grant program throughout this report.⁴ The evaluation reports will inform the U.S. Secretary of Transportation and U.S. Congress of the progress that has been made, 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.

It is important to note here that the evaluation team adopted the terminology used by the specific grantee sites in planning and executing their proposed programs. Similar concepts in different geographies may be referred to as "mileage-based user fee," "distance-based user fee" (DBUF), or RUC. Vehicle miles traveled (VMT) is also a term used to describe this strategy. Given the lack of a standard definition, these terms will be defined within the context of each grantee's program vision and activities.

Background of Alternative Transportation Revenue Explorations

For decades, economists and transportation experts have studied the potential for user-based revenue mechanisms, including various forms of RUC as an alternative to the fuel tax. A mileage-based fee falls within a class of innovative funding mechanisms that the States and the Federal government are considering using to help fund improvements and maintenance of the Nation's surface transportation infrastructure.

Oregon was the first State to explore a user fee mechanism based on mileage beginning in 2001. Since that time, several States have studied the potential for similar programs with fee structures based on VMT, with a few establishing pilots. In previous years, States either funded these efforts themselves, or they received grants under the U.S. Department of Transportation (USDOT)-sponsored Value Pricing Pilot Program. Additionally, previous authorization bills included language recommending VMT-related studies.

In 2010, FHWA released a broad agency announcement about a program entitled, "Exploratory Research on Technology Options for Collection of Road User Fees." The National Surface Transportation Policy and Revenue Study Commission was created in the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU)⁵ in 2008, and recommended a RUC mechanism as an infrastructure funding source. The majority of the Policy Commission recommended that the next transportation authorization bill find alternatives to the fuel tax to fund surface transportation programs.⁶ Further recommendations by the Commission suggested 2020 for the adoption of a RUC-based funding mechanism.

In 2011, the University of Iowa Public Policy Center conducted a 2-year field study, the National Evaluation of a Mileage-Based Road User Charge. The study evaluated technical feasibility and user acceptance of mileage-based charging as a potential replacement for the fuel tax.

The Moving Ahead for Progress in the 21st Century Act, a funding and authorization bill to govern United States Federal surface transportation spending, did not include dedicated funding to study RUC.⁷ In 2013, several western States formed a coalition (Western Road User Charge Consortium) to share resources and explore innovative transportation funding solutions. Today, many of these States are represented as grantees in the current STSFA grant program. The formulation and rise of the STSFA grant program represents a new beginning and an opportunity for the USDOT and States to determine the applicability of RUC systems to help maintain the long-term solvency of the Highway Trust Fund.

Minnesota Department of Transportation's Phase I Program

This report presents the results and the evaluation of the Minnesota Department of Transportation's (MnDOT's) STSFA Phase I (FY 2016 grant cycle) pre-deployment activities for a user-based fee demonstration. MnDOT, along with the University of Minnesota's Humphrey School of Public Affairs (hereinafter "Minnesota"), propose to design and ultimately deploy a user-based fee mechanism by partnering with a mobility-as-a-service (MaaS) provider (e.g., car-sharing businesses). 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. MaaS includes a range of new travel forms that promise greater efficiency, safety, and mobility. It provides a platform to explore a practical and implementable path toward wider deployment of DBUF.

Minnesota developed a document that outlines its approach to creating a pilot that represents a transferable and scalable model that is sustainable and fair. Minnesota's approach includes their following foundational assumptions:

• Minnesota believes that the DBUF should operate in parallel to existing surface transportation revenue collection mechanisms and not seek to replace currently efficient methods. The Foundational Assumptions document states:

  "the program should not risk collecting less revenues under a [vehicle-miles-traveled, or VMT] model than is now collected under the motor fuel tax (MFT) or collecting these fees in a manner that has greater risk or instability."

  This approach focuses on the efficiency of revenue collection with the proposed alternative approach.
• According to Minnesota, the DBUF approach should take advantage of the trend of increasing availability of onboard telematics in new vehicles, which is particularly true for the shared mobility fleet of vehicles. The Foundational Assumptions document states:

  "New vehicles are arriving factory-equipped to communicate with the cloud. DBUF collection model must be flexible to communicate to a diverse line of equipment and technologies for efficient data transmittal and for effective billing purposes. Today, the shared mobility environment has the capacity to seamlessly collect and transmit data sufficiently for the purposes of collecting DBUFs."

• 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, Minnesota believes these vehicles do not pay their fair share towards the maintenance and upkeep of the transportation system.

According to MnDOT's STSFA program manager, the foundational assumptions of the DBUF concept are a living document and are likely to evolve throughout the development and demonstrations of the concept. As the trials develop, the team plans to continue testing the legitimacy of these assumptions.

The key components of the Minnesota's Phase I activities include:

• Recruiting MaaS providers and determining policy requirements that take into account customer needs, data privacy, security, and enforcement requirements.
• Modeling pricing strategies as a surcharge calculated per mile (varying by vehicle types) or as a fixed percentage of MaaS charges.
• Designing back office operations, protocols, and software, including:
  • Addressing technology and processing needs specifications.
  • Identifying and resolving user compliance concerns.
  • Meeting reliability and security specifications.
  • Developing tests to ensure data accuracy.
  • Developing processes for participant account reconciliation and business rules.
• An important element of stakeholder interaction was to determine how to use findings and recommendations effectively and to develop measures of support. Conducting stakeholder analysis and outreach to explore concepts such as:
  • Equity analysis.
  • Decision maker input.
  • Market research.
• Exploring multimodal pricing options to investigate the feasibility of creating the opportunity for customers to make a combined trip that involves multiple transportation modes; for example, ridesharing or car-sharing to a park-and-ride, taking transit, and riding a shared bike for one single payment.
• Developing and executing legislative strategies at the State and local level.
• Planning and design development in preparation for deployment in Phase II demonstration.

Organization of this Report

Chapter 1 of this report introduces the user fee concept and the background and purpose of the pilot.

Chapter 2 provides background on the STSFA grant program, including legislative authority, program goals, and approach.

Chapter 3 details the activities planned and accomplished by MnDOT under Phase I of the STSFA grant program for the FY 2016 grant cycle.

Chapter 4 presents the evaluation framework as proposed under the 2016 Notice of Funding Opportunity, the key USDOT questions that the evaluation seeks to address, and the evaluation team's approach.

Chapter 5 provides the major findings from evaluation of Phase I activities, including lessons learned, findings and outcomes as observed by the evaluation team, and suggestions for further exploration through the course of future efforts towards an alternative revenue program.

Chapter 6 summarizes the key takeaways from Phase I activities and lessons learned that would be relevant for a national implementation of a mileage-based fee program.

Chapter 7 presents the references that are used in this report.