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

Chapter 3. Pre-Deployment Activities for a Minnesota User-Based Fee Demonstration

This chapter presents the Minnesota Department of Transportation's (MnDOT's) pre deployment activities as proposed in their grant application and a summary of activities conducted as part of Phase I of the Surface Transportation System Funding Alternatives (STSFA) grant program, or the fiscal year (FY) 2016 grant cycle.

Illustration has Current Individual Ownership on left and Emerging mobility-as-a-service on right. Each column includes Perception, Relationship with Transportation, and User Pays.

© 2016 Minnesota Department of Transportation
Figure 1. Illustration. Minnesota's proposed distance-based fee concept.⁽¹⁰⁾

According to Minnesota's FY 2016 grant proposal (see figure 1), the ultimate purpose of the demonstration is to test and prove a user based fee structure that will ensure the long-term solvency of the Federal Highway Trust Fund through a revenue collection mechanism that pairs with emerging transportation system and societal trends, specifically that of mobility-as-a-service (MaaS).

As part of Phase I, Minnesota's approach was designed to achieve the following:

Broad public and consumer support.
Rate setting that would be rational, equitable, and capable of being adjusted to address vehicle type, roadway design, jurisdiction, time-of-day, and other factors.
A model that is scalable to multiple service segments and exportable to other agencies.
A migration approach to the new system that will be incremental, painless, and cost effective.

The premise for the Minnesota approach is that: "...the future of personal travel will be captured in the new and evolving Shared Mobility (SM) business model which includes a range of new travel forms that promise greater efficiency, safety, and enhanced mobility."¹⁰

Distance-Based User Fee Program Goal and Objectives

Minnesota's vision is to design a revenue mechanism that is responsive to the projected convergence of shared mobility, vehicle electrification and vehicle automation.

As stated in Minnesota's FY 2016 STSFA grant proposal, the goal of this pre-deployment demonstration is to "… design a highway user based fee system that will be focused on the future of personal travel and will create an efficient and affordable path toward broader deployment."¹¹ The objectives of this system are to:

Anticipate where technology, cooperative mobility, electrification, and computing will be in the coming decades and create partnerships to take advantage of developing opportunities.
Design a user-based fee system that leverages existing onboard telematics and the capabilities of auto manufacturers and MaaS providers consistent with the needs of the transportation system.
Incorporate into the system design efficient operations, collections, enforcement, equity considerations, privacy and verification protocols, and transparency and ease of user fee collections.
Create an opportunity for the Phase II demonstration and the ultimate deployment of the Minnesota MaaS user-based fee system trial that is publicly and politically supported.

As part of Phase I, Minnesota aimed to demonstrate that a partnership can be forged with MaaS providers to conduct a demonstration with the above attributes. According to the Draft Concept of Operations (ConOps):

"Phase I – the project will explore how DBUF-related data could be accurately and securely transferred between a SM provider and MnDOT or the Minnesota Department of Revenue to understand how a DBUF would technically impact SM providers. In other words, is the transmission of data from a SM operated fleet vehicle to MnDOT even possible."¹²

The key strengths of the Minnesota approach are presented in Table 1.

Table 1. Key features of the Minnesota approach.
Pilot Program Aspect	Details of Minnesota's Approach
Recognition of efficiency of fuel tax	Minnesota's approach recognizes the unsurpassed efficiency of the fuel tax and its long and durable history. Using the mobility-as-a-service (MaaS)-based revenue collection structure is proposed to operate in parallel to the fuel tax rather than as a replacement.
Recognition of the need for differentiating tax based on vehicle type and time of day	The Minnesota approach recognizes that to be truly equitable, user-based fee alternatives will need to include sophisticated features such as consideration of vehicle weight, time-of-day, and indexing to inflation, even though some these approaches may not be politically viable at first.
Ease of user/stakeholder acceptance, equity, public opinion	Migration to user-based fees is likely to be publicly and politically acceptable because the new form of revenue collection does not involve personal vehicles.
Low system/administrative costs	Utilization of existing onboard technology and communications in MaaS vehicles will result in greatly reduced administrative costs—no need to create new and expensive technology and back office systems.
Privacy, data security, enforcement	Unlike other attempts at user-based fees, issues associated with personal privacy, data security, and enforcement will diminish with the Minnesota MaaS model.
Flexibility to expand/ nationwide applicability	A highly portable model will be developed that can be expanded easily and quickly around the nation and could be applied to other fleet operations.

Source: FHWA

The following section summarizes the key components of the Minnesota pre deployment activities as planned and conducted.

Key Components of the Minnesota Pre-Depoyment Approach

Collaboration With and Recruitment of Mobility-as-a-Service Providers

At the time the State submitted its grant application, MnDOT had established relationships with two local MaaS providers: HourCar and car2go, with 2,000 and 26,000 members, respectively, in the Minneapolis-St. Paul metropolitan area. Both providers had expressed interest in partnering in the demonstration. At the time, Minnesota was also working to engage other MaaS providers. However, soon after starting the program, car2go left the Minneapolis market.

According to updates shared by MnDOT in September 2018, MnDOT has had advanced discussions with two shared mobility service providers, HourCar and Zipcar, and is in the process of negotiating an agreement. Minnesota is planning for a third entity, Vision Systems Intelligence, to support the research data repository, including collecting anonymized per trip data from test vehicles and providing that data to MnDOT's partner, Minnesota, where researchers will conduct analyses.

Planned outcome: Determining interest and value proposition for MaaS providers and getting some providers onboard with the proof-of-concept and demonstration.

Key considerations at the outset of planned activities included:

Determining potential interest and articulating value proposition for MaaS provider participation.
Addressing privacy concerns through the use of telematics. As user-based fees would be applied to a shared vehicle and not necessarily an individual, and privacy concerns would be greatly reduced or removed all together. This approach is made possible by the MaaS platforms, which are embracing telematics technologies.

Key achievements of Minnesota's Phase I activities towards collaboration with and recruitment of MaaS providers include:

Developed communications plan and conducted interviews with MaaS providers to assess their feasibility and willingness to support the demonstration.
Developed role sheets for each MaaS provider identifying potential roles and responsibilities to support both the initial proof of concept as well as the potential future demonstration.
Initiated negotiations (currently underway) (now completed with HourCar) with MaaS providers to participate in development of the proof of concept. Minnesota is working to establish data use agreements related to how data would be safeguarded and used during both the proof of concept as well as the future demonstration.

Modeling Pricing Strategies and Exploring Multimodal Pricing Options

The Minnesota team worked with MaaS providers to explore multiple pricing schemes for user based fees, which MaaS providers will be charged during the trial period in Phase II. In exchange, the providers would receive fuel tax rebates in addition to other necessary trial financial incentives. Each pricing scheme was evaluated based on multiple criteria, including:

Effectiveness in changing travel behavior in a way that leads to more efficient use of roadway infrastructure.
Ability to recover fuel tax revenues that are forgone through rebates.
Extent and types of incentives created for participation by MaaS providers.
Cost of implementing the scheme both from an administrative perspective (for MnDOT) and from a compliance perspective (for MaaS providers and customers).
Other possible policy concerns.

Several options that are considered viable were planned to be applied later in the trial deployment period, when empirical data could be collected to analyze actual outcomes.

Additionally, MnDOT planned to conduct a study to investigate the feasibility of creating an 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, or riding a shared bike for one single payment.

Planned outcome: Research reports by Minnesota on modeling pricing strategies and multimodal pricing options.

A key consideration at the outset of planned activities was that, to be truly equitable, user-based fee alternatives will need to include sophisticated features, such as consideration of vehicle weight, time-of-day, and indexing to inflation, even though some these approaches may not be politically viable at first.

Key achievements of MnDOT's Phase I activities towards exploring pricing strategies include:

Developing the University of Minnesota report "A Framework of Pricing Schemes."¹³
Continuing work on modeling appropriate pricing strategies based on the shared mobility approach.

Stakeholder Outreach and Developing and Executing Legislative Strategies

A key planned outcome of the pre-implementation phase was to develop a demonstration plan that has support and commitment from all participants. This included MaaS providers, the department of transportation, State and local government leaders, and others. As part of this effort, stakeholders were identified and brought into the conversation to clarify their role, determine their interest, and incorporate their needs into the Phase II deployment. The models for the pricing strategies were to incorporate these variables and help determine the most viable options and partners for implementing them.

Through this effort, MnDOT worked to develop public awareness regarding the need for a user based fee system. The focus of the effort was to address the "value proposition" of user based fee systems for the public and to develop persuasive arguments as to why such systems are better than the current system(s). This included symposiums on user-based fees, other stakeholder meetings, and website support for the project. Concepts and issues discussed included:

Conducting an equity analysis.
Gathering decision makers' input.
Performing market research.
Determining effective applications for findings/recommendations.
Developing measures of support.

Planned outcome: Inputs to the demonstration plan that have support and commitment from all participants needed to make it happen.

Key achievements of MnDOT's Phase I activities towards stakeholder outreach include conducting interviews with stakeholders.

Planning and Design for Deployment in Phase II Demonstration Including Designing Back Office Operations

The main goals for this aspect of the Minnesota program was to execute an agreement with a MaaS provider(s) and to create a system architecture and back office design to efficiently collect user-based fees. In this phase, Minnesota planned to develop the ConOps and system requirements suitable for further design, building, testing, and operation with careful attention to completion of the subtasks identified below. The structured concept will include specific performance measures, targets, and capabilities associated with performance monitoring and performance management.

In this phase, the pilot deployment concept was designed in detail through the development of a Comprehensive Pilot Deployment Plan, which includes the following elements:

Project management plan, milestones, budget and timeline.
MaaS agreements.
ConOps and system requirements.
System architecture and system design and development.
Back office setup and operations.
Verification and reconciliation protocol.
Data collection plan and analysis of results.
Evaluation and monitoring of fee collection and operations costs.
Pilot deployment and system build out cost estimation.
Partner and customer support.
System testing and security operations interface.
Reporting plan/findings and recommendations.

Key achievements of MnDOT's Phase I activities towards planning and designing the Phase II demonstration include:

Drafting a ConOps.
Developing a risk worksheet along with mitigation strategies and responsibilities.

Table 2 provides an overview of key Phase I program activities conducted by Minnesota.

Table 2. Key Minnesota Phase I program activities at a glance.
Program Component	Key Achievements of Phase I activities	Lessons Learned
Collaboration with and recruitment of mobility-as-a-service providers	Negotiations (underway) with shared mobility providers to participate in development of the proof of concept. Finalizing non-disclosure agreements and memoranda of understanding with shared mobility providers.	Articulate value proposition for car share companies' participation. Achieve agreement on issues of data privacy and customer expectations.
Modeling pricing strategies and exploring multimodal pricing options	Developed framework for modeling appropriate pricing strategies based on the shared mobility approach.	To be truly equitable, user-based fee alternatives will need to include sophisticated features such as consideration of vehicle weight, time-of-day, and indexing to inflation, even though some these approaches may not be politically viable at first.
Stakeholder outreach and developing executing legislative strategies	Completed interviews with stakeholder panel, which explored Minnesota's DBUF concept viability, assumptions, advantages/disadvantages, and the political landscape. Completed interviews with shared mobility providers.	Issue of where any money is raised and spent is important. Funding should be dedicated to transportation-related projects and not spent elsewhere. Several interviewees brought up the need for current recipients of fuel tax revenue to continue to receive funds even if a distance-based user fee is implemented.
Gauging public interest and acceptance of a distance-based fee approach	Developed and conducted survey for current car-share members to determine baseline attitudes of this population, to compare with general public perspectives recorded in other studies, as well as to measure possible changes in Phase II.	Chapter 5 includes key survey findings.
Researching state-of-the-art in distance-based fee collections	Developed white paper on those mileage-based user fee projects completed or underway. Paper addresses the project design objectives, operations, and outcomes, among other considerations.	Technology, privacy, and data security aspects need to be further developed and explored through pilots. Public acceptance is growing, but will continue to be a key barrier. There does not appear to be any easy solution to the problem of scaling demonstration projects into full implementation.
Planning and design for deployment in Phase II demonstration	Drafted Concept of Operations	Not applicable

Source: FHWA

¹⁰ Minnesota Department of Transportation with the University of Minnesota Humphrey School of Public Affairs. 2016. "Proposal to Conduct Pre-Deployment Activities for a Minnesota Distance-based User Fee Demonstration," p.1. [ Return to note 10. ]

¹¹ Minnesota Department of Transportation with the University of Minnesota Humphrey School of Public Affairs. 2016. "Proposal to Conduct Pre-Deployment Activities for a Minnesota Distance-based User Fee Demonstration," p.1. [ Return to note 11. ]

¹² Minnesota Department of Transportation. 2018. Minnesota Distance-based User Fee Demonstration Plan, Concept of Operations, 90% Draft Final, St. Paul, Minnesota, p.5. [ Return to note 12. ]

¹³ Minnesota Department of Transportation and University of Minnesota Humphrey School of Public Affairs. 2018. Task 3 Report, Distance-based User Fee: A Framework for Pricing Schemes, St. Paul, Minnesota. [ Return to note 13. ]

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