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

Chapter 5. Major Findings

This chapter presents an overview of Minnesota Department of Transportation's (MnDOT's) proposed distance-based user fee (DBUF) system and summarizes key findings and lessons learned resulting from their Phase I efforts. The findings are presented in accordance with the evaluation framework provided in chapter 4 that is based on the Surface Transportation System Funding Alternatives (STSFA) grant evaluation criteria as provided in the notice of funding opportunity.¹⁴ It is important to note that, since MnDOT's Phase I scope included pilot planning and set up activities (pilot to be implemented in Phase II), several evaluation criteria were not directly addressed within the scope of grant-funded activities. These are anticipated to be addressed with future phases of MnDOT's alternative transportation revenue explorations. As such, this chapter only discusses the attributes of the proposed system that were explored, examined, or tested in some detail during Phase I.

Minnesota's Proposed System Overview

This chapter presents the major findings of the Phase I evaluation of Minnesota's proposed DBUF concept (Figure 3). The key features of Minnesota's Phase I efforts were:

• Designing an affordable DBUF program linked to the mobility trends of the future, particularly shared mobility.
• Creating partnerships that will be leveraged to demonstrate how existing onboard technologies can be used to collect a DBUF.
• Conducting a limited proof-of-concept demonstration of data transfer between shared mobility providers and MnDOT.

The key Phase I deliverables of Minnesota's program include the Concept of Operations (ConOps), stakeholder outreach and summary, and the 2-week proof of concept. The major findings included in this chapter are reflections of the concept developed and initial findings from the proof-of-concept demonstration.

Minnesota's DBUF concept is based on leveraging inherent efficiencies of linking the road usage charge (RUC) concept with the shared mobility model, most significantly:

• Taking advantage of the availability of vehicle telematics already capable of collecting mileage data in a secure manner that is the key to assessing and collecting mileage fees.
• Mimicking the efficiency of fuel tax collection by designing a system that is based on data exchange with a handful of shared mobility providers instead of millions of individual drivers. In addition to efficiencies in collection cost, MnDOT expects the proposed model to afford better data security and system reliability because these aspects are an integral part of the shared mobility providers’ business model.

© 2016 Minnesota Department of Transportation
Figure 3. Diagram. Minnesota mileage-based user fee demonstration proof of concept functional architecture.

Summary of System-Oriented Parameters

The following sections describe some of the system-oriented aspects of Minnesota's proposed DBUF model.

Data Security

Data security refers to the system's data source integrity and storage as well as secure transmission and access. Collecting mileage fees directly from the shared mobility provider for the mileage driven for each vehicle does not necessitate the collection of data or information for what particular driver has made a trip. The data being collected can be based solely on the qualifying, fee-generating mileage for each specific vehicle, regardless of driver and passenger.

The MnDOT system proposes to use a private third-party data repository where analysis of trip data can be used, with some data being available to MnDOT. Ultimately, the responsibility for data scrubbing will be in the hands of the mobility provider prior to turning it over to the Department of Revenue and the third-party data repository.

Cybersecurity relates to the protection of information confidentiality, integrity, authenticity, non repudiation, and availability. The following proof-of-concept provisions set the basis for sound cybersecurity that will be tested with the proof-of-concept demonstration:

• All data used in the proof of concept were sanitized, removing any personally identifiable information (PII).
• The shared mobility partners were responsible for ensuring that all data provided to the research data repository are sanitized.
• Firewalls and other network protection systems were incorporated to ensure that all proof of concept data are safeguarded against unauthorized dissemination.
• All data provided for the proof of concept were in comma-separated value or Excel spreadsheet format.
• All revenue reports provided by the University of Minnesota were in comma-separated value or Excel spreadsheet format.
• All data used for the proof of concept were considered research data and planned to be destroyed within 30-days of the completion of the proof of concept.

Charging Accuracy, Precision, and Repeatability

This parameter refers to the system's ability to produce a consistent assessment of fees repeatedly for identical travel. Car-sharing companies assess fees based on the time and mileage for each trip taken by a traveler. The data are already being collected using location technology that is embedded into each vehicle. In the case of a car-sharing company, the mileage and location of each trip is known and measurable. It is in the car-sharing company's best interest to collect accurate data on mileage and location.

It is unknown if the location accuracy is high enough to distinguish between public and private roadways, and the accuracy may be contingent upon the sophistication of the technology being deployed by the car-share company. However, it may not matter if the fee is being defined in the same way that the fuel tax is issued, which cannot distinguish the difference between public and private roadways.

Flexibility to Adapt and Expand

Flexibility refers to the ability of the technologies and systems within the proposed method to be upgraded or updated. However, the Minnesota DBUF system is not a single technology or system, but rather a series of agreements to collect mileage fees from commercial shared mobility operators.

The flexibility to expand is dependent on the technology deployed by these providers. An important distinction to make is the type of mobility provider that is being incorporated into the pilot. The Minnesota project is set to use a car-sharing service, which in essence allows somebody to rent a car for a short period of time. These services typically charge users for time and mileage without regard to the location and roadways that are being used.

Currently operating transportation network companies use location technologies to access additional fees for increased demand. This technology currently exists and presents an opportunity to expand how fees are assessed in different locations throughout different times of the day. While not part of Minnesota's 2016 STSFA grant activities, a fee system that applies to transportation network companies would give the opportunity to integrate demand pricing as a component of the price of the service.

While the future of mobility remains uncertain, this approach allows for a high level of flexibility to adapt and expand. The DBUF system proposed is a simple mechanism for collecting fees from a limited number of commercial operators that provide a mobility service. It is neutral to the specific technologies deployed to measure the mileage driven by a vehicle.

The flexibility of the system to adapt or expand is contingent on the expansion of shared mobility or mobility-as-a-service (MaaS) as a share of overall miles traveled. MnDOT's ConOps notes:

By some predictions, [shared mobility] will account for 35 percent of all personal travel by 2030 and perhaps as much as 90 percent by 2040.¹⁵

Regardless of the growth of shared mobility services, the Minnesota approach is likely to develop a road map for engaging with mobility providers and other potential intermediaries such as original equipment manufacturers that will provide the direct points of mileage data collection from individual travelers.

Enforcement and Compliance

This parameter deals with the ability of law enforcement to identify travelers that have evaded the system. MnDOT reasonably projects that the enforcement of the system would be as straightforward as the current fuel tax collection. The system's focus on commercial operators rather than individual drivers removes a significant enforcement challenge that is present with other RUC systems.

The operating model of the car-sharing companies provides little opportunity for individual drivers to evade the system. The operation of the vehicle is contingent on a driver having an account set with the vehicle operator and that vehicle operator maintaining vehicle operation for each trip. To state it succinctly, these vehicles are constantly monitored by the company, and their mileage and location is always known.

System Cost

According to the Congressional Research Service, one of the advantages of the Federal motor fuel tax (MFT) is that nearly all of the revenue is collected from roughly 850 registered taxpayers when the fuel is removed from the refinery or tank farm.¹⁶ In the State of Minnesota, the per gallon State fuel tax is collected from petroleum distributors.¹⁷ The total State tax rate is 28.5 cents per gallon for gasoline, diesel, and some gasoline blends.

Based on the stakeholder outreach conducted by MnDOT as part of Phase I activities, the high administrative cost of a distance-based fee structure was a key concern. As such, Minnesota's approach of collaborating with and limiting points of fund collection to shared mobility providers versus a multitude of individual customers found significant support within the stakeholder community.

MnDOT's ConOps states:

Minnesota's approach suggests the motor fuel tax, with all its advantages and deficiencies, is likely to continue for a long time. It is challenging to design a solution for universal replacement of the motor fuel tax that begins to approach its simplicity and efficiency. The cost of collecting the motor fuel tax in Minnesota is less than 0.5 percent of the fees collected. By the most optimistic forecasts, the cost of operations and retro-fitting vehicles with technology, as well as setting up the appropriate enforcement structures for a mileage-based fee, is likely to be in the range of 5-10 percent of total fees collected. By comparison, the motor fuel tax, while imperfect, is likely to remain in place for a long time.¹⁸

MnDOT is currently targeting a level of cost-efficient administration between that of the State's fuel tax and the sales tax collection. If the administrative costs can be demonstrated to be lower than other RUC efforts, the Minnesota approach is likely to become more widely considered by other States, particularly those already conducting pilots.

As the project moves ahead, MnDOT would need to explore categories of administrative costs or fees such as:

• Structural changes in the organization to support revenue collection, including integrating functions with the Department of Revenue. Given that MnDOT has not previously been in the business of collecting revenue, this will be a new function introduced within the organization. The Phase I efforts, as reported, have involved some coordination with the Department of Revenue; however, there may be additional needs in terms of organizational changes, including staffing needs, workforce development, and others, to administer the program.
• Electronic billing and collection charges, including credit card and bank fees. This may be already embedded in the fare collection methods used by shared mobility providers; however, depending upon the specifics of the agreement with the providers, MnDOT may have to account for a share of these expenditures.
• Revenue leakage that will need to be addressed through enforcement. Because the technology interface in the proposed demonstration is with the shared mobility providers rather than individual drivers, there is likely to be limited opportunity for violations and need for enforcement; however, these questions will become more relevant as the pilot progresses and with the proof of concept testing.
• Technology acquisition. For Minnesota's proposal, this is likely to be a less critical component of capital investment because the approach utilizes telematics already available on vehicles that shared mobility providers use.

Summary of User-Oriented Parameters

User Privacy — Perceived and Real

Both perceived privacy and real privacy are important factors in a RUC program given the public's potential for pushback to the program based on perceptions of the program's privacy properties and the potential for actual privacy breaches. Minnesota's Phase I activities did not include a detailed examination of privacy concerns. These are planned to be detailed in the agreement with the shared mobility providers and verified through the proof-of-concept testing and future demonstrations.

Privacy in a distance-based fee system pertains to:

• The type and quantity of raw data being collected. In Minnesota's proposed concept, minimal or no additional data may need to be collected across interfaces than what is being currently collected.
• How the raw data are treated (i.e., sanitized) and where in the system they are stored. Specific methods of sanitizing and scrubbing privacy-sensitive data would need to be detailed in future RUC pilot documentation. In addition, data aggregation rules would need to be clarified or standardized as well. Left unmitigated, high amounts of data aggregation may lead to privacy losses, especially if future RUC deployments collect higher resolution RUC source data. Higher resolution position time data collection may necessitate careful examination of data aggregation in conjunction with allowed data retention periods, especially as RUC programs begin to institute sub-regional, demand based RUC charging designed to influence driver behavior.
• The intractability of performing geo-temporal driver tracking. As RUC systems mature and more elaborate road-usage charging scenarios are developed, more fine grained location and distance information collection may become necessary. Aggregating too much of this data may introduce retroactive privacy breaches (i.e., tracking one's location history). In addition to data collected, the confidentiality protections afforded the data become paramount.

The following inputs were collected and documented as part of stakeholder outreach (Task 5 of the Phase I program) related to stakeholders' concerns about privacy:

The need for privacy during the collection and tracking of a distance-based user fee was a consistent concern of elected officials and advocacy organizations. Stakeholders recognized that tracking of individuals and their travel habits is looked upon poorly by the general public and could be a significant barrier to implementing a distance-based user fee. Several interviews discussed how using shared mobility to track distance traveled may be looked upon more favorably because tracking ride history information such as route and distance traveled are all considered features of shared mobility applications. While data tracking may be acceptable to the public when they opt into it and the information is kept by private companies, several elected officials brought up how attitudes would be different if the government tracked that information.¹⁹

The ConOps noted that public awareness and mistrust of the handling of PII is growing. The proposed demonstration model will not require government access to individual user accounts or any PII tied to individual users. Nevertheless, the MnDOT team plans to comply with industry data standards related to data protection and to perform necessary due diligence such as sanitizing PII before information is transferred from a shared mobility provider to the State.

MnDOT conducted a proof-of-concept focused test of how DBUF can be collected from shared mobility and automated vehicles. In collaboration with a shared mobility provider and a research partner, MnDOT collected data from participating vehicles for the purpose of assessing whether DBUF is feasible. The data from a variety of vehicles were sanitized and aggregated and transmitted securely to a data repository. The data were then used to create simulated invoices, assessing a DBUF of miles traveled and crediting fuels tax on gallons purchased. Finally, the Department of Revenue reviewed the simulated invoices and related data to determine potential integration with existing tax collection systems and processes and to confirm auditability.

According to MnDOT:

The proof of concept demonstrated that it is possible to accurately capture and report travel data from a [shared mobility] provider to state agencies without impeding motorist privacy. The DBUF collection and reporting has a small footprint and does not negatively impact [shared mobility] provider operations. Existing systems and interfaces can be used to collect and report DBUF-related data. There are still open policy considerations, including how to handle federal DBUF, federal fuels tax credits, and out-of-state mileage. Ultimately, the largest takeaway from the proof of concept is that this DBUF model is viable, cost effective, and scalable for a larger implementation.²⁰

While the approach to user privacy at this early state stage is sound, MnDOT could benefit from exploring standardized privacy policies for future demonstration.

Equity — Disparate Impacts Across Populations

Minnesota's Phase I activities did not include a detailed examination of perceived and real equity considerations. However, the following inputs were collected and documented as part of stakeholder outreach (Task 5 of the Phase I program):

The issue of equity in implementing a distance-based user fee can mean different things to different people. Representatives from Transit for Livable Communities, now known as Move Minnesota, and the Association of Minnesota Counties were both concerned about the disparate impact a distance-based user fee would have on low-income individuals. Concerns about the inequity for rural versus urban users were discussed during interviews with two politicians but both thought that this issue was addressed with this project. Two politicians brought up the issue of fairness to drivers with electric vehicles and vehicles that get different gas mileage…

Advocacy organizations and elected officials agreed that the issue of where any money raised is spent is important. Two politicians wished to ensure the funding is dedicated to transportation related projects and not spent elsewhere. Several interviewees brought up the need for current recipients of gas tax revenue to continue to receive funds even if a distance-based user fee is implemented.²¹

The MnDOT program could benefit from exploring and analyzing the following equity considerations along with preparation for deployment:

• All electric/fuel-efficient vehicles pay their fair share towards transportation expenditures. The premise for the Minnesota approach is that a majority of travel in the future will be accounted for through shared mobility providers.²² However, by several accounts, sales of personal vehicles is expected to continue to grow globally even if at a reduced rate than in the past.²³ There has also been a recent stagnation in shared mobility services evidenced by the exit of Car2Go from the Minnesota market in December 2016. The Shared Use Mobility Center notes that the success of shared mobility in the Minnesota/Twin Cities urban region requires stronger policy and programmatic support to fulfill its promise and serve a broader range of neighborhoods.²⁴
  
  Overall, there is sufficient uncertainty regarding the timing and extent of adoption of shared vehicle use over personally owned vehicles. Until the time of a significant transformation, a transportation tax system that is based on collections through shared mobility providers will not account for the mileage of personally owned fuel efficient and electric vehicles. If these vehicles continue to be a significant share of the vehicle mix—as personally owned vehicles—into the foreseeable future, the proposed concept would not allow a fair assessment of a distance-based tax on all electric and fuel efficient vehicles.
• Impact on low-income/rural drivers. While shared mobility is currently mostly an urban phenomenon, this may change in the future. If the shared mobility provider market expands into rural and exurban areas, the Minnesota approach will need to contend with both urban and rural equity considerations that the other pilot sites have been trying to address.
• Revenue distribution. As part of the stakeholder outreach conducted by MnDOT in Phase I, the question of the use of transportation revenues resulting from a DBUF approach was raised by some responders. There may be conflicting opinions on this topic among stakeholders, with some arguing for all mileage-based tax revenues to go towards transportation expenditures while others argue the need to maintain the funding streams that the current beneficiaries of the fuel tax revenue receive. A portion of the current fuel tax revenue—about $22.8 million in fiscal year (FY) 2017—is attributed to fuel use in non highway activities, such as operating all-terrain vehicles and motorboats, and transferred into various accounts related to those activities. This issue may be less relevant if both the fuel tax and a distance-based tax is simultaneously levied for different vehicle types.

Exploring the above equity considerations would involve examining potential adverse impacts, developing mitigation approaches, and designing education and outreach initiatives to address stakeholder concerns regarding such issues.

As the demonstration takes shape, Minnesota could also benefit from assessing the public's perception of equity and fairness of the RUC approach. As noted in National Cooperative Highway Research Program Synthesis 487, Public Perception of Mileage-Based User Fees (2016), equity and privacy are key concerns of the public. This synthesis, which reviewed results from 38 surveys and 12 focus groups, concluded that the public has numerous questions about the fairness and equity aspects of a RUC, including:

• Fairness to all drivers:
  • Is an RUC a fair way to raise transportation revenues?
  • Is an RUC more or less fair than a fuel tax?
• Is an RUC fair because it charges in direct proportion to highway use?
• Fairness to certain classes of drivers:
  • Is an RUC fair to people who drive vehicles that use little or no gasoline?
  • Is an RUC fair to rural drivers? (Two questions from two surveys).
  • Is an RUC fair to people who drive long distances for work?
  • Is it fair to charge a higher RUC rate for heavy vehicles, because they cause more wear and tear on roads?

The evaluation team held the opinion that Minnesota may wish to use this set of questions as a starting point to design an evaluation of how residents in the State perceive the equity and fairness of a RUC. For example, these questions and related concerns could form part of a future focus group study and other forms of public feedback and input.

Ease of Use and Public Acceptance

The degree to which a system is straightforward, easy to use, and accepted by public has been identified as a critical user need in MnDOT's ConOps. Under the Minnesota concept, public acceptance of the proposed model has two aspects:

• Acceptance by shared mobility customers.
• Acceptance by shared mobility providers.

Acceptance by Shared Mobility Customers: For acceptance by shared mobility customers, ease-of-use measures would include:

• Time and complexity of the sign-up procedure.
• Transparency, including sharing information such as mileage rate and mileage incurred on the receipt (similar to sales tax).
• Convenience of payment.

Acceptance by Shared Mobility Providers: For acceptance by shared mobility providers, ease-of-use measures would include a system with non-intrusive to regular operations that is easy to integrate with existing systems.

Minnesota, in coordination with MnDOT, conducted a survey to determine perceptions of car sharing members. Of the approximately 400 survey respondents, most were either slightly knowledgeable or not knowledgeable about the funding structure of Minnesota's transportation system, and a majority had not heard about DBUF. Figure 4 shows the survey respondents' perception on the extent that a DBUF will affect them.

© 2016 University of Minnesota, Humphrey School of Public Affairs
Figure 4. Chart. Survey respondents' perception on the extent that a distance-based user fee will affect them.

Additionally, the survey found that 40 percent of the respondents have concerns related to DBUFs. The key concern is how their data will be protected. The respondents also shared concerns about impact on low-income communities and shared mobility services.

The survey also found that, while a large number of respondents asked for more information before being able to express support for DBUF on all vehicles, the level of support for the concept increased when the question was posed about DBUF implemented through shared mobility services.

Additionally, when asked about the impact of DBUFs on the use of gasoline, a good number of respondents mentioned that DBUF would not incentivize less use of gasoline.

Likewise, MnDOT identified the following questions to explore further in future tasks:

• Why is public support greater for DBUF implemented though shared mobility services? Could this be related to greater trust in shared mobility companies?
• What are the factors underlying the perceived lack of impact of DBUF on the use of gasoline? Is it because respondents are largely already using electric or fuel-efficient vehicles?