Texas A&M Transportation Researcher Richard Baker on Mileage-Based User Fees

Richard Baker is an Assistant Research Scientist and Associate Transportation Researcher at Texas A&M University’s Texas Transportation Institute. He has worked extensively on researching mileage-based transportation revenue generating mechanisms and will discuss his findings with members of the CSG Transportation Policy Task Force at the CSG National Conference in Austin on December 1, 2012 (see the task force agenda here and register for the conference here). I interviewed Baker for an article in the October 25th issue of the Capitol Ideas E-Newsletter. Below is an extended transcript of our conversation.

CSG: Much of your research in recent years has focused on mileage-based user fees. What would you say are the biggest hurdles to implementing such fees either nationally or on a state-by-state basis?

Richard Baker: “The biggest challenge is one of the most obvious ones and that’s public acceptance. The public does not really understand how we currently pay for transportation infrastructure development. The transportation community has been looking at mileage-based fees as a replacement for the existing system and mileage fees--depending on the type of system that’s being talked about—appear to be much more complex, much more intrusive, much more expensive than the current system. And so the public doesn’t really see why we’re even talking about this sort of thing. And one of the reasons for that is they don’t really understand how the current system works. They don’t understand that fuel taxes … are the primary source of funding for transportation infrastructure development. They don’t know that the fuel tax is actually an excise tax that doesn’t return more revenue when the price of fuel increases. They also don’t understand that because it’s an excise tax, as vehicular fuel efficiency increases, there is going to be less and less revenue returned per mile traveled. So there’s a public acceptance barrier that’s tied to public education on the transportation system.”

“Additionally, there are strong concerns about privacy. All of the pilots with the exception of one that Nevada is doing right now … All the pilots—Puget Sound, University of Iowa, Minnesota and Oregon—they all used some form of in-vehicle device that was capable of accounting for location by using GPS. So the public sees this and they think that what’s going to happen when a mileage fee system gets put into place, the government’s going to start tracking mileage and—what’s even more scary to them is the government could be tracking location. That’s a significant obstacle … You can do a mileage fee by just doing an odometer reading. There are issues with that but you can implement something that can account for mileage without collecting location.”

“Another challenge is overcoming the cost of the system. Most estimates put the cost of the current fuel tax collection at about 1 percent of gross revenues. We don’t really have a lot of good estimates for what a mileage-based fee system, particularly a national system, but most estimates put it at about 7 percent at least. So there’s a significant challenge in getting that cost down.”

“A lot of these technology and privacy concerns can be overcome if you put a system in place such that technology would be voluntary, where basically you could use technology to discount out-of-state mileage and things like that. That poses a significant problem in terms of developing technology standards and how are you going to have a voluntary system operating side by side with a mandatory system. So there are just lots of policy issues that also need to be overcome. But in terms of the single biggest obstacle, that’s going to be public acceptance. That’s been most of the opposition you see for this from federal and even state lawmakers being driven by public opposition to talking about this.”

CSG: Back in 2008-2009, there seemed to be a groundswell of support at the federal level for the concept. But while the pilot projects in states have continued in the last few years, the mileage-based user fee concept seems to have taken a bit of a step back at the federal level. There’s been sort of a political backlash or hesitation to support the concept. Do you think that’s been the case?

Baker: “I would definitely say that’s been the case. I can’t really comment as to why that’s the case. I’m not sure why there’s been a step back. But I would say the climate has definitely cooled with regards to looking at this at the federal level. There are still quite a lot of state level initiatives going on and in fact most of the work being done on this is actually occurring at the state level. As I said, Nevada DOT currently has a small field test of some mileage-based fee assessment technologies. The Minnesota Department of Transportation is doing a field test using smartphones right now in the Twin Cities region. And Oregon is actually looking to perhaps implement an electric vehicle-based mileage fee system. So pretty much everything that’s being done right now is being done at the state level. So there’s still quite a bit of interest there. But with regards to interest at the federal level, that has definitely cooled here in the past few years.”   

CSG: Do you think there is still a belief that a mileage-based revenue system can one day be a replacement for the gas tax at the federal level and will it take states implementing a mileage-based system and having success for the idea to take off again in Washington?

Baker: “I think there is a sense at the federal level that there needs to be a transition to more usage-based funding mechanisms. Now whether that’s a mileage-based fee system or not remains to be seen. But there is definitely a belief that there should be a shift to more usage-based. I do believe that, yes, success at the state level would facilitate this being looked at more seriously at the federal level. I mean let’s remember that the fuel tax started out in Oregon and it wasn’t until a lot of states had implemented fuel taxes that the federal government sort of got on board and said ‘well hey this is a great idea. We should be looking to do this ourselves.’ I definitely think there are some parallels (with) the development of the fuel tax at the state level and that success at the state level in looking at these different types of fee systems will translate into interest by the federal government.”

CSG: What has been learned from the various VMT pilot projects that have been conducted around the country and how has the vision for a VMT system changed in recent years? Do you think there is a different role for government envisioned now as opposed to a few years ago?

Baker: “That’s a very good question and it’s actually a very interesting topic. What we saw with the first round of pilots (such as) the Puget Sound Regional Council … (which) turned into a mileage-based fee pilot kind of after the fact, they were really more interested in looking at how travelers would respond to network road pricing. They happened to use an in-vehicle device that accounted for mileage and location. Oregon was interested in looking at if this was a good idea and can we build a system that ties into fuel purchases. And the University of Iowa doing sort of the same thing, just looking at are these possible, are these feasible, can we build these systems and will the public like them. Those were sort of the first generation pilots.”

“What we’re seeing here recently (is) more of a shift (to) looking at how to actually get these systems off the ground. How would we actually go about implementing them? If we look at Minnesota for example, one of the things that we’ve seen in earlier pilots and what we’ve seen in our research here in Texas is that it’s really going to be difficult if not impossible to have sort of a single, mandated technology. The technology that was used in Puget Sound and in Oregon and in (the) University of Iowa (pilot), everybody had the same thing. Everybody had basically a proprietary solution. Everybody had the same thing and if you were to implement that, everybody would be required to have this one piece of equipment. Well Minnesota, what they were looking at, is can we build a fee system using off-the-shelf equipment. Now, they are using a single type of cell phone. But what they’re doing is they’re exploring the ability to develop a fee system using technology that folks could go out and choose for themselves, giving people an option.”

“Now what Nevada is looking at is sort of going the opposite direction. What they’ve learned through their efforts (is that) there is a very, very strong privacy concern to all this and so what they’re doing is they’re actually looking at how to do mileage fee systems that are going to have the maximum level of privacy protection. They’re not collecting any location data at all. They’re looking at a system that basically reads mileage—I think it’s through the OBD, the on-board diagnostic port. I think that’s what they’re using. I’ve had trouble getting details on exactly how Nevada’s system works. But they’ve basically been developing a system where mileage is read from the odometer or from the various components that feed information to the odometer. They don’t want to collect any location data. And they’re looking at ways to tie that to fuel purchases. They basically want to develop a system that is most like the fuel tax as possible because that’s what they’ve found in their research and that’s one of the things that came out of the Oregon pilot. Folks really like to have the ability to pay for these mileage fees in conjunction with their fuel purchases, which is what they’re all used to.”

“Now, what Oregon is doing right now is they’ve also concluded a single, sole-source technology solution is not the way of the future, that you need to have a system that supports lots of different technology applications, lots of different vendors. They’re going for an open systems approach. And what they’re looking to do is they’re having many, many technology vendors develop their solutions. They did an RFI a while back… But they’re looking at basically building a system that would facilitate lots and lots of different vendors, where people could pick basically the type of technology they’re comfortable with.”

“I would say that one of the big lessons coming out of the initial round of pilots was that no matter what, moving forward … driver privacy is going to be a big deal and that we’re going to have to facilitate options for people in order to address those privacy concerns. And Nevada’s looking at an option where there aren’t really any privacy concerns because no location data is being collected. And then on the other hand you’ve got Minnesota and Oregon, who are looking at providing the maximum range of technology choices for drivers.”

CSG: Do you think if states begin adopting mileage-based user fee systems that we’re likely to see different models emerge around the country as a result of these different pilot project approaches?

Baker: “I’m not really sure to be honest. Most of the states right now that are doing this type of research are actually in contact with each other. Nobody’s really doing anything in isolation. They’re all talking together and all of these issues are being discussed. So I’m not really sure to what extent you would see systems being developed in isolation. For example, Oregon is going with the open systems approach. I don’t think that anybody is really looking at doing a closed system approach. So really if everybody develops an open system mileage fee system in the right way, it shouldn’t really be too big of a challenge to make them all work together in the event that we go to a national system. But I guess in answer to your question, it’s possible that that would happen however two caveats: I don’t really know when we’re going to see any of these implemented. Oregon is sort of leading the charge. If it’s going to happen, it’s probably going to happen there first. Second, I’m not sure that even if these did get off the ground, if we did start seeing systems implemented, I‘m not sure how different they would really be because everybody is talking to each other.”