A primer on road usage charging: Like tolling, only different…quite different

By Joe Averkamp,
Director of Strategy and Technology,
Conduent Public Transportation and Mobility

With California and Oregon having completed pilots for the their road usage charging (RUC) strategies, and Washington State poised to be next, states are starting to take the threat of reduced gas tax receipts seriously. The challenge starting to emerge is that improved fuel economy, greater adoption of electric vehicles (see Tesla Model 3), and little appetite for increasing the gas tax, will ultimately lead to budget shortfalls in transportation departments.

The Tax Policy Center most recent statistics¹ for 2014 indicate that states collected over $42.0 Billion in gas tax revenue. Federal fuel taxes raised an additional $35.2 Billion in this same time frame (including diesel and special fuels). The gas tax has been the workhorse for funding road construction, and providing maintenance and operations support. Filling potholes, clearing incidents, and managing congestion are all elements that go into maintaining a roadway.

There are essentially three ways to raise revenue based upon usage fees:

1. Gas tax: The primary means is the gas tax as described above. The challenge is that gas tax is an imperfect proxy for use and gas tax receipts will be at risk with improving fuel economy and a move to hybrids and electrics. For a state like California which collects over $6.0 B² in gas tax, a 10% decline in revenue collection can dramatically affect the state’s ability to maintain their road system. $600 million in revenue loss would result in reduced maintenance, and the potential for cancelled projects. States need to evaluate other approaches to mitigate this risk, since the number of roads don’t decline even if the funds to build and maintain fall.
2. Tolling: The second approach is to toll specific roadways. In this approach, the revenue is used for a much different purpose. On the toll road, the road operator issues bonds to fund the construction, and then uses the toll collection to pay for roadway maintenance and to pay down the bonds. Thinks of this as paying down the mortgage on a very specific asset. From a technology perspective, toll roads in the United States track users as they pass under gantries and use transponders or license plate recognition to bill users of the road. Users of the toll road have an account relationship with the road operator, and the user essentially opts-in to the system---they use the road, and account is established and the user is billed. Toll roads typically have pioneered new techniques in demand management and congestion pricing that are not used with the gas tax. Gas taxes are paid at the pump and are the same always. Toll roads can use time-of-day pricing or dynamic pricing to adjust the cost of use based upon the level of traffic. Toll roads are generally well-instrumented with signage and well-maintained since the toll road operator must entice users on to the roadway.
3. Road usage charging (RUC): The third and newest approach is RUC, which combines elements of both the gas tax and the toll road. RUC is similar to the gas tax in that when fully implemented, road usage charging will be assessed on all users, since RUC is intended to supplant the fuel tax and become a more direct measurement of road use. However, RUC fees will go into the general transportation fund like the gas tax, and not be used to underwrite the cost of a specific toll facility.

RUC is similar to tolling in that both systems use technology to identify vehicle and drivers, both use transaction-based systems to assess charges, and both have account management systems to bill users.

Among the challenges that RUC brings is the concern of users that they are being “tracked”. RUC systems are looking at approaches to address this issue. One approach is to not identify the vehicle’s location, but to just track their odometer mileage---in this case, an Oregon RUC participant, for instance, will pay for all miles driven whether in Oregon or California. If a user is willing to use a GPS version of the RUC transceiver, the system can differentiate the mileage, and know not to charge for mileage when the vehicle is out of state. A third, low-tech approach, is to let the user simply write a check for the maximum annual charge. States are considering setting the maximum charge based upon 35,000 miles per year—so at 1.5 cents per mile a vehicle would pay $525. Implementing a system such as this will require the ability to audit.

Road use charging technology brings the ability to augment the revenue collection process with value added services based on predictive and prescriptive analytics. Participants in a RUC system could take advantage of telematics services, wireless data telemetry which provides dynamic information about the roadway, and support location based services. With the coming wave of connected and automated vehicles, these benefits could be a significant component of the value story. It’s also part of the continuing integration of transportation services overall – visibility to transportation options and true costs, especially the cost of road use and parking in an urban environment, allows travelers to make informed choices about the best way to travel.

Governments will need approaches to raise revenue to fund the building and maintenance of road. States need to consider approaches to manage their risk associated with declining gas tax revenues. Tolling and road usage charging represent two important but very different tools that they have at their disposal.

For more information on tolling solutions, visit Conduent.com/tolling

Source:
1.http://www.taxpolicycenter.org/statistics/motor-fuel-tax-revenu
2.https://en.wikipedia.org/wiki/Fuel_taxes_in_the_United_States

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