The passage of MAP-21 represents a historic milestone in the history of the Surface Transportation programs. The legislation contains many reforms that offer the potential to expedite the rebuilding and expansion of America's infrastructure. I want to commend Senators Boxer and Inhofe as well as Chairman Mica for their leadership in passing this bill.

However, the issue of revenue remains very much in play. We have managed to fund the Highway and Transit programs for two more years at current levels at which time we will face a new revenue crisis. Given the lack of political will to pass a gas tax increase as recommended by several commissions, we need to look at alternative revenue collection methods. The chart that follows shows where we could be in fiscal year 2015 if we fail to address the fundamental revenue issues.

Oregon: How to Make a Distance Based Charging System Publicly Acceptable: Take the Terrain That's Offered

by Jim Whitty, Manager, Office of Innovative Partnerships and Alternative Funding

Let's take a look into the not too distant future.  In a few years--say eight or ten--I will purchase a new highly fuel efficient automobile, perhaps an electric vehicle, if the battery life gets better, or a plug-in hybrid vehicle.  As part of vehicle registration, I will choose a method of reporting my miles driven from among various options provided me by the government.  Since I will want to keep things simple and easy, I will choose to use my new vehicle's telematics to report my miles to a tax processor.  For those not familiar, "telematics" is an on board computer with access to the Internet that does many things.  I will choose as my tax processor the company that has my data plan subscription.   I will direct my tax processor to debit my bank account for the amount of my mileage tax.  My tax processor will forward the net revenue to the government.  After I make these choices, I will forget about paying my mileage tax and simply drive.  Paying mileage taxes will be as easy for me as paying the fuel tax is now.

Do you think my prediction is far fetched?  Owners of the all-electric Nissan Leaf could do this today if a state legislature or Congress passes mileage tax legislation into law.   The Nissan Leaf already contains telematics that sends engine performance, driving habits and, yes, miles driven and where into the Internet cloud for access by the owner on the home computer.   That data is available to whomever the owner grants access.  State Farm Insurance Company has made an arrangement with Ford Motor Company to do just that for their pay-as-you-drive insurance customers.

How do we get to this future and what is Oregon doing to get there? 

1. Oregon has rejected the engineer's approach to mileage tax system design.  At ODOT I frequently hear "With enough money, engineers can design anything."  But focusing on the engineering aspects of a distance based charging system is a mistake.  Passing mileage tax legislation into law is not an engineering project; it's a public policy project.  Public acceptance is essential to changing public policy.
2. Oregon has adopted the approach of Psychologist Amos Tversky who said, "Let us take what the terrain offers."  This means the State of Oregon and the nation must adopt what is achievable and take an evolutionary approach to making distance charging a reality in the United States.  To determine what is achievable, the State of Oregon has learned to listen to the public.

Following our first pay-at-the-pump pilot program in 2007, Oregon DOT hit a policy stop sign.  While the pilot was regarded as successful, the public objected to our mandated government box that contained a GPS receiver.  Even the tech savvy said, "The government chose that device; I did not."  Oregon's mileage fee system developers had no pathway forward.  We had to rethink and redesign the system.   

Over the next couple of years, we noticed the smart phone market was growing quickly and these phones had GPS chips in them.  The users chose these devices from the marketplace and paid for the flow of data through private companies.  We also noticed people are buying Pay-As-You-Drive insurance policies that required reporting of miles driven.  We decided to redesign the mileage data collection system around what was already happening in the marketplace.

Based on this new perspective, we came up with the tenets for design of a new system. 

1. Offer motorists the ability to choose from among multiple options for reporting miles driven.  Let motorists choose a reporting method they find comfortable and acceptable.  Some reporting options may involve on board reporting technologies but non-OBU options should be provided as well.
2. There should be no government box.  The government should not select any particular technology for reporting miles driven.  Thus, there will be no requirement for GPS technology.  Instead of choosing technologies, the government should define what the system must do and let technologies available in the marketplace adapt to it.
3. The system should be open.  The government should set standards for an open system that will allow commercial off the shelf technologies that meet the standards to be used in the system.  This will allow the technologies and system to evolve with new capabilities and taxpayer preferences.  The standards will be set and published by the government.  The government shall select an independent certifications agency to apply the standards.
4. The government should enter into public private partnerships to assist in mileage tax collections.  Insurance and telecommunications companies do similar accounting activities now.  The government does not.

According to these tenets, Oregon DOT developed a new concept of operations for a road usage charge system for light vehicles.  Once mileage tax legislation is adopted by the Oregon legislature, the Oregon DOT will approve certification of on board units for use in the mileage tax system on board units in four initial categories: (1) an odometer reporter that reports all miles driven and contains no GPS technology-much like devices used in insurance industry for pay-as-you-drive insurance, (2) a smart phone app paired with the odometer reporter for differentiating miles driven out of jurisdiction, (3) an after market mileage locator unit, such as Garmin™ and Tom Tom™, and (4) factory installed telematics, such as OnStar™, Ford SYNC™ and Toyota's Entune™. 

ODOT will provide non-on board unit options as well.  Motorists could select a Pre-payment option whereby they could purchase miles in advance in lots, 1,000, 5,000, 10,000, and true up at the end of the year.  Or, motorists could elect out of the system altogether by paying a flat annual tax that buys them unlimited miles.  The flat annual tax would be a high number based on the rate multiplied by a large amount of annual driving, perhaps 35,000 or 40,000 miles.

Motorists will choose their method of reporting but also will choose who collects the mileage data, processes the tax and manages accounting.   Motorists will be able to choose the government process for these functions or certified services providers from the private sector. 

In the fall, ODOT will run a new pilot program to test the rudiments of this new mileage tax collection system.  The purpose of the pilot will be to test the fundamental building block for an open road usage charge system-the data message format that integrates mileage date from the car into the back end computer servers-but will also show policymakers how easy the system will be for motorists.  The pilot will test only three OBU options: the odometer reporter, the smart phone app paired with the odometer reporter and an after market vehicle location unit.    There will be two options for tax processing and account management: Oregon DOT and a private sector company. 

The pilot will have about 50 volunteer participants but they will be people of policy import, such as transportation commissioners, local transportation supporters and legislators.  Eleven legislators have signed up so far from both parties and both houses.  These volunteers will actually pay the mileage tax for three months and get a fuel tax refund or offset.  Nevada and Washington State are preparing to join the pilot with their own sets of participants but they will receive an illustrative billing because the states do not have authority to charge the mileage tax in a pilot as Oregon does.

Oregon's Road User Fee Task Force - the independent body created by legislation and appointed by the Governor, Senate President and Speaker and which as been guiding Oregon's policy development on road user charges for over ten years-is preparing legislation for the 2013 session to apply a road usage charge of 1.56 cents per miles on a small group of highly efficient vehicles to start the system, most likely owner/operators of electric vehicles and plug-in hybrids.  If adopted, this legislation would direct starting the system on July 1, 2015. 

Oregon's new pilot is a big part of the preparations for adoption of legislation in 2013 but Oregon DOT is undertaking several other efforts to improve the chances of passage.  One is a fleet forecast that predicts future revenues over 35 years-note that the trend line spikes downward under even the most optimistic scenario; another is preparation of an operational and transactional cost model that predicts system costs and taxpayer costs.  A third is preparation of an urban/rural impact study to determine the relative impact of a road usage charge system on rural and urban drivers. 

Most importantly, Oregon DOT Director Matt Garrett has directed me to undertake a round-the-state speaking tour to all of ODOT's area commissions on transportation prior to the 2013 session.  I have done one so far in a southwest Oregon rural community and our message was received well.   The idea of legislation for a mileage charge has received positive review from many local governments and most of the local media.  The local AAA organization has also been a positive force.

The Oregon Electric Vehicle Association is not pleased with having their vehicles targeted in legislation but individual members indicate that setting a target of vehicles over 50 miles per gallon would be a positive development.  ODOT will seriously consider that possibility and have a discussion on this point with the Road User Fee Task Force.

The Alliance of Automobile Manufacturers has been an opposing force to date.   It may be possible that removing the target on electric vehicles may change AAM's thinking.  In any event, Oregon DOT is designing the system to achieve public acceptance.  The alliance should take a deeper look at the new approach because the association may not understand Oregon's new public acceptance approach to distance charging compared to the earlier model.

The nature of our vehicles is changing.  This nation will get more fuel efficient in the years to come and as a result our consumption based revenue system will die a slow death that strangles our nation's ability to adequately maintain the road system.  The nation has very few feasible alternatives-a flat charge unrelated to use, tolling the interstates, raising the gas tax on an ever shrinking base, general funding, do nothing-none of which will prove acceptable to the public over time.  By adjusting our thinking on charging by distance by moving into the terrain that is offered, policymakers and system developers can make the charge on distance traveled acceptable to the public.  The terrain for starting a distance based charging system is available.  Let's take what the public offers!

Adapted from an address given by James M. Whitty to Congressman Earl Blumenauer's Transportation Finance Stakeholders Group at the Library of Congress, Washington DC, July 24, 2012