System Trials to Demonstrate Mileage-Based Road Use Charges (2010)

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109 APPENDIX A. RELATED TRIALS AND PROGRAMS The past decade has witnessed increasing interest in distance-based road use charges. This chapter briefly describes the pilot tests and program implementation efforts listed in Chapter 3 (for more in-depth discussion of some of the programs, see Sorensen and Taylor 2005). The cases are organized in three categories: general purpose distance-based road use charges, weight- distance truck tolls, and PAYD insurance/leasing. A.1. GENERAL PURPOSE DISTANCE-BASED ROAD USE CHARGES Distance-based systems for levying road use charges that would apply to all vehicles on the road have yet to be implemented, but more limited systems do exist. In New Zealand, a system of distance-based road use charges for passenger vehicles that do not pay fuel taxes (principally diesel-powered vehicles) as well as vehicles weighing in excess of 3.5 tons has already been instituted (Land Transport NZ 2008). The idea of developing more robust and flexible distance- based road-use charging systems, however, has received considerable attention in recent years. Well-known examples in this category include: • Oregon Department of Transportation Road User Fee Pilot Program • University of Iowa Mileage-Based Road User Charge study • Puget Sound Regional Council Traffic Choices Study • Georgia Tech Commute Atlanta study and trials • The planned Netherlands VKT (Vehicle Kilometers Traveled) system • The New Zealand road user charges Note that the United Kingdom has also reportedly conducted trials of distance-based road use charges but we were not able to locate documents describing the results. Oregon Department of Transportation’s Road User Fee Pilot Program. Under a mandate from the State Legislature, the Oregon Department of Transportation planned and conducted a pilot study of mileage-based user fees and area-wide congestion tolls. The 12-month pilot project took place from 2006 to 2007 and included 285 vehicles, 299 drivers, and two gas stations. Participating vehicles were equipped with OBUs featuring a GPS receiver to determine the geographic zone of travel (within or outside of Oregon and within or outside of a designated congestion charging zone) and a connection to the speed sensor to meter mileage (note that for a small set of participating vehicles, due to difficulties accessing the speed sensor, GPS was used to meter both location and mileage). To simulate the payment of mileage fees, billing data were transmitted wirelessly to an electronic reader at the pump of the participating gas stations, which in turn calculated the difference between the gas tax that would have been paid and the mileage fee. After an initial phase in which all drivers paid the regular gas tax, drivers were divided into two groups to test various pricing concepts: some were charged a flat fee of 1.2 cents per mile in one zone; others were charged 10 cents per mile during peak hours in the “congestion zone” but

110 only 0.43 cents per mile for other travel. At the beginning of the trial period, drivers received an endowment account, and mileage fees were debited from this account as the trial progressed. At the conclusion of the trial, participants received any remaining balance in the account. Thus motivated, drivers in both test groups reduced their overall VMT during the study, and the technology functioned as planned. For more information, see Whitty (2003, 2007, 2008). University of Iowa Mileage-Based Road User Charge study. The University of Iowa is conducting an extensive set of VMT-fee trials involving close to 2,700 participants in 12 locations around the country, including Albuquerque, Austin, Baltimore, Billings, Boise, Chicago, eastern Iowa, Miami, Portland (Maine), the Research Triangle in North Carolina, San Diego, and Wichita. Vehicles are outfitted with an OBU that combines GPS with an OBD II port connection; the GPS unit determines the location of travel, while vehicle speed data from the OBD II port is used to compute travel distance. Charges vary with two criteria–the vehicle’s fuel economy profile and the jurisdiction in which travel occurs—but are generally set to be revenue neutral in comparison to current fuel taxes. For example, the rate for fuel efficient vehicles in the 48 to 53 mpg range might be as low as 0.36 cents per mile; the rate for less fuel efficient vehicles in the 8.8 to 9.7 mpg range might be as high as 1.99 cents per mile. The per-mile rates might also differ by state to account for state-by-state variations in fuel taxes. Within each jurisdiction, however, all miles driven by a vehicle are charged the same rate; neither time nor specific location is considered. Data from the instrumented vehicles are transmitted wirelessly to a "back office" operated by the University, which then sends mock invoices to the drivers in all twelve regions on a monthly basis. Drivers continue to pay normal gas taxes, though; the invoices only demonstrate how much they would have paid if the system were fully operational. For further information, see Forkenbrock and Kuhl (2002) and Kuhl (2007). Puget Sound Regional Council’s Traffic Choice Study. The Puget Sound Regional Council conducted a study of distance-based, network-wide congestion tolls from 2005 to 2006. Approximately 275 households, with 500 vehicles in total, participated. Each vehicle was equipped with an OBU featuring cellular communications and a GPS receiver. The study was designed to test driver response to distance-based congestion pricing; tolls were levied on freeways and major arterials, with per-mile rates ranging from 0 to 40 cents depending on the link and the time of day (note that tolls did not vary dynamically with current traffic conditions, but rather were determined according to a pre-set schedule). The OBU detected when the vehicle traveled on a link subject to tolls, calculated the charge, and periodically uploaded the data to a central computer center. The OBU display also showed drivers the current cost per mile as well as the cumulative cost for the trip. To gauge driver response, the study team monitored the travel patterns for each participant before the trials began and then set up an individualized endowment account based on those patterns. Congestion charges were debited from the endowment account during the trials, but participants were allowed to keep any remaining balance at the end of the trials, thus creating a financial incentive for drivers to reduce their peak-hour travel on routes subject to the charges. Results from the study demonstrated that drivers did in fact change their travel behavior in response to the charges, and that the equipment functioned as planned. For more information, see Puget Sound Regional Council (2008). Georgia Tech Commute Atlanta study. The Georgia Institute of Technology conducted the Commute Atlanta study to examine the effects of converting fuel taxes, registration fees, and

111 insurance costs to variable costs. The first phase of the project collected baseline data from 475 vehicles in 273 households in 13 counties. In addition to conventional travel diaries, data were collected via GT Trip Data Collectors that were installed in the vehicles. These GPS devices collected data on vehicle location, speed, and acceleration every second. The second phase of the project studied travel behavior with a mileage-based incentive simulation. Participating households received rebates on travel costs based on their miles traveled in the preceding year; that is, if they drove fewer miles, they earned a certain number of cents per for each of the miles not driven (the number started at 5 cents per mile and increased to 15 cents). A third phase, to study the impacts of congestion tolls, was not funded. For further information, see Guensler and Ogle (2004). Planned Netherlands VKT system. The Dutch have been planning a system of road use charges for passenger and commercial vehicles based on vehicle kilometers of travel. Planners initially expected to launch the system as early as 2013 or 2014, likely beginning with trucks, will full-scale implementation for all vehicles by 2018; with the recent collapse of the Dutch governing coalition over foreign policy differences, however, further implementation efforts have been put on hold. The broad goals of the system, as planned, included reducing congestion, reducing emissions, and, more broadly, employing a “user pays” philosophy for raising road revenue. VKT fees were not intended to replace existing fuel taxes, which would remain in place; rather, the fees would replace, on a revenue-neutral basis, current vehicle purchase taxes and motor vehicle taxes (akin to annual registration fees), both of which are levied by the national government. The planned fee structure would vary by vehicle class (e.g., passenger cars, light commercial vehicles, heavy trucks), and within each vehicle class the fee would vary by such factors as emissions profile and vehicle weight. Additionally, rush-hour surcharges would be levied in areas prone to recurrent congestion. The planned implementation mechanism involved the use of an OBU that incorporates satellite positioning to determine location of travel, cellular communications to transmit billing data, and DSRC to assist in enforcement (mobile and fixed compliance check gates would be scattered throughout the road network to electronically probe passing vehicles and verify that their OBUs are operational). The technical design would meet relevant European road pricing interoperability and data protection standards. It was expected that private vendors would provide compliant OBUs that drivers could choose on the basis of price and value-added functions. The public sector would initially handle billing and collection, though planners anticipated that this function might be transferred to the private sector as well at some point. Prior to implementation, two trials were planned. The first, expected to last four months, would consist of a series of technical tests for key components of the system. The second, expected to last ten months, would involve 60,000 vehicles and focus on the functionality of the OBUs and the collection systems. For more information on the planned Dutch VKT program, see Dutch Ministry of Transport, Public Works, and Water Management (undated and 2009). New Zealand Road User Charges. Since the late 1970s, New Zealand has had a distance-based fee system in place for passenger vehicles whose fuel is not taxed at the source (mainly diesel) and vehicles that weigh over 3.5 tons. The fees vary by vehicle weight and the number of axles. Traditionally, passenger vehicle owners have been required to purchase licenses for a specific distance in 1000-km increments and display them in the vehicle, while trucks have been outfitted with a hub-odometer which measures distance by the rotation of the wheels. As of the beginning

112 of 2010, however, vehicle operators now have the option of installing in-vehicle equipment to meter mileage and pay the charges rather than installing hub-odometers or purchasing paper licenses. This option is offered by private service providers whose equipment has been certified for the collection of road use charges by the government. For further information, see Land Transport NZ (2008), New Zealand Transport Agency (2009) and New Zealand Ministry of Transport (undated). A.2. WEIGHT-DISTANCE TRUCK TOLLS Weight-distance truck tolls are not a new concept, and many states have in the past instituted this form of road-use charges. Previous programs were implemented through cumbersome manual means, however, and only four states currently levy weight-distance road-use fees. Within the past decade, though, several European nations have successfully implemented automated weight- distance truck charges through the use of electronic tolling technology, and this has stimulated a renewed interest in the concept within the United States as well. Examples in this category include: • The Austrian GO program • The Swiss Heavy Goods Vehicle Fee (HVF) • The German Toll Collect program • The Czech Republic truck toll • The Slovakia truck toll • The Oregon Truck Road Use Electronics (TRUE) pilot project Note that an effort to scope potential trials of truck VMT fees in New York, sponsored by the Greater Buffalo Niagara Regional Transportation Council, is also underway, though information about this project was not publicly available at the time of writing. The truck component of the New Zealand road use charging program, described in the previous section, also represents a weight-distance truck toll. The Austrian GO program. Successfully launched on time and within budget in January 2004, the Austrian GO truck-tolling program is managed by Europpass, a subsidiary of the Italian firm Autostrade. The GO program applies distance charges on the motorway for all vehicles whose maximum admissible weight exceeds 3.5 tons, with specific fee levels that depend on the weight class and the number of axles. From a technical perspective, the GO program is one of the simplest of the recently implemented or proposed truck tolling schemes reviewed here. To participate in the GO program (and thus avoid the inconvenience of paying tolls manually), each vehicle is equipped with an on-board unit featuring DSRC. These units communicate with overhead gantries located on different links throughout highway system. Each time a vehicle passes one of the 420 gantries distributed throughout the network, a distance charge for the link in question is applied. If the gantry fails to detect an on-board receiver, the vehicle will be flagged for investigation of possible toll evasion. One notable feature of the GO system is interoperability with the Swiss tolling program; by inserting a simple chip within their “Tripon”

113 on-board units, Swiss drivers traveling in Austria can pay their tolls automatically as well. For further information, see Schwarz-Herda (2004). The Swiss Heavy Goods Vehicle Fee (HVF). Following a lengthy political acceptance process, Switzerland successfully launched its heavy goods vehicle fee (HVF) on time and within budget in January of 2001. The HVF applies to all vehicles with a maximum laden weight in excess of 3.5 tons. The fee is calculated based on the distance driven (on all Swiss roads, not just the highways) as well as the maximum laden weight and the emissions class of the vehicle. The price structure is designed to account for both direct and external costs of trucking and to encourage a freight mode shift from road to rail. The supporting technology includes an on-board unit (mandatory for all Swiss vehicles and optional, though encouraged, for foreign vehicles) featuring GPS and DSRC, as well as a connection to the vehicle’s tachometer (including odometer information). DSRC signals from overhead gantries at border crossings (in the case of primary arteries) and/or the GPS position signals (in the case of smaller roads without DSRC gantries) are used to set the status of the OBU (within Switzerland or traveling abroad), and odometer information is used to register miles driven on Swiss roads. DSRC stations mounted throughout the network are also used to verify the correct functioning of passing trucks as a means to prevent toll evasion. For further information, see Balmer (2004) and Werder (2004). The German Toll Collect program. The German Toll Collect truck toll system was initially targeted for implementation in the fall of 2003, but due to technical and contractual difficulties the launch was delayed until January of 2005. Per European Union directive, the fee system applies only to vehicles over 12 tons and principally to use of motorways (some adjacent surface streets are tolled to prevent truck diversion). The price varies by distance traveled, by the number of axles (as a surrogate for weight), and by the emissions class of the vehicle. The overall fee structure is designed to recoup direct capital and operating costs to the motorway system imposed by truck traffic. The technology supporting Toll Collect involves an on-board unit equipped with GPS (to determine both entry to and exit from the motorway network and distance traveled), cellular communications (to transmit billing data to the central computer system), and DSRC (for enforcement purposes). Toll Collect is administered by a private consortium that collects the tolls on behalf of the German government. The government then spends most of the revenue on road maintenance and improvement projects that reflect government priorities. For further information, see Broaddus and Gertz (2008), Kossak (2003), Rothengatter (2004), and Ruidisch (2004). The Czech Republic truck toll. The Czech Republic recently implemented a DSRC-based weight-distance truck toll for major thoroughfares. The system became operational in January 2007 for trucks over 12,000 kg (13.2 tons), and was expanded to include trucks over 3,500 kg (3.8 tons) in January 2010. The managing authority is the Czech Ministry of Transport, but implementation is under contract to a private vendor. Fees are based on distance, vehicle types, and emissions class. The average toll rate translates to $0.35 per mile (freeway) and the system collected $350 million in 2008. Enforcement is based on automated number plate recognition (ANPR) for vehicles lacking the necessary metering equipment. Trucks are prohibited from operating on Sundays and during peak hours on Friday evening and Saturday morning. For more information, see AASHTO et al. (2010).

114 The Slovakia truck toll. In January, 2010, Slovakia introduced an automated weight-distance truck tolling system that uses OBUs combining cellular communications and GPS. All trucks over 3,500 kg are required to participate, as well as buses that carry nine or more passengers. The system covers approximately 2,400 km (1,500 miles) of roads, and the charge rate is based on vehicle category, number of axles, and emissions class. The system administrator is the National Highway Company, which has a contract with the SkyToll consortium (a joint venture between Ibertax and SanToll). During the first two months of operation, the system collected €12.8 million (US $17.4 million). The implementation of the system has been somewhat controversial; the government selected the highest bidder after finding the other three bidders ineligible, and truckers protested when the system was introduced, claiming that the units were incorrectly recording more miles than they had driven. For more information see Electronic Tolling System (2009) and SkyToll (2009). The Oregon Truck Road Use Electronic pilot project. At the request of Oregon Congressman Peter DeFazio, Chairman of the House Transportation and Infrastructure Committee, the Oregon Department of Transportation (ODOT) is working with an Oregon trucking company to test a GPS-based device that would automate the collection of the state’s existing weight-mile fee, which is currently implemented manually. The device, called Truck Road Use Electronics (TRUE), will record the miles that the truck travels in Oregon, as well as the declared weight and number of axles, and send the data to ODOT to produce the company’s weight-mile fee report. Goals of the project include demonstrating the ability to replace recordkeeping paperwork while ensuring the greatest accuracy for road-use reporting. The pilot project, involving five to ten trucks, began in January 2010 and was scheduled to last for 90 days. During this period, the participating company has been instructed to continue its normal processes for keeping mileage records and filing weight-mile tax reports, thus enabling comparison of the accuracy of the TRUE device. For more information, see ODOT (2010) and OIPAF (2010). A.3. PAY-AS-YOU-DRIVE (PAYD) INSURANCE / LEASING The PAYD insurance concept appears to be gaining significant traction, with many companies in the United States and abroad either offering or experimenting with this type of program. Note that some examples are more aptly described as mileage-based discounts, in which the rates depend, for example, on whether a vehicle travels between 0 and 2,500 miles in a year, between 2,500 and 5,000 miles in a year, between 5,000 and 7,500 miles in a year, etc. Even in such cases, however, it is still necessary to meter miles of travel. Though PAYD leasing – that is, varying the lease payment on the basis of miles traveled – has also been explored, to our knowledge this related concept has not yet been implemented in practice. Examples of PAYD insurance for which we were able to find documentation include: • Massachusetts, with multiple companies offering mileage-based insurance discounts • GMAC, offering mileage-based insurance discounts for OnStar customers in 34 states • MileMeter, offering PAYD insurance in Texas • Progressive Insurance, offering PAYD insurance in nine states • Aviva, offering PAYD insurance in Canada

115 • CoverBox, offering PAYD insurance in England • Hollard Insurance, offering PAYD insurance in South Africa • Nedbank, offering PAYD insurance in South Africa • Real Insurance, offering PAYD insurance in Australia Massachusetts. Massachusetts introduced competitively priced auto insurance in April 2008; previously, rates had been set by the state. Insurance companies can now offer discounts for low mileage: specifically, a ten percent discount for driving between 0 and 5,000 miles annually, and a five percent discount for mileage between 5,000 and 7,500. Mileage is verified by the Massachusetts Registry of Motor Vehicles. For more information, see Bingham et al. (2009) and Boston Consumer’s Checkbook (undated). GMAC. In 34 states, drivers of General Motors vehicles equipped with OnStar GPS systems can sign up for mileage-based insurance discounts. The discounts are based on mileage bands; for example, drivers who drive 5,000 to 7,500 miles per year receive a 34 percent discount over the standard premium they would otherwise pay, while those who drive 7,500 to 10,000 miles could receive a 26 percent discount. The mileage is calculated by the vehicle diagnostics system; location of driving is not used to calculate the premium. For more information, see OnStar (2007). MileMeter. This Texas firm offers PAYD with the cost per mile based on the driver’s age, vehicle type, and residential location. All miles driven carry the same cost. The driver purchases a six-month policy for a specific number of miles from 1,000 to 6,000; the policy ends when either the six-month mark is reached or the driver has driven the number of miles purchased. MileMeter does not actively keep track of the number of miles driven; if a claim is filed, it is matched against the policy, and the policy is considered invalid if the odometer reads over the specified number. For more information, see MileMeter (undated). Progressive Insurance. Progressive offers PAYD in ten states, under a program called MyRate. Pricing is based on distance driven but also takes into account the time of day (miles driven during peak hours and after midnight are more expensive than at other times of day) and sudden starts and stops. Drivers receive a discount on their next policy renewal. Discounts currently go up to 25 percent; drivers are also subject to a nine-percent surcharge if they are deemed more risky based on their driving habits. Mileage, time of day, and driving habits are computed with an OBU connected to the OBD-II port that transmits data wirelessly to Progressive at the end of each trip. For more information, see Donohue (2008) and Progressive Insurance (undated). Aviva (Canada). Aviva has a pilot program called Autograph offering PAYD insurance in the province of Ontario. Much like Progressive Insurance, from whom it licenses the technology, Aviva offers discounts based on distance driven, time of day, and speed; distance is the most important in terms of calculating the discount. While potential discount ranges between 5 percent and 35 percent, averaging around 20 percent (Aviva does not raise rates based on high mileage). The OBD II device that records the data requires the driver to take the device out, upload the data to a computer, and send it to Aviva. Aviva plans to move to wireless transmittal of data in the future. For more information, see Bettencourt (2005) and Insurance-Canada (2005). Note that

116 Aviva also offers PAYD in France and Turkey, but further information was not readily available in English. Coverbox (United Kingdom). Coverbox (owned by Wunelli Limited) offers PAYD insurance with costs based on distance and time of day driven (off-peak, peak, and “super-peak” periods). The per-kilometer cost is calculated for each driver; as Coverbox functions as a broker, drives can choose between quotes. Drivers estimate when they take out a policy the number of kilometers they think they will drive. They can either pay monthly, like a utility bill, or pay the whole premium up front and be credited or debited at the end of the premium period for any difference from their estimate. Kilometers are metered by the Coverbox, a GPS unit produced by Cobra that must be professionally installed and offers anti-theft protection. For more information, see CoverBox (undated). Hollard Insurance (South Africa). As with the Real Insurance program in Australia, Hollard offers PAYD insurance with a two-part fee, fixed and variable. However, the customer receives a monthly bill for the number of kilometers driven, much like a utility bill. The variable fee is applied for monthly distances driven between 417 and 3,200 km (259 to 1,988 miles) per month. All kilometers are charged at a flat rate, which is calculated separately for each driver. Kilometers are measured by a GPS device called Skytrax, produced by the firm Tracker and professionally installed. Skytrax offers roadside assistance and theft tracking. For more information, see Hollard Insurance (undated). Real Insurance (Australia). Real Insurance’s PAYD program operates with a two-part fee. Drivers pay a fixed fee per month (legal liability coverage) and a variable fee based on distance driven (comprehensive coverage). The initial purchase must cover at least 5,000 km, which can be rolled to the following period if the driver travels fewer kilometers. All miles are charged at the same rate. Real Insurance verifies mileage when claims are filed, and a claim can be refused if the odometer shows more kilometers than last purchased. The liability coverage remains in place even if the comprehensive coverage has run out. For more information, see Real Insurance (undated).