Implementable Strategies for Shifting to Direct Usage-Based Charges for Transportation Funding (2009)

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91 9. IMPLEMENTATION STEPS AND STRATEGIES As indicated in the preceding chapter, each of the three most promising options for the near-term implementation of VMT fees presents its own set of strengths and limitations. Moreover, there are key uncertainties regarding the likely costs and capabilities of certain administrative and technical components. This makes it difficult, absent additional targeted research, to specify with precision the optimal configuration for implementation by 2015. That said, prior work conducted in this arena does not provide a sufficient basis for outlining a set of planning and development steps that accommodates the near-term implementation goal yet offers enough flexibility to manage the risk surrounding remaining uncertainties. This chapter begins by laying out an approach that builds toward the near-term implementation of national VMT fees. Even if implementation commences in 2015, it may take time to phase in the required equipment for the entire fleet – particularly if the metering involves the use of an OBU. Two issues that will affect the duration of the transition include the cost of retrofitting existing vehicles and the level of privacy concerns surrounding metering based on vehicle location. As discussed in several recent proposals, it may be possible to mitigate both of these obstacles by developing a system in which users are not immediately required to install more sophisticated equipment, but rather are given the choice of choosing to opt in. It is thus useful to comment on possible incentives that could be used to encourage more rapid adoption. The chapter next discusses the potential advantages of an “open systems” approach to the development of the required in-vehicle technology. Broadly consistent with the opt-in transition strategy, the basic idea is that a national, minimal set of road use metering requirements would be developed. Technology vendors would compete for market share on the basis of price and add-on features (e.g., personal navigation or real-time travel information). Expanding on this discussion, the chapter considers the alternate roles that might be performed by public and private parties in the development, operation, and enforcement of a national system of VMT fees. 9.1. Managing Risk on the Path to Implementation Each of the implementation mechanisms discussed in the prior chapter offers compelling advantages, yet each suffers key limitations as well. Broadly speaking, the fuel-consumption- based mechanism offers more limited pricing flexibility, but it would also be much cheaper to implement and administer. The two options involving an OBU – including the OBD II / cellular device and the GPS device – offer much greater pricing flexibility, but at the cost of more expensive in-vehicle equipment and potentially more complex enforcement and administrative requirements. Additionally, acute privacy concerns may constrain the acceptance of either of the OBU mechanisms. If, however, the decision is made to implement VMT fees by 2015, then concerted efforts must begin shortly. Based on evidence from past studies and trials, the following planning and development steps may facilitate progress towards implementation by 2015 while helping to manage the risk associated with remaining uncertainty.

92 Implement Pay-At-The-Pump Collections. This payment option – requisite for the fuel- consumption-based estimates and optional with either of the OBU metering configurations – offers several significant advantages. The payment mechanism is already familiar to drivers, and it offers a means of charging for road use for vehicles lacking the necessary metering equipment, including foreign vehicles as well as older domestic cars. Though requiring an upfront cost to equip all fuel stations with electronic readers and an added burden on retail fuel stations, the option should none-the-less result in relatively low collection costs given that it involves the expansion of an existing revenue channel rather than the development of an entirely new collection apparatus. The pay-at-the-pump model also minimizes the risk associated with the transition to a new revenue system. Specifically, it provides a fallback revenue source – existing fuel taxes – should any element of the new system fail (Whitty 2008). Develop a Central Billing Agency that Supports Wireless Data Transmission. Regardless of the specific metering approach adopted, alternative-fuel vehicles will not be able to pay mileage fees at the pump. While such vehicles could pay based on periodic odometer readings, it may prove advantageous to develop a central billing agency with wireless data transmission capability. For one thing, this would reduce user burden, and it may well prove less expensive to implement than manual odometer inspections. Additionally, while the share of alternative-fuel vehicles is still low, it looks likely to grow in the coming years, and wireless communications to a central billing agency may prove the most flexible collections option for such vehicles. Implementing a central billing agency at the outset would provide the opportunity to explore alternate protocols and administrative arrangements while the volume of users is still low, hence lowering the risk should unanticipated problems arise. Any lessons learned in this process could be applied as the system is scaled up over time to accommodate more users. Resolve Uncertainties Surrounding In-Vehicle Equipment Options. Through targeted research, it should be possible to resolve remaining uncertainties surrounding the alternate technology configurations over the next several years and thus support a more informed decision regarding the most cost-effective metering platform. For the AVI device to support estimates based on fuel consumption, key issues include: • Cost and configuration of AVI device • Method of installing AVI device • Whether, and what form of, state support will be required For the OBD II / cellular OBU option, key issues include: • Whether the cellular location concept works in practice • Anticipated cost of device produced at scale • Anticipated cost of installing equipment in vehicles • Anticipated cost of ongoing cellular service • Methods for, and anticipated cost of, ensuring that users do not disable the OBU • Whether cellular location stimulates the same level of privacy concerns as with GPS

93 For the GPS option, key issues include: • Anticipated cost of device produced at scale • Anticipated cost of installing equipment in vehicles • Accuracy of metering while traveling in areas where the GPS signal may be weak or unavailable • Whether cost may decrease if GPS becomes standard vehicle equipment • Methods for, and anticipated cost of, ensuring that users do not disable the OBU • Whether, and by what means, current privacy concerns can be mitigated Proceed Based on Research Results. Depending on the research results, implementation could proceed in one of several directions: • If the two OBU options prove infeasible – from either a technology or cost perspective – vehicles could be equipped with a simple AVI device to enable mileage estimates based on fuel consumption. Because the AVI device should be inexpensive, a rapid transition period should be possible. • If it can be demonstrated that the OBD II / cellular OBU configuration works as expected and does not raise significant privacy concerns, the implementation effort could focus on this option. Given the higher equipment and installation costs, the transition may require a longer phase-in period. • If the expected equipment and installation cost for a GPS-equipped OBU can be reduced and current privacy concerns can be overcome, this option could be selected as the preferred configuration. Here again, the costs of retrofitting the existing fleet may motivate a longer phase-in period. 9.2. An “Opt-In” Strategy to Speed the Transition Period An assumption common to earlier VMT-fee concepts (Forkenbrock and Kuhl 2002, Whitty 2003) is that retrofitting existing vehicles with the required metering equipment would prove to be an extremely costly and cumbersome undertaking. To minimize start up costs, these earlier proposals suggested phasing in the equipment with new vehicle purchases, entailing a transition period of perhaps 15 to 20 years as the existing vehicle fleet turns over. If additional research demonstrates that the option of metering mileage based on fuel consumption represents the best near-term option, the expense of the required AVI device should be minimal, allowing for a much faster transition period. If, on the other hand, the decision is made to pursue either of the more flexible OBU-based metering mechanisms from the outset, then the issue of retrofitting existing vehicles must still be addressed. Recent proposals, however, have considered options for encouraging users to adopt the metering technology on a voluntary basis – to “opt in” to the system – so as to speed the transition period (at some juncture, of course, it may be necessary to require that all remaining vehicles adopt the equipment).

94 The discussion of opt-in strategies has identified at least three factors that could encourage more rapid adoption on a voluntary basis: lower costs, greater convenience, and access to desirable add-on functionality. Lower costs. Minnesota is currently planning to implement a VMT-fee trial that will incorporate a cost incentive to encourage voluntary adoption (Starr, 2009). Under the Minnesota concept, all drivers would be required to submit to periodic odometer readings as the basis for assessing VMT-based road use charges. Drivers willing to accept in-vehicle metering equipment, however, would qualify for a reduced per-mile rate when traveling in rural areas or at off-peak times, while drivers without the equipment would pay the undiscounted rate for all miles traveled. Applying this concept to the mechanisms under consideration here, all conventionally-fueled vehicles might be equipped with a simple AVI device by 2015 to meter estimated mileage based on fuel consumption, with a moderately high per-mile charge. Vehicle owners willing to voluntarily adopt an OBU, however, would qualify for lower rates for rural or off-peak mileage, though they perhaps might also be required to pay higher rates for peak-hour travel in congested periods. The potential to reduce fees should encourage at least some drivers to adopt the equipment sooner rather than later. Another option would be to raise fuel taxes during the transition period such that adopting VMT fees would be cheaper than continuing to pay fuel taxes. Greater convenience. By allowing for automated payment, in-vehicle equipment may be viewed as an opportunity to increase the convenience of paying road use charges. Imagine, for example, that conventional vehicles are provided the opportunity to pay fees at the pump. Owners of alternative-fuel vehicles might then be provided the option of either (a) submitting to annual odometer inspections as a means of levying VMT fees, or (b) adopting the in-vehicle metering equipment to automate the process. Many might view the latter option as being the more desirable. Access to desirable functionality. Whitty and Svadlenak (2009), along with other researchers, have made the observation that an OBU capable of determining the location of travel (e.g., via GPS) can be extended to offer many additional features that a driver might find desirable. In- vehicle navigation is the most obvious example, but many other possibilities exist, particularly when one considers ongoing advances in intelligent transportation systems technologies. The equipment might, for example, provide real-time traffic advisories specific to the current route of travel, estimate travel time to the intended destination given current traffic conditions, or identify available parking spaces in the nearby vicinity. Such features may further increase the number of vehicle owners willing to adopt an in-vehicle metering device. However, the programming associated with multiple functions can also increase security risks in data transmission, and further research in this area is likely warranted. 9.3. An “Open Systems” Approach Consistent with the “opt-in” approach, Whitty and Svadlenak (2009) also recommend consideration of an “open systems” approach in which the government publishes a set of standards that dictate minimum required metering capabilities and interface specifications for the OBU. Vendors would then be able to introduce their own products and compete for market share

95 on the basis of (a) price, and (b) the provision of additional features that motorists find desirable (note that each product would need to be certified as meeting the required metering capabilities). This concept is appealing in several regards. First, by harnessing market forces, it should help to increase the quality of the devices while simultaneously driving down cost. Second, it opens the door to the incorporation of new technologies as they emerge in future years. There would not be a single design that every driver uses; rather, vendors could continue to modify and improve their offerings as technology allows.