July 24, 2023|Garett Shrode, Jeff Davis and Robert Puentes
In 2009, the National Surface Transportation Infrastructure Financing Commission concluded that the United States needed a new approach to transportation infrastructure funding.i It recognized that alternative fuels and more efficient vehicle technology threatened the long-term stability of a financial system based on revenues generated from the federal excise tax on fuel purchases.
Today, those threats to transportation funding are not only still present, they are magnified. The national policy priority for electrification ensures that many new vehicles pay no motor fuel taxes, and for all vehicles the rate at which total miles driven in the United States increases has dropped significantly in recent decades. At the same time, federal policymakers are unable or unwilling to increase highway user tax rates, even to keep pace with inflation. The result is a system that has required over a quarter trillion-dollar infusion of revenue over only the last 15 years and effectively severed the principle of “user-pay, user-benefit.”
A system where drivers are charged for each mile driven has long been acknowledged as a viable and sustainable long-term option for national transportation funding. Known alternatively as a vehicle miles traveled (VMT) fee, mileage-based user fee (MBUF), or road usage charge (RUC), its application based on distance travelled (and potentially varied by geography, vehicle weight, time of day, and other variables) offers an enticing alternative. Indeed, states from coast-to-coast have begun testing their own systems and deploying pilot programs. These experiments are providing valuable lessons regarding privacy protection, cost of administration, equity, interoperability, and complexity of implementation.
With that as a background, the Infrastructure Investment and Jobs Act of 2021 (IIJA) requires the U.S. Secretary of Transportation to establish a national pilot to “test the design, acceptance, implementation, and financial sustainability” of a VMT-fee system. It requires the creation of a Federal System Funding Alternative Advisory Board that will provide an annual report to Congress and ultimately create recommendations for a possible permanent VMT fee.
To inform that federal initiative, the Eno Center for Transportation assembled an advisory panel, reviewed existing data and literature, evaluated best practices, and convened expert workshops. This resulting paper provides clear recommendations for the federal government to consider for an efficient VMT-fee pilot. Since the IIJA only authorized $50 million over five years for the program, Eno worked with expert stakeholders to develop a set of goals on which the program should focus and recommendations as to how to meet those goals.
For example, the federal program should commit to constructing the simplest implementation possible. This will help determine which data elements are needed to administer a full national VMT-fee program. In doing so, they should test scalability and, where possible, measure the impact on administrative practices and cost. It is also important for the federal pilot to distinguish between certain elements of a national program versus what the states are exploring today. The national test needs to consider cross-border travel with Canada and Mexico, as well as how to standardize elements such as vehicle classifications, weight definitions, and models for data formatting, sharing, and protection.
Time is of the essence, and Eno recommends the federal government assemble the Federal Advisory Board as soon as possible. The board should include a diverse range of voices, employ a subcommittee structure to address topics such as interoperability and standardization, and choose its chair from among its membership. The board should have an active role in identifying the needs for the national pilot, without overburdening it with explorations of elements already explored at the state level. To administer the program, the federal government should consider using commercial account managers to manage the data, payment, and technology needs of the pilot, as is done in most of the state and regional pilots.
The national pilot will also need to build on existing pilots and focus specifically on options and potential obstacles for a VMT-fee pilot for commercial trucks. For example, a national VMT-fee pilot for commercial vehicles should test various rate structures including a fee based on gross vehicle weight rating, gross registered weight, and vehicle class. This rate structure should be straightforward and not present undue reporting burdens for the trucking industry. Although commercial vehicles present unique challenges to international border VMT-fee testing, that element does not need to be prioritized.
The largest unknown for a national VMT fee is implementation on all private passenger vehicles. While other countries have addressed many of the implementation concerns with regard to VMT fees, there are still no widespread programs anywhere in the world that impose a fee on all passenger vehicles. Fortunately, state and regional level pilots in the United States have examined VMT-fee implementations for over a decade and provided many of the answers needed to determine their feasibility. However, questions remain and implementing a program at the federal level presents its own set of challenges. It is therefore important for the federal program to only test those elements that demand the unique perspective of a national system.
The national pilot should employ phasing to use the funds and time available more effectively. In other words, certain VMT-fee implementations can be tested in different regions, and they do not all have to take place at the same time or for the same amount of time. It should test the minimum data required to administer a national VMT fee, scalability, and administrative models in order to mitigate concerns over privacy. One potential model could use three different passenger-vehicle groups or cohorts to allow for the testing of different rate structures and administrative models, including how it might look for a state to administer both a state and federal VMT fee and remit the fee to the federal government, and vice-versa.
Finally, an education and outreach campaign will be a critical part of the exploration and recommendation of fuel tax replacements. IIJA gives the federal advisory board the opportunity to carry out a public awareness campaign regarding a national motor vehicle per-mile user fee, including distribution of information related to the pilot program, and consumer privacy. It is important for the education to go beyond what is proposed in IIJA and more generally provide education about the transportation funding crisis in the United States. Ultimately, the pilot will only be useful if it provides the ability to fully understand the benefits of the user-pay model and to weigh the potential of using a different funding model entirely.