Oregon goes down the RUC road

Article taken from the July 2013 issue of RUC Magazine

In 1919, Oregon became the first state to implement a gas tax comprising a 1 cent per gallon as a means to pay for new roads and maintain the existing road network. Like in 1919, on Sunday July 6, 2013 Oregon became the first state to pass road usage charge legislation.

Steve Morello D’Artagnan Consulting LLP

Steve Morello
D’Artagnan Consulting LLP

The Oregon legislature passed the historic Senate Bill (SB) 810 which will pave the way to replacing the state’s gas tax program with a “pay per-mile road usage charge.”

The bill authorises up to 5,000 volunteers (owners or leases) with cars and light commercial vehicles (gross weight < 10,000 pounds) to pay a 1.5 cents/mile or 0.9 cents/kilometre road usage charge (RUC) in lieu of the current 30 cents/gallon at the pump.

The bill directs that the system should be operational by July 1, 2015.

With the advent of recent CAFÉ (Corporate Average Fuel Economy) standards requiring that light vehicles in the US have significant increases in average fuel consumption, the decline in revenue from the gas tax has prompted Oregon and other states to action to stem the tide of declining revenue exacerbated by reduced miles driven and increases in fuel economy.

This new measure requires the Oregon’s Department of Transport (ODOT) to undertake a number of activities in addition to limiting the program to 5,000 volunteers.

First, ODOT will establish a choice of methods for participants, and at least one must be non-location-specific comprising no GPS elements.

Other options will include a flat annual rate offering unlimited miles, a plug-in module that simply records miles driven, and a smartphone option that distinguishes in-state and out-of-state miles.

Second, the plan protects driver privacy: the bill also requires personally identifiable information to be destroyed within 30 days after it is used for billing.

Lastly, all proceeds from RUC will go into the State Highway Fund to be distributed 50 per cent for state highways, 30 per cent for county roads, and 20 per cent for city streets.

Another unique component of the bill is the requirement for ODOT to carry out significant communications with the public as a means to market and explain the program with a focus on improving public acceptance.

In six other states a number there have been a number of “quick fix” laws passed trying to address the declining revenue issue.

Washington State recently passed a bill requiring highly fuel-efficient vehicles to pay $100/year for electric vehicles—effectively an “annual registration fee.”

In Virginia, in addition to raising sales tax to, has passed a law imposing $64/year for hybrid and electric cars.

Several other state have addressed the financial shortfalls: New Jersey is reviewing $50 annual fee on electric and natural gas cars, Arizona is considering a 1 penny per mile charge for electric cars, North Carolina passed a bill calling for a $100/year charge for electric cars and $50/year for hybrids, and in Indiana a legislative committee is looking into annual road impact fees for electric and hybrid cars.

Other initiatives and studies have been conducted in several states.

In 2012, the Washington State legislature charged the Washington State Transport Commission (WSTC) and Washington State Department of Transport (WSDOT) with conducting a study to determine the feasibility of transitioning from the fuel tax to a road usage charge, and to assess the operational feasibility of road usage charge operations and technologies.

To support this joint effort, the legislature established the Road Usage Charge Steering Committee. Washington State is also studying the potential transition to RUC and was recently involved in the Oregon pilot scheme.

In October 2012 the Steering Committee unanimously found road usage charging to be “feasible” for Washington State and is in the process of developing recommendations for further study to the legislature. The foci of the effort include public outreach, policy development, and development of operational concepts.

In 2010, Minnesota embarked on a pilot project to demonstrate technologies to allow for fuel tax to be replaced with a revenue neutral “mileage charge”.

The Minnesota DOT (MnDOT) Minnesota Road Fee Test (MRFT) project demonstrated the feasibility of collecting anonymous probe data through the use of smartphone software in conjunction with other safety and user fee applications.

It included a technology demonstration with 500 volunteers and a policy study.

The smartphone collected position data once per second and sent that data anonymously to traffic planners.

Currently, MNDOT is considering next steps, as there is no more testing activity, and legislative activity did not advance towards a RUC bill (although discussions in this direction did occur).

The University of Iowa conducted a four-year study of in-vehicle technologies that could be used to support road usage charging, along with attitudes and opinions of study participants (Paul Hanley, et al., 2010. Public Policy Centre, University of Iowa. “National Evaluation of a Mileage-Based Road User Charge”).

Throughout the term of their participation in the study, several hundred participants provided their views the appeal of regarding road usage charging relative to the fuel tax, their level of concern about privacy issues, and their preferences regarding trade-offs between privacy protection and auditability and accuracy of billing statements.

Key conclusions include the following:
• Public perception of road usage charging is positively impacted by experience and exposure.
• Privacy concerns are a significant issue but not an insurmountable barrier to public acceptance of road usage charging.
• The ability to audit the accuracy of charges outweighs privacy concerns.
• Road user charging is technically feasible using currently mature technologies.
• Installation of road user charging equipment into existing vehicles may pose a daunting challenge.
• The cost of incorporating mileage-based charging technology into newly manufactured vehicles would be low.

Despite these positive signs of addressing the gas tax revenue issues no other state is as advanced as Oregon. With the passage of SB810, Oregon has commenced the transition to treating highway charging like other utility billing (water, electricity, etc.), where people are used to paying directly for what they use.

Even though the nature of the SB810 law makes Oregon’s per-mile program is not a mandatory program like the original House Bill, it is a major milestone, just like the decision to implement a penny gas tax back in 1919.