From Gas Tax to RUC: The Transition Our Transportation Funding Needs
With IIJA signed into law, here’s a look at why States should take advantage of the opportunity, and how they can test and implement a Road Usage Charging program that is both sustainable and suitable for their transportation needs.
The Infrastructure Investment and Jobs Act (IIJA) is often endorsed as introducing historic investments in transportation, connectivity, and water and sanitation to create more livable communities. The legislation will not only increase investments in these critical areas but will finally afford states the opportunity to leverage available technology and solutions to address long-standing problems.
One of the most pressing concerns when it comes to transportation in the United States has been the increasing funding gap. The reduction of revenue from the gas tax has accelerated in recent years, leaving transportation coffers at the mercy of frequent federal bailouts year after year. This gap is only anticipated to increase, especially with the growing popularity of electric vehicles (EV) and unpredictable trends like Covid and work-from-home.
With this ever-growing reality, it is crucial for governments to start thinking beyond the gas tax toward alternative funding solutions; and more governments are turning towards the use of a road usage charge (RUC) because of its adaptability and sustainability as a funding source.
With IIJA providing funding to establishing per-mile user fee pilots it makes the prospect of actual RUC implementation even more promising and possible. States are finally given the chance to not only explore the best RUC option for their context and constituents but are also given the resources to shift towards a more lasting and effective solution to the decades-long struggle of diminishing transportation and highway funding.
The Rise of RUC
RUC goes by many names, sometimes referred to as road usage/user charge, mileage-based user fee (MBUF), vehicle miles traveled (VMT), per-mile fee, or even the hotly contested three-letter word ‘tax ‘(🤮), but regardless of the name, the concept is the same: pay-per-use.
The first thing to remember is that usage is tied to the vehicle and road use, not to gas consumption. RUC allows states and the federal government the ability to collect the necessary funds to pay for infrastructure, even when vehicles are generally using less gas — as is the case with more fuel-efficient vehicles — or even no gas — such as EVs. This addresses one of the key issues related to why the gas tax is inefficient in raising funds for our infrastructure and is increasingly becoming obsolete: less gas consumption means less funding.
When EVs started to become prevalent, DMVs and DOTs didn’t have the means to collect from drivers to pay their fair share towards infrastructure funding. Initially, vehicle registration even for EVs was in the $50 range, this means that those who could afford to purchase these $100,000+ EVs were reaping the benefits of paying almost no additional costs to drive their vehicles on public roads; they contribute little to nothing to the highway fund while other drivers who own gas vehicles continue to pay for the infrastructure and road use through the same cost of registration plus the gas tax.
Some might argue that even if we were able to get to 100% EV adoption, vehicles would still have efficiency ratings. Comparing a big electric box truck to a light aerodynamic passenger car, one is likely to have better mileage per kWh, making the system of charging based purely on miles driven seem similarly disproportionate.
But with RUC, the way we charge for road usage is open to possibilities. For example, the box truck might also weigh more, especially when loaded up for deliveries. That weight puts a lot more strain on roadways than a passenger car. Taking this scenario into consideration, wouldn’t it, therefore, be reasonable and feasible to now start charging vehicles based on more than just a single factor? To charge vehicles based on weight or class? What about time or location? Or drivers’ income and access to other transportation options?
Coupling RUC with the technology available to us today, we can now aim to create a more sustainable funding system that charges an equitable amount — compared to today’s gas tax — based on multiple factors including vehicle parameters, the location, and/or the ability of drivers to pay.
Leveraging technology
When discussing RUC, it should not solely be a discussion on the policy aspect but also include a conversation on how we plan to implement it. With technological developments, we now have access to a wide range of capabilities that afford us the opportunity to implement the type of RUC policies that we need and want for our communities. We are now able to push the envelope on how we can utilize RUC to create a system that is adaptable, agile, and seamless.
As early as 2015, some car manufacturers have been producing vehicles that already generate the data necessary to allow decisions to be made based on usage and location. Today, almost every new vehicle sold has this capability built-in. Add-on technology or even a driver’s phone is increasingly available to cover older models or non-connected vehicles, further shrinking the gap in data availability.
The software programs able to leverage this information is usually seen as the last missing piece. The good news is companies, like ClearRoad, are now bridging the gap between data and implementation. Since 2017, ClearRoad has been at the forefront of RUC, with a platform capable of enabling governments the particular nuances necessary to truly change how revenue is collected on our roadways. This technology has been tried and tested, with pilots showing its potential and possibility.
Testing RUC in Utah and Oregon
Utah and Oregon have been pioneering states in pay-per-mile pilots. ClearRoad worked with the Oregon Department of Transportation (ODOT) through the OReGO program and with the Utah Department of Transportation (UDOT) to conduct the following tests in real-world scenarios, over two six-week periods, using real vehicle data.
The foundation of the RUC program for both states starts with distance-based usage or pure miles traveled on all public roads. This simulates how States could charge for the distance driven within their state’s boundaries; roughly proposed estimates place it at 1.5¢ per mile ($150 per year for 10,000 miles driven). Taking it a step further, the pilots also tested how individual cities can charge an additional fee for driving within certain boundaries, such as driving within heavily trafficked Central Business Districts.
Below is how the UDOT pilot implemented these two types of charges where the total miles driven in Utah was 9.96 miles, with 7.73 of those miles occurring within the Salt Lake City Metropolitan. You can see how the trip successfully categorized the miles and calculated the charges based on the assigned area and per-mile rate.
Expanding this concept to multiple jurisdictions, implementing multiple factors in the charging calculation, or even including toll transactions in the calculations, you now have a single point of revenue collection for all transportation-related activities. This consolidation of charging allows for seamless revenue collections related to cross-regional and even cross-border trips that a driver might take.
In a test conducted by ClearRoad with ODOT, we sampled a trip between Salem, OR and Portland, OR with some hypothetical rate differences based on the region. Through the ClearRoad platform, DOTs are able to break down prices and charging based on boundaries and even based on specific roads traveled by the vehicle.
The benefits of these capabilities go beyond just a consolidated method of revenue generation and collection. DOTs are able to use this system to take advantage of different scenarios of Metropolitan-based usage and inner-city usage as a tool for traffic management and to encourage modal shift, such as charging drivers a fee for entering heavily trafficked areas to encourage alternative means of transportation or car-sharing to spread costs.
The RUC experience for drivers
Armed with the data available today and supported by technology, Governments can now structure their revenue programs according to the unique needs or transportation objectives of their communities.
Lower-income drivers could receive a credit or tax benefit or other types of price incentives based on their usage and vehicle information; companies could pay higher rates for using less efficient vehicles or be incentivized by lower rates if they can transition to more efficient vehicles.
The ways in which a RUC program may be implemented are numerous and flexible, but should ultimately be designed to support the goals and match the ability of each community.
From the drivers’ perspective, they would be armed with data, allowing them to see trends of when and how much they drove. This gives drivers the ability to validate the data reported to the system, keeping transparency related to charges.
Below is an example of what drivers in the Oregon and Utah pilot saw on their end, as data on their trips and charges were reported to them. In the tests conducted by ClearRoad, you can see the daily breakdown over the six-week test-drive period within Oregon showing travel mostly within Salem but with some trips up to Portland, and Utah with occasional toll charges and trips to Salt Lake City.
Vehicle ID: Acura TL 2004
Miles Driven: 1,801.18
# of Trips: 184
Total Charges (without discounts): $80.96
Vehicle ID: Chevy Equinox 2019
Miles Driven: 1,747
# of Trips: 355
Total Charges (without discounts): $52.44
Of course for privacy, the actual origin and destinations of all trips would be removed before transmission to the agencies, and only the distances and areas traveled would be reported. Along with user anonymization, this means giving only the minimum data necessary to the agencies responsible, while protecting the privacy of the individuals taking the trips.
Payment of RUC could be flexible as well. Today, drivers pay for the gas tax every time they fill up the tank; paying for RUC could be even easier and fit current user behavior and various payment methods. It could come in the form similar to a utility bill, or a charge that could be paid daily, weekly, twice monthly, or monthly — whatever is easiest for vehicle owners.
As shown in the examples conducted in Utah and Oregon, ClearRoad is ready to support the future of our transportation networks. With our advanced Road Data Engine and Clearhouse Technology, we are prepared to help governments build out their programs exactly as they envision. ClearRoad can deploy its systems immediately, working with governments to take advantage of the opportunity presented by IIJA to explore and implement effective and sustainable transportation solutions.
For more information, please visit www.clearroad.io or catch us at the IBTTA’s Road Usage Charging conference in Denver on May 15–17, 2022.
