BOX 6-1: LESSONS LEARNED FROM THE OREGON VMT PRICING PILOT

The Oregon DOT VMT pricing pilot was the first real-world experience (albeit a voluntary one) with comprehensive, distance-based pricing in the United States. The final report's findings include the following:

•  The concept is viable—The pilot program demonstrated that existing technology can be used in new ways and that a mileage fee can be implemented to replace revenues from motor fuel taxes. At the conclusion of the pilot program, 91 percent of the program's participants said they would agree to continue paying the mile- age fee in lieu of a motor fuel tax if the program were extended statewide.

•  Paying at the pump works—The pilot program demonstrated that the mileage fee could be paid at the pump, with minimal difference in process or administration for motorists compared with how they pay the gas tax. Like the motor fuel tax, collection of the mileage fee can be embedded within routine commercial transactions, with the bulk of it prepaid by the distributor in the form of the motor fuel taxes.

•  The mileage fee can be phased in—The study demonstrated that the mileage fee could be phased in gradually alongside the motor fuel tax, allowing non-equipped vehicles to continue paying the motor fuel tax while equipped vehicles pay the mileage fee. However, retro- fitting existing vehicles with the necessary technology at this point will be relatively expensive and difficult.

•  Integration with current systems can be achieved—

The study demonstrated the ability to integrate two critical existing systems: the service station point-of- sale system and the state's current gas tax collection system.

•  Congestion and other pricing options are viable—

The study demonstrated that pricing could be varied for different zones and time of day and that appropriate fees could be charged. This proves that the mileage fee concept could support congestion pricing and the assessment/collection of local taxes and other "zone- oriented" features. Furthermore, the area pricing strategy applied in the pilot program produced a 22 percent decline in peak period driving.

•  Privacy can be protected—The study demonstrated that privacy protection can be implemented, but there is a trade-off between privacy and information stored for enforcement and dispute resolution. Key privacy-related principles successfully integrated into the systems sup- porting the Oregon pilot included that no point location

data could be stored or transmitted, that all on-vehicle device communication must be short range, and that the only centrally stored data needed to assess mileage fees were vehicle identification, zone mileage totals for each vehicle, and the amount of fuel purchased.

•  The burden on business is minimal—While distributors and gas stations bear some new accounting burdens, ad- ministration is automated and can be integrated relatively easily into existing transaction processes.

•There is minimal evasion potential—The on-vehicle device was successfully configured so that tampering with it resulted in default payment of the motor fuel tax, thus negating the benefits of evasion efforts. This approach, however, will not address evasion issues associated with alternative fuel vehicles.

•  Implementation and administration costs are manageable—Implementation and administration costs for an approach similar to that used in the Oregon VMT tax pilot would occur in three areas: Service stations would incur capital costs to procure necessary system equipment and modify point-of-sale systems as well as operating costs for communications with a central database. In-vehicle capital costs would be determined by auto manufacturers and included in the price of new vehicles (costs to retrofit vehicles with on-board units (OBUs) are estimated at about $150 per vehicle). The administering agency (e.g., the Oregon DOT) would incur operating costs for auditing and providing technical assistance to service stations and motorists. Estimated auditing costs would include service station audits ($1 million annually for all services stations in the state) and auditing of non-complying motorists ($2 million annually, although these expenses could be recovered through fines for non-compliance) and would be in addition to costs to administer the current motor fuel tax.

•  Public acceptance is not guaranteed—Because all participants were volunteers, it is inappropriate to automatically assume their acceptance of the program would extend to the general public. In fact, volunteers indicated that they thought a smaller percentage of other people would find the system acceptable.

Source: James M. Whitty, Oregon's Mileage Fee Concept and Road User Fee Pilot Program: Final Report (Salem, OR: Oregon Department of Transportation, November 2007).

Internationally, Germany, Austria, and Switzerland have implemented various forms of comprehensive pricing, limited to trucks. In 2005, Germany, for example, began charging

The Netherlands is a notable example of a comprehensive national road pricing system. Although still in the planning stages, implementation could begin as soon as 2012

all heavy vehicles (i.e., trucks over 12 tons) for all miles driven on roughly 7,500 miles of motorways throughout the country.18 Tolls are charged per kilometer based on a satellite Global Positioning System (GPS) for most vehicles, and they vary by axle number (trucks with more axles pay a higher toll since they presumably do more damage to the road)19 and vehicle emission class (trucks that pollute more pay a higher toll). A manual online payment and on-road enforcement system is available for truckers who do not want to participate in the satellite-based system. Toll payments are in addition to existing motor fuel taxes and other fees; 50 percent of these revenues are spent on roads, 38 percent on rail, and 12 percent on waterways. Average tolls are 12.4 euro-cents per kilometer (equivalent to roughly 26¢ per mile at current exchange rates) and are adjusted based on vehicle emission characteristics. Initial findings from the pricing system indicate that the shift to more direct user charges has led to increased efficiency in Germany's heavy vehicle industry and provided benefits the German economy as a whole.20 However, there are significant differences between the German and U.S. freight and logistics systems, and it cannot be assumed that the results of the program would be the same in the United States