NEW OREGON ROAD TAX: Pay per mile? Sure! I’m on board with this…

… just as soon as Oregon politico types allow me to place a black box up their rear ends and allow me to charge them for every passing thought.

Here’s the story

Road User Charge Pilot Program

Early last century, the Oregon Legislature adopted the policy of covering road costs by charging vehicles operators based on their use of the roads. Oregon, then, has a long history of having ‘user pays’ as a state policy.

But things have changed – such as the nature of our vehicles. We’re seeing people driving electric vehicles for which they pay no fuel tax, and people driving plug-in hybrid vehicles for which they will pay a miniscule amount of fuel tax. It seems clear that operators of these new vehicle types are not paying their fair share for ‘using the road.’ This situation will only accelerate with more and more advances in technology.

Even more impactful, the move towards highly fuel efficient vehicles has become official government policy now that the federal government reached agreement with automakers last July for new vehicles to meet an average standard of 54.5 miles per gallon by 2025. While this development has positive implications for reduction of greenhouse gas emissions and reduction of our nation’s reliance on foreign oil, it has potentially devastating implications for the highway trust fund unless the funding mechanisms change.

The Oregon Legislature predicted these developments a decade ago when HB 3946 passed into law. That bill created the Road User Fee Task Force (RUFTF), which the legislature charged with proposing an alternative road funding system. After reviewing 28 different road funding options, the RUFTF recommended a fee based on vehicle miles traveled as the most viable alternative.

That bill also directed ODOT to run a pilot program demonstrating collection of the mileage fee according to policies adopted by the RUFTF. The department developed a pay-at-the-pump model to minimize the change motorists would experience, installed equipment in cars to count mileage, and implemented a successful pilot in the Portland area. It achieved positive regard by various policy bodies and organizations, including two national road funding commissions, AASHTO and the Miller Commission.

The motoring public (not including the pilot participants, who didn’t have any major issues with the pilot) did not regard the pilot program as well. The public expressed concern about privacy, because of the equipment’s GPS functionality, and worried about the expense and difficulty of complying with a new system as well as the potential for a large government bureaucracy to manage the new system. Experts noted the closed nature of the pay-at-the-pump model would hamper the new system because the technological aspect would be stuck in time and not evolve as these systems do naturally.

Redesign of the Road Usage Charging System

ODOT took heed of the critiques, listened to the public and recommended to RUFTF alterations to the concept of charging by distance driven. Under the new model, planned for testing in fall, 2012, there will be no requirement for a GPS device or a government box for any car. Rather, participating motorists will choose the method they want for reporting miles driven and for paying their bill from among several options. Should they choose an electronic means of reporting, they will have options from among technologies they already use for other purposes. Some may choose reporting directly from their odometer, like many do now for pay-as-you-drive insurance. Others may use their own navigation unit or On-Star, Ford’s Sync or other factory installed telematics. ODOT is developing a non-technology option as well that will likely involve buying miles ahead of use. Still others may want to pay a flat annual tax—buying essentially an unlimited number of miles—to avoid the reporting system altogether.

This new system will be open to ensure it can evolve along with changes in the marketplace. Further, the new concept envisions ODOT will outsource most of the system functions. This means private sector entities will obtain certifications to provide technologies, data collection, tax processing and account management. The role of ODOT would largely be reduced to auditing and enforcement.

New Pilot Program and Related Research

In 2011, as RUFTF pursued legislation applying a distanced-based charge to electric vehicles and plug-in hybrids, several questions arose. What are the on board unit options for reporting mileage and how expensive will they be to acquire? What will the new system cost to administer? How burdensome will the new system be? How many people will buy electric and plug-in hybrid electric vehicles?

The 2011 Legislative Assembly passed HB 2138 to direct RUFTF to consider additional factors when proposing pilot programs to ODOT. Last fall, RUFTF adopted new policies directing ODOT to run a new three month pilot program beginning in September to demonstrate the rudiments of the new open system. RUFTF also endorsed a research program to conduct a fleet forecast, to determine system costs, individual compliance costs and the impact upon rural an urban drivers. Results from this research and the pilot program will become available over the next several months.

In March 2012, ODOT issued a Request for Proposals to provide on board unit technologies, data collection, tax processing and account management services for this fall’s pilot program. In April, ODOT received ten proposals from consortiums totaling 18 companies. ODOT is currently in the process of selecting the winning bids and negotiating contracts. ODOT will have up to 50 volunteers for the pilot. This group will consist of ODOT management, RUFTF members, Oregon Transportation Commissioners and other VIPs, including members of the Oregon Legislature.

Volunteers for the pilot will actually pay a charge for miles driven during the pilot at a rate of 1.56 cents per mile. This rate was identified by the House Revenue Committee during the 2011 session as equivalent to what the average light vehicle driver pays in fuel taxes. Participants will also receive a refund or offset of approximated fuel tax paid during the period of the pilot. The states of Nevada and Washington will join Oregon’s pilot with their own volunteer participants.

In August, the volunteers will receive simple training on the system and install—or have installed—an on board unit of their choice. It appears at this point as though motorists will choose from among at least three on board unit options. One option will be similar to the snapshot device used by the Progressive Insurance Company. It has no GPS technology contained within it and reports all miles driven. We call this the Basic OBU. You will not want this choice if you drive a lot of miles out of state. A second option will involve the Basic OBU but it will have the ability to wirelessly connect to an Android smart phone so the motorist can exclude miles driven out of state. Those with an Android smart phone will download an APP and synchronize it to the Basic OBU. We call this the Bluetooth Connection. A third option will involve a GPS unit that can perform other Internet cloud-based functions similar to a smart phone or in-vehicle telematics. We call this the GPS Services option. Because this pilot will demonstrate a rudimentary system, we will not have available all technologies that could be used. For example, we don’t have an iPhone APP available yet nor do we have the ability for motorists to use factory installed telematics like GM’s On-Star, Ford’s Syncs and Nissan’s Car Wings. Those opportunities, and many others, will come in later demonstrations.

After making the on board unit selections, motorists will choose from two tax processors/account management providers. One will take the role of ODOT and provide basic payment services. The other will take the role of a private sector Certified Service Provider and provide more sophisticated payment services including access to online services.

The purpose of providing the volunteers choices is to demonstrate the rudiments of a new mileage charging system that is built upon an open marketplace. This pilot test will offer a peek into a future system whereby motorists will be responsible for choosing how they report their miles—from certified options, of course—and also their account management provider. Ultimately, participating motorists will have the ability to choose technologies they already use for other purposes and familiar account management providers as well.

Conclusion

Legislators are invited to join the pilot. ODOT believes experiencing the new road charging system will inform participants of the viability of a future system of charging by the mile and remove doubt about the state’s ability to implement an acceptable system that will generate revenue for our transportation system.

Activities to Date

RFP responses currently under review

The Oregon Department of Transportation invited multiple contractors to provide equipment and services related to conducting a road usage charge pilot program; the RFP deadline was April 17, 2012. The pilot, set to run later this year, will demonstrate that the proposed Road Usage Charge (RUC) system is viable, that the key system concepts and features are valid, and that the vendor community has the ability to provide and implement the system components required to operate an effective, efficient and open RUC System.

National, international interest in exploring “per mile fee”

ODOT received more than two dozen responses to its request for information related to road usage charge/mileage tax recently. The RFI (#00061) released on February 7, 2012, sought information from manufacturers and suppliers of mileage-based road use charging equipment, processes, and systems. It was a preliminary step in continuing the department’s investigation into the feasibility of a per-mile fee for electric and other non-fossil-fuel vehicles.

“It’s great to see the amount of interest in the marketplace,” said James Whitty, manager of ODOT’s Office of Innovative Partnerships. “I am also extremely pleased to see the mature level of industry technology and systems that will help inform the design of our next pilot project.”

ODOT intends to issue a formal Request for Proposals (RFP) and select one or more suppliers for implementing a demonstration system in support of a Road Usage Charge Pilot Project (RUCPP). These activities will allow companies to showcase their relevant qualifications and technologies and systems for mileage taxation systems to Oregon and other interested states. The results of the RUCPP will provide state decision makers essential information regarding the ultimate design and structure of a statewide (and possibly multi-state) mileage taxation system.

“Over the past several years, the marketplace for a mileage tax system and the thinking necessary to implement such a system has transitioned from conceptual to practical and viable solutions,” Whitty said. “This outpouring of interest demonstrates Oregon is on track to provide an acceptable range of choices for the public under an open architecture while offering a simple and understandable mileage tax system in Oregon and other interested states.”

As part of the RFI process, ODOT conducted an informational meeting, followed by 19 one-on-one sessions with representatives from the vendor community. Official RFI responses were due February 23, 2012, and ODOT received 28 RFI responses in support of the RUCPP, comprising 14 domestic, nine multinational and five international vendors:

1.Accenture

2.ACS

3.Banc Pass

4.Battelle

5.Brisa

6.CS America

7.Drive Sync

8.EROAD

9.GMV

10.IBI

11.IBM

12.Infosys/Skymeter

13.INRIX

14.Intel

15.Kapsch

16.Octo Telematics

17.Oracle

18.Raytheon

19.Samsung/FS

20.Sanef

21.Savari

22.Siemens

23.Telanon

24.Telvent

25.Tollink

26.Tollplus

27.Transcore

28.Verizon

Copyright ©2008-2012 The Valley Times. All rights reserved.

2 thoughts on “NEW OREGON ROAD TAX: Pay per mile? Sure! I’m on board with this…”

  1. IN New Jersey Senator Jim Whelan In OUR DIstrict 2 has submitted State Senate Bill S2531 that would charge .83906 cents per mile driven, he is up for reelection and is a democrat, who has no cosponsors on that bill. He has also cosponsored Senate bill S812 that would cost 5 cents for every bag we receive in stores wit h 4 cents of that money going to the state of New Jersey.

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