Road usage charging and its impact on government transportation

The last decade has seen significant changes in the way we work, travel, and pay for services. Governments have had to adapt to these changes and begin to plan for a future where the rate of change is not slowing down. For example, continued pressure to plan for a greener, more environmentally friendly future is top of mind for governments and individuals alike. As more changes are made to reduce our environmental footprint, this will have direct implications on how we live and work, and governments will have to keep up to continue providing critical services.

What is road usage charging, and why are states looking to implement it?

Currently, fuel taxes are used to maintain and modernize critical transportation infrastructure projects. Federal and state fuel taxes are collected each time someone pays to put gas in their vehicle, as it is included in the price per gallon. These taxes were intended to fund major projects, but recent events have begun to make that difficult.

As governments have pushed for continued electric vehicle (EV) adoption, even providing incentives to individuals who choose to buy electric, the need for gas has gone down. The increase in EVs and hybrid vehicles, in addition to improved fuel efficiency in modern engines, means people are buying less gas than before. Add in the impact of the COVID-19 pandemic that saw a push to remote work and fewer people on the roads, and governments began to feel the impact of a future without gas-powered vehicles. As fewer gas taxes are being collected, and therefore less funding is collected for infrastructure projects, governments are beginning to look for ways to offset the funds that were previously collected via fuel taxes.

There are several options being considered, particularly to make sure EV owners are charged fairly despite not needing gas. For example, governments could charge EV/hybrid owners additional taxes or fees to offset the lower gas tax payments. States like Arkansas, Hawaii, Illinois, and Washington have enacted laws to add new registration fees for plug-in EVs and certain plug-in hybrid vehicles.¹ More universally, governments and tolling agencies could increase the installation of tolling devices that charge all vehicles, incorporating tolling devices into any new road or highway and/or adding toll requirements to existing infrastructure. Another option, and one that is growing in popularity, is road usage charging (RUC).

Road usage charging, also known as pay-per-mile, charges each car for the use of roads. Rather than taxing at the gas pump for the amount of gas used to power the vehicle, RUC charges based on miles traveled on roads. This provides a more level playing field that requires everyone to pay for actual road use, independent of fuel efficiency or EV ownership. This has drastic implications for governments, as it is a new revenue stream that can be used to fund critical infrastructure projects.

For example, Oregon’s OReGO program charges drivers 1.9 cents for each mile they drive. The money is then used for their State Highway Fund, which is used for maintenance, repairs, and upgrades to the state’s roads and bridges. Currently, OReGO is an opt-in program with incentives for citizens who choose to participate, such as credits for fuel tax or reduced registration fees.² Other states such as California, Hawaii, Ohio, and Washington have also launched pilot programs, many of which were partially aided by federal funding.³ The FAST Act established programs like the Surface Transportation System Funding Alternatives (STFSA) Program to provide states funding for initiatives such as these and allow them to explore alternative revenue mechanisms.⁴

What are some of the key considerations around shifting to RUC?

As more states begin exploring RUC, they must consider several key factors. These include implications on finances, staff headcount, technology, and constituent satisfaction, to name a few. Some of the most top-of-mind considerations are explored below.

• Tracking and charging for road use
  • To effectively secure revenue from RUC initiatives, states must have a robust system in place to track and charge vehicles on the road. Options include charging an annual fee upon a vehicle registration odometer reading or placing a tracking device in each registered vehicle. Both options come with their own strengths and challenges and must be understood in the context of existing technical infrastructure.
• Ensuring accessible travel and equality of charges
  • In many cases, individuals from rural areas will be driving a greater number of miles simply because of their location. Governments should consider this when developing a pricing structure for road usage charges. Additionally, they should consider lower-income individuals and ensure that RUC does not impose too much of a financial burden. This leads to conversations about universal pricing or a pricing model dependent on location, income, and other factors.
• Maintaining constituent security and satisfaction
  • Implementing RUC will impact the day-to-day lives and finances of travelers in a big way. Governments must ensure they do everything possible to protect their constituents’ data and privacy and do not cause too much of a disruption to everyday life. RUC must be implemented in a way that does not disincentivize travel too since many states rely on travel and tourism as an additional revenue stream.

While there are notable benefits to RUC, it requires careful planning, and the constituent experience must remain top of mind throughout the process.

Preparing for the future of infrastructure funding

No matter the implementation tactics or plan, technology will play a key role in the rollout and administration of RUC. Whether it involves modernizing an existing system, developing a new one, or a combination of the two, effective use of technology will be a key success factor. Teams and technologies can work together to monitor road usage data, track vehicle/driver information, administer charges, monitor payment, and more. It is critical that these technologies are secure, efficient, and carefully integrated into existing systems and processes.

This can all be time-consuming and expensive—consider working with a partner organization to effectively develop and integrate the tools and technologies required to prepare for road usage charging in a sustainable, efficient way.

CAI has been delivering technology services to transportation and tolling clients for over 20 years, and we have helped our clients navigate new legislation and its impact on business operations many times before. Arrange a meeting with our transportation experts to discuss your agency’s planning efforts for RUC and learn its impact on your existing technical infrastructure.