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Summary: Session 5
User Perspectives

Tuesday, June 14, 2011

FERROL ROBINSON, Moderator (Bio)
Humphrey School of Public Affairs

KEN BUCKEYE, Panelist (Bio)
Minnesota Department of Transportation

DARRIN ROTH, Panelist (Bio)
American Trucking Association

JILL INGRASSIA, Panelist (Bio)
American Automobile Association

DAVE HUBER, Panelist (Bio)
GMAC Insurance

Transportation system users represent diverse interests and perspectives on mileage-based user fees. This session focused on commercial vehicle interests as well as others who have a stake in the financial and operational health of the surface transportation system.

Ken Buckeye

PowerPoint Presentation: State DOT Perspective of Mileage Fee Reaction from Trucking Firms

The Minnesota Department of Transportation conducted a study on distance-based truck fees

• The Minnesota Trucking Association approached Mn/DOT a year ago and asked whether a mileage fee system would benefit truckers.
• Most trucking firms believed that under a mileage fee system, they would have to pay more overall.
• Transportation costs account for approximately 40% of all freight logistics costs.
• A study is currently assessing whether mileage based pricing will help the trucking industry in the face of the user pays principle – that heavy trucks pay the direct proportional costs of the burden for damage to the system.
• Studies have shown that most categories of trucks pay less than their cost responsibility

The following industry objections were noted from the Minnesota study:

• Truckers believe they already pay too much into the system.
• The statement: "We have already paid for the Interstate and other highways."
• The trucking industry supports a user fee system such as the fuel tax, but they do not support a weight-distance tax.
• Trucking firms believe that only passenger vehicles can adapt to fuel efficiency and vehicle improvements.
• The belief that fuel taxes work well and are more efficient to collect and administer.
• A distance-based charge would be too costly to implement, operate, and enforce.
• Privacy is a concern with monitoring vehicles and usage.

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Darrin Roth

PowerPoint Presentation: Trucking Association Perspective

The American Trucking Associations offered a highly skeptical view of vehicle mileage fees.
Trucking associations still need to be convinced that the fuel tax needs to be replaced. The following policy areas need consideration with respect to mileage fees:

• Political viability
  • The political opposition does not distinguish between vehicle mileage fees and fuel taxes.
  • Current bipartisan opposition exists from both major political parties.
• Cost effectiveness is an issue for carriers and governmental agencies.
  • A revenue neutral approach to adopting vehicle mileage fees will likely require a rate increase due to a higher share of administrative costs.
  • Carriers may be burdened by having to consider multiple charging accounts that may not be uniform in structure or be similar to other states and political jurisdictions. Enforcement is a concern and privacy has to be addressed.
  • Enforcement costs are estimated to be high as compared to the current fuel tax.
  • The current fuel tax has roughly 1,000 taxpayers versus a mileage system may have to process activity for 248 million registered vehicles, a number that is higher than the amount of tax returns filed in 2009.
  • Belief that technology can be defeated.
• Geographic equity has to be ensured without abuse from local jurisdictions. For example, a small municipality may have the ability to unfairly target trucks with a higher fee on certain roads. Trucks typically cross many multi-jurisdictional boundaries in a trip, and one barrier imposed by a small municipality has the potential to affect the entire trip.
• The purpose of vehicle mileage fees have to be clearly stated and understandable.
  

The penetration of electric vehicles and hybrids into the market will be a lot slower than estimated.

• Some studies do not project that more than 20% of total automobile share will be electric powered by 2020.
• Commercial vehicles are expected to have a slower conversion to alternative fuels, and fleets that are non-local will have an especially longer conversion time.

The fuel tax is a viable funding source for the medium term.

• In a long term view, the fuel tax will eventually have to be replaced at some point.
• The current tax rate can be increased to address more immediate uncertainties.

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Jill Ingrassia

PowerPoint Presentation: Automobile User Perspective

The American Automobile Association offered a perspective that was favorable to vehicle mileage fees, particularly on the grounds that drivers of electric vehicles do not pay a fuel tax. Various industry groups have typically supported a gas tax increase during a short-term period and want to consider a different fee system for the long-term future. AAA believes that a new vision is needed for the transportation system and is disappointed by the fact that little progress has been made.

A motorist bill of rights was adopted by AAA, where policy principles in regard to transportation finance were outlined for the implementation of any new revenue collection system.

• The level of funding should be determined only after reforms and priorities are identified.
  Alternatives to the gas tax should be evaluated in the ability to be efficiently implemented, accepted by the public, allocated fairly, fully dedicated to transportation needs, and be resistant to fraud and evasion.

However, there is a significant challenge in getting the public to understand the transportation funding system, which includes:

• A general mistrust with government agencies;
• The public needs to be convinced to get them to understand why a new fee system is needed
• Communication is critical to public acceptance and the associated policy goals needs to be clearly articulated. An Oregon-style pilot is a good method to let the public view the fee system before a larger adoption is implemented. Any new system has to have the capability where users can see measurable results.

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Dave Huber

User Perspective from an Insurance Provider

A representative from the automotive insurance industry offered a viewpoint that vehicle mileage fees have to have a wide appeal and be generally understood by the users of the system.

• The automotive insurance industry is primarily concerned about segmentation and pricing.
• Insurers attempt to determine who is likely to crash based on forms filled out by drivers that characterize risk.
• If insurers understand how individuals drive through the use of additional data, policies may be more aptly priced based on risk potential. However, a repository of data is not needed, only enough to make the risk model statistically significant.
• Recently, GMAC gave low mileage discounts to vehicles that are equipped with the OnStar vehicle technology package.

A framework for a usage-based system from an insurance perspective may include:

• An OBD to assess vehicle speed;
• The use of GPS data to look at detailed driving information, however, businesses may want to shy away from looking like "big brother" and scaring consumers.
• Low administrative costs that will not threaten the thin profit margins.

To an insurer, usage-based fees have to have wide appeal and be applicable to most vehicles. Both the consumer and the insurance provider must benefit under a mileage fee system.

• Vehicles of age 1996 or earlier (those without OBD-II ports) represent about 20% of all vehicles in North America.
• Insurers, as businesses, do not want to surprise their customers with major changes in policies and rates.
• Insurers believe that travel information should not be shared with third-parties.
• It is tough to mandate a mileage-based system, so a voluntary adoption pathway is seen as the preferred approach.
• The insurer profits when a customer chooses to have a monitoring device, has less crashes, and returns back to the company.
• Consumers are attracted to mileage-based products because it allows them to prove they deserve a lower rate due to traveling less and driving during less risky time periods.

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