The Transportation Finance The Transportation Finance DilemmaDilemma

One Possible Solution:One Possible Solution:A National Pricing SystemA National Pricing System

NCLM MeetingNCLM MeetingPresented ToPresented To

October 26, 2009October 26, 2009Greenville, North CarolinaGreenville, North Carolina

Presentation Overview

• A quick look at Federal Re-authorization

• A possible step toward solving the transportation finance dilemma

Re-Authorization or New AuthorizationRe-Authorization or New Authorization

• Whatever you call it, it still hasn’t happenedWhatever you call it, it still hasn’t happened

• SAFETEA-LU Expired on Sept. 30, 2009SAFETEA-LU Expired on Sept. 30, 2009

• Currently working of a 30-day extension (?)Currently working of a 30-day extension (?)

• House is pushing for full new bill quickly House is pushing for full new bill quickly

• Administration and Senate favor 18-month Administration and Senate favor 18-month extension of current programextension of current program

• Growing pressure to generate jobs may Growing pressure to generate jobs may accelerate the processaccelerate the process

Some BackgroundSome Background

• Federal Transportation Authorizations Federal Transportation Authorizations normally come in 6 year cyclesnormally come in 6 year cycles

1991 – ISTEA1991 – ISTEA 1997 – TEA -211997 – TEA -21 2003 – SAFETEA-LU2003 – SAFETEA-LU 2009 -- ???2009 -- ??? Almost always lateAlmost always late

• Last bill was 2 years lateLast bill was 2 years late

What to Expect In New Legislation What to Expect In New Legislation

• Many believe it will be “new authorization”, Many believe it will be “new authorization”, not re-authorizationnot re-authorization Much restructuring and re-focusingMuch restructuring and re-focusing

• Hopefully an increase in funding for Hopefully an increase in funding for transportationtransportation

• Increased emphasis on performanceIncreased emphasis on performance

• Decreased emphasis on the gas taxDecreased emphasis on the gas tax

Major Policy Inputs fromMajor Policy Inputs fromCongressional CommissionsCongressional Commissions

• Two National Commissions created in SAFETEA-LU to provide Two National Commissions created in SAFETEA-LU to provide comprehensive review of transportation policy and fundingcomprehensive review of transportation policy and funding

Intended to specifically provide direction for new authorizationIntended to specifically provide direction for new authorization

• National Transportation Policy and Revenue Study CommissionNational Transportation Policy and Revenue Study Commission Recommended continuing strong federal role, considerable simplification Recommended continuing strong federal role, considerable simplification

and refocusing of Federal priorities, emphsis on performance and a and refocusing of Federal priorities, emphsis on performance and a significant gas tax increasesignificant gas tax increase

• National Transportation Infrastructure Finance CommissionNational Transportation Infrastructure Finance Commission Focused on funding and finance and recommended increased use of tolling Focused on funding and finance and recommended increased use of tolling

and pricing and the transition from the gas tax to a “per mile” fee structure and pricing and the transition from the gas tax to a “per mile” fee structure by 2020by 2020

• Bipartisan Policy Center – National Transportation ProjectBipartisan Policy Center – National Transportation Project Focused heavily on performance based decision and funding frameworks.Focused heavily on performance based decision and funding frameworks.

House T&I ProposalHouse T&I Proposal

• Surface Transportation Authorization Act of 2009Surface Transportation Authorization Act of 2009

• Total Funding up to $500 Billion (6 years)Total Funding up to $500 Billion (6 years) $337 Billion for highways$337 Billion for highways $100 Billion for transit$100 Billion for transit $50 Billion for High Speed Rail$50 Billion for High Speed Rail $13 Billion for Motor carrier Safety$13 Billion for Motor carrier Safety

• Passed in Committee – starting point in the Passed in Committee – starting point in the process – but expect major changesprocess – but expect major changes

STAA of 2009STAA of 2009

• Office of Public BenefitOffice of Public Benefit Oversight of toll rates – public and privateOversight of toll rates – public and private

• New rules on PPP projectsNew rules on PPP projects No non-compete clausesNo non-compete clauses Value-for-money assessmentValue-for-money assessment OPB oversightOPB oversight

• Tolling – giveth and taketh awayTolling – giveth and taketh away Some new opportunitiesSome new opportunities More restrictions and elimination of several pricingMore restrictions and elimination of several pricing

related pilot programsrelated pilot programs

• Not much new on national infrastructure bankNot much new on national infrastructure bank

• Increases project share limit on TIFIA programIncreases project share limit on TIFIA program

The Gas Tax: A System at RiskThe Gas Tax: A System at Risk

• Without major changes, the motor fuel tax will not be able generate the Without major changes, the motor fuel tax will not be able generate the revenue needed to maintain and expand our nation’s transportation revenue needed to maintain and expand our nation’s transportation infrastructure in the futureinfrastructure in the future

• An ominous trendAn ominous trend Political reluctance to raise tax ratesPolitical reluctance to raise tax rates Increasing fuel efficiencyIncreasing fuel efficiency Search for alternative fuelsSearch for alternative fuels

• Major inconsistency in national policyMajor inconsistency in national policy The backbone of all transportation finance is dependentThe backbone of all transportation finance is dependent

on the taxation of a commodity we seek to discourageon the taxation of a commodity we seek to discouragethe use of !! the use of !!

• Federal policy to increase fleet fuel efficiency to 35 MPG by 2020Federal policy to increase fleet fuel efficiency to 35 MPG by 2020

• We’re about to get We’re about to get veryvery seriousserious about Climate Change in the US about Climate Change in the US

Increasingly Clear NationalIncreasingly Clear NationalPolicy Direction Policy Direction

• National Policy Commission suggests gas will only be sufficient until 2025National Policy Commission suggests gas will only be sufficient until 2025 Suggested strong consideration of VMT feesSuggested strong consideration of VMT fees Calls for major planning effort in next reauthorizationCalls for major planning effort in next reauthorization

• National Transportation Infrastructure Finance Commission recommends National Transportation Infrastructure Finance Commission recommends moving off gas tax by 2020moving off gas tax by 2020

Most detailed and specific recommendation yetMost detailed and specific recommendation yet Stresses urgent need to move to direct road user charging to provide Stresses urgent need to move to direct road user charging to provide

- Sustainable revenue source- Sustainable revenue source

- Mechanism to manage demand- Mechanism to manage demand

• It is increasingly clear: It is increasingly clear: US will likely transition off the gasUS will likely transition off the gastax between 2015 and 2025 tax between 2015 and 2025

Key PointKey Point

• The problem with the gas tax is The problem with the gas tax is notnot that it is inefficient that it is inefficient It is efficientIt is efficient

• The problem with the gas tax is that it is The problem with the gas tax is that it is notnot sustainablesustainable--- in the face of:--- in the face of:

Need to reduce congestionNeed to reduce congestion Increasing fuel efficiencyIncreasing fuel efficiency New alternative fuelsNew alternative fuels Global warmingGlobal warming Need for energy independenceNeed for energy independence Political realitiesPolitical realities

The Gas Tax: The Gas Tax: Unsustainable Revenue SourceUnsustainable Revenue Source

$0.000

$0.005

$0.010

$0.015

$0.020

Tax

Rev

enue

Per

Mile

(201

0 $)

2010 2020 2030 2040 2050Year

No gas tax increase

0.3¢

Gas tax indexedfor inflation

0.9¢

1.8¢

One Vision for the Future: A National One Vision for the Future: A National Transportation Pricing SystemTransportation Pricing System

• Every vehicle in America equippedEvery vehicle in America equipped New vehicles equipped at the assembly lineNew vehicles equipped at the assembly line

• Fully automated electronic fee collectionFully automated electronic fee collection VMT fees to replace fuel taxVMT fees to replace fuel tax Tolling and PricingTolling and Pricing Transit fare PaymentTransit fare Payment Parking chargesParking charges

• Potential for integration with ITSPotential for integration with ITSservicesservices

Many ChallengesMany Challenges

• Perceived overwhelming technical complexityPerceived overwhelming technical complexity

• Privacy issuesPrivacy issues

• Enforcement and securityEnforcement and security

• Perceived high cost of deployment and operationsPerceived high cost of deployment and operations Especially as compared with gas taxEspecially as compared with gas tax

• Payment and collection issuesPayment and collection issues

• Revenue distribution issuesRevenue distribution issues

• Equity issuesEquity issues

One Potential Part of the Solution:One Potential Part of the Solution:National Travel CardNational Travel Card

NationalTravelCard

PrivateStored

Balance

NationalTravel

Account

IndividualSmartCard

Travelers Choice

• Maximize convenience whereprivacy not a concern

• Linked to credit card orbank account

• Requires no action by useronce opened

• Fully anonymous

• No travel data stored; notlinked to person or vehicle

• Network of stored balancereplenishment options

• No credit card or bankaccount needed

In –VehicleDisplay

I

CardReader

AutomatedCellular

Connection

VMT Fee FunctionsVMT Fee Functions(Replacing the gas tax)(Replacing the gas tax)

24 3 1 6 5

GSM

GPSOBU

IgnitionInterlock

State-Level VMT FeeState-Level VMT FeeDistribution NetworksDistribution Networks

StateVMT

RegionalVMT

LocalVMT

SpecialPricingZonesVMT

StateNetwork

NationalClearinghouse

FederalAgencies

StateNetwork

StateNetwork

StateNetwork

StateNetwork

National Pricing Jurisdiction --National Pricing Jurisdiction --Replacing the Federal Gas TaxReplacing the Federal Gas Tax

Typical JurisdictionalTypical JurisdictionalPricing Levels - StatePricing Levels - State

Typical JurisdictionalTypical JurisdictionalPricing Levels - StatePricing Levels - State

Typical JurisdictionalTypical JurisdictionalPricing Levels - StatePricing Levels - State

Charlotte

Winston-SalemGreensboro

Durham

Raleigh

Fayetteville

Typical Jurisdictional Pricing Levels - Typical Jurisdictional Pricing Levels - Municipal and Special Pricing ZonesMunicipal and Special Pricing Zones

CongestionChargingZone

Hypothetical Illustration,Hypothetical Illustration,VMT Charging LevelsVMT Charging Levels

Federal Fee

Statewide Fee

Triangle Region Fee

City Raleigh Fee

Congestion Fee

$0.010

0.020

0.010

0.005

0.250

OutsideSoutheast

Region

SoutheastRegion

WithinMiami

CongestionChargeZone

Travel AreaCost/Mile

ChargeComponent

Total Per Mile Change/Mile $0.030 $0.040 $0.045 $0.295

• Hypothetical 50-mile trip (all NC)Hypothetical 50-mile trip (all NC) 30 miles outside Triangle Region30 miles outside Triangle Region 20 miles inside Triangle Region20 miles inside Triangle Region 10 miles inside Raleigh10 miles inside Raleigh 4 miles inside Congestion Zone4 miles inside Congestion Zone

• Charges and DistributionCharges and Distribution• Federal (50@ $0.010)= $0.50Federal (50@ $0.010)= $0.50 State (50 @ $0.020) = $1.00State (50 @ $0.020) = $1.00 Triangle Region (20 @ $0.010) = $0.20Triangle Region (20 @ $0.010) = $0.20 Raleigh (10 @ $0.005) = $0.05Raleigh (10 @ $0.005) = $0.05 Congestion Zone (4 @ $0.250) = $1.00Congestion Zone (4 @ $0.250) = $1.00 Total trip charge = $2.75Total trip charge = $2.75

Illustrative Revenue and DistributionIllustrative Revenue and Distribution

Strategic Pricing OptionsStrategic Pricing Options

• Alternative Charge Rates to PromoteAlternative Charge Rates to PromoteFuel EfficiencyFuel Efficiency

• Alternative Charge Rates to EncourageAlternative Charge Rates to EncourageLow Emission VehiclesLow Emission Vehicles

• Vary Charge Rates by Time of DayVary Charge Rates by Time of Day

• Other Strategies to Make Use of more Other Strategies to Make Use of more Direct “Price Signals”Direct “Price Signals”

What about the Region’s Toll Facilities?What about the Region’s Toll Facilities?

In –VehicleDisplay

I

IgnitionInterlock

Adding a DSRC Link forAdding a DSRC Link forDirect Data and Revenue TransferDirect Data and Revenue Transfer

24 3 1 6 5

GSM

GPS

DSRC

CardReader

OBU

RoadsideReader

Other Direct Pricing FunctionsOther Direct Pricing Functions

• Toll FacilitiesToll Facilities

• HOT / Managed LanesHOT / Managed Lanes

• Cordon PricingCordon Pricing

• Parking SystemsParking Systems

• Transit Payments (Direct card)Transit Payments (Direct card)

• Taxis (Direct Card)Taxis (Direct Card)

• Toll Operators and other 3Toll Operators and other 3rdrd party service providers party service providerssimply “tap into” the national systemsimply “tap into” the national system Greatly reduces the cost of collectionGreatly reduces the cost of collection Greatly increases ease of pricing deploymentGreatly increases ease of pricing deployment

Roadside Infrastructure Provided byRoadside Infrastructure Provided byToll Operations or Service ProvidersToll Operations or Service Providers

In Vehicle ITS ServicesIn Vehicle ITS Services

• Vehicle-Infrastructure Interface (VII)Vehicle-Infrastructure Interface (VII)

• Dynamic Route GuidanceDynamic Route Guidance

• Access and Security ControlAccess and Security Control

• Provided by 3Provided by 3rdrd parties parties Charges for services collected through systemCharges for services collected through system

Potential VII and Other ITS ServicesPotential VII and Other ITS Services

24 3 1 6 5

GSM

GPS

DSRC

I

OBU

National Network ConceptNational Network Concept

NationalClearinghouse

StateNetworks

TollOperators

CongestionManagement

Zones

ParkingOperators

TransitSystems

Taxis

ITSServices

StoredBalanceNetwork

FederalAgencies

StateNetworks

RegionalServiceCenters

DMV’s

Revenue Claims

Revenue Transfer to Federal,Revenue Transfer to Federal,States and Service ProvidersStates and Service Providers

NationalClearinghouse

StateNetworks

TollOperators

CongestionManagement

Zones

ParkingOperators

TransitSystems

Taxis

ITSServices

StoredBalanceNetwork

FederalAgencies

StateNetworks

RegionalServiceCenters

DMV’s

Payments to

National Travel Account ManagementNational Travel Account Management

NationalClearinghouse

AccountData Base

CreditCard

EFT

Direct Billing(Commercial

Accounts)

TransitCenters

RetailCenters

ParkingFacilities

Kiosks

• CashCash• Credit CardCredit Card• DebitDebit

ACCEPT

Stored Balance Replenishment OptionsStored Balance Replenishment Options

BankATM’s

DMV’s

RegionalServiceCenters

MajorEmployers

RetailPartners

StoredBalanceNetwork

Rough (very rough) Costs??Rough (very rough) Costs??• Probably $150 - $250 per vehicleProbably $150 - $250 per vehicle

Less than Less than 1%1% of vehicle cost of vehicle cost About About 2%2% of revenue collected over life of device of revenue collected over life of device

• Initial Cost to equip national fleetInitial Cost to equip national fleet About $50-$70 About $50-$70 billionbillion Forecasts say $200-$300 Forecasts say $200-$300 billionbillion will be needed for transportation finance will be needed for transportation finance

each yeareach year System could replace virtually every form of transportation revenue nowSystem could replace virtually every form of transportation revenue now

collectedcollected

Only OBU’s and Clearinghouse Structure Financed throughOnly OBU’s and Clearinghouse Structure Financed throughNational SystemNational System

All roadside and other local system equipment cost paid by 3All roadside and other local system equipment cost paid by 3 rdrd party users party users“tapping into” the national system“tapping into” the national system

• Future net annual costs aboutFuture net annual costs about$15-$25 billion per year$15-$25 billion per year

About About 5-10%5-10% of annual revenue collected of annual revenue collected Major part of operating cost offset by third partyMajor part of operating cost offset by third party

service providers “tapping into” systemservice providers “tapping into” system

In Summary…In Summary…

• A national pricing system is needed to provide aA national pricing system is needed to provide asustainable foundation for transportation financesustainable foundation for transportation financein the futurein the future

A system based on user fees and charges A system based on user fees and charges per mile per mile instead ofinstead ofper gallonper gallon

A system designed to provide a single device means ofA system designed to provide a single device means ofelectronically paying electronically paying all forms of transportation feesall forms of transportation fees and charges and charges

A system which will A system which will link road use with paymentlink road use with payment to enable better to enable better management of demand through variable pricingmanagement of demand through variable pricing

A system that will be seamlessly A system that will be seamlessly intermodalintermodal

A system which will preserve privacy and allow forA system which will preserve privacy and allow foranonymous operations for those whose choose itanonymous operations for those whose choose it

• A pricing system framework designed to provide DSRCA pricing system framework designed to provide DSRCaccess to 3access to 3rdrd party service providers and facility operators party service providers and facility operators

Toll and parking operators simply “tap into” the systemToll and parking operators simply “tap into” the system VII and other ITS services provided “on demand” – paid thru systemVII and other ITS services provided “on demand” – paid thru system

• A pricing system for which a large part of the operating cost canA pricing system for which a large part of the operating cost canbe paid by fees from 3be paid by fees from 3rdrd party users who will find it very cost party users who will find it very costeffective to tap into the systemeffective to tap into the system

Toll facilitiesToll facilities Parking facilitiesParking facilities Transit systemsTransit systems ITS providersITS providers Access control systemsAccess control systems

In Summary…In Summary…

• It will be a big investmentIt will be a big investment……and certainly more complex and costly than the gas taxand certainly more complex and costly than the gas tax

• But it will provide a sustainable future forBut it will provide a sustainable future fortransportation financetransportation finance

• Technology is essentially Technology is essentially here todayhere today

• All it will take is the political vision (and courage)All it will take is the political vision (and courage)to decide to do itto decide to do it

……to start the long process of planning, design, consensusto start the long process of planning, design, consensus building, education and deployment building, education and deployment

• The time to start is NOW!The time to start is NOW!

In Summary…In Summary…