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Complexity dogs mileage-fee concept

Courtesy of MnDOT
Even overcoming technical difficulties, drivers' laziness, privacy concerns, system hackers and high costs won't push mileage fees into the end zone.

It seemed like such a simple, smart idea at first. With fuel taxes paralyzed over decades of inflation, cars going farther on each gallon of gasoline (or none at all) and roads and bridges still deteriorating under traffic’s wear and tear, why not switch user funding for this vital infrastructure from a levy at the pump to one based on miles driven?

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Proponents argued that it would be fair, adaptable to future automotive technologies and able to support other policy objectives such as reducing congestion, pollution and accidents. Pilot testing began in 2006 in Oregon, not coincidentally the first state to implement a user-pays principle for driving by assessing a gas tax back in 1919. After more trials, Oregon plans to roll out a live mileage fee system for up to 5,000 motorists next July.

Minnesota authorized its own $5 million study of mileage fees in 2007 at the recommendation of Gov. Tim Pawlenty, who opposed raising fuel taxes. Difficulties immediately surfaced as a first attempt at scoping the research was rejected and a second finally approved. Testing with 478 volunteer drivers from Wright County began in 2011 but was soon interrupted by a state government shutdown brought on by Minnesota’s first Legislature fully controlled by conservatives in 40 years.

‘Real world deployment’

The Minnesota Road Fee Test quietly wrapped up last year and now is gathering dust. Findings were mixed, some positive, some discouraging, but most of all the study pointed up the danged complexity of the whole concept. Here’s the evaluation report’s  list of “some of the activities expected to be present in a real world deployment” of mileage fees:

  • Scheduling appointments.
  • Capturing vehicle mileage.
  • Process user agreements.
  • Installing equipment.
  • Training drivers.
  • Preparing equipment kits.
  • Uninstalling equipment.
  • Processing on-site payment.
  • Receiving and documenting a service request.
  • Providing guidance for a known technical issue.
  • Providing guidance for a new technical issue.
  • Escalating issue to a specialist.
  • Generating and mailing paper invoices.
  • Processing payments received.
  • Managing late payments.
  • Developing and testing the application.
  • Developing operational procedures.
  • Establishing fees.
  • Managing data.
  • Managing hardware and software.
  • Developing messages to drivers.
  • Developing training materials.
  • Developing and maintaining a participant portal.
  • Coordinating across organizations.

Holy Moly, Rocky! That’s a lollapalooza of flies in the ointment. And it doesn’t even include actual problems uncovered by the test, including “hardware or software issues [that] hindered the system’s ability to reliably capture trips” and the preference of 48 percent of participants polled afterward just to keep paying the fuel tax versus 37 percent who liked the newfangled plan and 15 percent who were too mystified by the entire exercise to offer an opinion.

Concerns about misuse of data

Using smartphone GPS technology, the system tracked 500,000 trips covering 4 million miles with 660 million data points. Interestingly, privacy, a hot issue in the wider mileage fee debate, wasn’t a big concern for the self-selected participants. They believe “that they give up their privacy regularly (e.g., to mobile phone service providers). Instead, participants worried that their data would be vulnerable to access by wrongdoers (e.g., ‘hackers’) who would seek to misuse the information,” the report noted.

And that ought to be a worry for any state that tries to rely on automated mileage tracking to assess user fees for roads, although I’ve not seen it addressed in reports from testing in Minnesota or Oregon. Even without any high-tech looting, more than 4 percent of the mileage bills sent to the Minnesota test participants — who got stipends for their service and reimbursement of state fuel taxes — went unpaid.

Another cash drain is the basic cost of collecting mileage fees, estimated at four times that for the old-fashioned way at the pump. University of Minnesota Prof. Zhirong Zhao, who made that estimate three years ago, added that improved technology could bring it down to just three times as much. I wonder. The Minnesota test went through eight software versions and three generations of hardware upgrades, boosting help line calls from participants — 175 or fewer of them active at any one time — to 4½ a day.

On top of all that, “challenges exist with the ability to collect fees from out-of-state drivers,” the Minnesota report acknowledges.

To be sure, you can do some neat things with a GPS-powered mileage fee system. Fees can be tailored to peak congestion times and locations or to vehicle weights and emissions. One add-on in the Minnesota test was speed safety alerts transmitted to drivers both visually and audibly when they got too heavy on the gas pedal. The audible alerts worked best, researchers found, with average speed reductions of up to 9 miles per hour. 

Simplicity of current fuel tax noted

However, the report notes that “it may be wise to phase these elements in later, so as to not complicate the public acceptance issue.” And complexity may be the biggest hurdle of all. Test participants who still preferred the fuel tax often cited its simplicity. “The current fuel tax requires very little thought and … no work on the part of the driver,” the report notes, stating the obvious.

Even overcoming technical difficulties, drivers’ laziness, privacy concerns, system hackers and high costs won’t push mileage fees into the end zone, though. Although a 25-member Minnesota policy task force issued several encouraging recommendations along with a call for further study, a minority report from three participants said the majority overstated the benefits of mileage fees, understated their shortcomings and made no compelling case for “wholesale changes” in the transportation funding structure, “which can in fact continue to serve the state well, probably for decades to come.”

The dissenters represented important interest groups in any transportation policy discussion: the Minnesota Chamber of Commerce, the Minnesota Trucking Association and a rural county board. They said the equity problem with hybrid and electric vehicles can be solved with increased annual registration fees and motor vehicle sales taxes. 

Sounds simple to me. The hard part is, and will be, mustering the political will to keep those fuel taxes on the majority of motor vehicles in line with growing costs. And that’s one problem even a technically perfect mileage fee system can’t solve.

Conrad deFiebre is a Transportation Fellow at Minnesota 2020, a progressive, nonpartisan think tank based in St. Paul. This commentary originally appeared on its website.

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Comments (7)

  1. Submitted by Todd Hintz on 07/22/2014 - 12:04 pm.

    User Fees

    It sounds like just pumping up the gas tax (pardon the pun) would be both simpler and cheaper. Why build this huge complex system when the current one will do the job? Bump the gas tax to something that will cover road maintenance, tie it to inflation, and call it done. The higher tax gives people an incentive to drive more efficient cars and pollute less.

    If you want to cover electric cars, then tie something to their sales. Electrics are just a fraction of sales at the moment, but hopefully they’ll increase over time as the technology gets better.

    At the moment we’re spending about a billion dollars a year on road maintenance, which is half of what’s needed. At that figure doesn’t include any expansion of the road system.

    The other end of the equation is we need to get rid of paved roads. We have the fifth largest network of paved roads in the United States, even though we’re not the fifth largest in terms of size or population. We need to not only increase revenue, but also decrease costs.

  2. Submitted by Steve Titterud on 07/22/2014 - 01:19 pm.

    Your list of activities could apply to baking a cake, after…

    ….shopping for the ingredients at a super market and arranging for your kid to help bake it. This does not indicate overwhelming complexity.

    The rather ordinary steps or tasks you’ve listed occur in a myriad of business processes all around us. Your implication there is some unusual and overwhelming complexity here by their exhaustive listing, capped off with your “lollapalooza of flies in the ointment.” is misleading.

    Unpaid fees ?? 4% unpaid fees is not a problem – rather, it shows an overwhelming success in collecting fees !!

    Has anyone considered the possibility of simply requiring drivers to submit their cars for an annual inspection of mileage driven – as read on the odometer at a DMV facility – and basing their individual vehicle taxes in part on those numbers ?? Or is that too simple ??

    There is no system of financing without some flaw or other. It’s just not helpful to demonize one potential method by exaggeration.

    • Submitted by Joel Fischer on 07/22/2014 - 02:01 pm.

      How would you account – or rather, discount – for miles driven outside the State of Minnesota?

      • Submitted by Bruce Pomerantz on 07/23/2014 - 09:59 am.

        Out-of-State Travel Solution

        Two ways to account for out-of-state mileage:

        As with income taxes:

        1) Allow for a standard deduction in miles
        2) Itemize by showing hotel or gas receipts to claim higher deduction.

        Yes, #2 can be scammed but that happens with income tax deductions. Yet that hasn’t caused us to insist on eliminating income taxes because some people cheat.

        • Submitted by Steve Titterud on 07/23/2014 - 12:46 pm.

          Yes, some kind of honor system is unavoidable…

          …even if there are people who will fiddle with their odometers (make it a crime with a $500 fine) and who will file phony paperwork to get an invalid deduction. Most people will comply, especially if it is a “fair” system and its fairness is stressed in its presentation to the public.

          The people who drive should pay a substantial part of the cost of building and maintaining roads, proportionate to their usage. Most people will understand this and agree with the principle here.

  3. Submitted by Steve Titterud on 07/22/2014 - 05:53 pm.

    Good point, a problem. But it’s a problem for just about…

    …any means of revenue capture. I really don’t have any idea how it out-of-state mileage is accounted for now, or if there is even an exemption for use of your vehicle outside the state when you bought the gas and paid the tax in-state. In the method under discussion in the column above, this out-of-state driving matter is noted as a problem, too.

    Out-of-state driving is going to be a problem no matter how mileage is proven. Other than massive GPS data-gathering and analysis so you know exactly where a car has been and when, which couldn’t possibly be worth it, it’s hard to see how this exception of out-of-state mileage can be handled with any reasonable degree of accuracy. Assuming the miles driven in-state far outweigh miles driven out-of-state, maybe the best policy would be just to ignore it.

    Don’t we have a similar problem right now with people who buy gas in WI, IA, SD, or ND, and then tear up the MN roads without paying the gas tax here ?? What are we doing about that, if anything ??

  4. Submitted by Pavel Yankovic on 07/23/2014 - 06:16 pm.

    Is there any aspect?

    Is there any aspect of our lives that is safe from taxation in this state? And why do some cry out for more taxes when they should be asking for more accountability in our elected officials? This is the state of “No Tax Left Behind” and it is getting worse. And someone wants to account for miles driven outside of the state? Absolutely ridiculous and a gross invasion of privacy!!!!!!!!

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