1.) Mileage-based User Fee Initiatives in the United States and Abroad

In recent years, the federal government and several states have taken  steps to evaluate mileage fee systems, although none of these U.S.- based pilot projects has collected fees from drivers based on their road  use:  In 2005, Congress authorized $16.5 million for a field test for  assessing highway use fees to vehicles based on their mileage driven  and using satellite-enabled, on-board units. Reliable cost estimates for mileage fee systems are not  available; but launching and operating a system to collect fees from 230  million U.S. passenger vehicles is expected to greatly exceed the current  costs of collecting federal fuel taxes. Commercial truck user fee systems  in Germany and New Zealand show that considerable revenues and other  benefits can be achieved by charging these vehicles, but enforcing  compliance in a cost-effective manner presents trade-offs. Recent efforts in two states suggest that charging mileage  fees to commercial trucks presents several benefits over passenger  vehicle fees, including fewer privacy-related concerns and cost  challenges. GPS- based systems can lead to more equitable and efficient use of roadways  by charging drivers based on their actual road use and by providing  pricing incentives to reduce road use. Mileage Fees Could Generate Highway Trust Fund Revenues and Would Affect Users Differently

We modeled the average mileage fee rates that would be needed for  passenger vehicles and commercial trucks to meet three illustrative  Highway Trust Fund revenue targets ranging from about $34 billion to  $78.4 billion per year. To meet these targets, a driver of a passenger  vehicle with average fuel efficiency would pay from $108 to $248 per year  in mileage fees compared to the $96 they currently pay annually in  federal gasoline tax. Mileage fees, like federal fuel taxes,  would comprise a small portion of users’ overall fuel costs and thus would  only marginally increase users’ overall transportation costs. However, setting  rates that reflect the current costs that different users impose on the  system would require up-to-date estimates of vehicles’ responsibility for  road damage, which are not available. Effects of Mileage Fees on Users

			Passenger Vehicles

Mileage fees for passenger vehicles would affect users differently based  on their vehicle’s fuel efficiency because drivers of less fuel efficient  vehicles currently pay more in fuel taxes, as they have to purchase more  gasoline to travel the same distance as more efficient vehicles. A flat-rate mileage fee for commercial trucks could also increase users’  costs compared with current diesel fuel taxes but would affect users  differently, in part, because larger (combination) trucks are less fuel  efficient than smaller (single-unit) trucks. States Recognize That Alternative Transportation Revenues Are Needed, and Many Would Support Federal Actions to Evaluate Mileage Fee Systems

Fifty of the 51 state DOTs we surveyed agreed that it is important that an  alternative federal funding mechanism be identified in the next 10 years in   However, only 8 of  order to meet surface transportation revenue needs.the 51 states reported that they are likely to introduce some type of  mileage fee program in the next 10 years. Germany and New Zealand have  demonstrated that variable rate, distance-based user fees for commercial  trucks can generate substantial revenues linked to road damage costs  and help reduce emissions while posing fewer privacy concerns than  passenger vehicle systems. State DOTs reported broad support for federal initiatives to evaluate  federal mileage fees, including federally-led field tests for electric vehicles  and commercial trucks. In the absence of any current federal pilot programs or efforts to  evaluate (1) options to more accurately charge commercial trucks and  electric vehicles for their road use and (2) the cost to launch and  administer such systems, Congress lacks critical information to assess  whether mileage fees for these vehicles could be a viable and cost- effective tool to begin to address federal surface transportation funding  challenges. The most  recent FHWA estimates from 2000 suggest that many commercial trucks  underpay, but these estimates may not reflect current conditions. Matters for Congressional Consideration

Should Congress wish to explore mileage fees as a mechanism for  funding surface transportation, it should consider establishing a pilot  program to evaluate the viability, costs, and benefits of mileage fee  systems for:  commercial trucks—to ensure that fees paid by the owners of these  vehicles cover the costs of their use of the nation’s roads and bridges,  and electric vehicles—to develop a mechanism through which the owners  of these vehicles can contribute to the Highway Trust Fund for their  use of the nation’s roadways. The department provided  technical comments via email which we incorporated as appropriate. To determine the mileage fee rates necessary to replace and supplement  current fuel tax revenues deposited in the Highway Trust Fund and the  effect these fees would have on users’ costs, we conducted an economic  simulation to produce illustrative rates for passenger vehicles and  commercial trucks, an approach that is commonly used in relevant  existing studies.
Why GAO Did This Study

Federal funding to build and maintain the nation's highways and bridges comes primarily from highway users through federal fuel taxes. These revenues have eroded due to improvements in vehicle fuel efficiency and other factors contributing to shortfalls in the Highway Trust Fund. Experts have proposed alternative means of raising revenues by charging drivers fees based on their miles traveled. Several states have tested systems that gather vehicle mileage and location data, which has raised privacy concerns. GAO examined (1) the benefits and challenges of mileage fee initiatives in the United States and other selected nations, (2) mileage fee rates necessary to replace and supplement current Highway Trust Fund revenues and the effect these fees would have on users' costs, and (3) state DOTs' views on future revenue demands and mileage fees. GAO reviewed five domestic pilot projects and programs in Germany, New Zealand, and the Netherlands; modeled mileage fees for passenger vehicles and commercial trucks; and surveyed 51 state DOTs.

What GAO Found

Mileage-based user fee initiatives in the United States and abroad show that such fees can lead to more equitable and efficient use of roadways by charging drivers based on their actual road use and by providing pricing incentives to reduce road use. Mileage fees for passenger vehicles, however, continue to face significant public concerns related to privacy as well as cost challenges. Privacy concerns are particularly acute when Global Positioning System (GPS) units are used to track the location of passenger vehicles. Reliable cost estimates for mileage fee systems are not available, but implementing a system to collect fees from 230 million U.S. passenger vehicles is likely to greatly exceed the costs of collecting fuel taxes. Commercial truck user fee systems in Germany and New Zealand have achieved substantial revenues and benefits such as reduced road damage and emissions with fewer privacy concerns, but ensuring compliance in a cost effective manner presents trade-offs. Few commercial truck mileage fee pilots have been conducted in the United States, but efforts in two states suggest such fees pose fewer privacy and cost challenges than passenger vehicle fees.
Mileage fee rates could be set to replace or supplement current Highway Trust Fund revenues. GAO calculated average mileage fee rates for passenger vehicles and commercial trucks needed to meet three federal revenue targets ranging from $34 billion (replace current federal fuel tax revenues) to $78 billion (increase spending to maintain existing system conditions and performance). To meet these targets, drivers of passenger vehicles with average fuel efficiency would pay $108 to $248 per year in mileage fees compared to the $96 these drivers currently pay in federal gasoline tax. These fees would affect users' costs differently based on each vehicle's fuel efficiency, because drivers of less efficient vehicles now pay more in fuel taxes than drivers of vehicles with greater fuel efficiency. However, like federal fuel taxes, mileage fees would comprise a small portion of users' overall fuel costs and thus only marginally increase users' overall transportation costs. A mileage fee for commercial trucks could also increase users' costs, particularly for larger trucks that log more miles. In 2000, the Federal Highway Administration (FHWA) estimated that heavy commercial trucks generally pay less in federal taxes than the road damage costs they impose. Adjusting mileage fee rates to account for vehicle road damage costs would increase rates for commercial truck users. However, FHWA's estimates may not reflect current conditions. Setting rates to cover these costs would require updated estimates of vehicles' responsibility for road damage.
State departments of transportation (DOT) recognize the need for an alternative funding mechanism to meet future revenue demands, and many would support federal actions to evaluate mileage fees. Few states reported that they are likely to introduce such fees in the next 10 years, but more than half would support federally-led field tests of mileage fees for commercial trucks and electric vehicles. Although few electric vehicles are on the roads today, their numbers are expected to increase, and they do not contribute to the Highway Trust Fund. Without a federal pilot program to evaluate (1) options to more accurately charge commercial trucks and electric vehicles for their road use and (2) the costs and benefits of such systems, Congress lacks critical information to assess whether mileage fees for these vehicles could be a viable and cost-effective tool to help address the nation's surface transportation funding challenges.

What GAO Recommends

Should Congress further explore mileage fees, it should consider establishing a pilot program to test the viability of such fees for commercial trucks and electric vehicles. FHWA should update its estimates of road damages imposed by all vehicle types compared with the tax revenues generated by each. The Department of Transportation took no position on GAOs recommendation but provided technical comments which GAO incorporated as appropriate.