The Transportation Finance Dilemma

1. The Transportation Finance Dilemma One Possible Solution: A National Pricing System Presented To NCLM Meeting October 26, 2009 Greenville, North Carolina

2. Presentation Overview • A quick look at Federal Re-authorization • A possible step toward solving the transportation finance dilemma

3. Re-Authorization or New Authorization • Whatever you call it, it still hasn’t happened • SAFETEA-LU Expired on Sept. 30, 2009 • Currently working of a 30-day extension (?) • House is pushing for full new bill quickly • Administration and Senate favor 18-month extension of current program • Growing pressure to generate jobs may accelerate the process

4. Some Background • Federal Transportation Authorizations normally come in 6 year cycles • 1991 – ISTEA • 1997 – TEA -21 • 2003 – SAFETEA-LU • 2009 -- ??? • Almost always late • Last bill was 2 years late

5. What to Expect In New Legislation • Many believe it will be “new authorization”, not re-authorization • Much restructuring and re-focusing • Hopefully an increase in funding for transportation • Increased emphasis on performance • Decreased emphasis on the gas tax

6. Major Policy Inputs fromCongressional Commissions • Two National Commissions created in SAFETEA-LU to provide comprehensive review of transportation policy and funding • Intended to specifically provide direction for new authorization • National Transportation Policy and Revenue Study Commission • Recommended continuing strong federal role, considerable simplification and refocusing of Federal priorities, emphsis on performance and a significant gas tax increase • National Transportation Infrastructure Finance Commission • 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 by 2020 • Bipartisan Policy Center – National Transportation Project • Focused heavily on performance based decision and funding frameworks.

7. House T&I Proposal • Surface Transportation Authorization Act of 2009 • Total Funding up to $500 Billion (6 years) • $337 Billion for highways • $100 Billion for transit • $50 Billion for High Speed Rail • $13 Billion for Motor carrier Safety • Passed in Committee – starting point in the process – but expect major changes

8. STAA of 2009 • Office of Public Benefit • Oversight of toll rates – public and private • New rules on PPP projects • No non-compete clauses • Value-for-money assessment • OPB oversight • Tolling – giveth and taketh away • Some new opportunities • More restrictions and elimination of several pricingrelated pilot programs • Not much new on national infrastructure bank • Increases project share limit on TIFIA program

9. The Gas Tax: A System at Risk • Without major changes, the motor fuel tax will not be able generate the revenue needed to maintain and expand our nation’s transportation infrastructure in the future • An ominous trend • Political reluctance to raise tax rates • Increasing fuel efficiency • Search for alternative fuels • Major inconsistency in national policy • The backbone of all transportation finance is dependenton the taxation of a commodity we seek to discouragethe use of !! • Federal policy to increase fleet fuel efficiency to 35 MPG by 2020 • We’re about to get veryserious about Climate Change in the US

10. Increasingly Clear NationalPolicy Direction • National Policy Commission suggests gas will only be sufficient until 2025 • Suggested strong consideration of VMT fees • Calls for major planning effort in next reauthorization • National Transportation Infrastructure Finance Commission recommends moving off gas tax by 2020 • Most detailed and specific recommendation yet • Stresses urgent need to move to direct road user charging to provide - Sustainable revenue source - Mechanism to manage demand • It is increasingly clear: US will likely transition off the gastax between 2015 and 2025

11. Key Point • The problem with the gas tax is not that it is inefficient • It is efficient • The problem with the gas tax is that it is notsustainable--- in the face of: • Need to reduce congestion • Increasing fuel efficiency • New alternative fuels • Global warming • Need for energy independence • Political realities

12. Gas tax indexedfor inflation 1.8¢ No gas tax increase 0.9¢ 0.3¢ The Gas Tax: Unsustainable Revenue Source $0.020 $0.015 Tax Revenue Per Mile (2010 $) $0.010 $0.005 $0.000 2010 2020 2030 2040 2050 Year

13. One Vision for the Future: A National Transportation Pricing System • Every vehicle in America equipped • New vehicles equipped at the assembly line • Fully automated electronic fee collection • VMT fees to replace fuel tax • Tolling and Pricing • Transit fare Payment • Parking charges • Potential for integration with ITSservices

14. Many Challenges • Perceived overwhelming technical complexity • Privacy issues • Enforcement and security • Perceived high cost of deployment and operations • Especially as compared with gas tax • Payment and collection issues • Revenue distribution issues • Equity issues

15. One Potential Part of the Solution:National Travel Card National Travel Card Individual Smart Card Travelers Choice Private Stored Balance National Travel Account • 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

16. 2 4 3 1 6 5 VMT Fee Functions(Replacing the gas tax) GSM Automated Cellular Connection OBU GPS In –Vehicle Display I Ignition Interlock Card Reader

17. State-Level VMT FeeDistribution Networks State VMT State Network State Network Regional VMT National Clearinghouse Federal Agencies State Network Local VMT State Network State Network Special Pricing Zones VMT

18. National Pricing Jurisdiction --Replacing the Federal Gas Tax

19. Typical JurisdictionalPricing Levels - State

20. Typical JurisdictionalPricing Levels - State

21. Typical JurisdictionalPricing Levels - State Greensboro Winston-Salem Durham Raleigh Fayetteville Charlotte

22. Congestion Charging Zone Typical Jurisdictional Pricing Levels - Municipal and Special Pricing Zones

23. Hypothetical Illustration,VMT Charging Levels Travel Area Charge Component Cost/ Mile Outside Southeast Region Congestion Charge Zone Within Miami Southeast Region Federal Fee Statewide Fee Triangle Region Fee City Raleigh Fee Congestion Fee $0.010 0.020 0.010 0.005 0.250 $0.030 $0.295 $0.040 $0.045 Total Per Mile Change/Mile

24. Illustrative Revenue and Distribution • Hypothetical 50-mile trip (all NC) • 30 miles outside Triangle Region • 20 miles inside Triangle Region • 10 miles inside Raleigh • 4 miles inside Congestion Zone • Charges and Distribution • Federal (50@ $0.010)= $0.50 • State (50 @ $0.020) = $1.00 • Triangle Region (20 @ $0.010) = $0.20 • Raleigh (10 @ $0.005) = $0.05 • Congestion Zone (4 @ $0.250) = $1.00 • Total trip charge = $2.75

25. Strategic Pricing Options • Alternative Charge Rates to PromoteFuel Efficiency • Alternative Charge Rates to EncourageLow Emission Vehicles • Vary Charge Rates by Time of Day • Other Strategies to Make Use of more Direct “Price Signals”

26. What about the Region’s Toll Facilities?

27. Roadside Reader 2 4 3 1 6 5 Adding a DSRC Link forDirect Data and Revenue Transfer GSM DSRC OBU GPS In –Vehicle Display I Ignition Interlock Card Reader

28. Other Direct Pricing Functions • Toll Facilities • HOT / Managed Lanes • Cordon Pricing • Parking Systems • Transit Payments (Direct card) • Taxis (Direct Card) • Toll Operators and other 3rd party service providerssimply “tap into” the national system • Greatly reduces the cost of collection • Greatly increases ease of pricing deployment

29. Roadside Infrastructure Provided byToll Operations or Service Providers

30. In Vehicle ITS Services • Vehicle-Infrastructure Interface (VII) • Dynamic Route Guidance • Access and Security Control • Provided by 3rd parties • Charges for services collected through system

31. Conduit for VII / ITS Services 2 4 3 1 6 5 Potential VII and Other ITS Services GSM DSRC OBU GPS I

32. State Networks Toll Operators Congestion Management Zones Parking Operators Transit Systems Taxis ITS Services National Network Concept Revenue Claims Stored Balance Network DMV’s State Networks National Clearinghouse Regional Service Centers Federal Agencies

33. Revenue Transfer to Federal,States and Service Providers Payments to Stored Balance Network State Networks DMV’s Toll Operators Congestion Management Zones State Networks National Clearinghouse Parking Operators Regional Service Centers Transit Systems Taxis Federal Agencies ITS Services

34. National Travel Account Management Credit Card National Clearinghouse Account Data Base EFT Direct Billing (Commercial Accounts)

35. Major Employers Parking Facilities Bank ATM’s ACCEPT • Cash • Credit Card • Debit DMV’s Retail Centers Kiosks Transit Centers Regional Service Centers Retail Partners Stored Balance Replenishment Options Stored Balance Network

36. Rough (very rough) Costs?? • Probably $150 - $250 per vehicle • Less than 1% of vehicle cost • About 2% of revenue collected over life of device • Initial Cost to equip national fleet • About $50-$70 billion • Forecasts say $200-$300 billion will be needed for transportation finance each year • System could replace virtually every form of transportation revenue nowcollected • Only OBU’s and Clearinghouse Structure Financed throughNational System • All roadside and other local system equipment cost paid by 3rd party users“tapping into” the national system • Future net annual costs about$15-$25 billion per year • About 5-10% of annual revenue collected • Major part of operating cost offset by third partyservice providers “tapping into” system

37. In Summary… • A national pricing system is needed to provide asustainable foundation for transportation financein the future • A system based on user fees and charges per mile instead ofper gallon • A system designed to provide a single device means ofelectronically paying all forms of transportation fees and charges • A system which will link road use with payment to enable better management of demand through variable pricing • A system that will be seamlessly intermodal • A system which will preserve privacy and allow foranonymous operations for those whose choose it

38. In Summary… • A pricing system framework designed to provide DSRCaccess to 3rd party service providers and facility operators • Toll and parking operators simply “tap into” the system • VII and other ITS services provided “on demand” – paid thru system • A pricing system for which a large part of the operating cost canbe paid by fees from 3rd party users who will find it very costeffective to tap into the system • Toll facilities • Parking facilities • Transit systems • ITS providers • Access control systems

39. In Summary… • It will be a big investment …and certainly more complex and costly than the gas tax • But it will provide a sustainable future fortransportation finance • Technology is essentially here today • All it will take is the political vision (and courage)to decide to do it …to start the long process of planning, design, consensus building, education and deployment • The time to start is NOW!