Talking Michigan Transportation
The Talking Michigan Transportation podcast features conversations with transportation experts inside and outside MDOT and will touch on anything and everything related to mobility, including rail, transit and the development of connected and automated vehicles.
Talking Michigan Transportation
The future of road funding
On this week’s episode of the Talking Michigan Transportation podcast, a conversation about states studying or piloting road usage charges (RUC).
John Peracchio, a strategic adviser on intelligent transportation systems and mobility, and member of the Michigan Council on Future Mobility and Electrification, talks about key takeaways from a recent conference of the International Bridge, Tunnel and Turnpike Association (IBTTA), where RUC programs were a key topic.
Also discussed is what has been learned from other states and what it means that a proposal in the Michigan transportation budget would fund an RUC pilot. Hawaii has been especially aggressive in implementation, and Peracchio explains the unique nature.
As an advocate for increased funding for public transit, Peracchio also discusses how RUC could be structured to help.
Hello, welcome to the Talking Michigan Transportation Podcast. I'm Jeff Cranston. I'm excited today to talk again with John Peracchio, who is a managing member at Peracchio and Company and he's also a strategic advisor on intelligent transportation systems and mobility solutions, a member of the Michigan Council on Future Mobility and Electrification, and has a lot of great insights and experience with alternative funding methods tolling, for instance, or road user charges. He's fresh off a conference in Oklahoma of the International Bridges, tunnels and Turnpike Association where they talked about road user charges and what has gone on in some other states that are finding some success with studying or piloting that, and what's going to be happening in Michigan. So I hope you enjoy the conversation Once again.
Speaker 2:John Peracchio, a friend of the podcast. He's been on a couple of times and I really enjoy talking to him because he's so intellectually curious about all things transportation and especially something that I'm also passionate about and that's how we fund transportation, and in Michigan we haven't done it very well. So, John, thank you for taking time again. As always, my pleasure. So let's start. The reason I wanted to have you on this week is because you're fresh off of International Bridge, toll Bridge let's see International Bridge, tunnel and Turnpike Association Conference in Oklahoma.
Speaker 1:That's easy for you. Enough for you to say Clearly not. That's easy enough for you to say Kevin.
Speaker 2:Clearly not, and you know I looked at the agenda and, as you would expect, it covered all the things that we've been talking about, especially road user charges, and several states now are really getting into it seriously. Some are still piloting, Some are still studying. Michigan will be piloting based on money that the governor has included in her budget recommendation and that our Senate Appropriations Subcommittee chairperson is included in her recommendation. She's very much an advocate of this. So I guess give me the highlights from the conference and what the discussion was around this the discussion was around this Sure.
Speaker 1:So you referenced states that have done pilots or are continuing to do pilots. We heard presentations from four Utah, kansas, vermont and Maine. And we also got an update on Washington state, because they're sort of waiting for that final authorization from their legislature to make the program mandatory. So nowhere is it mandatory right now in the United States. But those states were, including Washington state has engaged in pilots, and we heard updates from the four.
Speaker 1:I would say that the most interesting was Utah, because they it's completely voluntary and they they're recruiting people to participate.
Speaker 1:But they went across the board with options for people to record mileage, because the the point of the road usage charge system is to have a driver pay only for the miles they use, ok, and so Utah gave people an option of either an odometer read and you can record it online, or you can take a picture of the of your odometer and upload it to a website. And then they had an option for using embedded telematics. Now the limiting factor there is the company that they use to provide the telematics link doesn't have every carmaker, so they have a great fall off in people who choose the telematics option, but because it's not available, they can't participate. So it highlights kind of the low-tech approach to this and the potential for higher technology being used to support a road usage charging system. And then the other option, of course, is using a smartphone, and some states have really developed a very sophisticated app that lets you combine your personal data with your vehicle and then you can track the mileage that way.
Speaker 2:So, going back to, I want to touch on that technology and how we get around I shouldn't even say get around how we satisfy the people that have these privacy concerns, because I know there are ways to do that. But when you talk about people opting in and doing this voluntarily, it sounds like you're suggesting. The reason some people would do that is because they actually think they will pay less. They think they're paying more now in registration and fuel taxes than they would with a road user charge because of their driving habits.
Speaker 1:That is exactly correct. There was a session on. You know why would drivers choose a RUC system? And it's because they feel registration fees lots of the fuel taxes will actually be more expensive for them than a per mile charge.
Speaker 2:Can you think of many scenarios where that would play out? Because I can't help but think that the person just isn't thinking about what it's going to be at the end of the year, but they do know what they pay every time they go to the pump or when they pay their electric bill, I guess in the case of EV owners, and they certainly know when they pay their registration. That's why some people in Michigan call it the birthday tax right.
Speaker 1:Oh right, yeah, I had not heard that, but I guess that's exactly correct. You have to renew on your birthday, so it's interesting because the fuel tax is not very transparent for people. Transparent for people it's, you know. Certainly people are aware they're paying fuel taxes, but they don't know exactly how much they're paying. It takes some mathematics to figure out, you know, if you're going to be better off with a per mile road usage charge versus, you know, paying for fuel taxes and then that registration fee, which of course you know, because it's a significant thing that you have to do once a year. But I say that it's more dependent the options and whether people will accept it. It's more dependent on educating the public about what they're paying now versus what they could be paying on a per mile basis.
Speaker 2:Then do you think I mean, did you hear some examples of some states that think they've been very successful with that kind of engagement?
Speaker 1:Well, the one that's most successful is Hawaii. So what they do is they read your odometer once a year for their required annual safety check of your vehicle. Okay, their required annual safety check of your vehicle OK. Unfortunately, that solution only works in a place like Hawaii, because you can't really drive your vehicle to another state. Ok, however, it's working. They're rolling it out. Ok, they started with electric vehicles and now they're. They're increasing it and it will be mandatory OK, in in Hawaii, increasing it and it will be mandatory okay, in Hawaii. But it raises the issue of what about out-of-state driving or, in our case, out-of-country? We have Canada as our neighbor. You know how can we craft a system to address what are, you know, genuine concerns about? You know, being fairly treated in terms of a per mile usage charge. Some states, like Washington state, they just give you a credit for something like 250 miles every year you can drive out of state, but if you're driving 350 miles, you might feel like you're being unfairly charged.
Speaker 2:So In terms of the education element, which everybody agrees is really important, besides Hawaii, for their obvious reasons for success, did you hear from other states that were having they felt like a successful outreach and getting across to people the opportunity to opt in? Because I just wonder how many people don't even know.
Speaker 1:Right. So we're talking about a very small population of participating in these pilots. But the people who do participate by and large are satisfied that they're being fairly treated, and because they have different options, the privacy concern is sometimes mitigated. Ok, because if you're responsible for taking a picture of your odometer and loading that in, you know it's you that is doing the reporting, versus a smart app or a telematic solution which would require you know monitoring where the vehicle goes. And oh, by the way, those types of solutions monitoring where the vehicle goes is quite doable. So right now GPS has a resolution of about two meters. I think technology will evolve such that that could get down to a meter within the next couple of years. But even at two meters that's good enough to show you're on a road. You actually could be even in a managed lane at that point, and so the GPS technology can support a road usage charge system. That is pretty accurate.
Speaker 2:Not to go too far afield. But since you mentioned managed lanes, explain that for the uninitiated.
Speaker 1:Sure, so that would be either a high occupancy vehicle or a high occupancy toll road. We have an example of that in Michigan on I-75 between, I want to say, 696 or just 12 mile road, something like that, and to be honest, I think it goes to Big Beaver Road and it is designed. That lane is designed for vehicles between certain hours of the day, rush hours of the day, for at least two people. So that's an example of a managed lane.
Speaker 2:And you probably are familiar because of your work in this field and expertise on tolling with states that started out with HOV and then converted those to HOT.
Speaker 1:Exactly so, and that good example there would be Minneapolis-St Paul. So they started out with high occupancy, then moved to high occupancy toll and actually in Minnesota the price changes dynamically depending on traffic, which is a very interesting concept.
Speaker 2:I don't know. I mean, I'm very familiar with what's going on around Denver and I don't know if they have dynamic pricing or not, but they definitely are aggressive about the managed lanes.
Speaker 1:Absolutely, and they need to be enforced properly. So that's always a concern. You don't want people cheating, you want to make sure it's enforced properly. On the other hand, you have to be very careful about enforcement because if you rely on law enforcement and their vehicles, it can be sometimes dangerous because of where these managed lanes are in the highway system.
Speaker 2:Yeah, and I think that the hot lane is probably less ripe for abuse than the HOV lane, where you've heard stories and I'm sure it's true that people will put a dummy in the seat next to them to drive to work.
Speaker 1:Oh, absolutely. I worked for a company that had camera video technology that was designed to make that, at least very difficult, and what people were doing is ordering if you can remember this, the Dos Equis guy, a full sized guy, that they plop next to the in the passenger seat.
Speaker 2:And the world's most interesting man.
Speaker 1:The world's most interesting man. The world's most interesting man was in many HOT lights.
Speaker 2:Please stay tuned. We'll be back with more Talking Michigan Transportation right after this.
Speaker 3:Oh, look at those beautiful wildflowers along the road, aren't they pretty?
Speaker 4:Check out that classic car. You don't see many of those anymore.
Speaker 3:Wow, look at that cable median barrier.
Speaker 4:What you mean, that wire guard rail in the middle of the road?
Speaker 3:Exactly, aren't they gorgeous?
Speaker 4:Um, not exactly.
Speaker 3:They were put there to prevent crossover head-on crashes, which are some of the most deadly type of freeway crashes, and they're really effective, reducing those types of incidents by 90 percent. That's a lot of lives that have been saved, huh.
Speaker 4:I guess I never really looked at them like that. I prefer the wildflowers. But I'm seeing those median cable barriers and a whole new light.
Speaker 2:Talk about in terms of the wrap on those. You know the Lexus lane, and I don't even know if anybody uses that term anymore, but I think all of these states found out that they were surprised at how many people were willing to pay that fee. That time is money and if presented with that option, at least certain times of the day, certain trips that you have to make because you're just running late, you'll say I don't care what it costs, I'm getting in this lane right.
Speaker 1:Well, you're absolutely correct, and to make it work effectively you have to have that transaction management payments processing system that has virtually no friction to it. So you have to make it as easy as possible for someone to pay if they choose to use that lane.
Speaker 2:So I mentioned earlier that when it comes to road user charges, that Veronica Kleinfeld, who is the chair of our Senate Appropriations Subcommittee for Transportation, she was a real champion for putting this $7.6 million into the budget recommendation for this, and that sounds like that's another takeaway from the conference that everybody said you really need a legislative champion to get this done right, absolutely correct, and in fact people were very disappointed.
Speaker 1:Several people came up to me and said they were very disappointed that Michigan did not get that federal grant to fund a study and a pilot and which is a last year application Exactly Last year.
Speaker 1:Yeah correct, and so I personally am very hopeful that the legislature agrees with the governor that we need to have this money for the study and the pilot. We haven't talked about this yet, but we have a huge gap in terms of transportation funding in Michigan. Yes, the roads need help, but our transit system needs help, so we have a challenge as Michiganders to determine how we're going to fund transportation in general, and certainly the roads need a long-term stable funding mechanism in order to provide the kind of infrastructure that everybody really wants.
Speaker 2:Yeah, and you've been a great champion both on that topic and for transit, and for first mile, last mile, and not just the economic imperative, which I think a lot of people forget about, but also the moral imperative for people with disabilities.
Speaker 1:Absolutely so. I'm glad you mentioned accessibility. That's critically important, important. But also, you know there are 100,000 people living in the city of Detroit today that would otherwise qualify for a driver's license, but they don't have one, and the reason is simple they can't afford a new or even used vehicle because they're way too expensive. I'm talking about people two, three times the poverty line. Personal vehicle ownership is often out of reach, and so those folks a lot of them are literally trapped in their neighborhoods because transit doesn't serve anywhere close to where they live or work. And so that's why I keep talking about a transportation funding gap, not just a road funding gap.
Speaker 2:So the states that are finding some success with road user charges, ruc how are they using some of those funds to support transit or non-motorized transportation?
Speaker 1:Well, so not so much in. I don't think we're far enough along with the RUC pilots for them to talk about where they're going to spend the money. But let's just have a level set here. Every state has the same issue. It's not just Michigan, and so they're using RUC as a policy option to provide for transportation in their states. But to give you a specific example of where tolling is being used to support transit, the best example I can think of is the Pennsylvania Turnpike supporting the Southeast Pennsylvania Transportation Authority, SEPTA. So the bulk of the tolling revenue goes to support transit in southeastern Pennsylvania.
Speaker 2:Yeah, and what's what's been the feedback or what have you heard in terms of the thoughts about that?
Speaker 1:It works OK. So the tolling, the tolling agency, generates enough money to do operations and maintenance and capex. Ok, because a toll road is like any other road it needs to be worked on at some point and then the transit agency is able to do the same thing operate, maintain and build out a transit system. That works pretty well.
Speaker 2:I may have told you this before, but I had a reporter that was doing the perennial story on Ohio's roads versus. Michigan roads say, I know that they have a toll road, but it's just one road. You know how much could that be? Well, it's $350 million a year that the Ohio Department of Transportation doesn't have to spend.
Speaker 1:So absolutely, and you know, ohio has a lot of really interesting things going on in terms of transportation. They have a technology and innovation group that's part of Ohio's Department of Transportation, called Drive Ohio, and they're piloting a lot of interesting technologies. And then, of course, ohio State University sorry, I have to mention it they have a transportation research center that I guess nine years ago with Honda, and so they're doing some innovative things there. I think that you know to your point. A toll road it can be a wonderful thing if it's presented in the right way, completely transparent about where toll revenues are going to go, what percentage is set aside to maintain and operate the road, and everything else goes to something that the public understands and appreciates.
Speaker 2:And some governors might even, let's say, bond against those future toll revenues to help fix roads in that vicinity.
Speaker 1:They have. I think the bonding side of the equation is one of making sure you have balance. I just saw a report this morning about the MTA in New York City saying no more debt, because their debt load now is getting to be a serious issue. And you know, if you can't sustain payments for the bonds, you're going to be in a situation where you either have to refinance or you have to raise transit fares or toll rates.
Speaker 2:And I think when Governor Kasich did that in Ohio, the promise was that the money would be spent on roads near the turnpike, presumably because those people drive both the turnpike and those other roads and would benefit from it.
Speaker 1:Precisely correct. Yeah, address is the privacy concerns associated with either a telematic solution or some kind of smart app that you know, using GPS, figuring out where you're going, you know how many miles you've used. The answer I have for folks that are uncomfortable with that is a question which is is your phone on?
Speaker 2:Exactly.
Speaker 1:If it's on, they know where you are and you kind of have to get over yourself. I know that people are very sensitive to that and that's why I go back to the critical need for public education. We have to make sure we tell people exactly what we're doing.
Speaker 2:And I've had lawmakers tell me that they've raised that to their constituents who have that privacy concern and they say, even though they acknowledge that they carry a phone and other devices, that they still just don't like the idea of having their vehicle tracked. And I don't know what to say to that.
Speaker 1:Right. Well, if you've ever used a tow road, they know when you're getting on, they know when you're getting off. And here's what a lot of people don't understand, because they see the cameras, the transponders. Virtually in every case, once the transaction is processed, the video is dumped, the data is gone because it costs money to keep that data. So you literally dump the data and then it's not really an issue for anyone following you Now whether the public believes that, okay, that's where we have to educate folks.
Speaker 2:That's educated, yeah, and I think that, yeah, you have to convince them that there are several. There are audits and other safeguards to ensure that when the government says we're not keeping that data, that they're not so now private firms would have an incentive to keep that, because they're all about data. That's a different question.
Speaker 1:But that's what you need to specify in your contract with whatever vendor you choose to manage the system. Or if it's a government employee, again you have to have the tests. Make sure people feel comfortable that data is actually being deleted.
Speaker 2:Yeah. So I know you'll be watching this budget process closely and hopeful that this $7.6 million for this pilot actually makes it and then MDOT is able to go ahead and implement that pilot. What is your fervent, yet most realistic?
Speaker 1:hope. I think we spend a lot of money on a lot of things at the state level and when I think of $7.6 million to address a critical funding gap for roads, and then at least thinking about the rest of transportation, it seems like a very modest sum.
Speaker 2:Yeah, it's our literal foundation.
Speaker 1:It is. And here's the other answer to folks who say, well, no, I don't want to spend that money on a road usage charge or road funding study and pilot. Tell me what the alternative is. Is it going to be a regressive sales tax? Because some states have done that. They use sales tax revenues to support roads and transportation.
Speaker 2:Arkansas voters approved that a couple of times.
Speaker 1:Absolutely. So okay, you want to go down that path. My concern about it is that it is, as I said, regressive and it hurts the lower income people more than anyone.
Speaker 2:Yeah, no, I think that's always been a problem. I have had people make the argument that a sales tax is a user tax, because all those goods that you consume use the roads. But that, to me, is an extreme stretch.
Speaker 1:Absolutely. And, by the way, with the road usage charging system, we can calibrate the fees to people who are at a lower socioeconomic level.
Speaker 2:I'm glad you made that point. That's really important.
Speaker 1:Yeah, we qualify people for all kinds of government benefits. There's no reason we couldn't qualify folks for a lower Ruck charge based on their income level.
Speaker 2:Yeah, john, thank you as always. I really appreciate your insights and it sounds like the conference was informative, and I know that others that were there told me that they learned a lot, so that's always good. Thanks for having me, jeff. I'd like to thank you once more for tuning in to Talking Michigan Transportation. You can find show notes and more on Apple Podcasts or Buzzsprout. I also want to acknowledge the talented people who help make this a reality each week, starting with Randy Devler, who skillfully edits the audio, jesse Ball, who proofs the content, courtney Bates, who posts the podcast to various platforms, and Jackie Salinas, who transcribes the audio to make it accessible to all.