Applying International Lessons Learned to U.S.-Based RUC Systems
While road usage charging (RUC) and its benefits are familiar to many transportation leaders in the United States, few know that the concept’s origins began abroad. New Zealand, for example, has collected RUC from heavy- and medium-duty vehicles, plus diesel cars since 1977, and many European countries have implemented time- and/or distance-based RUC largely for medium- and heavy-duty vehicles.
Thanks to a longer history and varied execution strategies, these international adopters can teach valuable lessons about how to implement successful RUC programs stateside. Scott Wilson, a New Zealand-born client service leader with CDM Smith currently based in New Zealand, has worked with clients in New Zealand, Australia, the UK, USA, Ireland, the Middle East and Hong Kong, as well as the European Commission. He specializes in advising on strategy, policy, regulation, and governance for road pricing and tolling.
Here, Scott shares solutions he's discovered for the most common RUC challenges, and advice for how states can learn from their international RUC counterparts.
When introducing and implementing RUC abroad, what are some of the key challenges facing clients, and how can they be overcome?
Challenge: Public opposition
Scott says: Resistance to change is a global phenomenon, and one that affects potential RUC jurisdictions everywhere. If you’re thinking about adopting a RUC system, particularly in the early stages, be sure to clearly communicate the concept and major objectives. It’s important to stress that RUC is a means to replace—not add to—revenue from existing taxes. You might consider a demonstration or pilot to help allay any fears and answer key public concerns.
Challenge: Conflicting objectives
Scott says: Is RUC about raising adequate revenue to fund road maintenance or managing demand? Often these two objectives are in conflict, and attempting to address both can raise costs and stoke public opposition. Direct and consistent communication will help the introduction and rollout of a RUC program, and the public tends to support RUC schemes that lead with fairness as a key objective. Most successful RUC programs globally focus on revenue: user fees aim to generate adequate revenue to address road infrastructure needs across a large jurisdiction such as a state, region, or country. To manage demand, congestion pricing is a separate consideration more appropriate for targeted local application in urban areas.
Challenge: Letting the technology lead the solution
Scott says: Exhaustive arguments can be made for (or against) each of the technology options available to capture and report road usage. It’s easy to be swayed by the flashiest option. But in reality, you’ll want to include a variety of high- and low-tech options to ensure all vehicle operators can partake in the program, regardless of their needs or the type/age of their vehicle. Drivers also like choice, which improves acceptance of something new and unfamiliar. The bottom line? Don’t be dazzled by devices.
Challenge: High administration costs
Scott says: Some mature RUC systems see administrative costs below 5% of revenue. Economies of scale are real, but you’ll want to remind the public that it may take a few years to reach that level of efficiency.
Challenge: Dealing with various classes of vehicles
Scott says: Much of our work abroad deals with heavy vehicle RUC. Indeed, much of Europe and New Zealand rely on tolling and distance-based charges from medium- and heavy-duty vehicles to fund their road networks. Australia is studying such a program through a national trial. While rare in the U.S. (only five states have distance-charging programs for heavy vehicles), experience abroad points to key success factors including fiscal reforms that optimize funding of infrastructure projects for the benefit of freight intensive industries; fair rate-setting methodologies carefully devised to allocate costs to road users based on their impacts; consolidating and simplifying tax burdens on businesses; and thoughtful administration designed to maximize compliance while minimizing costs for operators.
Challenge: Rate and revenue concerns
Scott says: Thanks to inherent skepticism of politicians and policymakers, many potential RUC end-users don’t trust government officials to set rates fairly. This is especially contentious with RUC systems, as the basis for setting per-mile rates is not obvious. Clear principles should guide how rates are set including considerations for medium and heavy duty vehicles by weight and configuration.
Challenge: Belief that RUC will hurt the transition to EVs
Scott says: There is no evidence of noticeable negative impacts on EV adoption in jurisdictions with RUC. In fact, EVs are still cheaper to operate with a RUC system than internal combustion engine vehicles. For European jurisdictions, the transition to EVs is well underway with or without RUC, in many cases with mandatory adoption timelines within 15 years. These transitions are putting pressure on governments to find replacement revenue sources such as RUC. Besides clearing up this confusion, it is useful to provide additional information on the issues that actually do hinder EV adoption, such as high upfront costs, range anxiety, and vehicle model choice.
In addition, motorists and businesses alike need to trust that when a ‘user pays’ principle is applied the money is actually spent on the roads.
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As Wilson outlines, avoiding the major pitfalls that have thwarted precursory RUC systems abroad requires coordination and commitment throughout an organization. CDM Smith’s revenue experts can guide you through the planning, piloting and implementation of your program. Schedule time to talk with an expert today.
Thanks to a longer history and varied execution strategies, international adopters can teach valuable lessons about how to implement successful RUC programs stateside.