Latest developments on Distance-based Road Usage Charging “RUC”

1. Latest developments on Distance-basedRoad Usage Charging“RUC” Jack Opiola D’Artagnan Consulting LLP

2. Transportation Funding in the Age of Fuel Efficiency Fuel tax receipts are now in permanent decline and will decline dramatically over the next several years. US CAFE standards for 2016 and 2025 are impacting the entire future passenger vehicle fleet composition and fuel efficiency for ICEs, Hybrids, and advanced Hybrids Standard passenger vehicles with 100 percent electric motive power entered marketplace in 2010 Four main models in 2012 More than 11 models being commercialized in 2013 15-18 models announced by all automobile manufacturers and introduced by 2015 Plug-in hybrid vehicles entered marketplace in 2012 and will be offered across all manufacturing brands and models

3. USA National Review & Support

4. Gas Tax is Not Sustainable 200% Vehicle Miles Traveled 150% Population 100% 50% 0 Gas Tax Revenue -50% -100% 2006 2002 1970 1974 1982 1998 1986 1990 1994 1978 Source: Trends based on data for Southern California (SCAG LRTP)

5. Revenues Have Not Kept Pace With VMT Growth Original 2007 Funding Study Forecast Unintended Consequence Nov. ’09 Forecast: $1.6 Billion drop 2005 9 ½ ¢ gas tax increase Current Risk Scenario: additional $2.2 Billion drop Source: WS Joint Transportation Committee – Implementing Alternative Transportation Funding Methods, 2009.

6. New Funding Sources – Plenty of Studies • “The historical tools and tax-based charges currently at governments’ disposal to raise revenue for infrastructure provisions are: • out of date, • inefficient, • create false pricing signals to users, and • are inadequate to fund increased accessibility and future growth.” Source: Roads Australia Road Reform by Consult Australia &D’Artagnan Consulting LLP, 2011

7. Revenue Generation per Alternatives ~10-12 X ~9-10 X ~5 X ~3.5 X 1.5 X 1 Revenue Generation per annum - $000 M Source: SCAG and HNTB team of HNTB, CDM Smith and D’Artagnan Consulting LLP

8. VMT Financial Analysis GRP and Employment Annual Percentage Increase from the Baseline (2021-2040) Source: SCAG and HNTB team of HNTB, KPMG and D’Artagnan Consulting LLP

9. Repeating Themes against VMT / RUC charging • Too complicated and expensive to operate; • Inequitable to rural drivers; • Technology invades privacy of the driver; • No business case for it; and, • No Politician brave enough to adopt it!

10. Major Cost Categories Administration and Collection • Program administration • Account management • Information technology (IT) • Enforcement • Lost revenue due to evasion • Cost of recovering unpaid tax debt • Cost of audit • Public relations • Cash flow

11. Example of Road Usage Charge Costs by Category High early year costs due to startup Account management Source: WSTC Road Usage Charge Business Case Analysis, October 14, 2013, D’Artagnan Consulting LLP

12. Financial / Operational Cost Model Source: ODOT Road Usage Charge Financial Viability Report, June 2013, D’Artagnan Consulting LLP

13. Repeating Themes against VMT / RUC charging • Too complicated and expensive to operate; • Inequitable to rural drivers; • Technology invades privacy of the driver; • No business case for it; and, • No Politician brave enough to adopt it!

14. Rural — Urban Equity Or, more Equitable ? Equitable? Pick-up Trucks $34B Needs $54B $78B Source: GAO Report GAO-13-77 Pilot Program Could Help Determine the Viability of Mileage Fees for Certain Vehicles, December 2012

15. Urban and Rural Road Usage Charge Impacts Average Self-reported Trip Distances (Miles) Rural residents tend to drive longer distances for all trips including medical appointments, shopping, and school Source: Oregon DOT, Rural-Urban Study, Augmentation 1, June 2013 by DHM Research & D’Artagnan Consulting LLP

16. Urban and Rural: Self-reported Distance Driven Annually (Miles) • The difference in miles driven among urban, mixed, and rural counties is not substantial. • Rural motorists drive more off-road and out-of-state miles than other motorists. This holds true for “border” and “non-border” counties. • These figures are self reported, but nevertheless illuminate individuals’ collective impressions of their own situations Source: Oregon DOT, Rural-Urban Study, Augmentation 1, June 2013 by DHM Research & D’Artagnan Consulting LLP

17. Repeating Themes against VMT / RUC charging • Too complicated and expensive to operate; • Inequitable to rural drivers; • Technology invades privacy of the driver; • No business case for it; and, • No Politician brave enough to adopt it!

18. Options for Road Usage Charging Option 2: The Smart Phone Plan Option 1: The Basic Plan (without GPS) Option 4: Read Odometer at start and end of year October ‘12 October ‘13 Technical 35,551 miles —15,151 miles = 20,400 miles 20,400 miles x 1.55¢ per mile = $316.20 tax Option 5: Pre-paid Flat Rate Plan October 2013 Option 3: The Advanced Plan (with GPS) State Department of Transportation 500.00 Five Hundred and 00/100 Joe Motorist Road Usage Charge Non-Technical

19. Minnesota Public Opinion on “Solutions” “High Tech” = GPS device “Low Tech” = Odometer reading Source: The Dieringer Research Group Inc. for Minnesota Department of Transportation, June-July 2009

20. Minnesota Public Opinion on “Features” Source: The Dieringer Research Group Inc. for Minnesota Department of Transportation, June-July 2009

21. Repeating Themes against VMT / RUC charging • Too complicated and expensive to operate; • Inequitable to rural drivers; • Technology invades privacy of the driver; • No business case for it; and, • No Politician brave enough to adopt it!

22. Present Value of Net Tax RevenueSensitivity Analysis, Alternative Concepts and Scenarios 2015-2040 All road usage charge concepts have considerably higher net present value than gas tax

23. Simplified Business Case – Gas Tax vs RUC (net) NPV RUC = $20.5 Billion Revenue neutral rate equals ~ 20 MPG at start Notes Base=4M vehicles Fuel Efficiency = Global Insight Rate (2015) = 1.55¢/mile [revenue neutral in 2015] NPV Gas Tax = $13.8 Billion

24. Repeating Themes against VMT / RUC charging • Too complicated and expensive to operate; • Inequitable to rural drivers; • Technology invades privacy of the driver; • No business case for it; and, • A Political System is not brave enough to adopt it!

25. USA Distance-based Pilots & Study Western Road Usage Charge Coalition (WRUCC) Program/Study Completed or finishing Beginning Inquiry Active Formal study Legislative Mandate

26. Closing Remarks • New automotive technologies are eroding the gas tax as a proxy for road usage, while other new technologies are removing the administrative and cost barriers to collect RUC. • Change is beginning at the State level — just as the gas tax did in 1919 • The focus is revenue sustainability. RUC may also include other objectives such as: • Environmental considerations or • Congestion reduction • Caveats • Does not preclude increase in state or federal gas taxes first • Does not preclude new toll facilities • May phase in over time, and • May never include all internal combustion engine (ICE) vehicles

27. Thank you! Jack Opiola (703) 915-1844; (703) 622-6446 jack.opiola@dartagnan.co