What are Distance-Based Fees?
Distance-based Fees (DBF) are fees that charge users of the road based on distance traveled. Not yet deployed anywhere in Minnesota, the DBF is a potential replacement for the motor fuel tax, or in the case of electric vehicles, a potential per-mile road use charge that might replace the registration surcharge. The DBF project also supports the fundamental concept of "user-pays/user-benefits" economic principle. It supports the notion of all users paying a fair share for use of the roads in some proportion to the benefits received.
How It Works
Technology-equipped vehicles log mileage, location, and fuel consumption.
Vehicle data is safely shared with the shared mobility provider and reviewed for accuracy.
Data is used to calculate total number of miles a vehicle travels to assess a per-mile fee.
The Minnesota Department of Revenue receives financial reports and collects simulated charges.
Why Does Minnesota Need Distance-Based Fees?
Most states in the U.S. rely heavily on the motor fuel tax as a major source of revenue to fund roads. The motor fuel tax is a fee levied on each gallon of gas purchased. While the motor fuel tax has been a reliable revenue source for nearly 100 years, there is a growing consensus that it will be a less reliable source in the future due to issues such as increasing efficiency of vehicles, alternative fuels, and inflation.
Minnesota relies heavily on the gas tax to build and maintain roads and bridges. At the same time, vehicles are using less gas, because they use other energy sources like electricity and/or they are more fuel-efficient. In effect, the public is driving more but paying less for gasoline.
Minnesota taxpayers fund highway construction and maintenance work with three basic financing tools — motor fuel tax, vehicle registration fees and motor vehicle sales tax. These reliable sources of revenue fund transportation projects that move people and products throughout the state and will continue to be funding sources for the next 10-20 years. However, in the long-term, the gas tax may not produce the revenue needed to remain a reliable funding stream due to increasing efficiency, growth in alternative fuel and electric vehicles and the potential for automated vehicles.
Today’s new vehicles are equipped with better technology and communications capabilities that provide the opportunity to collect fees efficiently using a DBF method. Whatever type of power is used — fossil fuel, electric, hybrid or alternative-fuel vehicles — DBF aims to charge vehicles appropriately and proportionately for use of the roads.
Issues to be Resolved
Distance-Based Fees—sometimes called mileage-based user fees, vehicle mile travel fees and road user charges, among other names—are a possible solution to replace or supplement the motor fuel tax. Among the lingering questions yet to be resolved:
- What to do about the motor fuel tax?
- How do we equitably and sustainably charge users for use of the road?
- How do we ensure that a new road funding mechanism, like a DBF, be designed to overcome the short comings of the motor fuel tax and remain a sustainable funding source for the next generation of vehicles?
- How do we efficiently and effectively collect DBF if they are levied?
- What are the right rates to charge for use of the roads?
- How to manage a statewide or nationwide DBF program?
Minnesota’s Distance-Based Fee demonstration considers these questions and will produce research reports analyzing these questions.
DBF in the US
Two states in the U. S. now have some form of distance-based fees. Oregon operates the OReGo program that allows drivers to replace the charge they pay for the motor fuel tax with a distance-based fee they call a road user charge. This limited enrollment option has been in place since 2015.
The State of Utah also has a road user charge that started in 2020. Electric and hybrid vehicle owners have an option to pay a road usage charge in lieu of their annual fee. In future years, the RUC program could also be a potential replacement to the fuel tax for all vehicles in Utah.
States across the United States are exploring road charge as a viable option. The Mileage-based User Fee Alliance (MBUFA) maintains a listing of State Pilots and Systems.
Learn more about other state programs underway in the United States.
Of note, several nations around the world have implemented distance-based charging including Belgium, Germany and New Zealand, and many other nations are considering this option.
Surface Transportation System Funding Alternatives Program: https://ops.fhwa.dot.gov/fastact/stsfa/reports/stsfarpt19/index.htm
Minnesota's DBF Historical Timeline
2007 - Mileage-Based User Fee v. Motor Fuel Tax research interviews
MnDOT conducted qualitative research to understand public opinion about a mileage-based user fee alternative to the current motor fuel tax. People interviewed included knowledgeable transportation experts as well as the general public. Eight transportation experts participated in an online bulletin board discussion about the issue and 10 focus groups (six in the Twin Cities Metro area and two each in Duluth and Mankato) totaling 89 people provided feedback. Read the Summary Report. (PDF)
2008 - Driver Perceptions of Mileage-Based User Fee focus groups
MnDOT conducted nine mini-focus groups (five in the Twin Cities Metro area and two each in Duluth and Mankato) with Minnesota drivers to understand the perceptions and level of acceptance among the Minnesota public about implementation of a mileage-based user fee. Read the Summary Report (PDF)
2009 - Transportation Funding Issues interviews
MnDOT conducted 821 phone-mail-phone interviews with Minnesota drivers selected by random sample augmented by drivers of hybrid vehicles to better understand their understanding of funding of transportation issues. Read the Summary Report (PDF)
2011 - Minnesota Road User Charge test
MnDOT conducted technical research of the mileage-based user fee with 500 people from Hennepin and Wright Counties. Volunteers in the study use a Smart Phone with a GPS application in their car or truck. Three different groups of volunteers tested the devices for six months each.
2013 - Mileage-Based User Fee research study
In 2013, MnDOT released the Operations Summary Report for the 500 participant Minnesota Road Fee Test Project, which localized in-vehicle signing for improved safety and demonstrated a Connected Vehicle approach for collecting vehicle probe data. The project relied entirely on commercially available components, primarily a smartphone using an application capable of tracking participant vehicle trips. The project met its overall objectives as the system could assign variable mileage fees based on location and time of day as well as presenting in-vehicle safety notifications which influenced participants' driving habits.
2013 - Evaluation of the Minnesota Road Fee Test
MnDOT issued a report evaluating its 2011 Road Fee Test (MRFT) User Charge Test. The report concluded that the project was successful in assessing the feasibility of consumer devices, namely smartphones, for implementing a usage-based charge and supporting connected vehicle applications. The report identified numerous challenges with using aftermarket devices that informed MnDOT’s current in-vehicle telematics-based approach.
2019 - Distanced Based User Fee planning study
MnDOT was awarded a federal grant to plan and design a distance-based fee approach using shared mobility (SM) services. MnDOT partnered with two SM providers offering services in the Minnesota, as well as a connected and automated vehicle research firm, to plan, design, test, and certify the system. MnDOT also worked with the University of Minnesota to establish a rate setting approach and administer a survey to over 5,000 SM customers to gauge their support for the concept.
2020 - Distanced Based User Fee demonstration pilot program
MnDOT subsequently received an additional grant to implement a 12-month pilot of the SM-based DBF system using embedded telematics for assessment and reporting. A total of 64 share mobility fleet vehicles and one connected/automated vehicle participated in the pilot and provided road usage data for MnDOT and the project team. The project was successful in accurately collecting and transmitting the necessary data for DBF assessment and confirmed that levying fees on fleet services may lower DBF administrative costs by reducing the total number of collection points and accounts to be administered and audited.