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The future of road funding · Talking Michigan Transportation

• 0:07
  Jeff Cranson: Hello, welcome to the Talking Michigan Transportation Podcast.
• 0:10
  Jeff Cranson: I'm Jeff Cranson.
• 0:11
  Jeff Cranson: 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.
• 0:41
  Jeff Cranson: 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.
• 0:59
  Jeff Cranson: So I hope you enjoy the conversation.
• 1:01
  Jeff Cranson: Once again
• 1:03
  Jeff Cranson: John Peracchio, a friend of the podcast.
• 1:06
  Jeff Cranson: 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.
• 1:20
  Jeff Cranson: So, John, thank you for taking time again.
• 1:23
  Jeff Cranson: As always, my pleasure.
• 1:25
  Jeff Cranson: So let's start.
• 1:27
  Jeff Cranson: 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.
• 1:39
  John Peracchio: That's easy enough for you to say
• 1:41
  John Peracchio: .
• 1:44
  Jeff Cranson: 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.
• 1:59
  Jeff Cranson: Some are still piloting, Some are still studying.
• 2:01
  Jeff Cranson: 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.
• 2:14
  Jeff Cranson: She's very much an advocate of this.
• 2:16
  Jeff Cranson: So I guess give me the highlights from the conference and what the discussion was around this the discussion was around this Sure.
• 2:28
  John Peracchio: So you referenced states that have done pilots or are continuing to do pilots.
• 2:30
  John Peracchio: We heard presentations from four Utah, kansas, vermont and Maine.
• 2:34
  John Peracchio: 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.
• 2:46
  John Peracchio: So nowhere is it mandatory right now in the United States.
• 2:50
  John Peracchio: But those states were, including Washington state has engaged in pilots, and we heard updates from the four.
• 3:01
  John Peracchio: I would say that the most interesting was Utah, because they it's completely voluntary and they they're recruiting people to participate.
• 3:10
  John Peracchio: 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.
• 3:42
  John Peracchio: And then they had an option for using embedded telematics.
• 3:46
  John Peracchio: 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.
• 4:03
  John Peracchio: 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.
• 4:16
  John Peracchio: 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.
• 4:36
  Jeff Cranson: 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.
• 4:48
  Jeff Cranson: But when you talk about people opting in and doing this voluntarily, it sounds like you're suggesting.
• 4:53
  Jeff Cranson: The reason some people would do that is because they actually think they will pay less.
• 4:56
  Jeff Cranson: 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.
• 5:04
  John Peracchio: That is exactly correct.
• 5:06
  John Peracchio: There was a session on, you know why would drivers choose a RUC system?
• 5:12
  John Peracchio: 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.
• 5:23
  Jeff Cranson: Can you think of many scenarios where that would play out?
• 5:25
  Jeff Cranson: 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.
• 5:42
  Jeff Cranson: That's why some people in Michigan call it the birthday tax right.
• 5:46
  John Peracchio: Oh right, yeah, I had not heard that, but I guess that's exactly correct.
• 5:51
  John Peracchio: You have to renew on your birthday, so it's interesting because the fuel tax is not very 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.
• 6:12
  John Peracchio: 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.
• 6:28
  John Peracchio: But I say that it's more dependent the options and whether people will accept it.
• 6:34
  John Peracchio: 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.
• 6:44
  Jeff Cranson: 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?
• 6:51
  John Peracchio: Well, the one that's most successful is Hawaii.
• 6:54
  John Peracchio: So what they do is they read your odometer once a year for their required annual safety check of your vehicle.
• 7:03
  John Peracchio: Okay, their required annual safety check of your vehicle OK.
• 7:07
  John Peracchio: Unfortunately, that solution only works in a place like Hawaii, because you can't really drive your vehicle to another state.
• 7:12
  John Peracchio: Ok, however, it's working.
• 7:15
  John Peracchio: They're rolling it out.
• 7:17
  John Peracchio: Ok, they started with electric vehicles and now they're.
• 7:19
  John Peracchio: They're increasing it and it will be mandatory OK, in in Hawaii, increasing it and it will be mandatory okay, in Hawaii.
• 7:29
  John Peracchio: But it raises the issue of what about out-of-state driving or, in our case, out-of-country?
• 7:31
  John Peracchio: We have Canada as our neighbor.
• 7:33
  John Peracchio: You know how can we craft a system to address what are, you know, genuine concerns about?
• 7:40
  John Peracchio: You know, being fairly treated in terms of a per mile usage charge.
• 7:46
  John Peracchio: 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.
• 8:05
  Jeff Cranson: 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?
• 8:24
  Jeff Cranson: Because I just wonder how many people don't even know.
• 8:28
  John Peracchio: Right.
• 8:28
  John Peracchio: So we're talking about a very small population of participating in these pilots.
• 8:34
  John Peracchio: 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.
• 8:46
  John Peracchio: 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.
• 9:04
  John Peracchio: And oh, by the way, those types of solutions monitoring where the vehicle goes is quite doable.
• 9:14
  John Peracchio: So right now GPS has a resolution of about two meters.
• 9:19
  John Peracchio: I think technology will evolve such that that could get down to a meter within the next couple of years.
• 9:26
  John Peracchio: But even at two meters that's good enough to show you're on a road.
• 9:31
  John Peracchio: You actually could be even in a managed lane at that point, and so the GPS technology can support a road usage charge system.
• 9:42
  John Peracchio: That is pretty accurate.
• 9:44
  Jeff Cranson: Not to go too far afield.
• 9:45
  Jeff Cranson: But since you mentioned managed lanes, explain that for the uninitiated.
• 9:59
  John Peracchio: Sure, so that would be either a high occupancy vehicle or a high occupancy toll road.
• 10:01
  John Peracchio: 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.
• 10:14
  John Peracchio: That lane is designed for vehicles between certain hours of the day, rush hours of the day, for at least two people.
• 10:21
  John Peracchio: So that's an example of a managed lane.
• 10:25
  Jeff Cranson: 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.
• 10:35
  John Peracchio: Exactly so, and that good example there would be Minneapolis-St Paul.
• 10:40
  John Peracchio: 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.
• 10:55
  Jeff Cranson: I don't know.
• 10:56
  Jeff Cranson: 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.
• 11:04
  John Peracchio: Absolutely, and they need to be enforced properly.
• 11:08
  John Peracchio: So that's always a concern.
• 11:11
  John Peracchio: You don't want people cheating, you want to make sure it's enforced properly.
• 11:16
  John Peracchio: 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.
• 11:32
  Jeff Cranson: 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.
• 11:45
  John Peracchio: Oh, absolutely.
• 11:45
  John Peracchio: 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.
• 12:09
  Jeff Cranson: And the world's most interesting man.
• 12:10
  John Peracchio: The world's most interesting man.
• 12:11
  John Peracchio: The world's most interesting man was in many HOT lights.
• 12:16
  Jeff Cranson: Please stay tuned.
• 12:17
  Jeff Cranson: We'll be back with more Talking Michigan Transportation right after this.
• 12:25
  MDOT Message: Oh, look at those beautiful wildflowers along the road, aren't they pretty?
• 12:28
  MDOT Message: Check out that classic car.
• 12:29
  MDOT Message: You don't see many of those anymore.
• 12:32
  MDOT Message: Wow, look at that cable median barrier.
• 12:34
  MDOT Message: What you mean, that wire guard rail in the middle of the road?
• 12:37
  MDOT Message: Exactly, aren't they gorgeous?
• 12:40
  MDOT Message: Um, not exactly.
• 12:41
  MDOT Message: 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.
• 12:53
  MDOT Message: That's a lot of lives that have been saved, huh.
• 12:57
  MDOT Message: I guess I never really looked at them like that.
• 12:58
  MDOT Message: I prefer the wildflowers.
• 13:00
  MDOT Message: But I'm seeing those median cable barriers and a whole new light.
• 13:07
  Jeff Cranson: Talk about in terms of the wrap on those.
• 13:11
  Jeff Cranson: 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.
• 13:22
  Jeff Cranson: 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.
• 13:35
  John Peracchio: 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.
• 13:47
  John Peracchio: So you have to make it as easy as possible for someone to pay if they choose to use that lane.
• 13:54
  Jeff Cranson: 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.
• 14:21
  John Peracchio: 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.
• 14:36
  John Peracchio: 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.
• 14:50
  John Peracchio: We haven't talked about this yet, but we have a huge gap in terms of transportation funding in Michigan.
• 14:58
  John Peracchio: 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.
• 15:25
  Jeff Cranson: 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.
• 15:42
  John Peracchio: Absolutely so.
• 15:42
  John Peracchio: I'm glad you mentioned accessibility.
• 15:44
  John Peracchio: That's critically important, important.
• 15:52
  John Peracchio: 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.
• 16:03
  John Peracchio: I'm talking about people two, three times the poverty line.
• 16:08
  John Peracchio: 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.
• 16:19
  John Peracchio: And so that's why I keep talking about a transportation funding gap, not just a road funding gap.
• 16:28
  Jeff Cranson: 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?
• 16:42
  John Peracchio: Well, so not so much in.
• 16:44
  John Peracchio: 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.
• 16:51
  John Peracchio: But let's just have a level set here.
• 16:53
  John Peracchio: Every state has the same issue.
• 16:55
  John Peracchio: It's not just Michigan, and so they're using RUC as a policy option to provide for transportation in their states.
• 17:07
  John Peracchio: 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.
• 17:21
  John Peracchio: So the bulk of the tolling revenue goes to support transit in southeastern Pennsylvania.
• 17:29
  Jeff Cranson: Yeah, and what's what's been the feedback or what have you heard in terms of the thoughts about that?
• 17:39
  John Peracchio: It works OK.
• 17:39
  John Peracchio: So the tolling, the tolling agency, generates enough money to do operations and maintenance and capex.
• 17:47
  John Peracchio: 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.
• 18:05
  John Peracchio: That works pretty well.
• 18:07
  Jeff Cranson: I may have told you this before, but I had a reporter that was doing the perennial story on Ohio's roads versus.
• 18:14
  Jeff Cranson: Michigan roads say, I know that they have a toll road, but it's just one road.
• 18:18
  Jeff Cranson: You know how much could that be?
• 18:19
  Jeff Cranson: Well, it's $350 million a year that the Ohio Department of Transportation doesn't have to spend.
• 18:27
  John Peracchio: So absolutely, and you know, Ohio has a lot of really interesting things going on in terms of transportation.
• 18:34
  John Peracchio: 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.
• 18:46
  John Peracchio: 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.
• 19:00
  John Peracchio: I think that you know to your point.
• 19:03
  John Peracchio: 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.
• 19:28
  Jeff Cranson: And some governors might even, let's say, bond against those future toll revenues to help fix roads in that vicinity.
• 19:35
  John Peracchio: They have.
• 19:36
  John Peracchio: I think the bonding side of the equation is one of making sure you have balance.
• 19:45
  John Peracchio: 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.
• 19:54
  John Peracchio: 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.
• 20:09
  Jeff Cranson: 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.
• 20:27
  John Peracchio: Precisely correct.
• 20:28
  John Peracchio: 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.
• 20:45
  John Peracchio: The answer I have for folks that are uncomfortable with that is a question which is is your phone on?
• 20:54
  Jeff Cranson: Exactly.
• 20:55
  John Peracchio: If it's on, they know where you are and you kind of have to get over yourself.
• 21:00
  John Peracchio: I know that people are very sensitive to that and that's why I go back to the critical need for public education.
• 21:08
  John Peracchio: We have to make sure we tell people exactly what we're doing.
• 21:12
  Jeff Cranson: 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.
• 21:26
  Jeff Cranson: And I don't know what to say to that.
• 21:28
  John Peracchio: Right.
• 21:28
  John Peracchio: Well, if you've ever used a tow road, they know when you're getting on, they know when you're getting off.
• 21:34
  John Peracchio: And here's what a lot of people don't understand, because they see the cameras, the transponders.
• 21:39
  John Peracchio: 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.
• 21:49
  John Peracchio: 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.
• 22:02
  Jeff Cranson: That's educated, yeah, and I think that, yeah, you have to convince them that there are several.
• 22:05
  Jeff Cranson: 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.
• 22:16
  Jeff Cranson: That's a different question.
• 22:19
  John Peracchio: But that's what you need to specify in your contract with whatever vendor you choose to manage the system.
• 22:27
  John Peracchio: Or if it's a government employee, again you have to have the tests.
• 22:33
  John Peracchio: Make sure people feel comfortable that data is actually being deleted.
• 22:37
  Jeff Cranson: Yeah.
• 22:38
  Jeff Cranson: 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.
• 22:48
  Jeff Cranson: What is your fervent, yet most realistic hope?
• 22:52
  John Peracchio: 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.
• 23:15
  Jeff Cranson: Yeah, it's our literal foundation.
• 23:20
  John Peracchio: It is.
• 23:20
  John Peracchio: 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.
• 23:28
  John Peracchio: Tell me what the alternative is.
• 23:30
  John Peracchio: Is it going to be a regressive sales tax?
• 23:33
  John Peracchio: Because some states have done that.
• 23:35
  John Peracchio: They use sales tax revenues to support roads and transportation.
• 23:40
  Jeff Cranson: Arkansas voters approved that a couple of times.
• 23:44
  John Peracchio: Absolutely.
• 23:44
  John Peracchio: So okay, you want to go down that path.
• 23:46
  John Peracchio: My concern about it is that it is, as I said, regressive and it hurts the lower income people more than anyone.
• 23:55
  Jeff Cranson: Yeah, no, I think that's always been a problem.
• 23:57
  Jeff Cranson: 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.
• 24:04
  Jeff Cranson: But that, to me, is an extreme stretch.
• 24:08
  John Peracchio: Absolutely.
• 24:09
  John Peracchio: And, by the way, with the road usage charging system, we can calibrate the fees to people who are at a lower socioeconomic level.
• 24:22
  Jeff Cranson: I'm glad you made that point.
• 24:23
  Jeff Cranson: That's really important.
• 24:24
  John Peracchio: Yeah, we qualify people for all kinds of government benefits.
• 24:27
  John Peracchio: There's no reason we couldn't qualify folks for a lower ruck charge based on their income level.
• 24:35
  Jeff Cranson: Yeah, John, thank you as always.
• 24:37
  Jeff Cranson: 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.
• 24:45
  Jeff Cranson: Thanks for having me, Jeff.
• 24:47
  Jeff Cranson: I'd like to thank you once more for tuning in to Talking Michigan Transportation.
• 24:51
  Jeff Cranson: You can find show notes and more on Apple Podcasts or Buzzsprout.
• 24:56
  Jeff Cranson: I also want to acknowledge the talented people who help make this a reality each week, starting with Randy Debler, who skillfully edits the audio, Jesse Ball, who proofs the content, Courtney Bates, who posts the podcast to various platforms, and Jacke Salinas, who transcribes the audio to make it accessible to all.