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Advisory panel reviews business case, leakage and how fuel taxes are collected for road‑charge planning
Summary
Caltrans project team presented a business‑case framework that isolates net revenue as gross revenue minus leakage and cost of collection; the meeting included a detailed primer on how California fuel taxes are levied, exemptions and transfers, and benchmarks for cost of collection.
An advisory presentation to the Transportation Commission Technical Advisory Committee reviewed the business case framework for a road‑charge system and provided an extended primer on how fuel taxes are collected and accounted for in California.
Travis Dunn, the project business‑case lead, told the committee the central equation for the analysis is “net revenue = gross revenue minus leakage minus cost of collection.” He said the business case will foreground net revenue because gross estimates of potential road‑charge receipts are only useful once the project accounts for leakage (evasion, negligence, systemic error) and the cost to collect the money.
Key numbers and benchmarks cited in the presentation: - The project team is using multiple institutional sources for data, including the Board of Equalization (which collects fuel taxes), Caltrans, the Air Resources Board, DMV, and federal sources such as the Energy Information Administration and FHWA. Dunn asked TAC members to share VMT and socioeconomic stratification data to refine the analysis. - Cost of collection for California fuel excise taxes is low compared with many utilities. The Board of Equalization’s compensation in the last fiscal year from the motor vehicle fund was stated as roughly $28 million, representing about 0.6% of revenue collected; national averages for fuel‑tax collection costs are generally below 1% (the presentation used 0.9% as a national benchmark). - Transfers and refunds reduce the taxable fuel base. The team estimated transfers for off‑highway and exempt uses at roughly 5% of the motor fuel tax base; refunds to exempt users occur but the total is unknown and staff said they are collecting more detailed controller data.
Dunn reviewed leakage (evasion, negligence, systemic error) and said there are limited benchmarks available — New Zealand’s road‑user charges and other jurisdictions provide data — and emphasized that pilot test data will be necessary to sharpen leakage estimates. The team noted odometer accuracy tolerances and cited odometer fraud as a potential data source on evasion.
The presentation included an explainer on how fuel taxes are imposed: taxes are levied as fuel is removed from the terminal rack by a licensed supplier, collected upstream, then passed through the distribution chain and embedded in pump prices. Dunn described the International Fuel Tax Agreement (IFTA), which is already used by interstate heavy trucks to allocate fuel taxes by miles driven in each jurisdiction and said that heavy‑truck reporting under IFTA shows existing mileage reporting practices for large commercial fleets.
Why it matters: Any road‑charge design must address net revenue, cost of collection and likely revenue leakage. The pilot will gather operational data that will inform realistic revenue forecasting and design choices such as whether to use private account managers, reconciliation and enforcement mechanisms, and which vehicles to include.
Next steps: The business‑case analysis will proceed with a bottom‑up estimate of costs and revenues for each operational concept and will use pilot results to refine leakage and cost estimates. The project team plans to return with more detailed revenue and cost estimates and asked the TAC to share additional data sources.
