Operating costs of Mileage-based user fee programs can be as low as 7 percent of total system revenue and are more cost-effective than many other types of variable pricing systems.

Experience with variable pricing systems in the United States and Europe

Date Posted

NCHRP Report 689: Costs of Alternative Revenue-Generation Systems

Summary Information

This report covered a small-scale study that analyzed the cost-effectiveness of four variable pricing concepts: parking pricing, cordon pricing, tolling, and mileage-based user fee systems. Data collected from project reports and evaluation studies were used to examine operational issues and performance compared to the current fuel tax system. Detailed benefits data were provided for select applications.

Tolling data were collected from approximately 15 agencies that operate and maintain a variety of electronic toll collection and variable pricing systems including open road toll systems and managed lanes. Agencies evaluated included older turnpike systems, more recently established toll agencies, and private companies that operate toll facilities under concession agreements.

Mileage-based user fee data were collected from a Dutch system designed to cover all vehicles in the Netherlands by the year 2016.

Cordon pricing data were collected from multiple cities (London, England; Oslo, Norway; Stockholm Sweden; and Milan, Italy)

Parking pricing data were collected from an advanced parking pricing system in Westminster, England.

The operating costs and revenues of each pricing concept were compared to that of the current motor fuel tax system eight states.


Fuel Taxes

Based on three to five years of motor fuel tax data, fuel taxes are the most cost-effective revenue generating system with operating costs estimated at about one percent of tax revenue. However, enforcement and evasion issues are pervasive. There are trade-offs between revenue losses from evasion and the implementation costs of enhanced enforcement which can improve collections.

Mileage-based User Fees

Cost data gained from companies submitting proposals to build and operate a vehicle-miles traveled (VMT) fee system for all vehicles in the Netherlands by 2016 indicated that operating costs would be reasonable at seven percent of revenue. In the United States, however, the percentage of revenue required for operations would likely be higher and capital costs would be quite high if new VMT fee collection systems had to be implemented because the current revenue per vehicle in the Netherlands is much higher than what is currently collected in the United States. Although current cost estimates are high, there is widespread expectation that technology costs will continue to decline.

Cordon Pricing

In London, Oslo, Stockholm, and Milan, the costs to operate a cordon pricing system averaged $75 million and revenues averaged $191 million Average operating costs were estimated at 38.7 percent of revenues.

Parking Pricing

Parking pricing was found to have highest operating cost relative to revenue generated. In Westminster, England the operating costs of a parking pricing system were estimated at 56.6 percent of revenue. The average operating costs for tolling, VMT fees, and cordon pricing were comparatively less requiring 33.5 percent, 6.6 percent, and 38.7 percent of revenue, respectively. Note, however, that the parking pricing system data was limited to one system.

The following data were excerpted from Table S1 in the source report.

Fuel Taxes
Average Cost Over States
Average Cost Over Agencies
Average Cost Over Providers
Average Cost Over Providers
Cost of Single Provider
$ per lane mile
$ per centerline mile
$ per 1,000 VMT
$ per vehicle
$ per transaction
% of total revenue (system generated)