National Academies Press: OpenBook

State Highway Cost Allocation Studies (2008)

Chapter: Chapter Four - Impacts of Highway Cost Allocation Studies

« Previous: Chapter Three - State of the Practice
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Suggested Citation:"Chapter Four - Impacts of Highway Cost Allocation Studies." National Academies of Sciences, Engineering, and Medicine. 2008. State Highway Cost Allocation Studies. Washington, DC: The National Academies Press. doi: 10.17226/14178.
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Suggested Citation:"Chapter Four - Impacts of Highway Cost Allocation Studies." National Academies of Sciences, Engineering, and Medicine. 2008. State Highway Cost Allocation Studies. Washington, DC: The National Academies Press. doi: 10.17226/14178.
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Page 25
Suggested Citation:"Chapter Four - Impacts of Highway Cost Allocation Studies." National Academies of Sciences, Engineering, and Medicine. 2008. State Highway Cost Allocation Studies. Washington, DC: The National Academies Press. doi: 10.17226/14178.
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23 Generally, there has been a surge in the number of HCASs conducted at the state level immediately following the com- pletion of a federal HCAS. As new HCAS methods and data are developed and tested at the federal level, they are used and in some cases enhanced at the state level. The research team identified the following state HCASs conducted since the 1997 Federal HCAS: • Arizona (1999, 2000, 2001, 2002, 2005), • Idaho (2002), • Indiana (2000), • Kentucky (1998, 2000), • Montana (1999), • Nevada (1999), • Oregon (1999, 2001, 2003, 2005, 2007), • Texas (2002), • Vermont (2005), and • Wyoming (1999). Since the last federal HCAS was performed in 1997, ten states have performed HCASs but only three (Arizona, Kentucky, and Oregon) have performed more than one HCAS. Oregon has completed five HCASs since 1997 and today is required to complete an HCAS every two years. In 1999, the Oregon Senate passed Senate Joint Resolution (SJR) 44, an amendment to the Oregon Constitution requir- ing that revenues from fuel taxes and fees on motor vehicles be generated in a manner that ensures that classes of high- way vehicles pay a fair and proportionate share of costs imposed on the highway system. Under SJR 44, the Oregon Legislative Assembly is required to provide for a biennial review and, if necessary, adjust highway-user tax and fee rates to ensure fairness and proportionality (Oregon Legislative Assembly 1999). SJR 44 referred the proposed amendment to the citizens of Oregon. The measure was approved by Oregon voters in the November 1999 special election. The experience in Oregon, however, has become the ex- ception rather than the rule. In recent years, the number of state HCASs being performed has been in decline, as illus- trated in Figure 1, which charts the number of state HCASs being performed across time. Years in which federal HCASs were performed are highlighted with vertical lines. The trend line represents a four-period moving average. The figure clearly shows the surge in the number of HCASs performed in the years immediately following completion of a federal HCAS and demonstrates that there have been fewer of them conducted since the last federal study. There could be a number of reasons for the decline in the number of HCASs being conducted, including an increased emphasis on revenue generation within states facing con- strained budgets, an inability on the part of most state tax structures to fully implement study findings, and constrained research budgets that are used on other higher priority re- search. Some reasons for this recent trend are explored in the next section of this report. Of the 33 states that completed surveys for this study, 26 in- dicated that the primary motivation for conducting an HCAS was to determine if its highway-user tax system was equitable, and 12 indicated that the desire to use the study findings to adjust taxes and fees to become more equitable was the prin- cipal reason for doing the study. Survey results suggest that the ability of most states to fully achieve cost responsibility by im- plementing HCAS findings has become increasingly difficult for at least two reasons: (1) the shift away from mileage-based forms of taxation, and (2) a political landscape that increas- ingly focuses on revenue generation from feasible sources rather than equity among highway-user classes. The concept of cost responsibility is often broken down into two categories: horizontal and vertical equity. Horizon- tal equity refers to the fair treatment of user classes with the same vehicle class, whereas vertical equity refers to the fair treatment of different user classes with respect to each other. Horizontal and vertical equity are not fully achievable in most state transportation tax structures owing to the heavy re- liance on registration fees, non-mileage-based weight fees, and motor fuel taxes. Mileage-based taxes and fees can be used to more com- pletely achieve equity and fully implement the findings of HCASs. In recent years, however, mileage-based systems, such as the weight-mile tax paid by heavy trucks, have been re- pealed in several states (Figure 2). Today, weight-distance taxes are imposed in only four states (Kentucky, New Mexico, New York, and Oregon), although many states once adminis- tered some form of weight-distance tax (Schultz 1994). In the absence of a mileage-based tax system, HCAS study findings can still be implemented to achieve equity between broad vehicle classes through non-mileage-based weight fees CHAPTER FOUR IMPACTS OF HIGHWAY COST ALLOCATION STUDIES

or graduated registration fees, but cannot completely achieve equity within weight classes. HCASs can be used to evaluate the current tax structure and generate recommended adjust- ments to enhance equity generally among all highway-user classes. Some states surveyed for this study indicated that it has become increasingly difficult to implement the findings of its HCAS owing to both internal and external political influ- ences that have complicated the process and led to an uneven application of study findings. In Nevada, the findings of the state’s HCAS have not been implemented since 1990, and the most recent HCAS performed in 1999 found that heavy- truck fees would need to be increased by $133.7 million to achieve an equitable balance between revenue and cost 24 responsibility (1999 Highway Cost Allocation Study 1999). In Kentucky, studies were completed every two years be- tween 1992 and 2000; however, disagreements over the ex- tent to which evasion should be factored into the study and other considerations ended the practice. In Oregon, the responsibility for conducting the HCAS was transferred from the Oregon DOT, the agency that pio- neered the HCAS, to the Oregon Department of Administra- tion Services. The Oregon Department of Administrative Services convened a study review team that included repre- sentation from the American Automobile Association, state agencies, academia, and trucking and shipping interests to refine the study’s methodology and hired a contractor to con- duct the study (Stowers et al. 1999). Although Oregon’s detailed weight-mile tax schedule would enable a full imple- mentation of the HCAS results, the Oregon Legislature since 1999 has moved all weight-mile tax rates in unison. There- fore, when the Oregon HCAS finds that heavy-truck tax pay- ments are forecast to exceed cost responsibility by 5%, the Oregon Legislature responds by reducing all weight-mile tax rates by 5%. This practice has led to a disparity in terms of the cost responsibility among heavy-truck classes with the most recent Oregon HCAS projecting that tax payments from vehicles with declared weights of between 10,000 and 26,000 lb would exceed their cost responsibility by 26%, whereas tax payments from heavy trucks weighing between 80,000 and 105,500 lb would fall short of cost responsibility by 16% (ECONorthwest 2007). One issue in planning HCASs that often affects the likeli- hood of implementation is the stated set of conditions for 0 1 2 3 4 5 6 7 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Year N um be r o f H CA Ss C on du ct ed Federal HCAS Federal HCAS States with weight-distance taxes States that have rescinded weight- distance taxes FIGURE 1 State HCAS frequency distribution (1980–2007). FIGURE 2 Weight-distance tax states.

25 studies. An example of such a condition often made is that an HCAS will exclude consideration of “highway needs.” Another example of a condition that is sometimes made is that recommendations for any changes in tax structure will be balanced so that the results will be revenue neutral for the overall highway tax structure. This condition is often made in cases where one particular highway-user group is seriously concerned that a study may lead to a recommendation for a significant fee increase for vehicles in that class. Another possible outcome might be an agreement on a quid pro quo solution—for example, a tax or fee increase offset in value by a favorable change in a non-tax condition, such as liberaliza- tion on vehicle combination or length limits or restrictions on access to more parts of the highway network.

Next: Chapter Five - Guidelines for Analyses Needed for Highway Cost Allocation Studies »
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TRB’s National Cooperative Highway Research Program (NCHRP) Synthesis 378: State Highway Cost Allocation Studies examines the history and evolution of highway cost allocation study practice and explores the current state of the practice.

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