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3 CHAPTER ONE INTRODUCTION In 1937, Oregon conducted the nation's first highway cost goal has been achieved in some states through legislation allocation study (HCAS). Since that first HCAS, at least authorizing an HCAS or a statement of intent to reach this 84 studies have been performed in 30 states. An HCAS is a ideal framework. study that is designed to determine the fair share that each class of road user should pay for the construction, mainte- HCASs are often conducted: (1) because of the neces- nance, operation, improvement, and related costs of state sity to routinely (e.g., every 2 to 5 years) monitor the need highways, roads, and streets. Through a comparison of user for adjustments in tax rates, (2) because of the perceived fees paid and cost responsibilities estimated within the need for changes in tax and fee schedules, (3) because HCAS, these studies assess equity, usually for a projected of perceived problems in the inequity of the current tax period, and may provide recommended adjustments to ex- structure, or (4) because of basic changes in the highway isting user fees and tax rates to bring about a closer match program that raise questions about who should be paying between payments and cost responsibilities for each vehicle for the program. class. Historically, HCASs have generally been conducted on Ultimately, an HCAS is an analysis of the equity of an infrequent basis without any clearly defined prior com- highway-user tax systems. Thus, it seeks to answer such mitment to follow up with legislative or executive action. questions as: Legislative recommendations often follow the completion of an HCAS, with mixed results, ranging from adoption of · Do highway users as a whole pay the full cost of study recommendations to ignoring or openly rejecting them. highways or are they subsidized by non-users? Do With that noted, HCAS results generally influence policy they subsidize non-users and, if so, how much subsidy makers as they consider making changes to existing trans- occurs? portation tax structures, although in many cases actions are · How do broad classes of highway users compare with taken after some period of debate and deferral. Further, each other in terms of paying their estimated shares of HCASs are also valuable because they can be used to inform highway costs? Are some classes of users overpaying or responses to legislative bodies regarding a wide variety of underpaying and, if so, by how much? tax-related issues. · Are there specific changes in the tax structure or tax rates that will improve equity among highway users? PROJECT GOALS AND SCOPE In addition to assessing equity in the current tax structure, HCASs can be useful in addressing a number of other tax The overall goal of this project is to assist states in perform- issues. For example, HCASs can be used to develop special ing comprehensive HCASs. At least 30 state governments permit fee schedules for overweight vehicles or implement have at some time conducted these studies to evaluate their marginal cost pricing through toll- or mileage-based fee systems of state road user charges, fees, and taxes. Studies schedules for specific vehicle classes, differentiated by weight vary in depth and scope. To date, results have been mixed. and configuration. This synthesis compares and contrasts what has been com- pleted by various states and seeks to provide guidance for Ideally, HCASs are conducted within the framework of future studies based on this experience. specific policies and procedures that are agreed on by both the legislative and executive branches of government. To assist states in performing comprehensive HCASs, Broad-based agreement on the principles underlying the this project provides practitioners with information to HCAS is important because the results of the study are improve their process of evaluating cost responsibilities, intended to lead to the modification of tax and fee schedules attributing revenue, and implementing study results. Both in a manner that most effectively achieves equity and/or federal and state highway agencies utilize HCASs to evalu- efficiency in the tax structure. Only rarely, however, have ate their revenue systems and to maintain a cost-based user states achieved this ideal framework. Movement toward this system.