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34 A survey of local governments to determine how funds Highway Statistics for historical years with appropriate are used is a principal additional task that is necessary in growth factors for a forecast year. most, if not all, states to do an equity analysis at the local level. Survey forms may be sent either to a sample of local governments (appropriate in states with many local govern- EMERGING ISSUES AND OTHER PROGRAMS ments of the same type) or to all units of local government (appropriate in states with relatively few units of each type of Equity principles should logically be applied to any highway local government). If samples are used, a representative sam- program involving collection of substantial user fees and/or ple should be implemented for each type of local government expenditure of substantial funds for highway-related pur- that has responsibility for streets and highways (e.g., cities, poses. A prime example of a common program of substantial towns, counties, and local highway districts). size is bond financing of highways with repayment from user fees. In the simplest case, there is a potentially large equity One possible way of simplifying the local-level analysis imbalance in that current highway users are the primary ben- is to reduce the number of highway-functional classes to just eficiaries and future highway users are the source of the one for local rural areas and one for local urban areas. This primary payments. Cases like this can be evaluated in equity eliminates the need to develop data needed to split local ex- terms using all the relevant good practices described in these penditures among several highway-functional classes; how- guidelines. ever, this raises the additional complication of preparing data specifically for the user-defined highway classes or Toll systems are another potentially important application preparing special tables to convert default data prepared for of equity principles. FHWA's State HCAS Model was set up the 12 functional classes to data by the user-defined highway specifically to conduct such an analysis because the FHWA classes. understood the potential for growing extensions of toll sys- tems. Automatic toll collection systems and associated The federal-level analysis is very similar to the direct regional fund transfer systems are now in place, and there is state-level analysis. When compared with the local-level growing evidence that users are accepting such systems, in analysis, it is simpler in one important way--no special sur- part because the user payments are more convenient. vey of expenditures is necessary. The major complexity involved in the federal analysis is that state and federal ex- The important thing to note when it comes to toll systems, penditures should be separated from each other at the most particularly as they are considered for widespread highway detailed level in preparing inputs. Ideally, this should be done system extensions, is that they provide the potential for real- in analyzing project-level data to prepare factors for convert- time payment to be made based on short-run marginal costs. ing programmed expenditures into expenditures by cost allo- Of primary interest from an equity perspective is that the cation category. For example, a state will normally have both basic supporting argument for implementing real-time vari- state and federal funds programmed separately for several able pricing is that the external or social costs of congestion construction categories (e.g., interstate maintenance, Na- could cease to exist (to the extent that the costs are accurately tional Highway System projects, and 4R projects) and will estimated and applied) and could, instead, become "internal" have to analyze a project database to develop two matrices highway-user costs. (for state and federal funds) to convert these programmed ex- penditures into cost allocation categories (e.g., new pave- High-occupancy toll (HOT) lanes also represent an emerg- ments, pavement rehabilitation, and new bridges). Similarly, ing issue with an important equity dimension. HOT lanes are separate sets of factors should be developed for splitting state expanding in heavily congested regions around the country. and federal expenditures into classes of highways. These are the only significant operational systems for which external congestion costs have largely, if imperfectly, been in- States with substantial direct federal construction programs ternalized. The algorithms being used in HOT lane systems may choose to include these expenditures in the federal-level are designed to apply real-time adjustments to the tolls col- analysis. Highway Statistics has data on such expenditures by lected so that specified levels of service will be maintained. state for historical years and these can be used with appropri- ate growth factors for a forecast year. Most of these expendi- For toll systems and HOT lanes, the equity analysis issues tures occur on lower-level rural functional classes of highway that arise are: (1) what are these short-run marginal cost-based (see http://www.fhwa.dot.gov/policy/ohpi/hss/index.htm). Re- fees, and (2) how do they compare with the actual payments lationships developed for state-level construction programs being collected based on the algorithms being used? that are concentrated on these types of highways (e.g., sec- ondary highway programs) can be used for most direct federal Finally, the other increasingly large emerging category construction programs. involving large equity questions are PPPs. As with bond pro- grams, a typical PPP involves up-front private capital subsi- The federal revenue attribution process should develop dizing current and near-term future users, and subsidies of revenue control totals by type of federal tax using data from those users by future users on a long-term basis.