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37 and mortality, property damage, personal injury, and other the MVA, highway patrol, public transportation operations on costs associated with vehicle crashes, the total social costs of streets and highways, crash response, traffic-related court motor vehicle use in 2000 were estimated at between $170 costs, and highway-user fee tax collection and enforcement. billion and $1.5 trillion (U.S.DOT 2000). Sometimes these expenditures are incurred by agencies in other parts of state DOTs, sometimes in other state agencies, If highway-user fees were designed to capture the full and sometimes in agencies at other levels of government. costs of highway use, the resulting revenue could be used to Nevertheless, their exclusion results in less of a comprehen- make investments (e.g., additional noise walls, improved sive analysis of expenditures on streets and highways. clean fuel development, better air pollution control pro- grams, development of new technologies, and better crash The third category of internal highway costs are those that response teams) that could mitigate major portions of these can be expected to occur in the future but are not already pro- external costs over time. Although some of the costs associ- grammed, such as the costs of deferred maintenance. These ated with these external cost categories are already internal- are important costs because they are usually going to be sig- ized into highway agency budgets (e.g., emergency response nificantly greater than the cost savings from cutting current costs and variable message signs), most social externalities maintenance program recommendations, so they could be in- are not being addressed through public expenditures. Be- cluded in HCASs even if they are not in adopted programs or cause the remediation of external costs does not generally fall budgets. In a typical HCAS, approved capital programs on a state's DOT, these costs are not allocated under the tra- cover five to 10 years in the future, but maintenance pro- ditional expenditure-based HCAS approach in many states. grams, or at least routine maintenance, are often excluded from anything beyond current budget years. Often in the Substantial uncertainties exist in the estimation of exter- process of developing proposed future capital programs nal costs, underscoring the need for caution in identifying the states will forecast future maintenance program requirements implications of including them when setting highway-user based on projections of future factors such as future lane- charges. However, much can be learned from analyses of miles of highways and future maintenance costs per lane- non-agency costs of highway use. The analysis of external mile. If deferred maintenance costs are likely to result in a costs is based on principles of economic efficiency. Ulti- significant increase in future maintenance costs per mile of mately, if highway users are required to pay highway-user highway, these costs should be included in an HCAS. charges equal to the costs they impose on others, then trips that are valued less than these costs will not be made and The fourth and final category of internal highway costs are overall societal benefits will be maximized. those associated with potential expansions of highway sys- tems beyond those included in all of the previous categories. INCLUSION OF INTERNAL COSTS NOT Traditionally, these have been identified in "highway needs INCLUDED IN AGENCY EXPENDITURES studies," which have typically included such potential future expenditures as upgrading portions of the highway system to We use the term "internal costs" to include all costs of high- include new routes, bypasses, and conversion of older routes way-related programs and use of highways that show up in to freeway standards. Such potential future expenditures have public expenditures during any time period. This is to distin- traditionally never been included in state HCASs, except dur- guish such costs from "external" or "social" costs, which are ing the early years of the development of the Interstate high- discussed in the previous section. Internal costs can be way system. If a state wishes to give serious consideration to divided into at least four categories, each of which could be such a program, HCASs could include them when sufficient considered in comprehensive HCASs. planning work has been done to provide both cost estimates and user forecasts. The most obvious category of internal highway costs is current highway agency budgets and programmed expendi- ISSUES IN DEVELOPING RECOMMENDATIONS tures, such as construction, maintenance, operations, and re- FOR CHANGES IN STATE TAX STRUCTURE lated administrative costs. These are almost always included in HCASs, except that federal expenditures on federal lands Experience demonstrates that state HCASs seldom if ever re- and similar expenditures on streets and highways that are not sult in major changes in the tax structure owing to the impor- the responsibility of the state highway agency are often tance of changes in tax burden to the stakehoders. As noted excluded from state HCASs. Although these may not be the in the final paragraph of chapter four: "One issue in planning direct responsibility of state highway agencies, excluding HCASs that often affect the likelihood of implementation is them could result in a less than complete analysis of highway the stated set of conditions for studies." Examples were cited expenditures in the state. of ways in which HCASs have eased the pain of recom- mended changes in tax structure by either ensuring that no The next most closely related category of internal highway major changes in tax rates will occur or that any significant costs is state expenditures for highway-related programs that increase in taxes or fees will be done in a less painful way by are not the responsibility of the state highway agency, such as seeking to reach agreement on quid pro quos.

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38 A related approach that is sometimes done to ease pain fees. A different approach used by a few states is setting a in making changes in tax structure in related situations is to higher diesel tax rate for high-mileage vehicles. either stage the changes over a several year period or to just propose incremental changes at the completion of a study A final way of coping with these important practical limi- and defer further changes until the results of the next study tations is to propose small changes in tax structure targeted at are available. the most seriously inequitable parts of the tax structure, such as by gradually reforming weight fees for very overweight Another way of incrementally improving the equity of the permit vehicles or vehicles that should be subject to special tax structure is to introduce some graduation of fees based on weight fees (see the section in this chapter covering weight annual mileage in a state as distinct from establishing a tax that fees and other special fees). This was the approach taken in varies directly with mileage. Examples include having high- developing recommendations in the 1990 Vermont HCAS mileage vehicles pay higher weight fees or higher registration and in a follow-up analysis of special vehicles in 1991.