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39 CHAPTER SIX CONCLUSIONS State Highway Cost Allocation Studies (HCASs) have a long Identify problems inherent in the HCAS process through history in the United States, with in excess of 80 studies discussions with other state practitioners with more ex- being performed in at least 30 states over the past 70 years. perience in conducting HCASs and design steps to work Historically, the HCAS has been an effective tool in building around these issues before they become a problem. equity into the state transportation tax structure. Equity is an Allocate a significant amount of up-front time and budget essential element to consider when designing an effective to planning the study. Planning efforts should include the transportation tax structure. determination of vehicle classes, time frame examined within the study, data needs, and staff assignments. The principles underlying the HCAS continue to evolve When a contractor is hired to do the study, require a de- even as fewer studies have been done in recent years. Many tailed scope of work and project schedule before the advances have been made and others proposed but not im- work begins. Clearly specifying expectations up-front plemented in state HCASs. Therefore, states are faced with is desirable because HCASs are extremely complex and an expanding set of choices when conducting HCASs and are misunderstandings can lead to cost overruns. challenged with the importance and relevancy of equity con- Consider assembling a team of in-house experts (De- siderations in state transportation tax structures. partment of Motor Vehicle staff, highway engineer, traffic data expert, bridge engineer, finance expert, This study was designed to aid states by laying the foun- maintenance engineer) to provide technical expertise in dation required to build on current thought and improve support of the HCAS. Forming this team of experts will current HCAS methods. Further, this synthesis highlights the enhance the accuracy of the study and streamline data importance of continuing the HCAS tradition and the con- collection efforts. sideration of equity in highway and related tax structures. Consider forming a study review panel comprised of external interested parties, including members of aca- Most importantly, this study is designed to assist states that demia, highway users, local government, legislative are considering performing an HCAS but have not performed staff, and industry. Forming such a group can expose is- a recent HCAS or have never performed one. Through a sur- sues that might not otherwise be brought to the attention vey and literature review, it has become apparent that the of the examiners and encourages political acceptance of need for HCASs continues today as states examine new ways the report. (This group would serve in an advisory of funding highway and related programs in response to capacity and not be used to determine allocation proce- constraints on the growth of motor fuel taxes through market dures or establish parameters for the study.) penetration of hybrids and alternative fuels, inflation, and Conduct HCASs regularly, ideally every 5 to 10 years. enhanced motor fuel economy, and considering new alterna- Dated HCASs tend to be viewed as obsolete as a result of tives for addressing complex highway transportation issues. changes in tax structures, traffic volumes, and highway programs. Conducting HCASs more frequently than rec- Respondents to the survey that was completed as part of ommended could lead to significant shifts back and forth this synthesis raised a wide range of issues concerning the in study results owing to short-term analysis periods in conduct of an HCAS and the following suggestions were which impacts of highway or bridge construction pro- among those offered: grams are too sensitive to a small number of projects, re- sulting in increased volatility in recommended tax rates. Allow adequate time (12 to 24 months) to conduct a Consider using existing software such as the State HCAS thorough and accurate HCAS. Ensure that budget and Model prepared by the FHWA. The issues that require staffing resources are adequate and dedicated with cer- attention in applying this model are well documented and tainty to completing the HCAS. This recommendation the model is designed to allow extensive modification to is particularly important for states with little or no meet specific needs at the state level. Further, the model experience in conducting HCASs. has been tested and successfully applied at the state level. Meet with staff in other states to understand what level When developing an HCAS model ensure that you of resources will be required and to develop an under- receive a commitment from information technology staff standing of how the HCAS process will work. for support.

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40 Consider excluding evasion from HCASs. The use of highways that would otherwise require additional state evasion estimates in setting tax rates and attributing expenditures. Include the results in a more thorough revenue often complicates HCASs and can be used to analysis of equity. If federal and/or local expenditures discredit HCAS results. Evasion studies are extremely are included in the HCAS, then federal and/or local complicated and often have not been successful in highway user revenues should also be included in the yielding reliable results. study for similar reasons. A true picture of equity would dictate that all user taxes and fees be considered in the equity ratio numerator, Those surveyed for this study identified many other func- regardless of how they are spent, and all roadway expen- tions that HCAS products can perform in addition to ad- ditures, regardless of the source of the revenues, be in- dressing the question of equity between broad vehicle cluded in the denominator. It is important to know not classes. These functions include: only if there is relative equity among highway users but also whether they are subsidized or are subsidizing other Responding to questions from legislators, state DOT government functions. policy makers, and others on issues related to the equity In conducting HCASs and considering what expendi- of a state tax structure; tures or costs not included in agency budgets should be Analyzing the equity and related impacts of legislative included, the basic question is whether each expendi- proposals that require the state DOT's review; ture is either necessary to build, maintain, or operate a Analysis of issues dealing with the impact of proposals highway system, or whether it is a necessary supporting for changes in truck weight limits; service for highway programs. If expenditures or other Analysis of the impacts on cost responsibility of sub- costs are required for items to support the highway sys- stantial proposed changes in the highway construction tem such as rest areas, noise walls, highway patrol and program; police traffic control, traffic courts and driver education Responding to questions about the mix of vehicle classes programs, crash response and incident management pro- using any classes of the state's highway system; and grams, some portions of public medical and air quality Responding to equity questions arising from emerg- control programs, and some public transit investments, ing types of systems such as area-wide tolling, high- these could appropriately be allocated to highway-user occupancy toll lane networks, and public-private classes. partnerships. Examine and consider allocating the full social costs of highway use, including costs related to congestion, air Survey respondents offered the following suggestions for pollution, noise, and vehicle crashes not covered by further research: agency budgets. These costs are borne by society, and including them in HCASs results in a more comprehen- Further develop and refine the FHWA State HCAS sive study. To the extent that relevant fees imposed as a model, correct errors identified in Appendix C, and up- result of such studies result in small adjustments to trav- date with improved documentation and more extensive eler behavior, the practice would serve to improve high- vehicle class data for the entire highway system. way transportation system efficiency. When considering Perform additional research into emerging HCAS whether to include external costs, consider the data lim- issues, including tolling, public-private partnerships, itations, the inability of user fees to remediate damage, regional and interstate cooperation, and allocation of and other cautions noted in this report. external costs (e.g., congestion, incident management, At a minimum, federal and state expenditures for air and noise pollution). highway-related programs, regardless of funding source, Conduct a thorough examination of alternatives for and highway-user revenues, regardless of their use, improving state HCAS practice, including methods for should be included in the cost allocation and revenue expanding the number of states performing HCASs, en- attribution processes and analyzed separately, regardless hancing funding for future HCASs, and improving the of how the results may be combined for reporting pur- implementation of HCAS results. poses. There are several good reasons for including Prepare selected issue papers dealing with both the federal revenues and federal expenditures, including the organization of HCASs and their implementation, as increasing flexibility in the use of federal funds in recent well as more specific technical issues involved in con- years, as well as that federal funds are heavily used for ducting HCASs, perhaps some of them similar to those expenditures on Interstate highways and other major completed in support of recent Oregon HCASs.