National Academies Press: OpenBook

State Highway Cost Allocation Studies (2008)

Chapter: Chapter Six - Conclusions

« Previous: Chapter Five - Guidelines for Analyses Needed for Highway Cost Allocation Studies
Page 39
Suggested Citation:"Chapter Six - Conclusions." 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 39
Page 40
Suggested Citation:"Chapter Six - Conclusions." 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 40

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

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

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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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