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5 CHAPTER 1 Introduction NCHRP Report 377: Alternatives to Motor Fuel Taxes for ness districts (CBDs) during peak periods. The high costs of Financing Surface Transportation Improvements and subse- implementing cordon pricing pose a serious issue to policy quent studies have pointed out that continued improvements makers. Although recent reports on the London cordon pric- in fuel efficiency will likely diminish the effectiveness of motor ing program indicate that the program will generate excess fuel taxes as a method for financing highways. In addition, revenues, the capital and operating costs have made this pro- higher fuel prices, increased congestion, and telecommuting gram more expensive than initially anticipated. have resulted in shifting patterns of behavior, causing individ- In today's environment, it is in the public's best interest to uals to either travel less or switch to alternative modes. As a look beyond existing revenue-generation systems and more result of these trends, the motor fuel tax system faces uncer- closely examine the feasibility of alternative approaches. How- tainties. Another factor affecting the motor fuel tax revenue ever, there is no clear indication of which approach will suc- system is that fuel tax rates have not been indexed for inflation ceed in the long term. As a result, it is likely that transportation or increased at the federal level since 1993. From 1993 to 2008, agencies will implement existing and innovative approaches in the purchasing power of the federal gasoline tax, which has combination to maximize funding and achieve mobility and remained at the fixed rate of 18.4 cents per gallon, has declined connectivity objectives in the near and medium term. In order by 33%. to provide a better understanding of the potential implemen- Given these concerns, the challenge faced by transportation tation costs, it is essential to analyze and compare collection, policy makers is how to expand revenue generation beyond administrative, and compliance costs for existing and alter- the traditional reliance on motor fuel tax revenues. Thus, the native revenue-generation systems. implementation of innovative strategies to reduce congestion and generate alternative sources of revenues to finance infra- 1.1 Research Objectives structure development and rehabilitation has become a top priority. The recent observable efforts have involved the mod- The objectives of this research are to (1) examine, com- ification of existing pricing schemes of toll systems as well as pare, and present the administrative, collection, and compli- the examination of potential financing sources for transporta- ance costs of usage-based revenue-generation systems, such tion infrastructure. For example, some toll systems have begun as motor fuel taxes, tolls, and VMT fees; and (2) examine the to implement variable pricing schedules. There has also been potential feasibility of alternative revenue-generation systems increased emphasis on the development of high occupancy that have been implemented on a pilot basis or are in the con- toll (HOT) lanes. Since 2001, an innovative approach has been ceptual stage. undertaken by the State of Oregon, which has tested a usage- In addressing these research objectives, this report presents based fee system by charging fees for vehicle miles traveled a cost analysis relating to the administrative, collection, and (VMT) to complement motor fuel tax revenues. Although enforcement costs for the following revenue systems used to the initial tests on area pricing in multiple zones in the state finance road infrastructure: (1) motor fuel taxes, (2) tolling, were successful and encouraging, the requirements to install (3) VMT fees, (4) cordon/congestion pricing, and (5) parking equipment in vehicles and gas stations make the implementa- fees. It also provides a comparative analysis of these revenue tion costs high. Internationally, the United Kingdom and collection systems and examines several technologies that Singapore have implemented cordon/congestion (or area) show promise for enabling revenue-generation systems. Finally, pricing, which charges users that travel by car to central busi- this report also lays out the methodologies and data structure