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· The fuel tax system is the most cost-effective revenue sys- data availability. Further, some of the components of the sen-
tem among the first three and has the lowest operating cost sitivity analysis outlined in this section were not applicable to
for all unit measurements. The operating cost for fuel taxes specific systems or were replaced with other, more relevant
is only approximately 1% of tax revenue, and the system elements. With that noted, the sensitivity analysis primarily
averages approximately $1.20 per vehicle to operate and focuses on the following elements:
manage.
· Though the operating cost may reach $75 per vehicle, the · Economies or diseconomies of scale and scope: These
cost for the proposed VMT system is still reasonable when can be considered and depend on the number of vehicles,
measured by the share of cost to revenue collected in the geographic coverage, and range of uses for the system. For
Netherlands, which is approximately 7%. It would be a some systems, such as cordon pricing, the effectiveness
larger share of typical revenues in the United States. may also vary with geographic coverage.
· Although it may cost $0.54 per transaction to operate and · Technology: The cost of each system discussed depends to
maintain the tolling systems, tolling agencies spent roughly some extent on the cost of the technology to implement it.
33.5% of revenues for toll collection, administration, and Known costs should be carefully separated from estimated
enforcement activities in 2007. Among the five revenue costs. Potential changes in cost due to technological progress
systems, operating costs for tolling and cordon pricing are or use of the technology for other purposes should be con-
roughly comparable, at 33.5% and 38.7%, respectively. sidered. This also relates to the possibility of sharing costs for
· The costs to operate the Westminster parking pricing sys- a system that is interoperable over various toll systems. In
tem are 56.6% of total revenue. Thus, of the five alternative addition, the cost estimates should be analyzed for the impact
revenue-generation systems, parking pricing was the most of large-scale deployment. For example, costs that are now
expensive to operate based on the very limited data col- low due to excess system capacity may be much higher if
lected for this study. more capacity is needed.
· For VMT fee systems, the biggest spending item is adminis- · Revenue: All revenue systems are subject to potential
tration costs, which may reach 3.4% of revenue. Compara- variation due to various forecast errors such as elasticity
tively, collection and enforcement costs for maintaining of demand, recession, or alternatives available.
a VMT fee system are relatively small. Note that operat- · Evasion and enforcement: Evasion estimates for existing
ing costs are composed of administrative, collection, and systems are subject to great uncertainty, so the estimates for
enforcement cost elements. See Section 4.1 for a definition proposed systems will be even more open to debate. There
of each cost element. They may be less than or about 1% of will also be trade-offs between enforcement costs and levels
revenue. As will be discussed in Section 6.2, collection costs of evasion that could be discussed.
for tolling systems are much larger than administration and · Implementation: There are a variety of risks associated with
enforcement costs. The evidence from the tolling agencies implementation. First, there is always the possibility of unex-
indicates that around or above 20% of revenue may be spent
pected problems and delays, which raise costs and reduce
on collecting tolls.
revenue. There is also the possibility of changes in political
support for a new system as it is being phased in, which can
5.4 Sensitivity Analysis lead to termination of the project or other costly changes.
· Privacy and security: Any system will have to have provi-
Motor fuel taxes and the alternative revenue-generation sys-
sions to maintain privacy and security. Failure of such sys-
tems considered in this study face both internal and external
tems will result in additional costs and other consequences.
uncertainties. The internal uncertainties faced by fuel tax sys-
tems, for example, involve improvements in fuel efficiencies
that threaten the revenue generated from the fuel tax. External 5.4.1 Motor Fuel Taxes
uncertainties may come from other systems if alternative rev-
Scale
enue systems are implemented to supplement or replace the
fuel tax system. As reported in Section 4.2.8, the size of the motor fuel tax
This section presents the results of a sensitivity analysis that collection program appears to have a negligible impact on
was designed to examine the impacts on operating costs caused operating cost levels. Collection data for the 50 states were used
by changing certain parameters. It also assesses uncertainties to rank the states and classify them into high-, mid-, and low-
and business risks involved in alternative revenue-generation level collection states. The states that make up the top third in
systems and discusses issues related to evasion and implemen- terms of total motor fuel tax collection incurred operating costs
tation. For some systems, only qualitative analysis could be equal to 1.1% of total tax collections. Mid-level states incurred
performed for certain parts of this assessment due to limited costs equal to 0.9% of total tax collections. States making up
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the bottom third of tax collectors incurred operating costs Table 37. State tracking systems.
equal to 1.0% of total tax collections.
State Tracking System
Virginia ACS
Technology
Nevada ACS
A number of technologies are used in motor fuel tax collec- Mississippi ACS
tions and enforcement, including diesel fuel dyeing equip- Arkansas ACS
ment, CVISN systems tied to IFTA credentialing, and electronic Michigan ACS
reporting and payment systems. Colorado Explorer
Electronic reporting and payment has been advanced in Wisconsin Synergy
many states as a means to reduce omissions and errors on South Carolina ZyTax
motor fuel tax returns, enhance access to information for Tennessee ZyTax
auditing and enforcement purposes, reduce labor costs, and North Dakota ZyTax
eliminate the space requirements associated with maintaining California In-house
paper files of tax records for a period of up to 5 years (Weimar Illinois In-house
et al., 2008). In point six of its 11-point plan, the FTA Unifor- Missouri In-house
mity Committee recommended that states adopt electronic Nebraska In-house
systems with ANSI and ASC X12 standards for all electronic Montana In-house
data interchange (EDI) applications (FTA, 2003). Source: Weimar et al., 2008
In recent years, both the federal government and a number
of states have invested in motor-fuel tracking systems. Motor-
fuel tracking systems promote total fuel accountability by ana- While some states have developed their systems in-house
lyzing motor fuel industry records to identify discrepancies (e.g., California, Illinois, Montana), more have chosen to
between the movement of fuel shipments and tax records. use third-party systems offered by ACS, Explorer, Synergy,
Under the Transportation Equity Act for the 21st Century or ZyTax (see Table 37). The costs of these systems vary
(TEA-21), Congress authorized funds to establish the Excise by state.
Files Information Retrieval System (ExFIRS), which is com-
The costs associated with these technologies are small when
posed of 10 subsystems designed to collect and analyze data
compared with those for the alternative revenue-generation
regarding motor fuel industry operations. These 10 subsys-
systems examined in this chapter. Furthermore, the data
tems include
presented in Section 4.2.8 demonstrate that operating costs
· Excise Summary Terminal Activity Reporting System
for states with motor-fuel tracking systems were nearly
(ExSTARS): Collects and analyzes motor fuel distribu- identical to those without such systems (1.0% of total tax
tion data, collections).
· Excise Classification Information System (ExCIS): Gathers
information on tax returns, Revenue
· Excise Automated Claims Tracking System (ExACT): Ana-
lyzes claims, A number of factors could have an impact on the demand for
· Excise Customs Activity Tracking (ExCAT): Gathers infor- transportation, mode split, and, ultimately, motor fuel tax col-
mation on imports and exports, lections. Changes in the relative price by mode will affect the
· Excise Fuel Online Network (ExFON): Integrates fuel track- decisions made both by shippers and passengers. When consid-
ing with case processing, ering price sensitivity, a product is considered relatively price
· Excise Tax Registration Authorization System (ExTRAS): sensitive (elastic) if the change in price generates a proportion-
Manages IRS Form 637 registration data (Application for ally greater percentage change in quantity demanded. A prod-
Registration for Certain Excise Tax Activities), uct is relatively insensitive (inelastic) to prices if a change
· Below the Rack Information System (BTRIS): Holds below- in price yields a less than proportionate change in quantity
the-rack motor fuel activity information such as fingerprint- demanded. A survey of studies estimating price sensitivity for
ing, and transport found
· Excise Tax On-Line Exchange (ExTOLE): Allows states to
exchange information. · Overall, transportation demand is relatively price-
insensitive.
In addition to the federal systems, a number of states have · Automobile and transit passenger transportation are rel-
adopted their own automated electronic tracking systems. atively insensitive to price, with a 1% increase resulting in
