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Alternative Approaches to Heady Vehicle Taxation Applications Manual - Equity 6.0 Equity The equity criterion measures the degree to which highway user charges paid by different vehicles and classes of vehicles are proportional to their estimated responsibility for public agency costs. The first section of this chapter addresses several basic issues relating to measuring the equity of highway user~harge systems. The second section discusses the attribution of user~harge revenue to the various vehicle classes. The Bird and final section discusses the conversion of estimates of highway cost responsibility by operating-weight range to estimates by reg~stered-weight range - a conversion that is required in order to compare cost responsibility with user-charge payments. The allocation of cost responsi- bility to vehicle classes is clescribed in Rationalization of Procedures for Highway Cost AZIocation. 2 6.! Basic Issues This section presents discussions of three basic issues relating to the equity criterion: Measures of equity; The set of revenues and expenditures to be measured; and The classes of vehicles to be distinguished in an eau~tv analysis. Measures of Equity ~J The most common way of evaluating the equity of a highway tax system is by comparing . Jar _~ ~ ~ _ ~ Em_ _ _ ~ ~ ~ ~ ~ ~ ~ ~ ~ .~ . a. equity ratios es~natecl tor each of several vehicle classes. For each class, the equity raho is obtained by dividing user charges paid by the vehicle class by the estimated cost responsibility of that class. The ratios indicate which vehicle classes overpay their cost responsibility and which- underpay, and they also indicate the extent of the over- or underpayment. As stated in Section 2.3, we adhere to the tradition of excluding non-agency external costs of highway use from consideration when evaluating equity. However, we do include these external costs in Me economic efficiency critenon. 2 The Urban Institute and Sydec, ~c., Rationalization of Procedures for Highway Cost Allocation, prepared for the Trucking Research institute, Alexandria, Virgnua, October 1990. Cambridge Systematics, Inc. 47

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Alternative Approaches to Heady Vehicle Taxation Applications Manual - Equity In most cases, total highway user revenues do not precisely equal total highway expenditures for the period of time being analyzed (e.g., due to interest income, bond proceeds, use of highway user revenues for other purposes, or use of non-user revenues for highways). When a significant unbalance occurs between total user revenues and total expenditures, cost aDocation studies commonly use an adjusted equity ratio to compare equity among vehicle classes. For each vehicle class, the adjusted equity ratio is obtained by dividing the percentage of total user charges paid by the cIass3 by the percentage of~costs a~ocated~to Hiat class. Equivalently, a set of adjusted equity ratios can be obtained by normalizing the equity ratios so Mat the overall ratio for ad vehicles is one (i.e., dividing each equity ratio by the overall equity ratio for all vehicles as a whole). Perfect equity among a set of vehicle classes requires that each adjusted equity ratio equals one or, equivalently, that all equity ratios are equal (but not necessarily equal to one). If highway expenditures exceed revenue from user fees, the overall equity ratio win be less than one. The extent to which this ratio is less than one provides an indication of the extent to which the highway system is being subsidized. Similarly, overall equity ratios above one indicate that highway revenues exceed expenditures and that highway users are contributing to the support of other governmental programs, and/or making payments to cover some portion of non-agency external costs. For some purposes, the equity ratio (or adjusted equity ratio) may be supplemented by estimates of over- or underpayments by vehicle class, obtained by subtracting the estimated total cost responsibility of the class from estimated payments by the class. Estimates of over- or underpayments may be expressed as totals for each class, or they may be made more comparable by dividing by vehicle-m~les of travel for each vehicle cIass.4 Revenues and Expenditures to be Measured An equity analysis of a given user-charge system should focus on the equity of that system. The equity ratios to be developed should compare revenues obtained from these user charges to cost responsibility for highway expenditures funded by these revenues. There are several issues relating to the appropriate set of user charges to be considered In an equity analysis. These issues include whether the focus should be on state, local and/or Federal user charges; the treatment of tons; and whether the analysis should include revenue from highway-related taxes that is used for non-highway purposes. These Issues are addressed below. 3 The percentage of total user revenue paid by various vehicle classes is sometimes used as a measure of the impacts of user fees. However, this measure is not an indicator of the equity of these fees since it contains no information on cost responsibility. 4 Alternatively, the results can be expressed on a per vehicle basis; however, such comparisons are complicated by the fact that vehicle classes differ greatly in their average annual mileage and the proportion of Weir mileage out of state, and by the fact that it is difficult (and unnecessary) to estimate the number of out-of-state-based vehicles that operate in a state. 48 Cambridge Systematics, Inc.

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Alternative Approaches to Heavy Vehicle Taxation Applications Manual - Equip revels of Government From a state's perspective, the user~harge system of most direct interest is the state's system. Revenues from state user charges are used to fund state highway programs, to provide matching funds for Federal programs, and to provide aid to local governments. An equity analysis of this system should compare revenues from these state taxes to cost responsibility for the resulting use of these revenues (but not for the use of revenues obtained from Federal or ~ocal~taxes). An alternative is for the state to compare the combined state and local systems of highway taxes to combined state and local highway expenditures. Since local governments are creatures of the state and state policies greatly influence local options for user revenues and highway programs, there is reason for considering state and local systems together. In most states, local governments collect only a small amount of highway user revenue, if any, due to limited powers given to them by the states. For this reason, local roads usually are financed mainly by general revenue or by specific types of non-user taxes such as property taxes. Only when states and/or local governments have a significant Interest In local highway user revenue options is there a strong reason for including local programs in state cost allocation studies. States often include an analysis of the sources and uses of Federal highway taxes in addition to the basic analysis of state highway taxes and state highway-related programs. An analysis of the equity of combined Federal and state tax systems is usually consiclered desirable as at least a secondary equity criterion. In the past, there were good arguments for excluding Federal revenues and expenditures from serious consideration in state cost aDocation studies. Federal expenditures were highly concentrated on the Interstate System and on heavy truck routes. Heavy trucks were responsible for a greater share of Federal costs than for state and local costs. If a state were to incorporate Federal taxes and revenues into its own equity analysis as the primary criterion for adjusting tax rates, it would be implicitly attempting to use its own tax system to make up for inequities in the Fecleral tax system. Any resulting unprovement in overall equity might be desirable, but individual states generally did not see it as their responsibility to make up for inequities in the Federal tax system. In recent years, Federal funds are being increasingly used for a variety of non- construction activities and for construction on non-Interstate routes serving general traffic, high-occupancy vehicles, park-and-ride facilities, etc. As a result of these trends and changes In the Federal tax structure, heavy combination trucks have equity ratios that are closer to I.0, though equity ratios resonated for heavy single-un~t trucks are still quite low.5 Thus, Were is less reason to exclude Federal taxes and Federal programs from state cost avocation studies based on the argument that states should not expect to assume the . . . . . .. . .. . . . responsibility for correcting for Me inequities in Federal highway user tax structure. The argument for giving greater consideration to Federal revenues and expenditures also has 5 FHWA, 1997 Federal Highway Cost Allocation Study, August 1997, Table ES-2. Ca mbridge Sys tema tics, I?' c. 49

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A.:ernative Approaches to Heavy Vehicle Taxation Applications Manual - Equity been strengthened by the greatly increased flexibility that states now have in where and how they can use Federal funds. To!! Roads Few, if any, cost aBocation studies have been performed in the U.S. for specific ton roads, for toll road systems, or for toR facilities as part of state highway systems. However, the reasons for applying the equity criterion to toll systems are essentially the same as for any other highway system. There are two equity issues relating to toD roads. One is a component of conventional equity evaluations that are the principal topic of this chapter: to what extent do the toss charged different classes of vehicles relate to their cost responsibility for the ton roact and/or contribute to the overall equity among vehicle classes of the state's user-charge system. The second issue relates specifically to ton roads: to what extent do users of toll roads subsidize other programs or users of other roads because of conventional highway taxes (e.g., fuel taxes) paid while using the toll roads or because of the use of toll revenues for other programs. The first issue is appropriately addressed by subjecting toll-road revenues and costs to the same type of equity analysis as other state highway revenues and costs. Depending on the degree of autonomy enjoyed by the toll authorities, separate equity analyses may be performed for the roads operated by each toll authority in a state and for the state's non- toll facilities, or a single equity analysis may be performed for all (toll and non-toll) roads In the state as a single system. The second issue is, at its heart, a significant policy question: some observers believe it is inequitable for toll-road users to subsidize other roads in the state; while others argue that the value of time and ability to pay of these users generally is above average, so they receive above average benefits from the toll systems (particularly in the case of toll systems that might otherwise not be built) and their extra cost burden contributes to social equity. Diversions Although most revenue from highway user charges is used for highway purposes, some is used to finance other transportation activities and some is used for other governmental expenses. However, when all levels of government are considered, there is significantly more non-user revenue used for highways than user revenue diverted from highways. If total highway user revenue does not exceed total highway expenditures, it is desirable to include diverted revenue in the analysis in order to provide a co "mplete accounting of user payments and cost responsibility. However, if total highway user revenue exceeds highway expenditures in a state, it generally is preferable to treat the excess revenue as part of a separate analysis because, from an equity perspective, there is no particular 50 Cambridge Systematics, Iliac.

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Alternative Approaches to Heavy Vehicle Taxation Applications Manual - Equity reason why revenue used for non-highway purposes shouIcl be obtained from highway users in proportion to their responsibility for highway expenditures.6 Vehicle Classes Ideally, cost allocation studies and equity analyses. should distinguish as a separate vehicle class any significant set of vehicles that has characteristics (weight, length, annual mileage, etc.) that result in highway costs or tax payments that are appreciably different from those produced by other vehicles. In practice, this principle results in distinguishing vehicles classes on the basis of body type (auto, pickup, bus or truck), axle configuration, and/or registered weight, with the total number of classes distinguished usually limited by study resources and data availability. The current Fecleral cost aBocation study7 distinguishes 20 different bocly types and axle configurations (which the study refers to as vehicle cIasses) and 30 registered-weight brackets (using 5,000-pound increments up to 150,000 pounds); however, most results are reported for the I! classes shown In Exhibit 6.~. Individual states may wish to use variants of these classes Mat distinguish significant vehicle classes operating in the state. For example, states allowing longer combination vehicles (LCVs) may find it desirable to distinguish double and/or triple- trailer configurations. Another vehicle characteristic that should be considered] by equity analyses relates to annual mileage. Since annual mileage has almost no effect on cost responsibility per mile, there is no need for highway cost-allocation studies to clishnguish vehicle classes on the basis of annual mileage. However, user fees paid per mile can vary quite significantly with annual mileage, so equity analyses should incorporate at least some representation of annual mileage. One option is to clevelop separate equity ratios for categories of vehicles in specific axle-configuration/weight classes that tend to have substantially different annual mileages (e.g., those operated by private carriers vs. those operated by for-hire carriers). Another option is to develop separate equity ratios for categories of 6 In general, the excess revenue should be obtained from user groups in proportion to some criterion for tax assessment that is not necessarily proportional to responsibility for highway- agency costs. Possible criteria include responsibility for some or all types of non-agency external costs. In me case of transit subsidies, it is common practice to allocate the expenditures among the vehicle-miles of travel in the urban areas benefiting from He transit service. In the case of excess user revenue used as a source of general revenue, it may be desirable to use a fuel tax as a means of discouraging vehicle use, emissions, and fuel consumption (as is done in most European countries). An option exists of developing a single set of equity ratios would combine all highway revenue (including revenue that exceeds highway-agency expenditures) in He numerator and both agency costs and some measure of any over costs of interest in He denominator; but development of an appropriate hybrid measure could be difficult and arbitrary. (However, non- agency external costs are considered when addressing economic efficiency, as discussed in Chapter 7.) FHWA, op. cit. Cambridge Systematics, Inc. 51

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Alternative Approaches to Heady Vehicle Taxation Applications Manual- Equity Exhibit 6.1 Classes Used for Reporting Results of the 1997 Federal Highway Cost Allocation Study Passenger Vehicles~- 1. Autos 2. Pickups and vans (four tires) 3. Buses (six or more tires) Overall Single-Unit Trucks 4. ~25,000 pounds 5. 25,001-50,000 pounds 6. >50,000 pounds Overall Combination Trucks 7. <50,000 pounds S. 50,001-70,000 pounds 9. 70,001-75,000 pounds 10. 75,001-80,000 pounds Il. >SO,OOO pounds Overall Overall - AD Vehicles Source FLORA, 1997 Federal Highway Cost Allocation Study, August 1997, p. Bee. 52 Cambridge Systematics, Iliac.

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Alternative Approaches to Heavy Vehicle Taxation Applications Manual - Equity very high or low mileage vehicles for which modified annual fees exist or are being cons~dered.8 Separate equity analyses also should be applied to any other major special tax provisions that are justified on the basis of equity or other policy reasons. The most important of these is tax-exempt vehicles, which commonly make up several percent of each vehicle class, but typically vary from a small percent for heavy truck classes to a majority for buses. The next most important is reduced-fee vehicles based on type of business (e.g., farm, log hauling, or other natural-resource haulers). Another common example is the practice of reducing registration fees or other user fees that are charged to vehicles that operate empty for at least some specified percentage of their miles (typically, 40 to 50 percent). An equity argument is sometimes made for these reduced fees: because of the high percentage of empty miles, the cost responsibility of these vehicles is lower than that of other vehicles. However, vehicles that always operate empty In one direction are more likely than other vehicles to operate at (or above) the GVW limit In the loader! direction, so the difference in cost responsibility for the two types of vehicle may be appreciably less than assumed or may even be the reverse of what has been assumed. If equity arguments are used to support the reduced fees,9 these arguments should be subjected to an analysis of the relative cost responsibility of the two vehicle types and the development of separate equity ratios. 6.2 Attribution of User-Charge Revenue Analyses of the equity of highway user charges require that revenue obtained from these charges be attributed to the various vehicle classes that are distinguished in the equity analysis. To the extent that these attributions are performed on the basis of estimates of VMT by vehicle class, it is important that the VMT estimates be the same ones used in the corresponding cost avocation. The first subsection below discusses the aUribudon of state revenue to vehicle classes; and the second subsection discusses the attribution of Federal revenue. 8 Currently three states (Colorado, Illinois, and Wyoming) have reduced registration fees for low annual-mileage vehicles. 9 Reduced fees charged to vehicles carrying agricultural products or other economically important commodities sometimes aTe justified can the basis of the vane- the -service being provided to the local economy. Political decisions to provide such tax subsidies need not be justified on the basis of equity. However, as in the case of all tax subsidies, it is good practice to provide data on the cost of the subsidy and to evaluate the equity of the incidence of the subsidy among users. A reasonable policy might be to treat the subsidy as an equal burden on all other users on a percentage basis (i.e., as an overhead on all other cost responsibility). Alternatively, it might be judged more appropriate to obtain the subsidy from general revenue than from highway users. Cambridge Systematics, Inc. 53

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Alternative Approaches to Heady Vehicle Taxation Applications Manual - Equity State Revenue The general approach recommended for attributing state user revenue to vehicle classes involves the following steps: Adjust the revenue totals for the period (or periods) to be used for each revenue category to- be compatible ^with' the period to be used for Me VMT and vehicle registration data (usually a calendar year), anchor adjust the VMT and vehicle registration data to be compatible with the revenue data period. Often the revenue data win cover a fiscal year that is different from a calendar year and sometimes may include an accounting period slightly longer or shorter than a year. A commonly used approach is to develop VMT and vehicle registration estimates for a fiscal year that coincides with the revenue period, based on an average, or weighted average if necessary, of VMT and vehicle registration clata for two calendar years. 2. Determine what specific revenue sources are included within each revenue category for which accounts are maintained, and find out if data are available for breaking revenue totals clown into components that win be useful in the revenue attribution process. For example, registration revenue commonly includes revenue from miscellaneous categories related to the registration process. Some of these other categories might be logically attributed to a subset of the vehicle population (e.g., commercial vehicles or trailers) and should be separated out and treated differently if possible. Make whatever adjustments are necessary to determine what total user revenue for the period is. This may require adding in collection ant! enforcement costs that have been subtracted out of total receipts, and may involve subtracting out various items of non-user revenue, such as interest income, carryover funds from the previous period, and transfers from other sources. Investigate past studies to determine if estimates have been made of factors that can be useful in the revenue attribution process, such as special surveys of registered vehicle owners, analysis of trends In components of the revenue, or studies of possible chances in the revenue collection process. v Based on an analysis of recent and historical user revenue data, make trend-based projections for the analysis period, which is typically the currently adopted five to ten year construction program period, for each category of user revenue to be attributed to vehicle classes. The forecasts can be for the entire period, or for the middle year of the period, representing an average year for the analysis period. 6. Do the same for ~-and-vehicle registration data as is done for revenue data in Step 5. The procedures presented in Sections 3.2, 3.3, and 3.4 describe how to estimate the three major categories of VMrr-related revenue for all vehicles as a whole and for each vehicle class (i.e., for registration fees, fuel taxes, and weight-distance taxes). The procedures presented in those sections are intended to be used to develop estimates of revenue that should be collected, and to do so as independently as possible from actual revenue 54 Cambridge Systematics, Inc.

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Alternative Approaches to Heavy Vehicle Taxation Applicatiotts Manual - Equity collection totals so that the results can be used for estimating evasion when compared with actual revenue totals. However, the estimates of revenue developed from these procedures are also intended to be used in the revenue attribution process requarect for equity analyses. The major difference is that the revenue attribution process required for equity analyses involves a top-down process of attribution of a given amount of total revenue actuaby codectec] for each class of revenue to vehicle classes, as contrasted to the bottom-up process of independently estimating revenue for each class and adcling these estimates to estimate~total revenues that should be collected for each revenue class. The general procedure for each of the three VMT-related revenue categories is to use the results of the procedures presented in Sections 3.2, 3.3, ant! 3.4 to produce an initial set of estimates of fees paid by each vehicle class and then to scale the results so that they add to the actual total revenue collected, acijusted as describer! in the steps described above. A few additional suggestions and cautions are provided below for each revenue category covered In Chapter 3, and for several additional revenue categories. Registration Fees and Other Vehicie-Related Fees In addition to registration fees and other related fees that are apportioned among states on the basis of VMT In each state, many states have other vehicle-related fees that are not apportioned and are therefore not related to VMT. Examples Include trailer registration fees, plate fees, title fees, licensing fees for clealers, and some property taxes. In many cases, the amounts of revenue involved are small, and very approximate procedures can be used. Many of these types of revenues are approximately the same amounts per vehicle and therefore can be attributed among vehicle classes in proportion to the number of registrations in each class. However, in a few states, the amounts of revenue involved are substantial and greater care is required. One example where substantial vehicle-related revenue is involved in a few states is property taxes that are uniquely applied to motor vehicles (as distinct from general property taxes, which should not be considered as user revenue). Such property taxes usually are applied on the basis of a percentage of the depreciatect value of the vehicle. In these states, a specific depreciation scheclule is often specified; and in some states the age distribution of vehicles in each class can be tabulated from registration data files, so that accurate revenue attributions can be made without resorting to secondary data. In cases where these data are not available, one can use depreciation schedules from other similar states and national data on vehicle-age distributions (such as the data shown in Exhibit 6.2~. Trailer registration- fees and-plate fees are usually flat fees per trailer, and can be attributed among power units in proportion to the product of the number of power units registered In each class and the number of trailers per power unit. The number of trailers per power 1mit can be estimated very approximately based on the type of configurations involved in each vehicle class if the total trailer revenue is relatively small. However, if the amount of trailer revenue Involved is substantial, AVC data should be analyzed to estimate the average number of trailers per power unit for each vehicle class. Cambridge Systematics, Inc. 55

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Alternative Approaches to Heavy Vehicle Taxation Applications Manual- Equity Exhibit 6.2 Age Distribution of Vehicles Operating in 1995 Year Passenger Cars Trucks 1980 and earlier 12.8% 19.8 1981- ~ 2.5 ~1.9 1982 2.8 2.2 1983 3.7 2.7 1984 5.6 4.3 1985 6.3 5.0 1986 7.0 5 9 1987 7.2 5.7 1988 7.4 6.4 1989 7.3 6.6 1990 6.6 5.7 1991 6.4 5.9 1992 6.2 6.0 1993 6.7 7.4 1994 6.6 8.7 1995 4.9 5.8 1996 0.0 0.0 unknown 0.0 0.0 r Source: American Automobile Manufacturers Association, Motor Vehicle Facts and Figures, 1996, pp. 39 and 40. 56 Cambridge Systematics, Inc.

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Alternative Approaches to Heavy Vehicle Taxation Applications Manual - Eguiby Fuel Taxes The attubudon of fuel-tax revenue to vehicle classes should be done separately for gasoline ant! special fuels, and should be done to fuel classes within each vehicle class because of substantial differences In the evasion rates between the two fuel classes. In states, where gasohol revenue is substantial and a large subsidy is involved, it may also be desirable, or even necessary,.to treat gasohol vehicles and gasohol.revenue separately. The m~sceHaneous revenues related to fuel taxes usually are relatively small, and can be treated as an overhead on fuel-tax revenues attributed to vehicle classes in the.manner clescr~bed in Section 3.3. These revenues include state licenses and fees imposed on wholesale and retail distributors of motor fuel, licenses and fees on users of motor fuel purchased in bulk quantities, and fuel-facility inspection fees. Weight-Distance Taxes and Alternatives Some states with weight-ctistance taxes allow some vehicles to pay an alternative tax, such as a flat annual fee for vehicles in specific types of operations. The amount collected from a flat-fee alternative is usually tabulated separately and can be attributed on a per-vehicle basis to the number of vehicles in each class qualifying for the flat-fee alternative, which also is usually tabulated separately. Tolls J ToH revenue may be attributed to the vehicle classes used in the equity analysis using a ree-step procedure: I. Obtain total ton revenue or, if the information is available, obtain toll revenue by vehicle class using whatever vehicle classes are used by the toll authority. 2. For each vehicle class distinguished In Step I, attribute ton revenue to the corresponding FHWA vehicle classes using classification data obtained for the ton facility if such data are available; overwise perform this attribution using estimates of VMT by FHWA vehicle class for the appropriate functional systems. 3. For each FHWA vehicle class, attribute the Step 2 revenue estimates to the vehicle classes used in the equity analysis using the same attributions as used in Step 3 of the Section 3.2 and 3.3 procedures. Gross Receipts Taxes Gross receipts taxes that are uniquely applied to motor carriers usually are relatively small and can be attributed to commercial vehicles in an approximate manner. A reasonable approach in these cases is to assume that gross receipts are proportional to commercial vehicle VMT, and therefore this revenue can be attributed to vehicle classes in proportion to commercial vehicle VMI. In the few states where gross receipts taxes are a substantial portion of total revenue, a more careful investigation should be made of how - Cambridge Systematics, Inc. 57

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Alternative Approaches to Heady Vehicle Taxation Applications Manual - Equity the revenue relates to vehicle characteristics. A more accurate revenue attribution might possibly be made by weighting the VMT by depreciated value (see the discussion of property tax in the Reregistration fee,, subsection, above). D"vers License Fees Some states have several categories-of drivers licenses ap,3lying-t`> different classes of vehicles, and often revenue from each class can logically be attributed separately to Me applicable classes based on ~n-state vehicle registrations. This may be desirable if the fee rates are substantially higher for heavier vehicles and if there are substantially more licenses per vehicle for heavy vehicles. Permit Fees Permit fees usually include several types of permits, but the amount of revenue involved usually is small enough so that it can be attributed to all commercial vehicles on the basis of commercial vehicle VMT in each vehicle class. The exception to this occurs in a very few states that collect heavy vehicle permit fees for LCVs In the form of weight-distance taxes, in which case the procedures described for weight-distance taxes should be used. The applicable VMT, of course, should be only the mileage for which the rates apply, which may exclude empty mileage and/or mileage operated in conventional configurations, as distinct from LCV configurations. Federal Revenue Currently there are four Federal highway taxes: Fuel taxes, applied at different rates to gasoline, gasohol, and special fuels; . The heavy-vehicle use tax on vehicles with registered gross weights above 55,000 pounds; - An ad valorem tax on the purchase of new trucks with manufacturers, GVW ratings above 33,000 pounds and new truck trailers with GVW ratings above 26,000 pounds; and An excise tax on truck Ores weighing more than 40 pounds. FHWA estimates of Highway Trust Fund (HALF) receipts from each of these taxes attributable to highway users-~n each state are published annually in Highway Statistics,2 with separate estimates provided for the highway and transit accounts. FHWA, Highway Statistics, annual, Table FE-9. Cambridge Systematics, Inc.

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Alternative Approaches to Heady Vehicle Taxation Applications Manual - Equity States that choose to consider sources and uses of Federal highway taxes in their equity analyses should attribute to vehicle classes the FHWA estimates of total HTF receipts attributable to users in the state. FHWA plans to make available tools for performing this attribution Hat use procedures from FHWA's Highway Revenue Forecasting Mode! (HRFM).~ Like the model, these tools are expected to distinguish 20 vehicle-type/axIe- configuration classes (referred to as vehicle classes) and 30 registered/operating weight brackets fusing 5,000-pound increments up to 150~000 pouncts). The 20 vehicle classes are listed in Exhibit 6.3. The tools that FHWA win provide are expected to include default values for ah required parameters (tax rates, fuel efficiencies, fuel prices, etc.~. In order to attribute HTF highway-account revenue to vehicle classes, a state would have to supply forecast or estimated revenue from each tax source attributable to highway users in the state (from Highway Statistics for recent years) and estimates of the state's share of VMT, vehicle stock, and vehicle sales by vehicle class. The required VMT estimates are obtained by: I. Developing a correspondence between the EIRFM configuration and operating weight classes and the equity analysis vehicle classes; e.g., if the equity analysis has a class consisting of Class 9 vehicles (five-alie single-trailer combinations) with (registered) weights between 50,000 and 80,000 pounds, this class would be associated win CS5Ts, CS5Ss and CT5s with (operating) weights between 50,000 and 80,000 pounds; and 2. For each set of HRFM classes corresponding to a given equity-analysis class, scaling the national VMT values so that the sum over the set of HRFM classes equals the estimated state VMT in the equity-analysis class. The required estimates of vehicle stock are obtained using a similar process in combination with estimates of the state's full-time equivalent vehicles by equity class developed by the procedure of Section3.2. The state's share of vehicle sales can be estimated by applying He scale factors cieveloped for converting the vehicle-stock data to national data on vehicle sales provided by FHWA. The other mode! parameters need not be modified. Outputs produced by the FE]WA tools are expected to include: Fuel-tax revenue by fuel type, vehicle-type/axIe-configuration class, and operating- weight bracket; . Tire-tax revenue by vehicle-type/axle-configuration class and operating-weight bracket; Truck and trailer--tax r~enueLv vehicle-typejaxle~or~.uration class; and ~FHWA, 1997 Highway Cost Allocation Study, Appendix B: Highway Revenue Forecasting Model (HRFM4), draft, June 1997. Cambridge Systematics, Inc. 59

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Alternative Approaches to Heavy Vehicle Taxation Applications Manual - Equity Exhibit 6.3 Vehicle Classes Used by HRFM, Version 4 1. AUTO Automobiles and motorcycles 2. LT4 Light trucks win ~ axles and 4 tires 3. SU2 Single unit, 2 axle, 6 tire trucks (includes SU2 pulling a utility trailer) 4. SU3 Single unit, 3 axle trucks (includes SU3 pulling a utility trailer) 5. SU4+ Single unit trucks with 4 or more axles (inclucles SU4+ puBing a utility trailer) 6. CS3 Tractor-semitrailer combinations with 3 axles 7. CS4 Tractor-semitrailer combinations with 4 axles 8. CS5T Tractor-semitrailer combinations with 5 axles with conventional rear tandem axles 9. CS5S Tractor-semitrailer combinations win 5 axles with split rear tandem axles (>8 ft.) 10. CS6 Tractor-semitrailer combinations win 6 axles 11. CS7+ Tractor-semitrailer combinations win 7 or more axles 12. CT34 Truck-trailer combinations win 3 or 4 axles 13. CT5 Truck-trailer combinations with 5 axles 14. CT6+ Truck-trailer combinations with 6 or more axles 15. DS5 Tractor-double-semitrailer combinations win 5 axles 16. DS6 Tractor-clouble-semitrailer combinations with 6 axles 17. DS7 Tractor-double-semitrailer combinations with 7 axles 18. DS8+ Tractor-double-semitrailer combinations win ~ or more axles 19. TRPL Tractor-triple-semitrailer or truck~ouble-semitrailer combinations 20. BUS Buses (alltypes) Source: FHWA, 1997 Highway Cost Allocation Study, Appendix B: Highway Revenue Forecasting Model (HRFM - ), draft, June 1997, p. Bus. 60 Cambridge Systematics, Inc.

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Alternative Approaches to Heavy Vehicle Taxation Applications Manual - Equity Heavy-vehicle use tax revenue by vehicie-type/axie-configuration class and reg~stered-weight bracket. For use In the equity analysis, the fuel and tire-tax revenue should be converted from an operating-weight basis to a registered-weight basis using the procedure presented in the next section and then aggregates! to the equity-analysis classes. The truck and trailer-tax revenue should be aggregated,- as appropriate, to the smaller number of vehicle-type/axIe- configuration classes used in the equity analysis and then distributed to registered-weight classes using VMT data developed by the Chapter 3 procedures. The use-tax revenue also should be aggregated, as appropriate, to the smaller number of vehicle-type/a~de- configuration classes used in the equity analysis. 6.3 Converting Between Operating Weight and Registered Weight Conversion matrices are required to convert cost responsibility results developed by operating weight into results by registered weight in order to compare results in the form Of equity ratios for vehicles by registered weight. Good practice requires that separate conversion matrices be developed for each major vehicle class, such as for: I) all passenger vehicles; 2) single-unit trucks; and 3) combination trucks. It often is desirable also to divide passenger vehicles between autos and others, and to divide the truck classes between trucks based in state and out of state. Ideally, major axle configurations should be broken out separately, but this requires a very large database; this was done in a recent study for Oregon, but was not done In several other recent studies. The best source of data for truck conversion matrices are special truck weight surveys conducted at weigh stations at random locations and time periods. Data collected should Include vehicle class, operating weight, registered weight, time, day, route, and direction. A sample of several thousand trucks should be obtained, but experience demonstrates that about 2,000 trucks wig produce reasonably accurate results, so long as at least i,000 are not five-axIe tractor-sem~tra~lers. Matrices constructed from these data are considered to be VMT-based conversion matrices rather than vehicle-based matrices, since the probability of being in the sample is roughly proportional to VMT. Each conversion matrix constructed from the raw data should be carefully edited to eliminate biases to Me extent possible (e.g., day of week, directional splits affected by types of hauls on particular routes, urban areas vs. rural areas, and functional class). The matrices should then be edited to force Me overall registered weight distribution for each matrix to equal the overall statewide VMT-based weight distribution for Mat vehicle class, ]2 ~ Federal taxes and programs are to be included in the analysis and the Federal revenue model is used, then it will also be necessary to convert these results to a registered-weight basis. Equity analyses must be performed by registered-weight categories rather than operating-weight categories because individual vehicles are identified (and are usually taxed) by registered-weight categories; whereas, most heavy vehicles actually travel at varying operating weights. Cambridge Systematics, Inc. 61

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62 Alternative Approaches to Heavy Vehicle Taxation Applications Manual- Equity while sunultaneously factoring the matrix to approximate the statewide operating-weight distribution based on a weB-edited VMT-based sample of weigh-in-motion (WIM) data for that vehicle class. Checks should be made when applying the matrices to assure that total cost responsibility for each matrix is unchanged, and that the resulting cost responsibility per vehicle-mile increases with registered weight in a relatively smooth fashion. Cambridge Systematics, Inc.