TRB Special Report 303: Equity of Evolving Transportation Finance Mechanisms (2011)

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6 Findings and Recommendations Transportation plays a key role in the functioning of the nation’s econ- omy and in determining people’s ability to participate fully in society. Consequently, equity is an underlying issue in nearly all transportation decisions, from how transportation services are paid for to how existing and proposed transportation systems and services are provided. The equity implications of transportation systems and how we pay for them defy simple characterization, and talking about transportation finance equity without talking about a broad spectrum of other factors is guaran- teed to lead to misguided conclusions. This report focuses on equity as a criterion for assessing transportation finance mechanisms, but, in practice, equity is only one of many criteria considered by public officials weighing alternative means of financing a transportation project or program. Trade-offs among different criteria are often needed to arrive at a compro- mise solution. Furthermore, the equity characteristics of transportation finance mechanisms are not solely matters of ethical concern; they can be important factors in determining political acceptance or rejection of a mechanism. Failing to address matters of equity, real or perceived, can contribute to implementation failures or delays or to increased social and economic costs. Against this backdrop, the committee was asked to pro- vide guidance to public officials about assessing the equity of evolving transportation finance mechanisms. This chapter discusses the various dimensions of equity, summa- rizes the current understanding of the equity of evolving finance mechanisms and of opportunities to remedy inequities, and discusses approaches to measuring equity. It then identifies equity-related issues for policy makers to consider and recommends actions to be taken by policy makers and their staff. A discussion of research needs is followed 129 

130 Equity of Evolving Transportation Finance Mechanisms by recommendations directed to researchers and analysts. The chap- ter concludes with recommendations about sources of funding for the recommended actions. DIMENSIONS OF EQUITY Researchers have compiled many different, and overlapping, definitions of equity and have explored different classification schemes in an attempt to analyze transportation equity in a logical and consistent manner. By way of illustration, Table 6-1 lists five of the many aspects of equity encountered in transportation debates, namely, income, geog- raphy, mode, generation, and race–ethnicity. This table lists important questions for judging the fairness of the distribution of burdens and benefits, identifies the kinds of information policy makers need to answer these questions, and gives examples of potential remedies for associated inequities. These illustrative examples are intended to out- line the several and overlapping ways of thinking about equity and transportation finance and are neither exhaustive nor prescriptive. For example, income equity is ultimately founded on the concept of ability to pay; generational equity is based on the relationship between costs paid and benefits received. This multiplicity of definitions and perceptions of equity often com- plicates the interpretation of results from empirical studies. As noted in Chapter 4, studies investigating the equity implications of road pricing typically consider only one aspect of equity—for example, the price sen- sitivity of low-income groups vis-à-vis new road tolls (ability to pay), or the ways in which low-income groups are affected by expenditures of toll revenues (benefits received). In fact, the overall equity outcome of a transportation finance policy depends on an array of factors, including, but not limited to • The size of payments by the affected groups; • The price sensitivity of the affected groups; • The transportation options available to these groups; • The shifting of the financial burden via changes in market prices; • How the revenues are spent, including any efforts to offset inequities; and 

TABLE 6-1 Types of Equity for Considering Distribution of Burdens and Benefits Category Important Questions Policy Makers’ Information Needs Potential Remedies for Inequities Compensatory service enhancements (e.g., Ultimate distribution of fees paid, services Are different economic classes burdened dis- Income improved transit services for low-income received, and resulting travel behavior for proportionately, taking into account fees communities), discounted fees or fares, different income groups paid, benefits received, and impacts experi- rebates, offsetting payments enced? In particular, are lower income peo- ple paying a disproportionate share of their income for transportation? Spatially adjusted finance and investment Distribution of fees paid within, and invest- Are different geographic districts or regions Geography strategy, e.g., investment in different proj- ments accumulating to, each geographic paying proportionally more or receiving ects or services in different jurisdictions district or region proportionally less from transportation investments? Adjusted investment (or taxing) plan, e.g., Pattern of allocation of funds across modes, Are the fees paid by users of different modes Mode more or less money to (or from) a particular e.g., dollars per trip, per passenger mile, or proportionally returned to the users of mode per ton-mile transportation services? Adjusted financing schemes, particularly bor- Patterns of cost obligations (e.g., bond pay- Are the costs paid by current and future gener- Generation rowing arrangements, to change the stream back) and expected transportation service ations proportional to service benefits they of future payment obligations, e.g., reduced characteristics and needs over time receive from transportation investments? (or increased) long-term borrowing Compensatory service enhancements (e.g., Ultimate distribution of fees paid, services Are different racial and ethnic groups, Race–ethnicity improved transit services for minority received, and resulting travel behavior for particularly minorities, burdened dispropor- communities) different racial and ethnic groups tionately, taking into account fees paid, ben- efits received, and impacts experienced? 

132 Equity of Evolving Transportation Finance Mechanisms • The effects of the policy on the performance of the transportation sys- tem (for example, shorter travel times on some routes and improved air quality as a result of reduced congestion). Consequently, studies examining only one aspect of equity provide use- ful, but incomplete, information and must be interpreted with caution and their limitations explicitly understood. Furthermore, the equity of a finance mechanism depends not only on the aspects of equity considered, but also on how the baseline for com- parison is defined, whether for a specific project or for a broader finance policy. For example, the equity implications of a high-occupancy toll (HOT) lane may differ depending on whether the lane in question is to be created by converting an existing toll-free lane or by adding a new lane. In the former case, the baseline is an unpriced general purpose lane; in the latter case, it is a highway with fewer lanes. In a broader context, the current highway financing approach is generally used as the baseline against which to compare evolving mechanisms, such as a comprehen- sive vehicle miles traveled (VMT) fee. There is no set rule for how to define the “correct” baseline in a particular case, however, and this can be one of the confusing characteristics of equity debates when different parties define baselines differently. EQUITY OF EVOLVING FINANCE MECHANISMS People tend to favor the status quo strongly, and sometimes even irra- tionally, over potential alternatives, as noted in Chapter 5. It comes as no surprise, therefore, that equity concerns are raised far more often in connection with evolving and relatively untested transportation finance strategies (which are the focus of this report) than in connection with established finance strategies. Nonetheless, research has shown that most current transportation finance mechanisms are generally regres- sive. For example, the use of sales taxes to fund transportation is less equitable than the gas tax or other user fees according to several equity criteria. Sales taxes are generally regressive with respect to income, are paid by nonusers and users of the transportation system alike, and make no distinction between occasional and heavy users of the transportation system. 

Findings and Recommendations 133 Much of the analysis to date on the equity implications of evolving transportation finance mechanisms relates to road pricing. Most of the studies have addressed the equity implications of motorists’ ability (or inability) to pay road tolls or other fees based on their income.1 The extent of the empirical evidence is limited, however, by the extent of practical experience with different road-pricing options—HOT lanes, cordon tolls, VMT fees, and so on. In the United States, practical experience with road pricing includes tolled roads, bridges, and tunnels, as well as “weak” congestion pricing variants offering toll-free alternatives to priced links, notably HOT lanes. Examination of equity implications has largely focused on HOT lanes; in a few cases, such as the 91 Express Lanes in California’s Orange County, data pertaining to equity implications have been carefully and compre- hensively documented. In general, however, the empirical evidence is limited in scope, and much of the research into the equity implications of HOT lanes is theoretical in nature. In a number of countries outside of the United States, comprehensive road-pricing variants offering only a tolled route have been implemented. Studies of the cordon toll policies in London; Stockholm, Sweden; and several other cities provide some limited evidence about equity impacts. In the case of VMT fees, however, the literature on the likely equity impli- cations is almost entirely theoretical. Theoretical analyses, including modeling studies, can be indispensable in guiding both analytic thinking and empirical studies. Nonetheless, empirical evidence constitutes a more credible basis for informing decision making—particularly given the dif- ficulties of anticipating how people or firms will change their travel behavior in response to a new transportation finance policy—and thus how the burden of any new tax or fee will be distributed in practice. Empirical evidence shows that road pricing, like most current forms of highway finance, is almost always regressive in terms of out-of-pocket costs. Priced facilities can benefit a variety of income groups, however, depending on circumstances. Despite the commonly held belief that road pricing is unfair to low-income drivers, both empirical data on trav- elers’ use of priced roadways and public opinion surveys tell a more 1 Ability to pay is generally assumed to be proportional to income. 

134 Equity of Evolving Transportation Finance Mechanisms nuanced story. It is dangerous to make broad generalizations about the equity of a road-pricing policy without delving into the details of its implementation. The actual effects of road pricing on low-income driv- ers depend greatly on the specifics of the pricing program, how travelers perceive and use priced facilities, and the services funded with the tolls. Likewise, public opinion research has shown that low-income respon- dents do not oppose congestion fees or HOT lanes any more than the average survey respondent does and, in some cases, are even more sup- portive of congestion pricing. REMEDYING INEQUITIES Empirical evidence about the effectiveness of strategies for remedying inequities resulting from transportation finance policies is very limited. In the relatively few instances in which a remedy has been implemented, the most frequent approach has been to provide alternative transporta- tion services in the form of new or improved transit services aimed at assisting low-income groups and others who prefer not to drive. Sub- stantial evidence indicates, however, that such services cannot always fully meet the mobility needs of affected groups or communities and thus may not remedy the inequities effectively. Public transit services, with their limited geographic scope and fixed schedules, rarely can serve all of the trips made by drivers wishing to avoid tolls, no matter how well these services are designed and delivered. In some cases, however, dis- parities between the needs of adversely affected communities and pro- posed remedies may be the result of failure to engage the communities in identifying responsive solutions, incomplete knowledge of the extent of adverse impacts, or other uncertainties—for example, unanticipated adaptations in travel behavior that change distributional outcomes. Even when inequities are clearly identified, building remedies into a finance policy may be difficult because of financial constraints. Establish- ing compensatory mechanisms, such as discount schemes to benefit low- income travelers, often involves redirecting some of the revenue stream away from paying for the new or improved transportation services that motivated the finance policy in the first place. Many recent HOT lane projects have not yet covered their initial costs, leaving little or no net 

Findings and Recommendations 135 revenue for remedying inequities. Public transportation budgets can be equally constrained. Nonetheless, HOT lane policies designed to include funds set aside for transit investment in the corridor have been success- fully implemented in several instances, thereby providing transportation alternatives for some adversely affected travelers. MEASURING EQUITY A transportation finance mechanism levies money from various groups to pay (in full or in part) for transportation facilities and services. There is, however, no single way of defining what constitutes an equi- table outcome—that is, an acceptable balance of costs and benefits— resulting from a finance mechanism. Whether an outcome is perceived as equitable varies across different contexts (for example, in different geo- graphic locations) and depends on the perspectives—and experiences— of different individuals and groups. Thus, there are many different dimensions of equity, as noted earlier in this chapter and discussed in more detail in Chapter 3. From a practical standpoint, the assessment of equity from any and all of the relevant perspectives should be informed by measuring the dis- tribution of effects—the costs (who pays and how much they pay); the uses of funds (where, how, and how effectively funds are deployed); and the services, facilities, and prices delivered to various groups. Differing values and judgments come into play even in the apparently objective process of measuring these distributions, for choices must be made about what to count as costs and benefits and how to count (measure) them. Identifying and measuring distributions of effects is also compli- cated by the fact that people and institutions may change their behaviors in response to new or modified transportation options and associated taxes or fees, and may pass some or all of these costs on to others. The notion of burden shifting is discussed in Chapter 3. The starting point for measurement is to define the financing scheme in detail, identifying who will bear the initial burden in terms of demo- graphics, geography, behaviors, and other dimensions discussed in Chapter 3. The magnitude of this burden can then be estimated in both absolute terms (e.g., dollars per year) and relative terms (e.g., proportion 

136 Equity of Evolving Transportation Finance Mechanisms of household income per year). Contrasting these effects with those of existing financing mechanisms enables one to characterize the initial impacts of additional or replacement taxes or fees and to present a com- parison with the status quo. Following this initial assessment, it is neces- sary to address additional effects resulting from behavioral changes, notably, the shifting of both economic and noneconomic burdens (see Chapter 3). Suitable models for predicting such shifts are not widely avail- able, so logical reasoning may well be needed to develop a qualitative picture of the redistribution of the burden of a new policy. The distribution of benefits resulting from the deployment of funds from a new finance mechanism also needs to be identified and measured. These tasks may be challenging if specific commitments to the uses of funds have not been made in parallel with selecting the finance mecha- nism. It is, nonetheless, important to address the potential benefits, since innovative transportation finance mechanisms arise because there is (presumably) a substantive need for incremental funds. In describing the benefits and their distribution, care is needed to avoid overpromising what future funds will actually bring. Data to develop descriptions of the various effects described in pre- ceding paragraphs depend in the first instance on descriptions of the finance mechanism itself—for example, who will pay the new or revised tax or fee, how much they will pay, how much revenue is anticipated, and how this revenue will be spent. In most cases, data from a variety of other sources will also be required—for example, demographic information from the Decennial Census and the American Community Survey, regional travel data collected as a part of regional transportation plan- ning processes, and national travel data from the National Household Travel Survey. Finding relevant and sufficiently detailed freight data is more difficult, but the national Commodity Flow Survey and specialized regional data sources may be relevant. ISSUES FOR POLICY MAKERS TO CONSIDER Understanding the complex web of equity implications associated with a transportation finance policy is a challenge, as the preceding discussion illustrates. In addition, the shortage of comprehensive and carefully documented empirical evidence about the equity impacts of road pricing 

Findings and Recommendations 137 and other evolving policies leaves public officials with relatively little experience-based information on which to draw when considering finance options. Despite these difficulties, there are a number of ways in which pol- icy makers and the analysts who support them can address transportation finance equity issues more effectively. The following paragraphs address the importance of • Adopting a comprehensive perspective when a policy’s equity impli- cations are considered, • Considering the possibility that the actual incidence of a relatively untested finance policy may differ from that originally intended or anticipated, • Engaging stakeholders in the planning and decision-making processes, • Drawing on the results of carefully conducted public opinion research, and • Avoiding red herrings raised during public debates over equity. Comprehensive Perspective Understanding the equity outcomes of a finance policy involves asking a broad range of questions about who will be affected by the policy and how, rather than just the commonly asked questions about who pays for and who benefits from transportation services. Both short- and long-term behavioral responses to a policy need to be considered, together with their consequences—for example, changes in mobility, changes in land use and associated home and job locations, and environmental impacts. Intended Versus Actual Incidence The actual incidence of a finance policy may be quite different from that intended or anticipated when the policy was developed and enacted into law. Individuals and institutions may be able to modify their behaviors to avoid paying a new tax or fee or to shift the economic burden to oth- ers. The equity implications depend ultimately on how the burden is shifted through the complex array of behavioral responses and market forces. Furthermore, shifting of the economic burden may change the nature of noneconomic equity considerations through disproportionate effects on particular communities or categories of people. For example, toll or tax increases may lead to greater reductions or changes in trip 

138 Equity of Evolving Transportation Finance Mechanisms making among low-income travelers than among higher income groups, with an associated loss of benefits. Thus, low-income travelers may forgo needed visits to health clinics or may have to use public transit to make very long trips that were formerly made by car. Stakeholder Engagement Evidence from road-pricing initiatives demonstrates the value of engag- ing stakeholders in the planning and decision-making processes in a meaningful way to address concerns about the equity of transportation finance mechanisms. Stakeholder engagement provides opportunities to • Develop a better understanding of equity concerns, including any such concerns that may have been overlooked in an initial assessment; • Educate policy makers, the public, and the media about a project and its financing and forestall or correct any inaccurate or misleading per- ceptions about the financing plan and its likely equity implications; and • Identify potential remedies for inequities and target those remedies to the specific needs of adversely affected groups. Public Opinion Research Public opinion research can help policy makers understand their con- stituents’ expectations for and responses to evolving transportation finance mechanisms and associated equity concerns, as well as any misperceptions about these topics. Public opinion can be influenced by limited understand- ing and unrealistic expectations about a finance mechanism, so explanation and education may be necessary prerequisites to getting a meaningful mea- sure of public opinion. Furthermore, public opinion may change after a policy has been implemented. As discussed in Chapter 5, evidence from London and Stockholm shows that people’s views about the proposed projects changed following implementation, becoming more supportive as the promised benefits (reduced congestion, for example) materialized. Possible Red Herrings Anecdotal evidence suggests that some higher income travelers may cyn- ically use arguments about “pricing poor drivers off the road” to mask their own desire to avoid additional fees. At the same time, there may be 

Findings and Recommendations 139 genuine equity concerns, even if some people’s claims are self-serving. Thus, it is sometimes difficult to distinguish legitimate concerns about equity in road pricing (or other finance policies) from people’s general resistance to paying more or paying differently. Although public officials generally have to address all the equity con- cerns raised by stakeholders, specific concerns raised by an affected group or by someone representing them may carry more weight than general comments about the equity implications of a policy made by those unlikely to be affected. In a hypothetical case, interest groups con- cerned about the impact of a project on the environment might choose to bolster their case by also claiming that the project would be unfair to low-income groups. Although such a claim might have merit, input from low-income groups themselves would likely be more useful to public officials in assessing the need to modify a policy or develop remedies for inequities. RECOMMENDATIONS FOR PUBLIC POLICY MAKERS AND THEIR STAFF Recommendation: Public policy makers should engage all their con- stituents and stakeholders early and repeatedly in discussions of pro- posed transportation finance mechanisms. In addition, they and their staff should ensure that appropriate data, analytical results, and com- munication strategies are used to address equity explicitly from the outset of a program or project. Specific tasks include • Assessing likely impacts of financing strategies, • Using lessons learned elsewhere to inform discussions, • Developing outreach programs and educational materials, and • Exploring possible remedies for inequities. Assessing Likely Impacts of Financing Strategies Public policy makers and the analysts who support them should explore the ways in which people’s travel behavior is likely to change as a result of implementing financing strategies and should develop reliable esti- mates of transportation service and facility use to the extent possible with existing and emerging analytical tools and data. In particular, they should 

140 Equity of Evolving Transportation Finance Mechanisms • Apply the most appropriate data and forecasting tools available, while acknowledging that better data, more sophisticated models, and alternative assumptions could refine, and possibly even modify, the outcomes; • Address the likely incidence of costs and benefits, not just the intended effects; • Draw on documented experience with similar finance mechanisms; • Consider the implications—short- and long-term, direct and indirect— of changes in people’s travel behavior on their quality of life and access to opportunities; and • Consider valid public opinion research that assesses people’s views, while recognizing that people may well be averse to change before it occurs and more accepting afterwards. Using Lessons Learned Elsewhere to Inform Discussions Public policy makers should take advantage of experience in the United States and overseas with evolving transportation finance mechanisms to inform their discussions with constituents and stakeholders. To the extent that this experience is well-documented, it should be treated as a knowledge base that, with thoughtful interpretation, can guide future decisions about transportation finance mechanisms. Developing Outreach Programs and Educational Materials Public policy makers should develop outreach programs and educational materials to help diverse audiences understand and engage in discussion about the proposed mechanisms and their likely equity implications. During the course of this activity, they should do the following: • Tailor the design and content of outreach and educational materials to meet the information needs of specific audiences. • Address the motivations or problems that led to a search for new fund- ing mechanisms, the benefits expected to result from those mechanisms (for example, improvements in transportation services), and alternatives to the proposed funding policy. • Explain to constituents and stakeholders the equity implications of the current way(s) in which the transportation system is financed to pro- 

Findings and Recommendations 141 vide a contemporary baseline against which to understand differences between current and proposed mechanisms. • Encourage and capture input from the various audiences to inform subsequent iterations of the program or project proposal—in partic- ular, discern the underlying equity principles raised during discus- sions to help identify inequities requiring remediation among the various stakeholders. • Provide special outreach as necessary throughout the project process (i.e., planning, implementation, identifying and resolving impacts, and monitoring outcomes) to ensure that traditionally underserved or vulnerable populations engage meaningfully in the discussions. Obtaining expert advice from resource agencies experienced in work- ing with underserved populations could be valuable in these special outreach efforts. Exploring Possible Remedies for Inequities Public policy makers and their staff should identify and evaluate possi- ble remedies for inequities, including both modifications to the design of the finance mechanism chosen and ways to use some of the revenues generated by the mechanism to compensate those adversely affected. Any change in transportation finance policy results in both winners and losers, but the new revenue may, when in excess of operating costs, offer opportunities to compensate the losers through monetary rebates or the provision of alternative or improved transportation services, such as new bus routes or more frequent bus services. Where remedies for finance inequities are identified and adopted, policy makers and their staff should develop strategies to help ensure that those remedies are mean- ingfully implemented and assessed. Engaging the affected communities in identifying and evaluating remedies is essential. RESEARCH NEEDS Comprehensive Before-and-After Studies To date, comprehensive before-and-after studies documenting practical experience with emerging finance mechanisms have been limited in 

142 Equity of Evolving Transportation Finance Mechanisms number, at least in the United States. Such studies are expensive to conduct because they involve extensive data gathering. For example, evaluation of the impacts of the 91 Express Lanes in Orange County, California, involved collecting data over a period of more than 5 years, including about a year and a half prior to the facility’s opening (Sullivan 2000). Such studies are, however, a particularly valuable resource for informing future policy deci- sions and guiding accompanying analyses because they produce results based on actual experience. Better Understanding of Travel Behavior and Its Consequences There is a shortage of reliable information about the real distribution of both burdens and benefits to travelers and shippers—information that is needed to assess the equity implications of transportation finance mechanisms. Relatively few studies to date have considered either the equity impacts of people changing their travel behavior to avoid paying a tax or the benefits resulting from the expenditure of tax revenues. For example, people who stop driving to avoid a user fee may experience a more time-consuming or less reliable commute than previously, and some may change or lose their jobs as a result. Implementing congestion pricing should, however, result in toll payers experiencing faster trips and, in many cases, also being offered better transit services. Among the questions for which research could provide useful insights into the equity implications of transportation finance mechanisms are the following: • How do members of different socioeconomic groups alter their behavior systematically to avoid or reduce payments, either in the short or long term? Short-term changes could include changing routes or time of travel, or both; using public transit rather than driving; or foregoing a trip entirely. Long-term changes (over a period of years) could include changing home, job, or business locations, or choosing to stop work or travel less. • Do the consequences of any of these behavioral changes have direct and material equity impacts on the people involved, including the range of costs that they may incur (e.g., longer commutes, poorer job benefits, more expensive rents or mortgages)? 

Findings and Recommendations 143 • Do the consequences of any these behavioral changes have indirect or independent equity impacts on other stakeholders? For example, do behavioral changes in response to new taxes or fees change the com- petitiveness of certain retail, housing, land, or labor markets, possibly accompanied by a spatial rearrangement of jobs? Do such behavioral changes improve health outcomes by reducing environmental pollu- tants, noise, or other negative externalities? And if so, what are the equity effects? • What have been the behavioral responses to remedies intended to address inequities in transportation finance and services? How effec- tive have the remedial actions or programs been? Have efforts to mit- igate perceived inequities of a finance policy ever worsened actual equity outcomes? Analysis of the equity implications of transportation finance mecha- nisms calls for anticipating and forecasting the ways in which people and businesses are likely to modify their use of the transportation system in response to changes in both prices (including taxes) and services. Devel- oping reliable forecasts depends on the availability of fine-grained data on personal travel and freight movements as well as on models that can reliably simulate relevant behavioral changes. Analysts today routinely assess some aspects of changes in travel behav- ior, but the traditional travel behavior models used by states, counties, met- ropolitan planning organizations, and local governments are limited in their ability to capture these changes. For example, none of the models in use in the United States today recognizes that willingness to pay to save time (as in HOT lanes, for example) varies from person to person, and for the same person in different situations. Cost-benefit analyses of transportation projects typically assume all drivers have the same value of time for all trips, and, as a result, evaluations of road-pricing strategies using forecast data are of questionable validity. Similarly, commonly used analytical models do not address so-called “second-order” impacts such as changes in the allocation of household duties or in work styles (e.g., more telecommuting) to mod- erate the burden of new transportation fees. In contrast, more advanced activity-based travel-demand models offer the potential to forecast travel behaviors with sufficient sophistication to support comparison of alterna- tive finance schemes. In the coming years, such models, which are now 

144 Equity of Evolving Transportation Finance Mechanisms being developed and gradually implemented, are expected to prove useful in informing equity analyses, although their complexity and demanding data requirements may delay or limit widespread implementation. More Attention to Freight and Transit Much of the recent research on the equity implications of evolving trans- portation finance mechanisms has focused narrowly on public and polit- ical concerns that road pricing will force low-income drivers off the road. In contrast, the broader effects of road pricing, including impacts on freight transportation and the workers in that sector, have received far less attention. A better understanding of the impacts of road pricing on the freight sector is needed to provide a more complete picture of the likely equity implications of this finance policy. A new finance mecha- nism may influence the effectiveness and efficiency of freight transporta- tion, affecting economic competitiveness and the spatial arrangement of jobs as well as changing patterns of mode utilization and congestion. The equity impacts of transit pricing have also been largely ignored in the research literature, although concerns over the inability of low- income people to pay transit fare increases are common. Nonetheless, most conventional equity assessments largely ignore the impacts of actual fare levels, discounted passes, and the like. Transit pricing tends to affect those in the very lowest income categories far more than road pricing. Thus, informed assessments of the equity implications of finance policies on the mobility of the lowest income group cannot ignore transit pricing. RECOMMENDATIONS FOR RESEARCHERS AND ANALYSTS Recommendation: Researchers and analysts should conduct scientifi- cally rigorous before-and-after and cross-sectional studies to measure the equity implications of evolving financing mechanisms and pro- vide a robust basis for future decision making. These studies should • Track short- and long-term behavioral shifts in response to the evolving mechanisms, • Conduct verifiable analyses to ensure the validity and transfer- ability of results, and • Avoid preconceived notions and oversimplification. 

Findings and Recommendations 145 Researchers and analysts should monitor the overall impacts of evolv- ing transportation finance mechanisms through systematic and ongoing data collection and analysis programs. Such monitoring should include analyses of resulting transportation service changes and the effectiveness of remedies aimed at redressing inequities. In the case of before-and- after studies, it is particularly important to ensure that reliable before- implementation data are collected to provide a strong basis for comparison. A special data collection effort may be required, because routinely main- tained data on travel and financial impacts may be insufficient. After implementation, data need to be collected on the direct and indirect impacts, both short- and long-term, on various groups. Collection of such data should ideally be done at regular intervals. Important questions to be answered by these data include the following: • How do members of various socioeconomic groups alter their behav- ior, in the short or long term, to avoid or reduce the payment? • To what or whom are the burdens of taxes or fees shifted, in whole or part, and what are the equity implications of such shifts? • What are the consequences (for example, reductions in travel bene- fits) of any resulting behavioral changes for the people involved? Are there indirect and independent equity impacts on other stakeholders? • How have negative equity outcomes been compensated for or addressed? • How are the affected communities engaged in identifying and address- ing negative impacts? As these questions illustrate, it is important to extend the scope of before-and-after studies beyond monetary effects to recognize behav- ioral impacts, the effects of changes in transportation services, and the effectiveness of any remedies. This effort should include not only short- term implications, but also long-term and indirect impacts that are often difficult to follow. It will be important—and challenging—to sort out confounding effects. Discernible effects from funding changes emerge over time, during which many other events occur. For example, changes due to the economic cycle, such as recession or expansion, can confound the attribution of response to new finance mechanisms. Likewise, fuel price fluctuations and relocation 

146 Equity of Evolving Transportation Finance Mechanisms of centers of employment or other activities can also confound responses. Such confounding effects need to be documented as a part of comprehen- sive before-and-after studies. High-quality before-and-after studies are dif- ficult and expensive, but they are the most reliable source of objective information to guide future decision making. Although evolving transportation finance mechanisms are the focus of this report, research on current mechanisms is also relevant to the issues under consideration. In particular, analyses continue to reveal cer- tain inequities of current mechanisms, thereby providing a baseline against which public policy makers can consider the relative strengths and weaknesses of evolving mechanisms. Recommendation: As practical experience is gained with newer transportation finance mechanisms, researchers and analysts in the United States should take full advantage of opportunities to cap- ture lessons learned abroad. Capturing lessons learned is partly a research activity, and partly a matter of direct information exchange, possibly through site visits by public officials or their staff. The value of adding to the empirical knowl- edge base through such efforts returns to decision makers, and thus this latter group bears responsibility for ensuring that the necessary resources are made available. Recommendation: As researchers and analysts continue to develop and implement advanced travel behavior and land use models for a variety of applications, they should ensure that such models incorporate features needed to inform equity analyses of trans- portation finance policies. In particular, models need to recognize that a willingness to pay to save time (value of time) varies from person to person, and for the same person in different situations. Activity-based travel models are advancing in sophistication and are gradually moving into practice for transportation planning and policy analyses. The need to analyze the equity implications of road-pricing options provides another motivation to accelerate the implementation of such models. It will be important to include explicitly in the data collection and model development tasks those population segments and household 

Findings and Recommendations 147 characteristics that are expected to be of special interest in equity analysis, for example, persons with disabilities, racial minorities, and low-income households. Advanced models used to inform equity analyses need to include the ability to simulate variations in the use of modes, links, and paths as trav- elers adjust their behavior to optimize some combination of travel time and user costs. They also need to capture the long-term effects of trans- portation investments and fees on land use and development as individ- uals and organizations change their behavior in response to changes in transportation facilities, services, and the way these are financed. Researchers and practitioners should remain cautious about the uncertainties inherent in all travel forecasting models and should con- sider how alternative assumptions could modify the outcomes of stud- ies using these models. SOURCES OF FUNDING FOR RECOMMENDED ACTIONS Recommendation: The Federal Highway Administration (FHWA) and the Federal Transit Administration (FTA) should ensure that equity assessments integrated into overall project and program evaluation processes are both effective and meaningful. To this end, they should clarify and publicize the eligibility of such equity assessments as expenses of the federal aid program. The equity assessments performed by public policy makers to inform and support decisions about the use of various transportation finance mechanisms are eligible expenses of the federal aid program via Title VI of the Civil Rights Act, requirements for environmental impact statements, and other legislative mandates. Such equity assessments, which identify equity impacts of both the finance mechanisms and of the transportation services they fund, are challenging and costly to conduct, as this report illustrates. Clarifying and publicizing the availability of funds from the fed- eral aid program could help bring more resources to bear on equity assess- ments. These additional resources could improve the scope of assessments and provide the ability to address more long-term and diffuse issues. Recommendation: The U.S. Department of Transportation’s Office of Policy and its Research and Innovative Technology Administration 

148 Equity of Evolving Transportation Finance Mechanisms (RITA) should support and direct a collaborative effort to build a knowledge base for decision support that includes • A program of scientifically rigorous before-and-after and cross- sectional studies to assess the equity outcomes of road pricing and other evolving transportation finance mechanisms as they are implemented in the United States and • An ongoing effort to gather lessons learned about equity impli- cations from the implementation of such mechanisms abroad. Because there is widespread interest in evolving finance policies, par- ticularly road pricing, there is a clear federal role in supporting research activities that lead to a more robust and informed basis for future deci- sion making. High-quality empirical studies of the equity implications of new finance mechanisms are essential to build a credible U.S. knowledge base to support future transportation finance decisions. Both a mandate and support for equity analyses should be linked to programs and incen- tives to test new ways to finance transportation, particularly various forms of road pricing. The proposed knowledge base should encompass studies from other countries as well, to accelerate the rate of learning and broaden the perspectives on finance methods. Organizations with relevant experience and expertise that could use- fully lead in building this knowledge base include, but are not limited to, RITA’s Bureau of Transportation Statistics and its Volpe Center; the Oak Ridge National Laboratory; FHWA; and university transportation centers around the United States. Recommendation: The American Association of State Highway and Transportation Officials (AASHTO) and the FTA should support activities under the National Cooperative Highway Research Program (NCHRP) and the Transit Cooperative Research Program (TCRP), respectively, to develop information, guidance, and analysis tools for state departments of transportation and others to use in studying and understanding the equity implications of evolving transportation finance mechanisms. These activities should include the development of a handbook describing recommended procedures for conducting equity analyses of transportation finance policies. Given the interest in road pricing, including VMT fees, as an alterna- tive to current transportation finance mechanisms and of the important 

Findings and Recommendations 149 role of the states in funding the nation’s surface transportation system, NCHRP provides an appropriate framework under which to conduct research aimed at developing a better understanding of the equity impli- cations of evolving transportation finance mechanisms. Given the impor- tance attached to both income and racial equity and the role of transit in providing mobility for low-income and minority groups, there is a clear opportunity for the FTA and the TCRP Oversight and Project Selection Committee to contribute to this research through TCRP. There may also be opportunities for RITA to contribute to this effort through the National Cooperative Freight Research Program. A transportation equity analysis manual, analogous to AASHTO’s Highway Safety Manual, could provide tools and guidance targeting prac- titioners at the state, county, metropolitan planning organization, or local levels who need to conduct equity assessments of projects and programs for which the use of evolving finance mechanisms is being considered. As with the Highway Safety Manual, the transportation equity analysis man- ual would describe a science-based technical approach that helps practi- tioners make the most effective use of available tools and data while also recognizing areas of uncertainty and knowledge gaps. Other potential sources of funding for the recommended actions by researchers and analysts include state planning and research funds for state-level projects, perhaps used in collaboration with one or more of the university transportation centers; the National Science Foundation (NSF); and private foundations that have traditionally been interested in topics related to equity. NSF addresses a wide range of program areas through its multiple divisions and could perhaps be a source of funds for research into burden shifting in transportation finance, research on tools for forecasting social impacts of transportation decisions, and research on other basic topics. Given the diverse facets of equity assessment, researchers will likely need to think beyond traditional transportation programs and funding sources in seeking support for their work. CONCLUDING REMARKS The equity implications of transportation finance mechanisms are com- plex, often controversial, and important in decision making. Policy mak- ers addressing such equity issues need to have a broad understanding of the array of issues involved. They also need to recognize that the complexity of 

150 Equity of Evolving Transportation Finance Mechanisms the issues can be managed—though not eliminated—through systematic consideration of the ways in which burdens and benefits are distributed across society and institutions. Such an approach means • Considering the ways in which people and organizations respond to, and sometimes shift, new transportation charges; • Taking into account the distribution of the benefits from the use of those funds; • Weighing the equity concerns about new ways to pay for transporta- tion against those for existing methods; • Exploring and assessing possible remedies to inequities; and • Working closely with stakeholders to find solutions that are feasible, effective, and acceptable. The knowledge and tools to accomplish these tasks are emerging, but there remains a need to invest in research and development to provide more effective support for decisions about new finance mechanisms. In the meantime, there is much that can be done to support our transportation systems and to make informed decisions about paying for them. REFERENCE Sullivan, E. 2000. Continuation Study to Evaluate the Impacts of the SR 91 Value-Priced Express Lanes. Final Report. State of California, Department of Transportation, Traf- fic Operations Program, HOV Systems Branch, Sacramento, December.