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TRANSPORTAT ION RESEARCH BOARD WASHINGTON, D.C. 2011 www.TRB.org N A T I O N A L C O O P E R A T I V E H I G H W A Y R E S E A R C H P R O G R A M NCHRP REPORT 689 Subscriber Categories Finance â¢ Policy Costs of Alternative Revenue-Generation Systems Patrick Balducci BATTELLE Portland, OR Gang Shao MACROSYS Washington, D.C. Albert Amos JACOBS ENGINEERING GROUP Austin, TX Anthony Rufolo PORTLAND STATE UNIVERSITY Portland, OR Research sponsored by the American Association of State Highway and Transportation Officials in cooperation with the Federal Highway Administration
NATIONAL COOPERATIVE HIGHWAY RESEARCH PROGRAM Systematic, well-designed research provides the most effective approach to the solution of many problems facing highway administrators and engineers. Often, highway problems are of local interest and can best be studied by highway departments individually or in cooperation with their state universities and others. However, the accelerating growth of highway transportation develops increasingly complex problems of wide interest to highway authorities. These problems are best studied through a coordinated program of cooperative research. In recognition of these needs, the highway administrators of the American Association of State Highway and Transportation Officials initiated in 1962 an objective national highway research program employing modern scientific techniques. This program is supported on a continuing basis by funds from participating member states of the Association and it receives the full cooperation and support of the Federal Highway Administration, United States Department of Transportation. The Transportation Research Board of the National Academies was requested by the Association to administer the research program because of the Boardâs recognized objectivity and understanding of modern research practices. The Board is uniquely suited for this purpose as it maintains an extensive committee structure from which authorities on any highway transportation subject may be drawn; it possesses avenues of communications and cooperation with federal, state and local governmental agencies, universities, and industry; its relationship to the National Research Council is an insurance of objectivity; it maintains a full-time research correlation staff of specialists in highway transportation matters to bring the findings of research directly to those who are in a position to use them. The program is developed on the basis of research needs identified by chief administrators of the highway and transportation departments and by committees of AASHTO. Each year, specific areas of research needs to be included in the program are proposed to the National Research Council and the Board by the American Association of State Highway and Transportation Officials. Research projects to fulfill these needs are defined by the Board, and qualified research agencies are selected from those that have submitted proposals. Administration and surveillance of research contracts are the responsibilities of the National Research Council and the Transportation Research Board. The needs for highway research are many, and the National Cooperative Highway Research Program can make significant contributions to the solution of highway transportation problems of mutual concern to many responsible groups. The program, however, is intended to complement rather than to substitute for or duplicate other highway research programs. 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The National Academy of Sciences is a private, nonprofit, self-perpetuating society of distinguished scholars engaged in scientific and engineering research, dedicated to the furtherance of science and technology and to their use for the general welfare. On the authority of the charter granted to it by the Congress in 1863, the Academy has a mandate that requires it to advise the federal government on scientific and technical matters. Dr. Ralph J. Cicerone is president of the National Academy of Sciences. The National Academy of Engineering was established in 1964, under the charter of the National Academy of Sciences, as a parallel organization of outstanding engineers. It is autonomous in its administration and in the selection of its members, sharing with the National Academy of Sciences the responsibility for advising the federal government. The National Academy of Engineering also sponsors engineering programs aimed at meeting national needs, encourages education and research, and recognizes the superior achievements of engineers. Dr. Charles M. Vest is president of the National Academy of Engineering. The Institute of Medicine was established in 1970 by the National Academy of Sciences to secure the services of eminent members of appropriate professions in the examination of policy matters pertaining to the health of the public. The Institute acts under the responsibility given to the National Academy of Sciences by its congressional charter to be an adviser to the federal government and, on its own initiative, to identify issues of medical care, research, and education. Dr. Harvey V. Fineberg is president of the Institute of Medicine. The National Research Council was organized by the National Academy of Sciences in 1916 to associate the broad community of science and technology with the Academyâs purposes of furthering knowledge and advising the federal government. Functioning in accordance with general policies determined by the Academy, the Council has become the principal operating agency of both the National Academy of Sciences and the National Academy of Engineering in providing services to the government, the public, and the scientific and engineering communities. The Council is administered jointly by both Academies and the Institute of Medicine. Dr. Ralph J. Cicerone and Dr. Charles M. Vest are chair and vice chair, respectively, of the National Research Council. The Transportation Research Board is one of six major divisions of the National Research Council. The mission of the Transporta- tion Research Board is to provide leadership in transportation innovation and progress through research and information exchange, conducted within a setting that is objective, interdisciplinary, and multimodal. The Boardâs varied activities annually engage about 7,000 engineers, scientists, and other transportation researchers and practitioners from the public and private sectors and academia, all of whom contribute their expertise in the public interest. The program is supported by state transportation departments, federal agencies including the component administrations of the U.S. Department of Transportation, and other organizations and individu- als interested in the development of transportation. www.TRB.org www.national-academies.org
CRP STAFF FOR NCHRP REPORT 689 Christopher W. Jenks, Director, Cooperative Research Programs Crawford F. Jencks, Deputy Director, Cooperative Research Programs Andrew C. Lemer, Senior Program Officer Sheila Moore, Senior Program Assistant Eileen P. Delaney, Director of Publications Doug English, Editor NCHRP PROJECT 19-08 PANEL Field of AdministrationâArea of Finance Alan J. Arceneaux, Salem, OR (Chair) Amy K. Binkley, Missouri DOT, Jefferson City, MO Jeff Doyle, Washington State DOT, Olympia, WA Rachel Falsetti, California DOT, Sacramento, CA Norman S. J. Foster, City of New Orleans, New Orleans, LA Jannine M. Miller, Georgia Regional Transportation Authority, Atlanta, GA Jonathan R. Peters, The City University of New York, Staten Island, NY Victor Paulo Saltao, Brisa North America, Inc., Norcross, GA John Svadlenak, Oregon DOT, Salem, OR Patrick T. DeCorla-Souza, FHWA Liaison Ralph Erickson, FHWA Liaison Martine A. Micozzi, TRB Liaison C O O P E R A T I V E R E S E A R C H P R O G R A M S AUTHOR ACKNOWLEDGMENTS The research documented in this report was performed under NCHRP Project 19-08 by Battelle, with Jacobs Engineering and Portland State University acting as subcontractors. Mr. Patrick Balducci was the principal author of Chapters 1 and 6, and authored all sections of Chap- ters 2 and 4 dealing with motor fuel taxes. Dr. Gang Shao was the principal author of Chapters 3 and 5. Dr. Anthony Rufolo was the principal author of all sections of Chapters 2 and 4 focused on VMT fees. Mr. Albert Amos was the principal author of all sections of Chapters 2 and 4 focused on tolling, cordon/ congestion pricing, and parking pricing systems. The authors wish to thank the tax administrators and industry experts who were interviewed for this study. The authors also wish to thank the NCHRP Project 19-08 Topic Panel for the thoughtful guidance they provided in support of this project.
NCHRP Report 689 presents an analysis of the direct costs incurred in generating the rev- enues that support federal-aid and state highway construction, operations, and mainte- nance. Federal and state taxation of motor-vehicle fuel is presently the primary mechanism for generating such revenue. Alternative revenue-generating mechanisms are used or have been proposed, including tolling and fees for road usage [for example, vehicle-miles of travel (VMT) fees]. There are costs associated with administering any of these revenue mechanisms, collecting the taxes, and ensuring compliance. This report presents a frame- work for analysis of these costs and uses that framework to estimate unit costs for fuel taxes, tolling, VMT fees, and cordon pricing schemes. The analysis will be helpful to departments of transportation (DOTs), departments of motor vehicles (DMVs), and other responsible agencies and policy makers concerned with generating revenues to support the surface transportation system. The current system for generating the revenues to support federal-aid and state highways depends largely on federal and state fuel taxes. Tolling is used in a relatively few instances to generate funds to support particular roads, bridges, and tunnels. Several decades of pub- lic policy discussions, legislative actions, and executive decisions account for how these taxes and tolls are collected and by whom. There are costs associated with administering any revenue system, collecting the taxes, and ensuring compliance. Administrative costs accrue to operations of the government agency, private company, or independent authority that implements and oversees revenue- producing activities. Collection costs are associated with receiving tax payments, placing and operating the equipment for tolls, and other such activities. Compliance costs are the result of efforts to ensure that taxes and charges are paid in full when they are due, to reduce evasion, and to collect past-due amounts. These costs may be incurred by multiple agen- cies. How costs are recorded and presented may vary from one agency to another. Under- standing these costs and comparing costs among agencies and alternative revenue-generation systems is challenging. Various proposals for alternative revenue-generation mechanisms are being considered in public-policy forums. Such schemes as tolls that vary over time, tolls that vary based on distance, area-based licensing, and charges based on VMT will each have their own pattern of costs, and those costs will influence the amount of revenue ultimately available for high- ways. This report is the product of NCHRP Project 19-08, research undertaken to provide information to support discussions by state officials and other policy makers of the costs of implementing and administering alternative revenue-generation mechanisms. While this research draws on practical experience of agencies in the United States and abroad, alterna- F O R E W O R D By Andrew C. Lemer Staff Officer Transportation Research Board
tives being considered exceed the scope and scale of that experience. In addition, much of the information required for comprehensive analysis is considered sensitive and private by government agencies and private operators concerned with protecting taxpayersâ privacy and corporate competitive advantage. The objective of NCHRP Project 19-08 was to develop a methodology that can be used to analyze and compare the administrative, collection, and compliance costs of highway revenue-generation mechanisms and to apply that methodology to a selected set of alter- native mechanisms. Although the range of revenue systems is potentially quite broad, this project was limited to five usage-based charges: motor fuel taxes, tolling, VMT fees, congestion and cordon pricing, and parking fees. A team led by Battelle relied initially on existing literature and discussions with knowl- edgeable experts to develop an accounting framework for the analysis and to gain under- standing of the limitations faced in making cost comparisons. The team collected informa- tion from recent VMT-fee trials in Europe and the United States and from the experience of toll authorities. However, the research was limited by reluctance of private operators and government agencies to release data on their operations, as well as by the lack of experience with proposed alternative revenue-collection methods. To facilitate comparisons of alternative methods, the research team worked to develop estimates of five indicators of efficiency or severity of the cost burden associated with each mechanism analyzed: (i) average cost per lane-mile, (ii) average cost per centerline-mile, (iii) average cost per thousand VMT, (iv) average cost per transaction or vehicle, and (v) percentage of total costs to total revenues. Using this last measure, for example, the current system of fuel taxation is very effective. This report may be useful to analysts and policy makers at all levels of government, both as an initial assessment of the potential effectiveness of particular revenue-collection methods and as a template for developing more specific estimates of costs associated with particular methods.
C O N T E N T S 1 Summary 5 Chapter 1 Introduction 5 1.1 Research Objectives 6 1.2 Report Audience 6 1.3 Report Structure 7 Chapter 2 Overview of Existing and Alternative Revenue-Generation Systems 7 2.1 Motor Fuel Taxes 7 2.1.1 Motor Fuel Tax Administration and Enforcement Practices 10 2.1.2 Previous Administrative Cost Estimates 10 2.2 Tolling 10 2.2.1 Overview of Tolling Systems and Current Practices 12 2.2.2 Practices and Trends Affecting Tolling Systems 12 2.2.3 Change in Governance Structure of Toll Agencies 12 2.2.4 Electronic Toll Collection and Video Tolling 16 2.2.5 Congestion Management 17 2.2.6 Leakage Rates 19 2.2.7 Administrative Fees and Criminalization of Toll Violations 20 2.2.8 Tolling Administrative Cost Estimation and Comparisons 21 2.3 VMT Fees 21 2.3.1 Prices Set to Improve Management of the Road System 22 2.3.2 Review of U.S. Experience 25 2.3.3 Review of International Experience 25 2.3.4 Discussion of Issues Related to VMT Fees 26 2.4 Cordon Pricing 26 2.4.1 Singapore 28 2.4.2 London 31 2.4.3 Oslo 33 2.4.4 Stockholm 35 2.4.5 Milan 36 2.5 Parking Pricing Systems 36 2.5.1 Westminster City Councilâs Parking Program 38 2.5.2 SFpark Smart Parking Management Program 41 2.5.3 Chicago Parking System: Chicago Parking Meters, LLC 44 Chapter 3 Revenue Enabling Technologies 44 3.1 IntelliDrive Technology 44 3.1.1 Background of IntelliDrive System 44 3.1.2 IntelliDrive Preliminary Proof of Concept 45 3.1.3 Technology Components of the System 48 3.1.4 Tested Functionalities of the System
50 3.1.5 The Current Status of the System 50 3.2 Fleet Management Systems 50 3.2.1 Objectives and Benefits of Fleet Management Systems 51 3.2.2 Satellite-Based Fleet Management: Expanded Satellite-Based Mobile Communications Tracking System 53 3.2.3 Cellular Technology-Based Fleet Management System 53 3.3 Commercial Vehicle Information Systems and Networks 53 3.3.1 Objectives of CVISN 54 3.3.2 Specifications of CVISN 55 3.3.3 Technology Components of the System 55 3.3.4 The Current Status of the CVISN 56 3.4 Electric Cars and Smart Charging Software 57 3.4.1 Objectives of Using Electric Cars 57 3.4.2 Technology Components Related to Electric Cars 57 3.4.3 Electric Vehicle Implications for Revenue Collection 58 3.4.4 Regional Influences on Electric Vehicle Market Penetration 59 3.4.5 The Current Status of the System 59 3.4.6 Funding Sources 61 Chapter 4 Administrative Cost Estimates for Motor Fuel Taxes and Alternative Revenue-Generation Systems 61 4.1 Cost Accounting Framework 62 4.2 Cost Estimates for Motor Fuel Taxes 62 4.2.1 Administrative Costs Reported in Highway Statistics 62 4.2.2 Determination of Sample States 64 4.2.3 Identification of Responsible Agencies Within Sample States 65 4.2.4 Collecting Cost Data from State Agencies 65 4.2.5 Analysis of Cost Data 65 4.2.6 Summary Data for 2003 through 2007 66 4.2.7 State-by-State Data for 2007 66 4.2.8 Data Grouped by Different Characteristics 66 4.2.9 Data from Eight Sample States 68 4.2.10 Analysis of Survey Results 70 4.3 Cost Estimates for Tolling 70 4.3.1 Methodology 71 4.3.2 Toll Agencies Analyzed and Selection Criteria 71 4.3.3 Data Sources, Coverage, and Limitations 72 4.3.4 General FindingsâOperational Costs 74 4.3.5 Administrative Costs 75 4.3.6 Collection Costs 77 4.3.7 Enforcement Costs 77 4.3.8 Summary of Operating Costs 77 4.3.9 Capital Costs 78 4.4 Cost Estimates for VMT Fees 78 4.4.1 Types of VMT Fees 81 4.4.2 Method for Generating Cost Data for Dutch VMT Fee Systems 82 4.4.3 Cost Classification and Cost Data 85 4.4.4 Costs of Other Mileage-Based Systems 85 4.5 Cost Estimates for Cordon Pricing Systems 86 4.6 Cost Estimates for Parking Pricing Systems
88 Chapter 5 Cost Comparison Analysis 88 5.1 Unit Measurements for the Cost Comparison Analysis 88 5.2 Comparison Within Revenue Systems 89 5.2.1 Motor Fuel Taxes 89 5.2.2 Tolling 90 5.2.3 VMT Fees 90 5.2.4 Cordon and Parking Pricing 92 5.3 Comparison Between Revenue Systems 93 5.4 Sensitivity Analysis 93 5.4.1 Motor Fuel Taxes 95 5.4.2 Tolling 101 5.4.3 VMT Fees 104 5.4.4 Cordon Pricing 105 5.4.5 Parking Fees 106 Chapter 6 Conclusions 106 6.1 Overview of Existing and Alternative Revenue Generation 106 6.1.1 Motor Fuel Taxes 106 6.1.2 Tolling 107 6.1.3 VMT Fees 107 6.1.4 Cordon Pricing 107 6.1.5 Parking Pricing 107 6.2 Costs to Administer the Current and Alternative Revenue-Generation Systems Examined in This Report 108 6.3 Policy Implications 109 6.4 Implementation Plan 109 6.4.1 Potential Impediments 110 References 114 Appendix A Oregon VMT Pay-at-the-Pump System Case Study 118 Appendix B Survey Questionnaire for Collecting Fuel-TaxâRelated Cost Data 121 Appendix C Parameter Data and Detailed Cost Estimates 125 Appendix D Acronyms