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61 This chapter presents a cost analysis for five transportation revenue-generating systems, including motor fuel taxes, tolling, VMT fees, cordon/congestion pricing, and parking pricing. Motor fuel taxes, which have been levied in the United States since the 1920s, are one of the main revenue and funding sources of the federal HTF for constructing and maintaining the nationâs highways and other transportation facilities. Although tolling has a long history, it has been viewed, especially in recent years, as a supplemental revenue source to motor fuel taxes. A number of new tolling facilities have been proposed and have been under construction around the country. In an effort to search for alternative revenue sources that can mitigate further declines in the HTF, interest in VMT fees has been rising. Although some VMT fee systems have been tested and proposed, there is not a single VMT fee system in use that levies fees for all vehicle types. Consequently, there is no real cost data available except information that has been submitted by companies that competed for building and oper- ating the proposed VMT fee system in the Netherlands. This chapter provides an overview of a cost accounting framework established for this report and then presents the cost data collected for each of the five systems. For motor fuel taxes, more detailed cost analysis is focused on eight selected states, which were chosen based on a set of criteria (e.g., geo- graphic diversity, point of taxation). As part of this analysis, capital and/or operational cost data for 14 tolling agencies have been collected. These agencies include older turnpike systems, more recently established toll agencies, and private companies that operate a toll facility under a concession agreement. For VMT fees, the costs examined in this report are based on the data from the proposed system in the Netherlands. Due to data limitations, only 1 year of cost data for the VMT fees has been gathered, while 3 to 5 years of cost data for motor fuel taxes and tolling have been collected. For cordon pricing, cost data were collected for five existing cor- don pricing systems. For parking pricing, three systems were examined. 4.1 Cost Accounting Framework This section describes the cost accounting framework that was used to estimate the costs required to administer each transportation revenue system presented in this chapter. The general methodology for analyzing administrative, collection, and enforcement costs involved the following: â¢ When feasible, financial data were collected from 2003 to 2007; â¢ To normalize the data between tax systems, it was neces- sary to differentiate between and separately analyze capital and operational costs; â¢ Annual operational expenditures were examined and sorted between administrative, collection, and enforce- ment activities; â¢ Revenues generated from ancillary activities, such as food and fuel concessions along toll road facilities, were excluded from this analysis; and â¢ Enforcement activities could be conducted by a private or public agency. Administrative costs included in this analysis involved the following: â¢ Wages and salaries, employee benefits, social security taxes, and pensions of administrative and collection staff; â¢ Finance and accounting activities, especially if involved in the processing of (i) customer transactions and tax forms; (ii) the settlement of interagency transactions; (iii) the pro- cessing of bulk transactions from rental car companies, local delivery trucks, and auto dealers; (iv) the exclusion of trans- actions by non-revenue vehicles (e.g., police, ambulance, and fire vehicles); and (v) processing of refund requests; â¢ Management and professional services; â¢ Procurement and purchasing of equipment; â¢ Office supplies and equipment; C H A P T E R 4 Administrative Cost Estimates for Motor Fuel Taxes and Alternative Revenue-Generation Systems
â¢ Planning activities related to system development and expansion; and â¢ Buildings, utilities, and insurance for administrative staff. Collection costs included the following components: â¢ Operation and maintenance of tollbooths and other facil- ities related to each transportation revenue system; â¢ Customer account management, payment processing, and banking charges; â¢ Inventory, distribution, and sale of transponders; and â¢ Cash counting, payment processing, transportation, and vault services. Enforcement costs encompassed: â¢ Catching violators and auditing taxpayers, â¢ Assessing administrative fees and fines, â¢ Settling accounts before violations reach court, â¢ Inspecting motor fuel, and â¢ Prosecuting violators (court costs). Enforcement costs also included police services, which could also include incident management and communica- tion expenses. 4.2 Cost Estimates for Motor Fuel Taxes State motor fuel tax administration and compliance pro- grams are regulated by state legislatures and state agencies, including state DOTs and departments of revenue (DORs). Thus, state motor fuel tax programs vary significantly across the nation. To analyze the costs of administrating motor fuel taxes, a two-tiered approach was taken to collecting cost data from both federal and state government agencies. To carry out the approach, the following three-step data collection process was performed: 1. Collect data for 2003 through 2007 reported to FHWA on Form 556. Form 556 is used by states to report state motor fuel tax receipts and initial distribution by tax collection agencies, and includes adjustments to total receipts such as collection, administration, and enforcement costs. Data collected through Form 556 are reported in a series of tables in Highway Statistics, including Tables MF-1 (deduc- tions by distributors for expenses), MF-3, and SDF (deduc- tions for collecting motor fuel taxes and fees). Although the cost data presented in Tables MF-3 and SDF are called âcollectionâ costs, the data actually represent the total costs of administering motor fuel taxes, including the costs asso- ciated with administration, collection, and enforcement. 2. Examine several factors that could be responsible for driving administrative cost differences between states (e.g., point of taxation, proximity to low tax state, presence of interna- tional border) and determine the administrative cost differ- ential between states based on these characteristics. 3. Gather more detailed cost data from eight representative sample states in order to separate the collection costs reported to FHWA into administrative, collection, and enforcement cost categories, and examine cost data in greater detail. This final step explores the items that are attributable to the cost estimates, including the costs asso- ciated with building and maintaining motor-fuel tracking systems, the number of auditors employed by revenue agencies, the annual salary and fringe benefits paid to audi- tors, and the transaction costs associated with processing electronic payments. 4.2.1 Administrative Costs Reported in Highway Statistics States report annual motor fuel tax administrative costs on Form 556, which is used to support a series of tables, including Tables MF-1, MF-3, and SDF, published annually in Highway Statistics. Since the cost data reported to FHWA cover admin- istrative, collection, and enforcement costs, the term âoperating costâ will be used hereafter. Annual operating cost data for all states were collected from Highway Statistics for 2003 through 2007. The cost data are used for a comparative analysis to show how the characteristics of certain programs, such as states with electronic motor-fuel tracking systems, may affect administra- tive costs. For the eight states identified for further examination, completed Form 556s were obtained for 2006 and 2007. In the instructions accompanying Form 556, respondents are directed to input data covering distributor allowances, deduc- tions by state collection agencies, expenses for collecting and administering motor fuel taxes, expenses for inspecting motor fuel, and other costs or deductions by the collecting agencies. The Form 556s obtained and reviewed for this analysis typi- cally only included data regarding expenses of collecting and administering motor fuel taxes. Distributor allowances are deductions provided to taxpay- ers for collection expense. In 2007, 25 states authorized dis- tributor allowances totaling $184.8 million, or 0.5% of gross tax collections. 4.2.2 Determination of Sample States The purpose of selecting sample states is to obtain detailed cost data used to separate the total operating costs reported to FHWA by states into administrative, collection, and enforce- ment cost categories. Eight statesâ motor fuel tax programs 62
were identified for the more detailed analysis. The criteria for selecting sample states are designed in a manner to ensure that a range of characteristics that typically drive collection, admin- istration, and enforcement costs will be examined. In so doing, the results of the sample states are designed to be representa- tive and could be used to examine how these characteristics (e.g., proximity to international borders, state population, and point of taxation) correlate with higher or lower administra- tive costs. The criteria for the detailed analysis included â¢ Motor fuel tax rate, â¢ Border low tax state (yes or no), â¢ International border (yes or no), â¢ DOT reported administrative costs, â¢ Geographic dispersion, â¢ Points of taxation, â¢ Motor-fuel tracking system (yes or no), and â¢ State population. Using these criteria, the states highlighted in Table 19 were selected for further analysis. Table 19 presents information for each of the criteria outlined above when applied to each state. The selection process captures states that embody a range of attributes defined within each criterion. That is, both relatively low and high tax rate states were identified, as were those with and without international borders. The remainder of this section describes the process used to select the states on a criterion-by-criterion basis. Motor Fuel Tax Rate High-, mid-level-, and low-tax states were identified for analysis. As motor fuel tax rates increase, profits associated with motor fuel tax evasion grow, thus requiring enhanced enforcement measures and higher administrative costs. The weighted average gasoline tax rate in the United States is 20.2 cents per gallon (FHWA, 2008). The weighted average state tax rates reported in Highway Statistics includes only taxes that are levied as a dollar amount per volume of motor fuel. Taxes that apply to all petroleum products are omitted, but local option taxes are included provided they have been adopted uni- formly statewide. The weighted average tax rate does include the impact of several unique state-level fees, including a 2-cent- per-gallon inspection fee in Alabama, 0.4-cent-per-gallon environmental assurance fee in Arizona, a 1.4-cent-per-gallon petroleum environmental assurance fee in Kentucky, and a 0.7-cent-per-gallon oil discharge and disposal cleanup fee in New Hampshire. Presently, there are four states (Alaska, Geor- gia, New Jersey, and Wyoming) in the United States with gas tax rates that fall below 15 cents per gallon. One of these low- tax states (New Jersey) was targeted for further analysis. There are 21 states with gas tax rates between 15 and 20 cents per gal- lon, and four of these states (Florida, California, Tennessee, and Texas) were targeted for analysis. There are 25 states with gas tax rates in excess of 20 cents per gallon, and three such states (Colorado, Idaho, and Iowa) were targeted for analysis. Border Low-Tax State Large disparities in tax rates between bordering states within the United States create the potential for cross-border evasion, thus requiring enhanced enforcement in the higher tax state. To satisfy this criterion, the state must border one of the four low-tax states noted in the preceding paragraph, and the tax rate in the subject state must be at least 7 cents per gallon higher than the rate in the bordering low-tax state. Four of the selected states (Colorado, Florida, Idaho, and Tennessee) satisfy this criterion. 63 Criteria CA CO FL ID IA NJ TN TX Motor fuel tax rates Gas â 18Â¢, Diesel â 18Â¢ Gas â 22Â¢, Diesel â 20.5Â¢ Gas â 15.3Â¢, Diesel â 15.3Â¢ Gas â 25Â¢, Diesel â 25Â¢ Gas â 21Â¢, Diesel â 22.5Â¢ Gas â 10.5Â¢, Diesel â 13.5Â¢ Gas â 20Â¢, Diesel â 17Â¢ Gas â 20Â¢, Diesel â 20Â¢ Borders low- tax state No Yes Yes Yes No No Yes No International border Yes No No Yes No No No Yes Reported admin. costs 0.7% 0.4% 1.1% 1.7% 0.3% 1.0% 1.4% 1.0% Points of taxation Gas â terminal, diesel â terminal Gas â distributor, diesel â distributor Gas â terminal, diesel â terminal Gas â terminal, diesel â terminal Gas â terminal, diesel â terminal Gas â distributor, diesel â retail Gas â first receipt/sale, diesel â terminal Gas â distributor, diesel â distributor Tracking system Yes Yes No No No No Yes No State population 36,756,666 4,939,456 18,328,340 1,523,816 3,002,555 8,682,661 6,214,888 24,326,974 Sources: HDR (2009) and FHWA (2008). Table 19. Summary information for states identified for further cost analysis.
International Border International borders also create opportunities to evade through cross-border evasion schemes, thus requiring expanded enforcement and higher administrative costs. To satisfy this criterion, the state must border Canada or Mex- ico. Of those states selected for analysis, three (California, Texas, and Idaho) meet this criterion. DOT Reported Administrative Costs The U.S. DOTâs Comparing Administrative Costs of Collect- ing Highway Revenues: Fuel Tax vs. Direct User Charge and its analysis of motor fuel tax administrative costs to target high, mid-level, and low operating cost states is used as a reference (HDR, 2009). While the results of the surveys conducted in this study could differ from the findings of this U.S. DOT report, the findings of that report are considered an indica- tor of operating cost levels with each state. In the U.S. DOT report, average motor fuel tax administrative costs were esti- mated at 1.0% of total tax collections. Of the eight states selected for further analysis, two registered average operating cost levels (New Jersey and Texas), three were below average (California, Colorado, and Iowa), and three were relatively high operating cost states (Idaho, Florida, and Tennessee). Geographic Dispersion States were selected to capture multiple regions and achieve geographic dispersion. As shown in Figure 36, states were tar- geted in the Northeast, South, Midwest, Southwest, Moun- tain, and West Coast. Point of Taxation States with points of taxation at the terminal, distributor, first receipt/sale, and retail levels were identified. The point of taxation in the distribution system affects administrative costs because the number of taxpayers decreases as the point of taxation is moved up the distribution system. Motor-Fuel Tracking System In recent years, states have built motor-fuel tracking sys- tems to track shipments of fuel between fuel suppliers. These automated tracking systems enable motor fuel tax enforce- ment authorities to detect discrepancies between reported and actual transactions between fuel suppliers. While these sys- tems reduce evasion, there is a cost associated with their use. Further, their use is indicative of enhanced enforcement mea- sures, which could generate additional costs while still yield- ing positive returns on investment through reduced evasion. Of the 15 states with automated motor-fuel tracking systems identified in NCHRP Report 623: Identifying and Quantifying Rates of State Motor Fuel Tax Evasion, three (California, Col- orado, and Tennessee) were identified for further analysis (Weimar et al., 2008). State Population The selected states vary significantly based on population. The sample of states includes two rural, low-population states (Idaho and Iowa) and three high-population states (California, Texas, and Florida). The remaining statesâ populations range from 4.9 million (Colorado) to 8.7 million (New Jersey). 4.2.3 Identification of Responsible Agencies Within Sample States Agencies and organizations within each of the sample states that are responsible for collecting, administering, and enforc- ing motor fuel tax programs vary from state to state. The agencies investigated for this analysis include 64 Figure 36. States targeted for detailed administrative cost analysis.
â¢ State DOT, including the motor carrier services division, finance division, and motor fuel tax section; â¢ State DOR; â¢ Board of Equalization; â¢ Comptroller of Public Accounts; â¢ Department of the Treasury; and â¢ Department of Taxation. Once the responsible agency was identified, individuals with knowledge of motor fuel tax administrative programs were contacted and follow-on data-collection activities com- menced through the distribution of a survey. 4.2.4 Collecting Cost Data from State Agencies To collect cost data from state agencies, a questionnaire (see Appendix B) was designed and distributed to the sample states. Once a survey was completed, an additional contact was made to discuss the data provided by the respondent. The questionnaire included the following information: â¢ The objectives of the study â Examine, estimate, and compare administrative, collec- tion, and enforcement costs of motor fuel tax programs â Examine the factors that drive administrative, collec- tion, and enforcement costs â¢ Topics covered â Background information: Name of respondent, agency responsible for tax collection and enforcement, and con- tact information â Auditing costs: The types of administrative costs currently incurred when implementing a motor fuel tax, the num- ber of auditing staff required for motor fuel taxes, costs associated with licensing auditors, return on investment of auditing efforts â Enforcement costs: Presence and cost of motor-fuel track- ing systems, on-road inspections of motor fuel, licensing and bonding of motor fuel tax distributors, capital and other indirect enforcement costs â Collection costs: Electronic reporting system costs, manual data input costs, transaction costs, collection allowances, costs associated with debt collectors, and other indirect costs. Follow-up telephone interviews and data transfers were used to complete the data-collection process. 4.2.5 Analysis of Cost Data As outlined in Section 4.2.1, the primary sources of data used to estimate the costs of administering motor fuel taxes are the Form 556 data reported to FHWA by states. Addi- tional data were collected through surveys from eight sample states, which were chosen based on the criteria outlined in Section 4.2.2. This section presents the results of the cost analysis using the methodology described earlier in this chap- ter. Note that in all cases, motor fuel tax collection costs include those associated with both gasoline and special fuels. Results addressed in this section include â¢ Estimated tax collections and costs of motor fuel tax admin- istration for the entire United States for 2003 through 2007, â¢ Estimated tax collections and costs of motor fuel tax admin- istration in 2007 for every state in the United States, â¢ Administrative costs for states grouped together based on the criteria outlined in Section 4.2.2 (e.g., point of taxation or international border state), â¢ Detailed cost and system characteristics data for each of the eight states included in the sample frame, and â¢ Summary information acquired to date through completed surveys. 4.2.6 Summary Data for 2003 through 2007 As shown in Table 20, total motor fuel tax collections for all states have grown from $33.3 billion in 2003 to $39.4 billion in 2007. Data reported in Table 20 represent net collections with distributor allowances deducted from gross tax collec- tions. Average annual collections during that time period were $35.7 billion. 65 2003 2004 2005 2006 2007 Average Net motor fuel tax collections 33,276,518 34,696,386 35,038,064 36,278,026 39,377,467 35,733,292 Collection expenses 326,377 494,404 309,325 373,615 405,096 381,763 Collection expense as percentage of tax collections 1.0% 1.4% 0.9% 1.0% 1.0% 1.1% Source: FHWA, Highway Statistics, 2003â2007 Table 20. Net state motor fuel tax collections and collection expenses (2003â2007) ($000s).
During the 2003 to 2007 time period, states spent on average $381.8 million on administering diesel and gasoline motor fuel taxes. From 2003 to 2007, operating costs as a per- cent of total tax collections were very consistent, ranging from a low of 0.9% in 2005 to a high of 1.4% in 2004, with an average of 1.1%. The consistency in operating cost is a com- mon phenomenon in mature tax systems, with costs associated with collections, administration, and enforcement programs experiencing limited growth from year to year. The major operating cost elements reported by states sur- veyed for this report included â¢ Distributor, IFTA, and refund audit programs; â¢ Refund and distributor report processing; â¢ Motor-fuel tracking systems; â¢ Licensing and bonding programs; â¢ On-road dyed fuel inspections; and â¢ Electronic reporting transaction costs. Among the states completing surveys for this study, the aver- age salary plus fringe benefits for auditors ranged from approx- imately $50,000 to $75,300 annually. Other cost elements reported by states included indirect costs (e.g., training, human resources, office support, and information services), taxpayer education programs, and third-party debt-collection services. 4.2.7 State-by-State Data for 2007 Highway Statistics presents motor fuel operating costs for all 50 states plus the District of Columbia. In 2007, however, 19 states did not report collection expenses. Two steps were taken to fill in the gaps created by the unreported amounts. For states that did not report collection expenses during the 2003 through 2007 timeframe, the average collections expense rate of 1.0% was assigned. For states that reported data for at least 1 year during the 2003 to 2007 timeframe, the average values for years when the state did report data were used to fill in the 2007 value. In 2007, net state motor fuel tax collections in the United States reached $39.4 billion while operating costs were estimated at $405.1 million, or 1.0% of total tax collections. Most state-reported values were near the mean collection cost rate of 1.0%, though reported values did reach as low as 0.1% and as high as 3.7%. The collection cost rate for Indiana was estimated at 5.2%; however, that value was not reported by Indiana. The value reported in Table 21 was calculated by the research team based on previous yearsâ reports from Indiana. 4.2.8 Data Grouped by Different Characteristics Section 4.2.2 identified several factors expected to have an impact on the costs associated with administering motor fuel taxes. To measure the effect of these factors on collection cost rates, states that fell into each relevant category (e.g., distrib- utor or terminal rack point of taxation) were identified and grouped, and the associated administrative costs are reported for each group. The results of this analysis are presented in Table 22 for the 2003 through 2007 time period. â¢ The average collection expense as a percent of total motor fuel tax collections among the 44 states reporting data was 1.1%. â¢ Motor-fuel tracking systems and the size of the motor fuel tax collections program had a negligible impact on operat- ing cost levels. â¢ Operating costs in states that border low-tax states were slightly higher than average at 1.3% of total tax collections. â¢ Operating costs in states with international borders were lower than the mean estimated collection cost rate at 0.8%. â¢ The point of taxation had little effect on collection expense rates. There were too few states reporting at the first receipt/ sale or retail level to derive any conclusions. The finding on point of taxation could be construed as counterintuitive given that as the point of taxation moves up the distribution chain, there are fewer taxpayer forms to process and fewer taxpayers to audit; however, moving the point of taxation to the terminal rack also results in more refund requests and associated processing and auditing costs. The costs associated with the refund process could counter- balance the reduced distributor auditing and return process- ing costs. 4.2.9 Data from Eight Sample States Table 23 presents more total operating cost and total tax rev- enue data for each of the eight sample states identified in the previous section. Data collected for each state will be used as the basis for the cost comparative analysis within fuel tax sys- tems and with other revenue systems to be discussed in Chap- ter 5 of this report. In 2007, motor fuel tax collections in these states reached $11.4 billion, up from $10.3 billion in 2003. Motor fuel tax collections in these states represent 29.0% of the nationâs total motor fuel tax collections. The survey results presented in this section summarize the major operating cost characteristics reported by the states that have completed the survey: California, Colorado, Florida, and Idaho. The primary motor fuel tax administrative categories addressed in the questionnaire for each program are as follows: â¢ Auditing costs, â¢ Administrative program costs, â¢ Enforcement costs, and â¢ Collection costs. 66
67 State Net Motor Fuel Tax Collections ($000s) Collection Expenses ($000s) Collection Expense as % of Tax Collections Alabama Alaska 1 Arizona 2 Arkansas California Colorado Connecticut Delaware 2 Dist. of Col. 1 Florida Georgia Hawaii 2 Idaho Illinois Indiana 2 Iowa Kansas 1 Kentucky 2 Louisiana 1 Maine 2 Maryland Massachusetts 2 Michigan Minnesota Mississippi 1 Missouri 2 Montana 2 Nebraska Nevada New Hampshire 2 New Jersey 2 New Mexico New York 1 North Carolina North Dakota Ohio Oklahoma Oregon 2 Pennsylvania Rhode Island 1 South Carolina South Dakota Tennessee Texas Utah Vermont Virginia Washington West Virginia Wisconsin Wyoming Total $680,013 31,638 728,385 462,190 3,418,725 567,680 676,813 117,218 26,776 2,233,129 934,173 85,561 237,411 1,338,373 879,793 444,086 439,590 563,168 639,748 238,796 758,834 669,357 1,027,933 674,682 431,432 704,183 193,453 332,467 520,736 151,965 589,571 289,747 2,197,646 1,656,334 124,839 1,894,435 410,639 412,950 2,106,731 146,104 535,261 130,076 849,662 3,086,196 372,747 94,961 932,996 1,119,386 1,107,615 1,006,012 105,251 39,377,467 $18,175 316 3,642 17,191 22,569 3,693 4,615 2,227 268 24,761 6,602 684 3,597 30,449 45,749 1,258 4,396 1,126 6,397 478 7,774 6,024 8,903 766 4,314 2,817 1,161 2,000 1,221 608 5,896 9,787 21,976 29,540 874 15,773 1,000 1,652 13,708 1,461 1,347 2,642 12,239 31,330 2,677 693 7,573 6,987 1,525 1,368 1,265 405,096 2.7% 1.0% 0.5% 3.7% 0.7% 0.7% 0.7% 1.9% 1.0% 1.1% 0.7% 0.8% 1.5% 2.3% 5.2% 0.3% 1.0% 0.2% 1.0% 0.2% 1.0% 0.9% 0.9% 0.1% 1.0% 0.4% 0.6% 0.6% 0.2% 0.4% 1.0% 3.4% 1.0% 1.8% 0.7% 0.8% 0.2% 0.4% 0.7% 1.0% 0.3% 2.0% 1.4% 1.0% 0.7% 0.7% 0.8% 0.6% 0.1% 0.1% 1.2% 1.0% 1States that did not report collection costs during the 2003 to 2007 time period were assigned the average state collection ratio of 1.0%. 2For states that reported data for at least 1 year during the 2003 to 2007 time period, average values from the years that were reported were used to fill in 2007. Source: FHWA, Highway Statistics, 2007 Table 21. Motor fuel tax collections and collection expense, 2007.
4.2.10 Analysis of Survey Results As noted in Section 4.2, the questionnaires were distributed to eight states based on the aforementioned criteria. The pur- pose of the questionnaire was to gather more detailed cost data in order to disaggregate the total operating costs reported to FHWA by states. The primary cost categories targeted for data collection were as follows: â¢ Auditing, â¢ Collection costs, â¢ Enforcement costs, and â¢ Administrative costs. Four states have provided information regarding the costs to administer the motor fuel tax. Though the states that returned surveys were able to provide detailed cost data, the 68 Measure of Characteristics Collection Expenses as % of Total Tax Collections Number of States Average of all states that reported costs States with electronic tracking systems States with international borders States that border low tax states Top third tax collection states Mid third tax collection states Lowest third tax collection states States taxing at first receipt/sale States taxing at distributor level States taxing at terminal rack States taxing at retail level 1.1% 1.0% 0.8% 1.3% 1.1% 0.9% 1.0% 1.6% 1.0% 1.1% 0.7% 44 15 17 16 15 15 14 1 20 20 3 Table 22. Ratios of collection expenses for states with varying characteristics. State 2003 2004 2005 2006 2007 Average over years Total Operating Cost California $24,711 $26,551 $23,320 $22,530 $22,569 $23,936 Colorado 2,758 2,557 2,583 2,334 3,693 2,785 Florida 22,299 22,893 23,677 24,853 24,761 23,697 Idaho 980 2,978 3,162 3,649 3,597 2,873 Iowa 1,099 1,099 1,181 1,250 1,258 1,177 New Jersey 5,544 6,178 5,645 5,794 5,896 5,811 Tennessee 11,606 11,927 12,121 12,069 12,239 11,992 Texas 29,176 29,843 29,972 30,686 31,330 30,201 Average over sample states 12,272 13,003 12,708 12,896 13,168 12,809 Total Revenue California 3,176,019 3,531,929 3,299,559 3,258,087 3,418,725 3,336,864 Colorado 544,337 553,593 516,575 602,897 567,680 557,016 Florida 1,851,781 1,891,053 2,029,290 2,165,327 2,233,129 2,034,116 Idaho 205,772 211,337 213,646 219,360 237,411 217,505 Iowa 409,191 418,164 424,354 430,083 444,086 425,176 New Jersey 554,365 617,811 564,505 579,392 589,571 581,129 Tennessee 800,720 812,091 891,499 842,236 849,662 839,242 Texas 2,789,208 2,912,008 2,915,672 2,970,092 3,086,196 2,934,635 Average over sample states 1,291,424 1,368,498 1,356,888 1,383,434 1,428,308 1,365,710 Source: FHWA, Highway Statistics, 2003â2007 Table 23. Fuel taxes â total operating cost and revenue (in $000s).
total operating costs reported often differed from the amounts reported to FHWA. For example, the data collected from Col- orado indicate that operating costs in 2007 totaled approxi- mately $2.6 million, which differs by $1.1 million from the total reported to FHWA in 2007. The following summary includes details of the survey results that have been received from each state. California Point of taxation: Diesel (terminal); gasoline (terminal). The respondent from California was unable to provide a detailed breakdown of costs associated with motor fuel tax collection as outlined in the survey. Instead, the respondent broke down the 2007 administrative budget into five parts according to the state Board of Equalization budget alloca- tions. Breakdown is as follows: Registration: This section includes licensing new accounts and maintaining existing information in the licensing system. The total reported in this section was $3.1 million in 2007. Return processing: California budgeted $7.2 million for all activities associated with processing returns, e-filing, advisory services, and the California matching program in 2007. Auditing costs: Auditing costs for the State of California include auditing, refunds, and appeals. Total auditing costs in 2007 were $8.1 million. Enforcement costs: California reported $1.9 million for on- road inspections of dyed fuel and other (unspecified) enforce- ment costs. Collection costs: The respondent did not identify specific sys- tems that were involved in collection costs but did indicate that these activities amounted to approximately $1.5 million in 2007. In addition, the respondent noted that although the five categories have allotted budgets, there is a fair amount of over- lap between cost elements, especially between auditing and enforcement and auditing and the matching process in return processing. All five categories include personnel service costs, operations expenses, and allocated overhead; personal service costs was estimated at approximately 76% of the allocated budget. Administrative costs budgeted by California totaled approximately $21.8 million, and actual spending amounted to $21.6 million. These amounts differ slightly from the $22.5 mil- lion reported by FHWA. Colorado Point of taxation: Diesel (distributor); gasoline (distributor). Auditing costs: Auditing costs for the State of Colorado include labor overhead and indirect costs associated with motor fuel tax auditing activities. The respondent to the sur- vey did not indicate costs associated with IFTA licensing or joint auditing expenses. Labor costs for 2007 totaled $373,697, which included salaries and benefits for supporting staff. Indirect costs include rent, utilities, training costs, materials/ supplies, and personal services costs such as office support, management, HR services, information services, other ser- vices, and supplies. Indirect costs associated with auditing in 2007 totaled $58,943. Enforcement costs: Colorado employs a motor-fuel track- ing system with electronic filing, but system expenses are not included in enforcement costs since they are maintained by a third-party operator. The state performs on-road dyed fuel inspections at an annual cost of $735,102. The respondent also indicated that indirect costs associated with enforcement totaled $26,150 in 2007. Collection costs: Colorado uses an electronic system to both process tax returns and receive tax payments. Costs associated with this system in 2007 amounted to $411,148, with an addi- tional $90,834 in costs relating to manually processing tax returns and payments. Colorado did not identify any costs associated with payment transaction fees or debt collection expenses but did identify an additional $3,232 in indirect col- lection costs. Administrative costs: Program administration costs, which include the overarching management of the motor fuel tax col- lection department, totaled $751,902 in 2007, which included $243,676 in indirect costs pertaining to program administra- tion. Based on information gathered in the questionnaire, motor fuel tax administrative costs for 2007 totaled approxi- mately $2.4 million, an amount which was $1.1 million less than the total reported to FHWA. Florida Point of taxation: Diesel (wholesaler); gasoline (wholesaler). Auditing costs: Total annual labor costs associated with auditing activities were reported to be $794,039. Florida did not report IFTA auditing costs or conduct joint auditing with other states or the IRS. Additional indirect costs were reported as $214,391, bringing the total auditing cost in Florida to approximately $1 million annually. Enforcement costs: Florida does not presently employ a motor-fuel tracking system but is in the programming stages of implementing one. Florida does conduct on-road inspec- tions of dyed fuel through the Department of Agriculture, with costs reported to be approximately $6.8 million in 2007. The respondent at the Department of Revenue attributed an addi- tional $4,893 to other inspection activities. Indirect costs asso- ciated with enforcement were reported to be $1,321, bringing total enforcement costs to approximately $6.8 million. Collection costs: Florida requires electronic filing; how- ever, a paper version is available for those taxpayers who request, qualify, and receive a waiver of this requirement. The 69
state incurs a cost of $0.27 per transaction plus $1,500 per month to support electronic filing. In total, the processing of electronic payments costs the state $307,911 annually. Florida also allows distributors a 2.0% collection allowance. In addi- tion, the respondent reported $51,266 in debt collection activ- ities and $83,136 in indirect costs associated with collections. Administrative costs: Program administration costs in Florida were reported as $345,115 in 2007, with an additional $501,390 in indirect costs. Due to the discrepancy between the $2 million reported by the respondent of the question- naire and the $24 million reported to FHWA, a transporta- tion analyst from the Department of Transportation was contacted. The respondent indicated that the FHWA total was reported by three departments broken down as follows: â¢ Department of Revenue: $14,010,475 withheld from admin- istrative charge on fuel taxes, â¢ Department of Highway Safety and Motor Vehicles: $3,944,276 withheld from fuel use tax (permits), and â¢ Department of Agriculture and Consumer Services: $6,805,832 costs of inspection fuel. Idaho Point of taxation: Diesel (distributor); gasoline (distributor). According to Idaho Code Section 63-2403, Idaho is a âfirst receiverâ state, meaning the first fuel distributor to receive the fuel from an Idaho pipeline terminal or importer is responsi- ble for paying Idaho fuel tax and transfer fees. Auditing costs: Idaho employs 17 auditors who conduct distributor, IFTA, and refund audits. In 2007, the state spent $860,444 in labor costs associated with auditing activities. Of that total, $433,473 is dedicated to licensing IFTA auditors. Idaho receives a special grant from FHWA to conduct joint audits with the IRS and other jurisdictions, but does not include the grant amount in the overall auditing expenses. Indirect costs, such as rent, utilities, and training services, amounted to $233,238. Total auditing costs totaled $1,083,682 in 2007. Enforcement costs: Idaho did not report any costs associ- ated with enforcement activities. Collection costs: Idaho allows distributors to file returns in either electronic or paper form. Further, it allows distributors to pay using electronic funds transfers (EFT). Costs associated with operations and maintenance of the electronic filing system amounted to $210,000 in 2007, and transaction fees totaled $8,760. The state spent an additional $108,714 on man- ually processing tax returns and payments. Debt collection activities conducted by state-employed personnel amounted to $303,686 in 2007, and an additional $230,000 was spent on indi- rect costs associated with collections. Collection costs totaled $861,160 in 2007. Administration costs: Overarching program management costs not associated with auditing, enforcement, or collections in 2007 were reported to be $1,353,101, with an additional $351,057 in indirect costs. The respondent estimated a total of $3.6 million in total administrative costs associated with motor fuel tax collection in 2007, which is the same amount reported to FHWA. 4.3 Cost Estimates for Tolling Although widespread, the ability to impose tolls on high- ways, causeways, bridges, and tunnels varies greatly through- out the United States. In some states (e.g., Florida and Texas), state and local agencies have broad authority to impose tolls on highway infrastructure. This authority, however, is typi- cally limited to the development of new infrastructure; several states have statutes that expressly forbid the tolling of existing infrastructure. In other states, toll authority may be granted to either state or local public agencies, but not both. Other states restrict tolling to a few pilot projects and/or bridges. Moreover, some states (e.g., Virginia) permit the develop- ment of concession agreements which allow private agencies to operate and collect tolls from road facilities, while current statutes in other states (e.g., Maryland) preclude private enti- ties from developing and operating toll facilities. Finally, some states expressly prohibit the imposition of tolls (e.g., Nevada). Additional restrictions focus on the tolling of existing fed- eral Interstates, which is generally prohibited. In this manner, the selection of toll agencies for analysis was limited to the jurisdictions that permit tolling as well as have a reasonably long history in the collection of toll revenues. 4.3.1 Methodology The general methodology for analyzing administrative, collection, and enforcement costs incurred by toll agencies involved the following: â¢ Selection of the toll agencies for analysis by taking into account facility type, system age, governance structure, and toll-collection systems. â¢ The collection of financial data from 2003 to 2007. Most of this data has been compiled from comprehensive annual financial reports (CAFRs). Operational statistics have also been compiled. All of the agencies under review have pre- pared data for at least 3 years. â¢ To normalize the data between toll agencies, it was neces- sary to differentiate between and separately analyze capital and operational costs for toll systems. Although most agen- cies have begun to install ETC systems, open road configu- rations, or video tolling systems, implementation rates tend to vary greatly. 70
â¢ Examination of annual operational expenditures and sort- ing between administrative, collection, and enforcement activities. â¢ The mandate of all toll agencies involves the maintenance of road infrastructure, the extension of toll road systems, and other capital improvements that expand system capacity. To provide a more accurate representation of the costs that are specific to toll administration, collection, and enforce- ment, it was necessary to exclude the capital and operational expenditures related to physical infrastructure. However, toll collection and highway maintenance activities may share cost centers. â¢ Toll agencies that did not disaggregate annual expendi- tures (e.g., states that merged highway maintenance costs with toll activities within a single line item) were excluded from this analysis. â¢ Revenues generated from non-toll-related activities, such as food and fuel concessions along the road facility, were excluded from this analysis. â¢ Enforcement activities may be conducted by a public agency that is separate from the toll agency. In some cases, enforce- ment activities have not been listed as a cost item. As a result, additional data were collected related to enforcement costs. However, these data were not available for all toll agencies included in this analysis. 4.3.2 Toll Agencies Analyzed and Selection Criteria The objective of this analysis was to review a diverse num- ber of toll agencies in order to provide a comprehensive survey of toll agency costs. To accomplish this goal, the criteria for selecting the toll agencies for this analysis were â¢ System age. This analysis includes â Mature toll-road systems: The New Jersey Turnpike Authority (NJTA), the New York State Thruway Author- ity (NYSTA), and the Ohio Turnpike Commission (OTC) â Toll road systems that were first developed in the 1960s and have since undergone considerable expansion: The North Texas Tollway Authority (NTTA) â Relatively new toll-road systems: The Central Texas Regional Mobility Authority (CTRMA) â¢ Governance structure. This study covers toll system costs from a variety of governance structures, including: â State toll-road agencies: The Illinois State Toll Highway Authority (ISTHA), NJTA, and NYSTA â Toll roads administered by state DOT: The Dulles Toll Road in Northern Virginia (Virginia Department of Transportation transferred operations to the Metropol- itan Washington Airports Authority in 2008.) â Regional government agencies that oversee toll roads across multiple cities and counties: NTTA â Metropolitan MPOs: The San Diego Association of Gov- ernments (SANDAG), which manages the I-15 lanes â Multi-modal agencies: OCTA, which oversees SR-91 and the Delaware River Port Authority (DRPA) â Private operations: Toronto 407 International Inc. and the Dulles Greenway â¢ Toll system type. This analysis includes â Single facility toll roads: SR-91, CTRMA (or US 183-A), E-470, and I-15 â Multi-road toll agencies: NTTA, the OrlandoâOrange County Expressway Authority (OOCEA), Floridaâs Turn- pike Enterprise (FTE), and ISTHA â Bridges: The Delaware River Joint Toll Bridge Commis- sion (DRJTBC) and the Delaware River Port Authority â HOT lanes: I-15 HOT lanes â¢ Toll-collection method. As toll systems are moving toward the implementation of all or partial ETC systems, the major- ity of toll systems under analysis have a hybrid toll-collection system in place. However, two systemsâCTRMA and Toronto 407âuse an AETC system. â¢ Geographic diversity. This analysis includes toll systems from all parts of the United States where tolling is permitted. To the extent possible, in the analysis of toll system costs, same states that were included in the analysis in the collec- tion of fuel taxes were reviewed. There was an overlap in four statesâCalifornia, Colorado, New Jersey, and Texas. In order to include a privately operated toll agency, Toronto 407 was included in the analysis. Figure 37 summarizes the toll-road agencies analyzed with respect to facility age and governance structure. Table 24 summarizes the toll facilities operated and man- aged by each toll-road agency as well as the operational cost factors that are incurred by each agency. 4.3.3 Data Sources, Coverage, and Limitations The analysis involved the review of financial data listed in the audited CAFRs for each agency from 2003 through 2007. Finan- cial data were collected for a minimum of 3 years. The advan- tages associated with the use of audited CAFRs include (1) that the reports are publicly available and, therefore, easy to obtain and (2) that these reports have been audited according to Gov- ernmental Accounting Standards Board (GASB), Financial Accounting Standards Board (FASB), or similar accounting standards, permitting data comparability among agencies. The primary disadvantage of CAFRs is that for some agen- cies, operational data have not been disaggregated between administrative, collection, and enforcement activities. For most of the agencies analyzed, operational data were adequately dis- aggregated. However, in the analysis of a couple of agencies, it 71
72 Source: Jacobs Engineering Group, 2010 Old New Private Public NYSTA Toronto 407 SR-91 E-470 NJTA NTTA FTE OOCEA OTC ISHTA DRJTBC DTR CA I-15 CTRMA Delaware Port Authority Dulles Greenway Figure 37. Toll-road facilities analyzed. was necessary to allocate costs between highway and toll- collection activities. In the financial statements for the privately operated ITR and the Chicago Skyway, annual operational expenditures were merged within a single line item without additional clarification. Because of the difficulty in disaggregat- ing this data, these agencies were excluded from the analysis. To the extent possible, expenditures related to the mainte- nance and/or rehabilitation of highway facilities have been excluded from the analysis. Engineering and design costs related to road infrastructure as well as snow removal costs have also been excluded. Because US 183-A in Austin, Texas, opened in March 2007, it has not been included in the analysis of opera- tional costs due to the lack of historical data. However, 183-A has been included in the analysis of capital costs. Although 3 to 5 years of operational cost data has been col- lected, the findings in this section are largely based on 2007 data. In reviewing the data, it was found that collection costs, for the most part, tended to increase gradually each year. As a result, the use of multi-year averages led to cost estimates that most closely approximated the mid-year of the analysis (e.g., 2005). To provide a more accurate representation of current costs, the most recent year, 2007, was used for analyz- ing administrative, collection, and enforcement costs. Capital costs tend to vary greatly between agencies since some facilities have a fully installed ETC system (e.g., Toronto 407 and US 183-A) while other agencies still have a mixture of cash collection tollbooths and ETC systems. Moreover, agencies are moving at different rates with regard to the implementation of ETC, ORT, and video tolling systems. Among toll agencies, there may be variation in the level of implementation of ETC systems. For example, NTTA has recently completed the instal- lation of an ETC system on the President George Bush Turn- pike, but is gradually implementing ETC systems on its other roads. The transition to ETC depends largely on funding avail- ability, political and regulatory requirements, and transponder penetration rates. As a result, capital costs are treated separately in this analysis. 4.3.4 General FindingsâOperational Costs Within the tolling industry, common benchmarks that are used to assess toll collection include (i) costs as a percentage of total revenues, (ii) cost per transaction, and (iii) cost per cen- terline mile. Centerline and lane-mile data presented in this report represent all public road mileage, including that owned by (a) the state highway agency; (b) counties; (c) federal agen- cies; (d) towns, townships, and municipalities; and (e) other jurisdictions. These parameters provide various conclusions with respect to the administrative, collection, and enforcement costs for toll roads. With respect to costs as percentage of revenues, the toll agencies analyzed typically expended 33.5% of revenues to
73 Toll Road Facility Location Responsible Agency/Entity Admin. Toll Collection Enforcement Dulles Toll Road1 Northern Virginia Metropolitan Washington Airports Authority/VDOT Transfers funds Dulles Greenway Northern Virginia Toll Road Investors Partnership II, L.P. (TRIP II) Walt Whitman Bridge Ben Franklin Bridge Betsy Ross Bridge Commodore Barry Bridge Pennsylvania and New Jersey DRPA N/A Trenton-Morrisville Bridge New Hope-Lambertville Br. I-78 Bridge Easton-Phillipsburg Bridge Portland-Columbia Bridge Delaware Water Gap Bridge Milford-Montague Bridge Pennsylvania and New Jersey Delaware River Joint Toll Bridge Commission E-470 Denver, Colorado E-470 Public Highway Authority (E-470) N/A Turnpike Mainline Toll 589 Toll 417 Beachline Expressway Polk Parkway Sawgrass Expressway Western Beltway Florida Floridaâs Turnpike Enterprise Transfers funds S. TriState N. TriState Ronald Reagan Memorial Jane Addams Veterans Memorial Chicago, Illinois ISTHA I-15 HOT lanes San Diego, California SANDAG Separate entity for enforcement I-90 I-87 Tappan Zee Bridge New York NYSTA New Jersey Turnpike Garden State Parkway New Jersey NJTA Dallas North Tollway Pres. George Bush Turnpike Addison Airport Toll Tunnel Mountain Creek Lake Bridge Lewisville Bridge Dallas, Texas NTTA SR 408 Orlando, Florida OOCEA N/A SR 414 SR 417 SR 429 SR 528 Ohio Turnpike Northern Ohio Ohio Turnpike Commission SR-91 Orange County, California OCTA Separate entity for enforcement Toronto 407 Toronto, Ontario Toronto 407 International Inc. Transfers funds 183A2 Austin, Texas Central Texas RMA 1. VDOT transferred operations of the Dulles Toll Road in December 2008. 2. Until 2008, the Texas Department of Transportation (TxDOT) handled toll-collection activities on the behalf of CTRMA. Table 24. Summary of toll facilities, agencies, and operational costs.
cover administrative, toll collection, and enforcement costs in 2007. The range of values was from 16.5% of revenues, which was incurred by the 407 International Inc., to 92.6% for I-15 HOT lanes in San Diego. Enforcement costs were not available for either of these facilities, which understate total costs. The relatively low costs incurred by the Toronto 407 International Inc. reflect the following: (i) the toll road is operated by a pri- vate concessionaire that has a strong incentive to maximize revenues and minimize costs so that greater profits can be accrued to its shareholders; (ii) toll rates are largely unregu- lated; and (iii) the facility is an urban expressway along the northern section of Toronto with limited competition from non-tolled facilities. The relatively higher costs as a percentage of total revenues on the I-15 HOT lanes may be reflective of the fact that the facility is primarily intended to relieve conges- tionâtoll rates increase and decrease with demand. During off-peak hours, demand may be relatively low. Newer toll agencies tended to be on the low end of this benchmark. In particular, OOCEA expended about 25.5% of revenues to collect tolls for their respective facilities in 2007. Facilities that have regulatory and/or political restrictions with respect to the implementation of toll increases were more likely to be at the high end of this range. This indicates that toll rate increases may not occur frequently enough to cover costs. In 2007, the average cost per transaction for the agencies analyzed was $0.54. The costs for urban and multi-road toll-road agencies tended to have a relatively high number of related transactions, which tended to decrease the over- all cost per transaction. In particular, NTTA and OOCEA recorded an average cost per transaction of $0.16 and $0.17, respectively. In comparison, single facility toll agencies had a higher cost per transaction. Specifically, total costs per transaction for the Ohio Turnpike and SR-91 were $1.43 and $1.34, respectively. Figure 38 summarizes the operational costs related to toll activities as a percentage of total revenues and per transaction for each toll-road agency in 2007. 4.3.5 Administrative Costs In the analysis, administrative costs involved the following items: â¢ Wages and salaries, employee benefits, social security taxes, and pensions of toll-collection staff. (Pension costs include only the per annum costs reported by the toll agency in their CAFRs. Additional pension liabilities that may be incurred by other public agencies have not been included in these estimates.) 74 Source: Jacobs Engineering Group, 2010 $0.00 $0.20 $0.40 $0.60 $0.80 $1.00 $1.20 $1.40 $1.60 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0% Co st p er T ra ns ac tio n % o f T ot al R ev en ue s % Revenues Per Transaction Figure 38. Total operational costs by toll agency, 2007.
â¢ Finance, accounting, and audit activities, especially if they involve the processing of (i) customer transactions; (ii) the settlement of interagency transactionsâdefined as drivers with interoperable transponders who incur toll transac- tions on other toll-road systems; (iii) the processing of bulk transactions from rental car companies, local delivery trucks, and auto dealers; and (iv) the exclusion of transac- tions by non-revenue vehicles (e.g., police, ambulance, and fire vehicles). Some agencies may also exclude city buses and government vehicles. â¢ Management and professional services. â¢ Procurement and purchasing of toll equipment and transponders. â¢ Office supplies and equipment. â¢ Planning activities related to toll-system development and expansion. â¢ Buildings, utilities, and insurance for tollbooths and cus- tomer service. Depreciation, amortization, interest expense, and the current portion of debt obligations were excluded from this analysis. For toll agencies, these cost factors are more typically associated with capacity expansions, major rehabilitations, and maintenance activities. As a result, these cost factors have been excluded from this analysis. For the 13 agencies for which data were available, adminis- trative costs averaged approximately 7.7% of toll revenues and $0.14 per transaction in 2007. OOCEA had the lowest admin- istrative costs per transaction with $0.02, and the Dulles Green- way had the highest estimated administrative costs per trans- action at $0.34. As a percent of revenues, OOCEA had the lowest administrative costs (2.9%) and DRPA the highest (13.9%). Figure 39 summarizes administrative costs by toll- road agency in 2007. 4.3.6 Collection Costs Toll-collection costs include the following components: â¢ Operation and maintenance of tollbooths; â¢ Operation and maintenance of ETC and video tolling sys- tems as well as related information technology hardware and software; â¢ Customer account management, payment processing, and banking charges relating to toll accounts; â¢ Inventory, distribution, and sale of transponders; and â¢ Cash counting, transportation, and vault services. Toll-collection costs for the 15 agencies included in this analysis averaged $0.36 per transaction and 25.8% of total costs in 2007. Toll-collection costs for the privately operated, all- ETC Toronto 407 were 11.0% of revenues and $0.43 per trans- action. In comparison, toll-collection costs for NYSTA, a state agency with cash and ETC lanes, were 16.1% of revenues and $0.34 per transaction. Moreover, ISTHA recorded toll- collection costs of 19.2% of revenues and $0.14 per transaction. 75 Source: Jacobs Engineering Group, 2010 $0.00 $0.05 $0.10 $0.15 $0.20 $0.25 $0.30 $0.35 $0.40 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% Pe r T ra ns ac tio n % o f R ev en ue s % Revenue $/Transaction Figure 39. Administrative costs by toll agency, 2007.
Toll-collection activities were estimated to be $0.09 per trans- action for NTTA, which was the lowest of the agencies exam- ined. At the other end of the spectrum, OTC had toll-collection costs of approximately $0.98 per transaction. Toll-collection costs accounted for 92.6% of revenues for the I-15 HOT lanes in San Diego. This may be a function of relatively lower rev- enues generated for the I-15 lanes since this facility was prima- rily developed to support congestion management objectives. Figure 40 summarizes toll-collection costs by agency. Leakage To improve collections, toll agencies actively attempt to reduce leakage. Minimizing leakage is particularly difficult on open-road facilities since there are more opportunities for violators to avoid payment. To reduce opportunities for leak- age, toll agencies have installed video-billing systems. Video billing involves taking an image of all vehicle license plates and mailing drivers without a valid transponder or with insuf- ficient balances in their accounts a bill of toll activity. These systems involve capital expenditures related to video-billing equipment as well as account review by customer representa- tives to ensure accuracy of the bill statements that are mailed to toll-road users. In general, toll agencies are reluctant to publicize leakage rates because high leakage rates tend to be viewed negatively by bondholders and shareholders. Moreover, toll agencies are concerned that public disclosure of a high leakage rate on their respective toll facilities may also discourage users from paying tolls. Within the industry, toll leakage typically ranges from 5% to 10%. Table 25 provides an estimate of toll leak- age rates for toll systems in Texas, Colorado, California, Florida, Illinois, and New Jersey in 2006 and 2008. The pay- ment of administrative fees and fines may result in a zero or even negative leakage rate (where the amount of revenues collected is greater than the amount of revenues owed) for a single year. The increase in leakage rates estimated for ISTHA and SR-91 highlight the following issues: (i) leakage rates are par- tially determined by the accounting definition of leakage (e.g. doubtful accounts, net violations), which can include unpaid tolls as well as violation fees, and (ii) increased enforcement efforts may paradoxically result in higher leakage rates. For example, ISTHA increased its enforcements efforts, result- ing in an increase in revenues from toll evasion recovery of $29 million in 2007 to $224 million in 2008. However, ISTHA still had $146 million in allowance for doubtful accounts on its balance sheet. A large percentage of this amount consists of 76 Source: Jacobs Engineering Group, 2010 $0.00 $0.20 $0.40 $0.60 $0.80 $1.00 $1.20 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0% % Revenue $/Transaction Figure 40. Toll-collection costs by toll agency, 2007.
unpaid fees rather than unpaid tolls. Lastly, leakage rates may also be affected by growth in total revenues. SR-91 generated roughly the same amount of revenues in 2006 and 2008, but the amount of net violations increased from $3.8 million to $6.2 million, respectively. 4.3.7 Enforcement Costs Toll enforcement costs encompass: â¢ Catching violators, â¢ Assessing administrative fees and fines, â¢ Account settlement before the toll violation reaches court, and â¢ Prosecuting violators (court costs). Included are police services, which can be directly carried out by the toll agency, outsourced to a public agency with monthly or annual payments for services rendered, or conducted inde- pendently by a public agency. Police services may also include incident management and communication expenses. Ten of the agencies under study recorded some type of enforcement costs. Because court activities tend to be conducted by a sepa- rate judicial agency, these costs have typically not been included in the analysis. On average, enforcement costs accounted for 6.3% of total revenues and were about $0.09 per transaction. Enforcement costs ranged from $0.01 (DRJTBC) to $0.28 (OTC). In terms of total revenues, the Dulles Greenway had the lowest costs (1.2% of total revenues) and the Dulles Toll Road had the highest costs (17.5%). It should be noted that the $0.09 per- transaction average includes outliers at the high end of the data analyzed. As a result, this statistic may not be reflective of the enforcement costs of most of the agencies under analy- sis. With the exclusion of these outliers, enforcement costs averaged approximately $0.04 per transaction. Toll enforce- ment costs may be a function of the number of centerline miles to be covered by enforcement agencies as well as toll enforcement statutes, regulations, and policies. This estimate does not include court costs. Figure 41 summarizes enforce- ment costs. 4.3.8 Summary of Operating Costs Table 26 summarizes the total operating costs and revenues collected by tolling agencies from 2003 to 2007. The table also presents the average operating cost and revenue for each agency for all years. Detailed administrative, collection, and enforcement cost data are summarized in Appendix C. An additional measure of financial performance is operat- ing margin, which is defined as net income as a percentage of net sales. Net income includes depreciation and amortization expenses but excludes taxes payable, interest expense, interest income, and nonrecurring expenses. Operating income is also known as earnings before interest and taxes (EBIT). Since some of the toll authorities are involved in other transporta- tion and non-transportation activities, this definition has been refined slightly to include only net income from toll opera- tions over toll revenues. High operating margins are an indi- cation that a company or a public agency has effective control of its costs or that sales (revenues) are increasing at a faster rate than operating costs. In 2007, the average operating margin for the toll agen- cies included in this analysis was 36.2%. The privately oper- ated Toronto 407 had the highest operating margin of the agencies analyzed, with a 65.2% operating margin. The sec- ond highest was the Dulles Greenway, which had an oper- ating margin of 60.0%. The lowest operating margin was recorded by NYSTA, which had an operating margin of â15.9%. This shortfall is due to the depreciation expenses, which account for nearly a third of NYSTAâs operational expenditures. SANDAG (for the I-15 HOT lanes only) had the second lowest operating margin, at 7.4% in 2007. Figure 42 summarizes operating margins for the 15 facilities included in this analysis. 4.3.9 Capital Costs Capital costs for toll-collection activities tend to vary con- siderably depending on (i) type of collection system imple- mented, (ii) system objectives, (iii) implementation rate, and (iv) funding availability. Start-up toll agencies such as CTRMA incur capital costs for the initial design and implementation of 77 NTTA E-470 ISTHA SR-91 OOCEA DRPA 2006 2008 2006 2008 2006 2008 2006 2008 2006 2008 2006 2008 Revenue ($M) $199 $250 $92 $90 $585 $808 $44 $46 $193 $206 $200 $213 Leakage rate as % of revenues 6.6% 1.8% 0.5% 0.5% 5.0% 18% 8.6% 13.3% 0.3% 0.0% 2.5% 2.1% Sources: 2006 and 2008 comprehensive annual reports from NTTA, E-470, OCTA, OOCEA, and DRPA. Table 25. Estimated leakage rates for selected toll agencies, 2006 and 2008.
the toll-collection system, which may be expanded over time as the toll facilities are expanded or new roads are added to their respective systems. In contrast, more mature toll agencies may decide to gradually retrofit existing tollbooths and traffic lanes to ETC (e.g., OTC) or continue to expand ETC toll collection to increase transponder penetration and improve traffic flows (NTTA, OOCEA, FTE, and Toronto 407). Given these differences, an accurate comparison of capital-costârelated expenditures for toll-road agencies may be too difficult to achieve. Table 27 provides a sample of capital costs associated with toll collections incurred by seven toll agencies during the 2003 through 2007 time period. 4.4 Cost Estimates for VMT Fees This section presents cost estimates for VMT fees based on the proposed Dutch VMT systems and also discusses the types of VMT fees in practice today. It also presents the method for generating the cost data in the Dutch VMT fee systems, presents cost classification and cost data, and discusses costs of other mileage-based systems. 4.4.1 Types of VMT Fees Many types of charges may be considered to be a form of charge for VMT. For example, many toll facilities charge the toll based on the distance traveled on the facility. However, this section is concerned with systems that charge for all VMT for a vehicle. The charge may be flat or it may vary based on class of road, time of day, direction of travel, characteristics of the vehicle, or geographic location. Interest in such com- prehensive charging systems has grown over time and has accelerated recently. For example, the National Surface Trans- portation Infrastructure Financing Commission recommended that Congress look toward using a VMT system as the major source of surface road funds in the future. In addition, the Dutch proposed moving to a comprehensive VMT-based charging system for all road use in the Netherlands by 2016. While the current government does not plan to implement road pricing, substantial work was completed to determine if it was a feasible option. Actual experience with VMT systems, other than weight- mile taxes, is sparse. There have been some experiments in the United States with such charging systems, and heavy vehicles have some of their charges levied based on VMT. However, the actual experience provides very limited information on 78 Source: Jacobs Engineering Group, 2010 $0.00 $0.05 $0.10 $0.15 $0.20 $0.25 $0.30 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0% 20.0% DRJTBC NYSTA Greenway OTC FTE DTR ISTHA SR-91 NJTA NTTA % Revenue $/Transaction Figure 41. Enforcement costs by toll agency, 2007.
79 Cost Item/Tolling Agency 2003 2004 2005 2006 2007 Average over Years Total Operating Cost DRPA $29,460 $32,362 $31,516 $32,909 $33,994 32,048 DRJTBC 25,627 25,428 30,554 30,919 28,132 Dulles Toll Road 36,758 34,737 38,639 36,711 Greenway 9,706 13,164 10,868 12,468 11,552 E-470 21,393 29,180 25,746 26,419 36,717 27,891 FTE 227,238 254,883 258,891 247,004 ISTHA 127,900 134,995 148,808 149,949 164,888 145,308 NJTA 230,141 316,896 326,309 341,768 365,797 316,182 NTTA 48,796 52,794 61,047 54,212 NYSTA 160,820 173,726 182,406 212,303 194,960 184,843 OOCEA 38,027 45,620 46,211 52,563 52,206 46,925 OTC 64,071 67,333 73,057 72,035 73,468 69,993 San Diego I-15 2,225 1,541 1,385 1,717 SR 91 12,607 14,506 15,078 15,447 14,410 Toronto 407 62,825 66,141 68,800 67,945 86,522 70,447 Average over agencies 91,830 83,109 84,731 90,423 95,157 85,825 Total Revenues DRPA 130,399 139,471 141,057 143,843 144,835 139,921 DRJTBC 78,856 79,421 80,154 85,503 80,984 Dulles Toll Road 43,727 65,533 64,931 58,064 E-470 58,895 73,584 77,788 92,185 94,373 79,365 FTE 598,762 647,959 681,615 642,779 Greenway 40,725 45,433 55,294 55,925 49,344 ISTHA 433,495 418,721 612,237 585,095 608,440 531,598 NJTA 606,620 747,932 751,381 784,919 796,259 737,422 NTTA 177,472 191,434 202,676 190,527 NYSTA 427,184 439,583 511,191 554,363 540,321 494,528 OOCEA 154,726 169,725 178,830 194,292 204,641 180,443 OTC 182,740 192,451 182,014 186,945 200,471 188,924 San Diego I-15 2,211 1,617 1,496 1,775 SR 91 32,375 39,584 44,238 49,838 41,509 Toronto 407 265,511 318,109 361,995 391,375 525,365 372,471 Average over agencies 282,446 241,048 253,540 267,950 283,779 265,753 Table 26. Tollingâtotal operating cost and revenue (in $000s). how a large-scale system would function and what it would cost. Hence, this section will focus largely on the data gener- ated in support of the Dutch proposal, but it will start with a brief discussion of the other information available. The FHWA Value Pilot Pricing program has sponsored several experiments that looked at alternatives for distance- based pricing. They take fairly different approaches, although all are based on some form of GPS location device to deter- mine how mileage charges should be allocated. Unfortunately, cost data based on experiments have very limited usefulness. While information from these experiments is useful, cost data based on experiments have substantial lim- itations. The cost of the experimental units tends to be quite high due to development costs and the small scale of produc- tion. Large-scale, standardized production should result in lower cost per unit, but it is difficult to determine what this lower cost would be. In addition, the experiments typically do not actually charge participants. Rather, they set up accounts against which charges are levied, with the participant getting any remainder at the end of the experiment. This gives the appropriate marginal incentives to participants and allows for collection of behavioral data; however, there are no issues with evasion, nonpayment of bills, or enforcement of the sys- tem. Hence, cost data from such experiments are not well suited for comparison to the actual cost of other revenue col- lecting systems.
80 Source: Jacobs Engineering Group, 2010 -20.0% -10.0% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% DRJTBC DRPA Greenway DTR E-470 FTE ISTHA NTTA NJTA NYSTA OTC OOCEA SANDAG SR-91 Toronto 407 Average % Revenue Figure 42. Operating margin by toll agency, 2007. Toll- Road Agency Improvement Total CapitalCosts Cost/Year Cost/Per Centerline Mile CTRMA Design and installation of an ITS system Dulles Greenway Toll-collection equipment FTE Intelligent Transportation System and Fiber Optic Improvements, Mainline Intelligent Transportation System and Fiber Optic Improvements, Polk and Suncoast Addition of Sun Pass Lanes Open Road Tolling Plaza and Express Lane Conversion, Sawgrass Open Road Tolling Plaza and Express Lane Conversion, Mainline Toll System Technology Upgrades on the Mainline NTTA Toll equipment for Lewisville Lake Bridge and the NTTA system OTC Conversion to ETC OOCEA Toll equipment and buildings Toronto 407 Toll equipment, transponders, operations center, office equipment, and computer equipment $20,010,000 56,137,545 166,200,000 5,742,321 9,703,412 156,978,000 182,856,744 $10,005,000 11,227,509 41,550,000 N/A 9,703,412 31,395,600 20,317,416 $1,725,000 4,009,825 $618,369 N/A N/A 1,569,780 2,728,788 Sources: CTRMA (2005), Floridaâs Turnpike System (2007, 2008), NTTA (2007), OTC (2007, 2008), OOCEA (2007), Toll Road Investors Partnership (2007), and 407 International Inc. (2007). Table 27. Toll agency capital costs.
Actual VMT-based systems exist for heavy vehicles but again offer a limited basis for cost comparison. Heavy vehi- cles in the United States traveling interstate have fuel taxes determined by the reported mileage driven in each state rather than by where fuel is purchased. Mileage and fuel pur- chases by state are reported based on IFTA. This information is used to calculate the fuel tax that would have been paid to each state if fuel for travel in that state had been purchased there. This is compared with the actual fuel taxes paid in each state and amounts due or overpayments by state are calcu- lated. The trucking company then makes up any shortfall or receives a rebate of overpayment and IFTA settles the differ- ences among the states. This relatively crude system is VMT based, but it does not provide a good basis for cost compar- isons. First, the majority of the revenue is collected as fuel taxes so the system is directed more toward redistributing that revenue among the states and preventing strategic pur- chases of fuel to avoid state fuel taxes than toward actually collecting revenue. Second, most of the enforcement is left to the states. Third, most heavy vehicles in commercial opera- tion must keep track of mileage for other reasons. Germany instituted a mileage-based fee on heavy vehicles using its major roads. Some cost information is available from this program, as discussed below. However, the system is limited to heavy vehicles and specific roads. Oregon charges heavy vehicles a weight-mile charge based on mileage in the state. The system is well established, but it is based on self- reported mileage data. Most analysts conclude that self- reported mileage data are not suitable for a comprehensive system (Sorenson et al., 2009). The cost data for the proposed Dutch VMT system is based on detailed estimates provided by large, reputable companies that have experience with the technology and customer ser- vice. One of the providers is Siemens, which makes the onboard unit used in Germany, and another is T-Systems, which manages the German system. Although the cost data are preliminary estimates and subject to adjustments in oper- ation, they are the most realistic estimates that are available at the present time. Hence, these sources were chosen as the basis for the cost comparison. The original cost estimates were required to include a 15% contingency and a 19% value- added tax (VAT). It was decided to omit the VAT in convert- ing the cost data from euro to dollar estimates for comparison with the cost of existing revenue systems in the United States. In addition, the euro-to-dollar conversion rate was based on the approximate rate at the time of the estimates. Also, the proposed system is quite complex and comprehensive. The cost estimates are a valuable benchmark for understanding the potential cost of such a system; however, it would cer- tainly be possible to design less comprehensive systems that also had lower costs. On the other hand, it should also be rec- ognized that these are cost estimates and actual implementa- tion costs could be higher. One company did an analysis for the Dutch project looking at the potential cost savings of reducing various requirements and found that there was potential for substantial cost reductions if various require- ments were relaxed. 4.4.2 Method for Generating Cost Data for Dutch VMT Fee Systems The Ministerie van Verkeer en Waterstaat (Ministry of Transport, Public Works and Water Management) in the Netherlands worked with a number of private companies to develop cost estimates for a proposed system of road pric- ing. Some of the cost estimates focused on specific topics, such as the design and cost of different onboard units (OBUs), but four of the companies were asked to provide comprehensive cost estimates covering all aspects of the pricing system. These companies were provided with a long list of required features that were designed to reflect realis- tic operating requirements and create comparable cost esti- mates. An English translation of the report to the Dutch Parliament was published as âCost Benchmark for Kilome- ter Pricing in the Netherlands.â This report contains appen- dices with the reports from the individual companies, and these reports contain information on the approaches taken by the different companies and summary cost data for vari- ous categories. The four companies that provided comprehen- sive cost estimates were Siemens, DaimlerChrysler, T-Systems, and Vodafone. Unfortunately for this study, Daimler provided their data in a separate spreadsheet that was not included in the report. Hence, there are three estimates of cost based on initial start-up, annual operating cost, and annual depreciation, for five major categories. The reports provide extensive discussion of many impor- tant issues accompanying the Dutch cost estimates. The following represents a brief summary of some key issues, including thick versus thin OBUs, communication and record- ing use, visitors and interoperability, and enforcement. The major cost of such a system will be an OBU that is capa- ble of determining the time, location, and distance traveled for each vehicle. While there are other options, the consensus was that the system would have to use satellite navigation systems (GPS/Galileo) as the basic method for determining location. One company did propose using cell phone communication towers as an enforcement mechanism to check the reported travel; however, all of the systems had the same basic technol- ogy to determine location and road usage. They did, however, differ on what functions should be performed in the vehicle and what should be done in the back office. The complexity of the pricing system affects the cost of the OBU since more complex systems require more precise location and travel information. In addition, the need to accommodate temporary users of the 81
system was noted as generating a high cost relative to the rev- enue generated. Thick Versus Thin Client OBU There are two basic methods to charge for VMT based on GPS data. The âthick clientâ approach requires that the OBU have the capability to determine where the vehicle is being driven and to apply the appropriate toll rates. The system then only needs to communicate the toll due by jurisdiction to the back office for billing. With the âthin clientâ method, the OBU maintains location data that is regularly transmitted to the back office. The determination of where the vehicle was driven and the toll due is then done in the back office. Most analysts have concluded that the thin client approach is preferable. The thick client requires substantially more capa- bilities in the OBU and requires that the units receive updated maps and toll information whenever there is a change. It does provide more inherent privacy and the potential to be used for other applications. The thin client must transmit more infor- mation to the back office but does not have to receive map and toll updates. Hence, the system is applied equitably to all users when there are changes in toll rates or road classification (e.g., a road is added to the âcongestedâ category). Siemens and Vodafone chose to use the thin client approach, while T-Systems opted for the thick client approach. Communication and Recording Use Whether the calculations are done in the vehicle or in the back office, there is a cost to process the data and to communi- cate between the vehicle and the back office. The three proposed Dutch VMT systems for which there is data chose cellular com- munication for this purpose. Two of the systems also proposed DSRC systems for use in enforcement. Daimler chose the exchanging of a data carrier or short-range communication sys- tems for all data exchange. This saved the cost of the cellular communication system and communication charges, but also involved expenses for creating and managing the infrastruc- ture. The cost estimates for cellular service varied from t7.5 to t36 per user per year. The conversion factor at that time was about $1.25 per euro, yielding a cost estimate of approximately $9.38 to $45 per user per year. Apparently this variation was due to differing assumptions about the impact of 8 million new users on the cellular system and the impact of current excess capacity on pricing. All systems were required to meet European directives regarding privacy requirements for users of the system. For example, where charges would be calculated in the back office, the procedure would be for the location data and an OBU identification number to be sent to one office. This would be used to calculate the amount due for that OBU. The OBU identification number and amount due would be sent to another office, where the identification number would then be associated with the person to be billed. Hence, no travel or location data other than the amount of charge owed would be associated with any vehicle. Visitors and Interoperability The Dutch government required that all users of the road sys- tem pay for using the roads. The companies took different approaches to this requirement. One option for visitors was to use a fixed toll that allowed either restricted or unlimited use of the road system for a specific period of time. Another was to require that everyone make use of an approved system. Under the required device option, visitors would use a device that could be acquired for temporary use and could be self-installed in the vehicle. In addition, Europe is developing an interoper- ability directive that requires toll-collection systems to be usable for all toll systems in any European country. This requirement affects the cost of the systems, and some of the expense of the OBU could be reduced without the extra capabilities. Enforcement The basic approach to enforcement of the system was to have DSRC communication with a series of fixed and move- able enforcement stations and to have mobile enforcement. The fixed enforcement stations would be on major roadways and would determine the unit ID for vehicles on the system, compare that to the license plate registration, and check to see if the observed time and place of operation were appropri- ately recorded in the back office. Moveable enforcement sys- tems would perform the same basic function, but they would be moved around the road system on a regular basis. Mobile enforcement would be done from specially equipped vehicles. One provider (Vodafone) called for a system that compared reported travel with cell phone tower sequence as an addi- tional enforcement mechanism. In addition, they proposed using cellular communication for enforcement, and this elim- inated the need for DSRC communication equipment. Summary of Three Dutch VMT Fee Systems The major components and their designs from three Dutch VMT systems are summarized in Table 28. The major compo- nents include OBU, data communication, method to accom- modate visitors, and enforcement. 4.4.3 Cost Classification and Cost Data The Dutch cost data were required to be reported for five categories: OBU, declaration and customer care, billing and 82
payment, enforcement, and miscellaneous. Within these cat- egories there were separate estimates of the initial setup cost, annual operational cost (excluding depreciation), and annual depreciation. The initial setup cost was an estimate of the total start-up cost, but the expectation was that this cost would be spread over a number of years. Hence, it is not expected that this cost will coincide with the full-scale operation of the system. In general, it was expected that an attempt to conduct an all-at-once start would increase cost and introduce other complications. The annual operating cost and annual depre- ciation were then based on the first year of full operation of the system. Given the downward trend in the cost of the OBUs, there were different assumptions about the cost at the time of initiation versus the historical cost. The basic requirement was that the system had to accommo- date 8 million Dutch vehicles and any foreign vehicles operated in the country. The systems took different approaches to fulfilling these requirements. One system required that all vehicles have permanent operational devices, increasing the number of units required. Other systems allowed for the use of fixed tolls for specific time periods and the option of using a temporary system. The fixed toll would allow unlimited use of the roads for a specific period of time and would be enforced with license plate recognition. The use of temporary units required that they be easy to install and remove and that pay- ment accounts would have to be set up for each user. Cost estimates were based on varying degrees of detailed cost calculations by the different responders. Some of the data were considered proprietary and were not made public. The required public level of detail is what is used in this report. More detailed data were available for some categories from some providers, but the data were not provided in any con- sistent manner across the providers. Discussion of the Dutch VMT Cost Data The general approach to the Dutch VMT system was largely determined by the required elements specified for the system. The system had to be able to charge all vehicles for using Dutch roads based on the amount of use and vehicle characteristics. Minimum standards were set for items such as enforcement, ability to accommodate all users, interoper- ability with other European toll systems, and privacy. As a result, the cost estimates have similar orders of magni- tude. However, there were substantial differences in both the technological approaches taken and the organization of tasks. These led to some real differences in the cost estimates and some differences based on where costs are allocated. For example, the costs allocated to the âmiscellaneousâ category differ quite substantially across the providers. In general, the cost of the OBUs was the single largest cost category, but this represents a capital cost and is not directly comparable to the annual costs. Further, the capital cost has the potential to be reduced if the system is developed for some alternative use and the pricing system is then an add-on to an existing system. Depending on the expected life of the OBU, the annualized cost would be the appropriate amount to compare to revenue. The estimates of the annual operating costs are somewhat more surprising than the estimates for the OBU cost. These operating cost estimates vary significantly between systems. Each of the systems considered for the Dutch system had GPS-based OBUs and therefore required that the location data be converted into usage data that could then be used as the basis for charges. As noted earlier, the biggest issue here was the choice between onboard or back-office calculations of this information. T-Systems chose to calculate the infor- mation on board, while Siemens and Vodafone chose the back office method. Since the thick unit requires more com- puting power, storage capacity, and so on, it was expected to be the more expensive unit. However, the cost estimates show the OBU as being relatively less expensive based on expected cost in 2010. However, the need to update maps, tolls, and other information results in relatively high operation cost, and these costs are based on 2005 estimates. Siemens based its cost estimates on a 2012 start, so its lower cost is at least partially due to an assumption that both capi- tal and operating costs would continue to decrease over time. The Siemens approach was based on two types of OBUâone that is permanently installed in the vehicle and one that can be used temporarily. In addition, temporary or infrequent 83 Component Siemens T-Systems Vodafone OBU Thin Thick Thin Communication Cellular & DSRC Cellular & DSRC Cellular Calculation of charges Back office OBU Back office Visitors Fixed tolls or temporary units Fixed tolls or temporary units Temporary units Enforcement Fixed, movable, and mobile Fixed, movable, and mobile Cellular & fixed, movable, and mobile Source: Ministry of Transport, Public Works, and Water Management, 2006 Table 28. Summary of three Dutch VMT fee systems.
users would have the option to purchase a temporary fixed cost pass that would allow unlimited road use for a limited time period. The Vodafone approach was to require that all users have an OBU, but they also identified four possible types of OBU. One was a unit that met all European interoperability requirements, the second was a system with only the communication capabil- ities needed for the Dutch pricing system, the third was a GPS system that could be attached to an existing cell phone for data transmission, and the fourth was a projection of cell phone technologies capable of implementing the pricing system. They also proposed a unique enforcement system based on cell records that supplemented the required enforcement system. Table 29 shows the cost estimates converted from euros to dollars using an approximate ratio of 1.25 dollars per euro for the relevant time period. In addition, the 15% contingency allowance is included but the 19% VAT is not. The totals for the initial setup costs are very similar. However, the estimates of the annual operating cost and the annual depreciation vary quite substantially. Relevant Parameters Used in Dutch VMT Cost Data For this study, certain parameters of the system served were used to generate comparisons across different revenue- generation systems. Each provider may have made assump- tions for certain parameters and estimated others. The key parameters included lane miles, centerline miles, VMT gener- ated, number of vehicles, total revenue, average VMT fee rates (or tax rates), and number of staff. These parameters or the information from which they could be derived were included in some reports and omitted in others. Where data are missing for one vendor but available for another, the information is assumed to be the same since they were all developed under the same set of assumptions regarding the road system, number of vehicles, and so on. Appendix C shows the data for parameters that were found for each of the three different approaches designed by providers, converted from kilometers to miles and euros to dollars where appropriate. These data were used for the comparison across systems. Discussion of Factors That Could Reduce Cost As part of this study, EFKON AG was commissioned to identify systems that would not meet all of the requirements specified for the full cost study but would be lower in cost. A number of alternative systems are discussed in some detail, but there appear to be two basic findings of relevance for the cost analysis. The first is that the cost to meet the European inter- operability requirements could be substantial. The system that 84 Cost Category Cost Item Siemens T-Systems Vodafone Average over Providers Initial Setup Cost OBUs Administrative Collection Enforcement Miscellaneous Sum Annual Operating Cost OBUs A dministrative Collection Enforcement Miscellaneous Sum Annual Depreciation OBUs A dministrative Collection Enforcement Miscellaneous Sum $1,890,411 5,498 85,531 119,251 202,225 2,302,916 165,938 111,132 110,976 11,883 18,446 418,375 41,508 4,550 2,156 8,947 5,917 63,078 $1,698,067 217,631 41,397 81,355 201,285 2,239,735 126,908 510,427 231,283 80,751 24,087 973,456 267,006 31,973 5,304 14,257 10,351 328,892 $1,664,625 133,688 41,687 77,625 304,750 2,222,375 37,375 406,813 58,938 54,625 53,188 610,939 232,875 27,313 10,063 10,063 10,063 290,377 $1,751,034 118,939 56,205 92,744 236,087 2,255,009 110,074 342,791 133,732 49,086 31,907 667,590 180,463 21,279 5,841 11,089 8,777 227,449 Source: Based on data from Ministry of Transport, Public Works, and Water Management, 2006 Table 29. VMT fees â cost estimates (in $000s).
comes closest to the others analyzed appears to be lower cost primarily by not meeting this requirement. The second is that it would be possible to simply charge for distance driven at a much lower cost than the system designed. Nevertheless, this system would still be quite expensive. There were a number of alternative systems discussed, but some idea of the limitations can be demonstrated by describing one of the low cost alterna- tives. It would be based on a written logbook of mileage by the driver that would also require an OBU to verify the mileage reports. This system would be lower in cost, but it would impose compliance costs on users and have substantial limita- tions relative to the goals specified for the pricing system. 4.4.4 Costs of Other Mileage-Based Systems As noted earlier, some mileage fee systems are in use for heavy vehicles. Both IFTA and the Oregon weight-mile charge rely on self-reported mileage data. These systems have rela- tively low administrative costs but do not appear to be a good basis for comparison since there appear to be substantial issues with the use of self-reported mileage data. In particular, if the charge is expected to differ by jurisdiction, time of day, or other characteristics, then verification and enforcement of self-reported data become extremely difficult. The German mileage system provides a much better basis for comparison. This information was indirectly included in the estimates generated for the Dutch system since the com- panies managing the German system were among the data providers. However, the limited number of vehicles and the focus on specific roads make the cost comparisons somewhat problematic. Nevertheless, there is substantial interest in the German system so basic data were collected. In January 2005, the German truck toll system was initiated. The system is managed by a company called Toll Collect. Most of the tolls are collected via an OBU that tracks usage of the tolled roads and reports toll information to a billing system. Trucks not equipped with an OBU may pay tolls in advance either over the Internet or at one of over 3,500 toll-payment terminals. Tolls are levied on about 12,000 km of German autobahn as well as major trunk roads. The tax is based on kilometers driven, number of axles, and the emission category for the truck. The charge averages about t0.135 per kilo- meter. Collections average about t2.4 billion per year. The initial investment by Toll Collect is estimated at t700 mil- lion. It is estimated that by 2008 about 650,000 vehicles were equipped with the OBU, accounting for about 90% of the revenue collected. Enforcement is generated from about 300 toll checker gantries and a mobile enforcement fleet of about 300 vehicles (roadtraffic-technology.com). Charges by Toll Collect to the German government reflect the cost of operating the system. For fiscal year 2008 (ending August 31, 2008), Toll Collect reported revenue from the German government of t581 million, employment of 531, and about 640,000 trucks equipped with an OBU. Based on the reported numbers, the annual operating cost is about 25% of revenue, or just over t900 per equipped vehicle. While the operating cost covers all of the manual and Inter- net toll collection as well, the cost per vehicle is high relative to revenue that is likely to be collected from light vehicles. The annual cost seems to have been fairly stable for the first 3 years of operation, but news releases indicate that operational effi- ciencies are being pursued to lower these costs. 4.5 Cost Estimates for Cordon Pricing Systems In the implementation of cordon pricing systems, the largest single roadblock has typically involved political rather than technological concerns. A number of these systems first began as pilot programs and were later adopted (e.g., Stockholm) or discarded (e.g., Hong Kong) after public sentiment was con- sidered. The major issues that have been raised to date include user costs, capital costs, fairness, enforcement, and privacy concerns. Cordon charge systems have generated considerable debate, especially in regard to the fee assessed on local residents living within the zone compared with the fee imposed on non- residents living in suburban areas who travel into the conges- tion price zone during peak hours for work, education, or shopping. A separate question has involved the assessment of fees for through and multiple trips. Table 30 summarizes the general framework and main objectives of some of the conges- tion pricing systems in place around the world. The general trend of the systems examined has been a tem- porary reduction in congestion, which has typically returned to historical levels over time. With the reduction in traffic, there has been a related decline in vehicle emissions. Given the recent implementation of these systems, it is too early to deter- mine whether this is a sustainable trend or merely a short- term effect. Another potential issue is the economic impact of cordon price zones, particularly on retailers within the zone who rely on outside traffic for business. In studies conducted by the operating agencies, it has generally been found that the implementation of the cordon zone areas has not had a nega- tive impact. Based on a limited sample of cordon pricing systems, the cost of administering the system, collecting revenues, and enforcement is in line with the costs associated with tolling systems in the United States and Canada. Given their relatively long implementation history and demographic characteris- tics, the Oslo and London congestion pricing systems serve as reasonable comparators with tolling systems. For the Oslo sys- tem, operating costs averaged about 11% of total revenues, while the London system averaged about 55% of revenues. For 85
most of the tolling systems studied, operating costs ranged from 17% to 60% of revenues. Additionally, the average operating cost as a percentage of revenues for the London, Oslo, Stockholm, and Milan con- gestion zones was 38.7%. Financial data were not available for the Singapore congestion pricing system. In contrast, operating costs for a sample of 15 tolling agencies in the United States and Canada averaged nearly 34% of operating revenues in 2007. Figure 43 summarizes the operating costs as percentage of revenues for the cordon price systems under review. 4.6 Cost Estimates for Parking Pricing Systems Each of the three systems presented in Section 2.5 illustrates a different approach to parking pricing management: â¢ In Westminster, the municipal government manages park- ing directly; â¢ In San Francisco, a partnership of agencies led by SFMTA is managing the parking pricing system; and â¢ In Chicago, the responsibility for parking management has been handed over to a private party. The primary objective of the public sector agencies that administer and operate these programs is to make parking in downtown areas less desirable than parking areas in outlying areas. For the Chicago system, the private sector partner also has the objective of maximizing revenues within the rate struc- ture set by the rate framework established by the city. In con- trast, the pricing structure for the San Francisco parking system is relatively more dynamic. The intent is to adjust parking rates to help shift the demand for parking from one area of the city to another (e.g., from the business district during the day to the 86 Singapore London Oslo Stockholm Milan Charging method 85th percentile of average speed Cordon with flat charge Cordon Cordon Cordon Primary objective Demand management Congestion relief Revenue generation Environmental Environmental Discounts No Yes Yes N/A Yes Charges for through trips Yes No Yes Yes Yes Exemptions HOV 4+ and buses Motorcycles and taxis; residents get a 90% discount N/A Clean vehicles, taxis, motorcycles, buses, and emergency vehicles Vehicles meeting high emissions standards Table 30. Summary of congestion/cordon pricing systems. Source: Jacobs Engineering Group, 2010. 55.4% 10.6% 53.9% 28.8% 38.7% 33.5% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% London Oslo Milan Stockholm Congestion Zone Average US Tolling Agencies Average (2007) Figure 43. Operating costs as a percentage of revenues for congestion pricing systems.
nightlife areas in the evening) as conditions warrant. In this manner, San Francisco is going one step further since parking rates for on-street spaces are set at lower rates than off-street parking spaces. San Francisco also expects to have a broader range of rates than either Westminster or Chicago. Table 31 summarizes the parking management systems under study. In some regions (e.g., Westminster), parking pricing sys- tems may be combined with cordon pricing to support con- gestion management. Drivers heading into a city with cordon tolls not only must pay the toll to enter the city but must addi- tionally pay parking rates that reflect the demand for the space chosen. When faced with congestion and parking charges, drivers may consider the trade-offs of public transit versus personal vehicles, potentially creating a synergistic effect that reduces congestion in urban areas. Notwithstanding, this approach may affect the amount of revenues generated from parking systems due to reduced demand for private vehicles entering into the city and using its parking areas. The impact of combining congestion management techniques would need to be carefully analyzed for any city or other jurisdiction considering implementation. Although three parking pricing systems are presented in this report, financial data are only available for the Westmin- ster system. Operating revenues and operating costs for the Westminster parking pricing system averaged $136 million and $77 million, respectively, over fiscal years 2004 to 2008. Thus, the average operating cost as a percentage of revenues was 56.6% over fiscal years 2004 to 2008. 87 Westminster San Francisco Chicago Management Municipal Multiple public agencies Privateâpublic partnership Primary objective To control parking To make parking easier and manage demand To generate revenue Primary method Price cars out of high-demand parking zones Price cars out of high- demand parking zones Price cars out of high-demand parking zones Technology CCTV, pay-stations, wireless network In-street sensors, pay - stations, wireless network Pay-stations, wireless networks Payment options Coin, credit, debit, phone, scratch card Coin, credit, debit, smart card Coin, credit, debit Rate schedule Static Variable by time of day Static 2009 price range (per hour) $0.25â$10.00 $1.25â$4.25 2013 price range (per hour) TBD TBD $2.00â$6.50 Â£1.10âÂ£4.40 Table 31. Summary of parking price management systems.