I. Study Background, Objectives, Scope, and Approach


This document represents the first Federal HCAS in more than 15 years. The last Federal HCAS was completed in 1982 pursuant to the Surface Transportation Assistance Act of 1978 (STAA). As directed by the STAA, the 1982 Federal HCAS focused on estimating the responsibility of different vehicle classes for Federal highway program costs and evaluating the equity of Federal user fees in terms of whether different vehicle classes were paying a proportionate share of highway program costs for which they were responsible.

No comprehensive review of Federal highway user fee equity has been conducted since the 1982 Federal HCAS. Meanwhile, the composition of the Federal-aid highway program has changed substantially, as have Federal highway user fees. An important reason for undertaking this 1997 Federal HCAS was to determine how changes in the Federal highway program and user fees that support that program have affected the equity of the Federal highway user fee structure.

In addition to updating analyses of Federal user fee equity conducted in the 1982 Federal HCAS, the 1997 Federal HCAS addresses issues that were not covered extensively in the 1982 Federal HCAS, including the responsibility of different vehicle classes for external costs associated with highway use and for highway program costs for all levels of government. These issues are particularly important in understanding the extent to which total Federal, State, and local highway user fees paid by each vehicle class cover overall highway-related costs occasioned by that vehicle class.

Another important reason for conducting a Federal HCAS at this time is that the U.S. DOT also has a Comprehensive TS&W Study underway. Among the factors that must be considered in the TS&W Study are whether various truck classes pay the highway costs they occasion under existing TS&W limits, how potential changes in TS&W limits might affect highway infrastructure and related costs, and potential changes in highway user fees that might be desirable to cover changes in highway cost responsibilities of different vehicle classes.

What Is Highway Cost Allocation?

The HCA is the assignment of highway-related costs to various classes of highway users (and sometimes non-users), usually to estimate the share of highway costs that various users pay and to evaluate the equity of highway user fees. The Federal Government and about half the States have conducted HCASs over the years. In 1956 and again in 1978 Congress mandated that Federal HCASs be conducted to evaluate the equity of the Federal highway user fee structure. The 1978 mandate also required that alternative highway user fee structures be evaluated to identify options that could improve overall user fee equity.

The Federal highway construction program and most State highway programs are financed primarily from various taxes and fees imposed on highway users. This direct connection between highway user fees and highway program costs is central to most HCASs. In general, the closer the match between user fees and highway cost responsibilities for each vehicle class the more equitable the user fee structure. Cost allocation studies often examine alternative highway user fee structures that could bring user fee payments by each class closer to that user's highway cost responsibility.

All recent Federal and State HCASs have used a "cost-occasioned" approach to allocate costs among vehicle classes. In the cost-occasioned approach, physical and operational characteristics of each vehicle class are related to expenditures for pavement, bridge, and other infrastructure improvements. Details of how the cost-occasioned approach is applied vary somewhat among studies, but the same underlying principles apply. The cost-occasioned approach is discussed in detail in Chapter V.

In addition to the cost-occasioned approach for allocating highway costs among vehicle classes, other approaches have been discussed for estimating highway user fees that different vehicles should pay. One approach would allocate costs according to the relative benefits realized by different vehicle classes from highway investments. The greater the benefits, the greater the share of user fees a vehicle class should pay, regardless of its contribution to highway costs. Benefits-based cost allocation was discussed in the 1961 Federal HCAS, but was not fully developed or used. Another approach would charge vehicles according to environmental, congestion, pavement, and other marginal costs associated with their highway use. Unlike other approaches the objective of the marginal cost approach is not to assign all highway agency expenditures to different vehicle classes, but rather to estimate user fees that would cover marginal costs of highway use by different vehicle classes. However, the marginal cost approach could be adapted to recover full agency costs. Neither the benefits approach nor the marginal cost approach have ever been completely applied in a major study.

The HCA has evolved over the years as the nature of the highway program has changed, as data and analytical tools available to attribute costs and revenues to different users have improved, and as the scope of policy concerns related to HCA have expanded. Each successive Federal HCAS has developed improved data and analytical methods and has attempted to add more precision by allocating costs for more detailed cost categories. As the scope of highway programs has expanded to include pedestrian, bicycle, transit, and intermodal improvements, the scope of HCASs has expanded as well.

The focus of previous Federal and State HCASs has been on determining an equitable distribution of highway agency costs among different groups of highway users. Recently there has been growing interest in external costs of highway use and operation, including environmental, congestion, crash, and various other social costs. Highway users currently do not directly pay those costs, although they contribute to reducing some external costs through their payments for environmental and safety equipment on automobiles, and through user fees that are expended for noise barriers, wetlands protection, landscaping, and other improvements to mitigate social, economic, and environmental costs of highways. State HCASs have not considered external costs, but the 1982 Federal HCAS compared user fees paid by different vehicle classes to marginal air pollution, noise, and congestion costs to evaluate the economic efficiency of highway user fees. In general, the closer that each vehicle's user fee payments come to its marginal highway costs, the more economically efficient the user fee structure. In the current study, analyses of external highway-related costs are extended further to consider total external costs attributable to different vehicle classes and potential policy implications of those costs.

Recent Studies Related to Highway Cost Allocation

Several studies have recently been conducted related to HCA issues. Major Federal studies are summarized below along with a study comparing various approaches to cost allocation that was conducted by the Trucking Research Institute (TRI) of the American Trucking Associations (ATA). Recent State HCASs are summarized in Appendix G.

1982 Federal Highway Cost Allocation Study

Between 1979 and 1982, the U.S. DOT conducted a Federal HCAS pursuant to Section 506 of the STAA of 1978. The purpose of the 1982 Federal HCAS was to allocate Federal highway program costs among the various classes of vehicles occasioning those costs, to assess the equity of the existing Federal user fee structure, and to recommend changes in Federal highway user fees that could improve overall equity. The 1982 Federal HCAS was in many ways a seminal study because it developed new and sophisticated procedures for allocating system preservation costs that previously had not been considered in Federal cost allocation studies. Also, the 1982 study explicitly recognized that highway user fees could help promote economically efficient use of the highway system and compared user fees to marginal costs of highway use including environmental and congestion costs that had not been considered in previous cost allocation studies.

The new method developed in the 1982 Federal HCAS for allocating pavement 3R costs is frequently called the "consumption method" because it allocates costs of those improvements based upon the degree to which different vehicle classes "consume" the pavement's strength and contribute to its deterioration. Estimates of the contribution of vehicle axle loads to each of the principal pavement distresses that necessitate 3R improvements were developed, and these relationships were used to allocate 3R improvement costs among different vehicle classes.

Fundamental changes were also made to the allocation of new pavement costs. The 1965 Federal HCAS had used an incremental method that allocated the costs of additional pavement thickness to vehicles that were judged to require the additional thickness because of their heavier axle loads. Because the relationship between pavement thickness and pavement strength is not linear, costs to provide the last increment of thickness to accommodate the heaviest vehicles were much lower than the costs to provide the first increments that were assigned to light vehicles. Heavy vehicles thus unfairly benefited in terms of allocated pavement costs from the inherent economies of scale in pavement design. The 1982 Federal HCAS corrected this inequity by allocating new pavement costs to all vehicles in proportion to their equivalent single axle loads (ESALs), a measure of the relative effects of different axle loads on pavement life. Thus no vehicles benefited more than others from the economies of scale in pavement design.

The 1982 Federal HCAS allocated agency costs for two different periods, a base period of 1976-1978 and a forecast period, 1980-1990, with a target year of 1985. Results were also presented for 1990 and 1995. Revenues in the base period were 1977 Federal user charge payments, whereas revenues for the forecast period were expected 1985 payments under alternative Federal user charge structures. Costs in the base year were Federal expenditures from the HTF; forecast period costs consisted of the expected Federal share of projected average annual highway capital improvement costs for all levels of government for the 1980-1990 period.

Analyses for the 1982 Federal HCAS were conducted using 38 vehicle classes representing 15 different vehicle configurations with up to 4 weight groups per class, and the results were reported for 12 classes. Analyses were further disaggregated into eight highway classes, Interstate Highways, other arterials, collectors, and local roads in rural and urban areas.

A key issue in the overall analysis was determining the share of total costs attributable to various vehicle classes. Costs that were not directly attributable to the various classes of vehicles were treated as common or residual costs and were allocated to all vehicle classes based on their relative VMT. Attributable costs represented 53.3 percent of the total costs for the forecast period and common costs represented the remaining 46.7 percent of costs. For the forecast period autos and motorcycles were found to be responsible for 16.8 percent of attributable costs and combination vehicles 56.9 percent with the remaining 26.7 percent attributable to other vehicles (single-unit trucks and buses).

Other key issues that the 1982 Federal HCAS addressed include:

Unpublished analyses after the 1982 study considerably expanded the scope of alternatives examined. In connection with legislative debate on the STAA, the Federal Highway Administration (FHWA) and U.S. DOT recommended simplifying the previous package of user fees, and replacing the fixed annual HVUT with a higher fee that would have varied depending upon miles traveled -- heavy vehicles traveling less than 90,000 miles per year would have paid a prorated share of the annual fee. The final user fee package adopted by Congress substantially increased the HVUT but did not include a provision for prorating the fee by mileage. Although this aspect of the new user fees was not as equitable for low-annual-mileage heavy vehicles, by and large the new user fee package resulting from the 1982 study simplified highway user fees and improved equity.

Alternatives to Tax on Use of Heavy Trucks

A study, Alternatives to Tax on Heavy Vehicles, was called for in Section 513(g) of the STAA. The study examined potential alternatives to the HVUT which had been raised substantially in that Act. Alternative bases upon which to levy heavy truck taxes were considered, including vehicle size, vehicle operating weight, and distance traveled, all of which affect the highway cost responsibility of different vehicles. The study analyzed several "diesel differential" alternatives that would increase the fuel tax paid by diesel vehicles with GVWs above 10,000 pounds and reduce or eliminate the HVUT for various classes of vehicles. The study also analyzed WDT alternatives that would replace the HVUT, and possibly the vehicle excise and tire taxes as well, using either a single rate schedule (based on registered GVW) for all vehicles or separate schedules for single-unit trucks and combinations.

The Section 513(g) Study report concluded that, in the short term, the equity of the user fee structure could be improved somewhat by reducing the HVUT and instituting a diesel differential tax. However, the study concluded that major improvements in equity were not possible within the existing user fee structure because existing user fees do not directly reflect the two principal variables affecting cost responsibility -- weight and distance traveled. The report recommended continued investigation of the benefits and potential implementation problems of a WDT as a possible long-term solution.

Heavy Vehicle Cost Responsibility Study

The Deficit Reduction Act of 1984 (DRA) called for a Heavy Vehicle Cost Responsibility Study which concluded that most pavement costs are directly related to heavy vehicles, and that axle loads are more important than gross weight in determining a vehicle's pavement cost responsibility. This study analyzed highway cost responsibility and user fee payments by 14 different truck configurations in 25 weight brackets, using 5,000-pound increments. The study concluded that:

Feasibility of a Federal Weight Distance Tax

The DRA also called for a study of the Feasibility of a Federal Weight-Distance Tax. That study analyzed three versions of a WDT: a registered gross vehicle WDT; a registered axle WDT; and a configuration-based gross vehicle WDT. The study evaluated two administrative plans for these taxes: administration by the Federal Internal Revenue Service (IRS), and State administration under Federal guidelines and regulations. The study also considered a system consisting of the HVUT and the fuel tax, with no other Federal truck taxes.

The study findings covered administrative costs, compliance costs, evasion potential, impacts on Interstate commerce, and the equity of WDTs. The study found that administrative costs will vary based on the weight threshold of the tax and the payment procedures. To minimize costs, a threshold of 55,000 pounds could be adopted, along with periodic payments through a Federal tax deposit (FTD) system, and a single WDT return. The IRS estimated that administrative costs would be from 14 percent less to 26 percent more than the current tax structure, depending on the type of tax and level of examination coverage.

The study concluded that if a WDT replaced the vehicle excise tax, tire tax, and HVUT, and were administered through an FTD system, carriers' compliance costs would not significantly increase relative to compliance costs associated with the HVUT. The study also concluded that while potential WDT evasion needed additional analysis, evasion did not appear to be such a significant problem that it would make a WDT infeasible. Further, the study concluded that a WDT would have no significant impacts on interstate commerce and could improve equity.

Finally, the study concluded that a Federal WDT was feasible from the standpoint of administrative costs and enforcement, but that additional analysis of the cost responsibility of different vehicles operating at different weights was necessary before such a tax could be implemented.

Trucking Research Institute Review of Highway Cost Allocation

This study, sponsored by the ATA , TRI, sought to assess alternative methods for conducting HCASs, provide guidelines for conducting such studies, and offer improvements that should be made in the methods and data.

The study compared and contrasted four HCA methods:

  1. Benefits Based (allocating cost responsibility in proportion to the benefits).

  2. Incremental (the methods used in the 1965 Federal HCAS).
  3. Federal (the methods used in the 1982 Federal HCAS, also called the "consumption method").
  4. Marginal Cost (changes based on congestion costs and pavement damage costs).

The TRI study concluded that under all four methods, the relative cost responsibility of heavier vehicles is greater than that of light vehicles. However, the differences in relative cost responsibility among heavy and light vehicles are much less under the benefits-based approach than under the incremental or Federal methods. The differences in relative cost responsibility per mile among vehicle classes under the marginal cost method are also smaller than under the incremental or Federal methods, although all vehicle classes would pay much higher total user fees than they do today.

The study concluded further that it is desirable to use different methods in performing cost allocation studies to permit comparisons and to help inform public and political debate.

Finally, the study included guidelines for conducting HCASs. Among the more important suggestions were the following:

1997 Federal Highway Cost Allocation Study Outreach

Numerous opportunities for public comment on the 1997 Federal HCAS scope and methods were provided during the course of the study. Two workshops were conducted, one at the very inception of the study and one during the middle of the study. A Notice was published in the Federal Register seeking comments on the study work plan and specific study issues. Formal and informal briefings were conducted with interested parties during the study. A particularly important element of the outreach process was the establishment of a Peer Review Committee through the Transportation Research Board (TRB) to provide a mechanism for independent and expert review of key technical elements of the study. The first HCAS workshop was conducted in October 1994 in cooperation with the AASHTO. The primary purpose was to discuss emerging issues that should be considered in the Federal HCAS. Over 75 persons representing interested Federal agencies, State Departments of Transportation, industry groups, consulting firms, and academic institutions attended the 2-day workshop. Participants discussed implications of legislative changes since 1982 that have affected the composition of the Federal-aid highway program and user fees supporting that program.

Several participants at the October 1994 workshop recommended that a committee of experts be established to review technical work on the cost allocation study. In 1995, a committee of nationally recognized authorities on pavements, bridges, transportation economics, and transportation policy analysis was established by the TRB to review technical and other aspects of the study. The committee met four times during the course of the study and submitted two letter reports to the Federal Highway Administrator summarizing discussions of key technical issues being addressed in the study. Subcommittees were established to provide more detailed review of several technical issues including pavement and bridge analysis, the estimation of external costs of highway transportation, applications of marginal cost and external cost concepts to highway finance decisions, and considerations of cost allocation for all levels of government. Liaison members of the committee included representatives of the U. S. DOT, ATA, Association of American Railroads, and AASHTO. The Peer Review Committee commented on early drafts of technical sections of the final report, but did not review or comment on study conclusions.

The second cost allocation study workshop, held in December 1995, summarized study progress to that point and outlined in detail methods being used to address various technical aspects of the study. Also, the Chairman of the TRB Committee, Dr. David Forkenbrock, summarized committee activities. Breakout sessions were conducted during the workshop to give everyone greater opportunity to discuss issues or concerns.

Highway Cost Allocation Study Issues

There was a strong sense from many participants at the HCA workshops that this study should not simply update the 1982 Federal HCAS. Changes in the highway program since 1982 included: (1) the creation of a National Highway System (NHS), (2) the increased flexibility provided by the ISTEA to fund transit, intermodal projects, and other State and local priorities, and (3) increased concern that external and other social costs of highway use and operation all affect HCA and all need to be thoroughly considered in the study. The workshop participants discussed relationships between Federal HCA and the allocation of highway program costs across all levels of government, and implications of multimodal investment programs for HCA. Participants believed that analyzing these emerging issues would enrich the report and its usefulness for a variety of policy analyses. There was consensus, however, that significant attention should be paid in the final report to traditional HCA issues related to evaluating the equity and economic efficiency of Federal highway user fees. The comparison of highway user fee payments by different vehicle classes with HTF outlays attributable to those vehicles is still believed to be a valuable indicator of the equity of the highway user fee structure that is understood by decision makers in the executive and legislative branches at both the Federal and State levels of government.

Participants noted that previous Federal and State HCASs have focused considerable attention on analyzing the responsibility of different vehicle classes for pavement, bridge, and other highway agency costs. Methods for attributing costs to different vehicle classes have evolved over time, but generally have followed a "cost-occasioned" philosophy. Engineering and economic studies have been conducted to estimate the extent to which various vehicle classes contribute to highway costs because of their weight, axle loadings, width, length, or other physical or operational characteristics. For instance, a vast body of research has demonstrated the relationship between axle loads and pavement wear. Heavy axle loadings contribute significantly to costs for rehabilitating and reconstructing pavements, and anticipated axle loadings also are major factors influencing the design thickness of new pavements. All pavement costs cannot be attributed to vehicles based upon their relative axle loadings. However, analytical methods are being refined to estimate shares of pavement improvement costs that are load-related and shares that should be allocated to vehicles based on other factors. Likewise, research has been conducted to allow costs for other types of highway improvements to be assigned to different vehicle classes based on characteristics of each vehicle class that influence costs.

In the 1982 Federal HCAS many costs were lumped together as "common costs" and allocated to different vehicle classes in proportion to the VMT for each vehicle class. Participants at the October 1994 HCA workshop discussed the desirability of reducing the number of cost categories treated as common costs. They believed that careful analysis would allow many of those costs to be attributed to the various vehicle classes based on characteristics of the different vehicle classes and their operations. Participants also discussed whether VMT is necessarily the best allocator for costs that truly are common.

Workshop participants discussed a number of issues concerning how various highway user fee issues should be treated in the HCAS. Federal HURs have been dedicated for transit improvements since 1982 when the STAA established the MTA in the HTF and 1 cent of the Federal fuel tax was deposited to that account for use in Federal transit assistance programs. Since then, an additional 1 cent per gallon of Federal fuel tax revenues has been dedicated to the MTA. The 1982 Federal HCAS report did not explicitly allocate costs of transit programs since, at the time, virtually no Federal HURs were expended on transit projects except for very small amounts of Federal-aid Urban System monies.

Many workshop participants believed that with the passage of ISTEA, future expenditures for transit improvements from the HTF may increase, as well as projects to improve air quality and to fund transportation enhancements that previously may not have been eligible for Federal participation. Attributing some such costs to different vehicle classes may be difficult under traditional cost-occasioned philosophies, and new rationale for allocating those costs among highway users may have to be developed.

Participants noted that the evaluation of highway user fee options must consider how each user fee contributes to equity, efficiency, and other policy objectives. Equity is important both across user groups and for vehicles within the same user group. Economic efficiency generally is improved when fees that vehicles pay reflect the full costs associated with their operations including environmental and other external costs. Many consider marginal cost pricing to be impractical to implement at the Federal level, but there may be opportunities to improve the efficiency of the Federal highway user fee structure without implementing full marginal cost pricing. Relationships between equity and efficiency in highway taxation and opportunities to improve both the equity and the efficiency of the user fee structure are considerations in evaluating user fee alternatives.

Over the years there have been suggestions that highway user fees be used to achieve air quality, energy, land use, and other broad social, economic, and environmental objectives. In 1990 and again in 1993, a portion of Federal taxes on transportation fuels was dedicated for Federal budget deficit reduction. This was the first time that Federal highway user fees had been diverted from transportation programs. Some workshop participants also raised questions about the treatment of some enhancements that may only loosely serve highway-related purposes.

Another issue raised at the October 1994 HCA workshop and in meetings of the TRB Peer Review Committee was the allocation of highway costs across all levels of government. An important reason to examine cost responsibility for highway program expenditures at all levels of government is to evaluate the overall level of subsidies that may accrue to different vehicle classes. Some vehicles may pay less than their proportionate share of Federal highway user fees but more than their proportionate share of State user fees, leaving them paying very close to the share of overall highway costs for which they are responsible. Other vehicle classes may pay less than they should at both the Federal and State levels while other classes may pay more than they should at both the Federal and State levels. While there may be no immediate changes in user fees that would be feasible or necessarily desirable to reduce cross subsidies among vehicle classes, knowing the nature and magnitude of those cross subsidies is important in making other policy decisions, particularly decisions affecting competition with other modes.

Another important reason for analyzing cost responsibility for highway program expenditures by all levels of government is to improve our understanding of how changes in the Federal highway program might affect Federal cost responsibility and equity by vehicle class. Federal-aid highway funds traditionally have been used primarily for capital improvements on the highest order highway systems. While this is still true, ISTEA granted State highway agencies greater flexibility in the use of Federal-aid highway funds. For instance, preventive maintenance on NHS highways is now an eligible activity, and a variety of demand management strategies and transportation enhancements also are eligible for Federal funds. Analyzing cost responsibility for highway expenditures at the State level will provide a basis for estimating how changes in the composition of the Federal-aid highway program might affect the cost responsibility of different vehicle classes for future Federal program expenditures. It will also provide insight on how States have allocated costs for certain items that have not been considered in previous Federal HCASs.

Relationship Between the Federal Highway Cost Allocation and Comprehensive Truck Size and Weight Studies

The U.S. DOT currently is conducting a Comprehensive TS&W (1997 U.S. DOT TS&W) Study to evaluate potential impacts associated with a range of TS&W policy scenarios. There is a close relationship between the Federal HCA and the TS&W Studies. Many of the same infrastructure, environmental, and traffic operations impacts are being evaluated in both studies, although for somewhat different purposes. Many of the costs estimated in the HCAS will be used in analyzing impacts of TS&W scenarios. Any policy changes that might alter the mix of truck configurations operating on the Nation's highways may also affect highway costs and the cost responsibility of different vehicle classes.

There has been a longstanding Federal position that increases in highway costs resulting from TS&W policy changes should be recouped to the extent possible through increased user fees on those vehicles causing the added costs. The U.S. DOT Freight Policy Statement reiterates this user pays principle -- "Whenever feasible, fees and taxes adequate to cover the cost of building, operating, and maintaining public infrastructure facilities should be recovered from the parties that use and benefit from them." The HCAS and related highway revenue analyses thus must anticipate the kinds of policy options that will be addressed in the TS&W Study and factors related to those policy options that may affect infrastructure and external costs.

Close coordination with the TS&W Study was maintained throughout the HCAS. Analytical tools developed for the HCAS will be used to estimate infrastructure, environmental, and other costs attributable to different vehicle configurations. Since vehicle configurations that currently are seldom used may become attractive under some TS&W policy options, provisions were made in the HCAS to analyze the cost responsibility of these vehicle configurations even though they currently are not widely used. Annual travel and other operating characteristics of new vehicle configurations will be estimated in the TS&W Study, while HCAS tools will be used to estimate cost responsibility and user fee payments based on operating characteristics of the new configurations. The 1997 Federal HCAS developed tools to analyze new user fee or permit fee options that could equitably recoup added highway costs associated with operations under TS&W policy alternatives.

External and Other Non-Agency Costs

Executive Order 12893, "Principles for Federal Infrastructure Investments," calls for a systematic analysis of expected benefits and costs of infrastructure investments. The Executive Order specifies that, "To the extent that environmental and other nonmarket benefits and costs can be quantified, they shall be given the same weight as quantifiable market benefits and costs."

The term "external costs" refers to costs of highway travel that are not borne by individual trip-makers, but that are imposed on other motorists, public agencies, or society as a whole. External costs include congestion costs imposed on other travelers, noise, air and water pollution, other environmental costs, certain safety-related costs, and a variety of other social and economic costs on different segments of the population. The TRB recently completed a study, Public Policy for Surface Freight Transportation, which examines the marginal external costs of freight transportation by different modes.

Because external costs are not borne by the driver, they are not factored into trip-making decisions. Many economists advocate trying to reflect those external costs in highway user fees. It may be difficult, however, to directly charge for some external costs of highway travel. Other options are available to reduce the severity of those costs. For instance, many highway agencies have aggressive programs to erect noise barriers where residences and other noise-sensitive land uses are exposed to high noise levels from passing vehicles. Likewise, there are requirements that highway agencies take measures to reduce air pollution, to restore wetlands taken for highway construction, and to mitigate other social, economic, and environmental impacts of highways. No estimates are available of the total costs of programs to mitigate external costs of highways, but they are substantial.

Changes in safety, environmental, and other external costs are important considerations in evaluating TS&W policy options. This study focused considerable attention on estimating external costs associated with different types of vehicles operating under different conditions. As with infrastructure costs, the analysis was conducted in such a way that external costs can be estimated for new vehicle configurations and new traffic mixes that must be analyzed in the TS&W Study. Changes in the number and severity of crashes generally will be estimated in the TS&W Study and information developed in the 1997 Federal HCAS will be used to estimate changes in the economic costs of crashes. Environmental costs associated with TS&W policy options generally will be estimated based on emission rates and economic cost factors developed in the 1997 Federal HCAS, while changes in the relative travel by different vehicle classes will be estimated in the TS&W Study.

Interest in external and other social costs of highway transportation extends beyond impacts associated with TS&W policy options. There is considerable interest in the external costs of automobile travel and in total costs of highway travel. Substantial controversy surrounds estimates of the total costs of highway transportation, and estimates of various types of costs may vary by an order of magnitude or more. The 1997 Federal HCAS did no original research into the economic costs of various externalities, but rather synthesized the state-of-the-knowledge of social cost analysis to estimate the relative magnitude of various social costs of highways and the range of uncertainty surrounding cost estimates.

There are several potential uses for information on external costs of highway use and operation. One is to estimate total marginal costs of highway travel in order to estimate efficient user fees. Issues of equity versus efficiency in highway taxation were discussed in detail in the 1982 Federal HCAS, although the STAA of 1978 had stipulated that equity was to be the primary basis for evaluating user fee alternatives. Efficient user fees generally reflect the marginal cost of highway travel. In general, when price (including user fees) equals marginal cost, net benefits to society are maximized and economic efficiency exists.

As suggested in Executive Order 12893, a second use of information on external costs of highway transportation is for infrastructure investment decisions. Executive Order 12893 emphasizes that all costs and benefits should be considered in infrastructure investment and management decisions. Knowledge of and concern about environmental, congestion, and other external costs of highway use has resulted in transportation agencies giving these factors greater consideration in overall program development and in project planning, design, and construction. The Congestion Mitigation and Air Quality (CMAQ) Improvement Program was established in ISTEA to focus funds on reducing congestion and improving air quality, and States are using increasing amounts of other Federal monies as well to mitigate adverse impacts of highway use.

The issue of "external" benefits of highway use was discussed at some length in meetings of the TRB Peer Review Committee. Economists generally believe that there are few if any true external benefits of highway use that are not directly considered by the personal or commercial traveler when deciding whether or not to make a trip. This is not to say, however, that benefits of highway investment accruing to communities and businesses should not be considered when decisions are made about highway funding levels and where and how the HURs should be spent. Care must be taken, however, not to double count benefits that accrue in the first instance to highway users and that are then passed on to others.

Considerable work recently has been done to estimate both the macroeconomic impacts of highway investment on the output of the overall economy and the microeconomic impacts of highway improvements on the productivity of firms in specific industries. Research in the last 5 years at the macro and micro levels shows that the return on investment on non-local highways during the 1980s was significantly higher than the prevailing rate of return on private capital investment. During the period 1980 to 1989, the latest years for which data are available, highway capital investments contributed between 7 and 8 percent to national productivity growth.

Future highway investment is expected to continue to contribute to increased economic productivity and to overall net benefits to society. Net benefits can be maximized, however, only if the external costs as well as the benefits of highway investment are considered in all phases of the program and project development process. A detailed analysis of highway benefits was beyond the scope of this study. The Department's Surface Transportation C&P Report considers highway user benefits in depth in estimating the incremental benefit cost ratios of different highway investments, and on-going FHWA research is examining relationships between highway investment and economic productivity in greater detail. Appendix D of this report discusses general considerations in the estimation of highway-related benefits and references recent studies.

Study Objectives and Scope

The scope and objectives of this Federal HCAS were strongly influenced by recommendations from the October 1994 HCA workshop. The primary objective of this study is to analyze highway-related costs attributable to different highway users as a basis for evaluating the equity and efficiency of current Federal highway user charges. This is consistent with objectives of previous Federal HCASs, although the current study examines certain items in greater detail than previous studies. The STAA of 1978 explicitly limited the scope of the 1982 Federal HCAS to examining Federal highway program costs paid from the HTF and the equity of Federal user charges. While there is no similar legislative direction on this study's scope, the extent to which Federal user fees paid by different vehicle classes correspond to Federal highway costs attributable to those vehicle classes remains an important policy issue and is a principal focus of the study. Environmental, safety, congestion, and other non-agency costs attributable to different vehicle classes are analyzed in detail for this study. Several other emerging highway policy issues that were outside the scope of the 1982 Federal HCAS also are considered in this study.

This study analyzes the various costs associated with highway use and operations, estimates costs attributable to different classes of highway users, and compares user fees paid by different users with highway-related costs for which they are responsible. The study also evaluates alternative highway program structures to estimate how different types of programs might affect the relative cost responsibility of different user groups.

Several user fee options are examined to determine the kinds of changes that could improve Federal highway user fee equity and efficiency, but the study does not evaluate options in as much detail as the 1982 Federal HCAS. Congress had mandated that the 1982 Study include recommendations on alternative user fee structures that could improve equity, but there is no similar requirement for this study. Furthermore, detailed evaluation of alternative user fee structures should await completion and deliberations of the Comprehensive TS&W Study since TS&W policy changes could have substantial implications for the cost responsibility of particular vehicle classes.

Requirements of the Comprehensive TS&W Study have been major considerations in designing the HCAS. The vehicle classes that might be evaluated in the TS&W Study have been included in the HCAS, and the various analytical models used in the HCAS have been designed with requirements of the TS&W Study in mind.

Summary of Study Approach and Methods

Methods used in the 1997 Federal HCAS are generally consistent with methods developed for the 1982 Federal HCAS. More types of truck configurations are considered in this study than in 1982 and much more detailed data on travel and operating weight distributions for each vehicle configuration have been developed. Many areas of the report benefited from recommendations made by members of the TRB Peer Review Committee.

Data on the composition of the highway program have also been developed in more detail for this study than the 1982 Federal HCAS. The primary source of cost data is FHWA's FMIS which contains information on FHWA obligations for Federal-aid highway projects, direct Federal projects, and all other purposes. There is no source of information on Federal highway expenditures that provides as much detail about how Federal monies are actually used as obligation information contained in FMIS, so the obligation information is used, even though money obligated in a particular year may not actually be expended until a later year.

Obligations for over 80 specific improvement and work types are separately allocated and those obligations are further broken down by the highway functional class upon which the improvement is made. Methods for allocating the various costs among vehicle classes have been refined from methods used in the 1982 Federal HCAS, especially for pavement, bridge, and capacity-related costs. New methods were developed for allocating transit-related costs and other multi-modal transportation costs that were not considered in the 1982 Federal HCAS. Chapter V and various appendices contain detailed explanations of HCA methods. Suggestions from members of the TRB Peer Review Committee were valuable in key study areas.

The base period for the 1997 Federal HCAS is 1993-1995 and the analysis year is 2000. Base year distributions of highway program costs by improvement type represent an average of obligations over the 1993-1995 period and base period revenues are averaged over the 1993-1995 period as well. Costs are averaged over several years because the distribution of particular types of improvements on the various highway systems varies from year to year. A 3-year average of costs by improvement type and location is thus more representative of current patterns of highway costs than estimates in a single year.

Because highway cost responsibility is so strongly influenced by a vehicle's axle configuration and axle weights, and because many potential vehicle configurations and gross weights are being evaluated in the U.S. DOT Comprehensive TS&W Study, highway revenue and cost analyses for this study are conducted for 20 different vehicle configurations. Table I-1 lists the 20 vehicle classes, acronyms used in this study for each class, and a brief description of the types of vehicles included in each vehicle class. Figure I-1 presents a graphical image of the axle configuration for each vehicle class.

Travel, HURs, and highway cost responsibility are estimated in up to thirty 5,000 pound weight intervals for each vehicle class. Weights range from 5,000 pounds or less to more than 145,000 pounds. Since cost responsibility is related to the nature and location of highway improvements and to the location of travel by different vehicle classes, travel and associated cost responsibilities are estimated separately for each of the 12 highway functional classes, but results are not reported at that level of detail since revenue estimates for particular functional classes are not meaningful. All axles on single unit and combination trucks are assumed, throughout this study, to be fully load-bearing axles during all modes of operation.

Table I-1. HCAS Vehicle Class Categories
VC Acronym Description
1 AUTO Automobiles and Motorcycles
2 LT4 Light trucks with 2-axles and 4 tires (Pickup Trucks, Vans, Minivans, etc.)
3 SU2 Single unit, 2-axle, 6 tire trucks (includes SU2 pulling a utility trailer)
4 SU3 Single unit, 3-axle trucks (includes SU3 pulling a utility trailer)
5 SU4+ Single unit trucks with 4- or more axles (includes SU4+ pulling a utility trailer)
6 CS3 Tractor-semitrailer combinations with 3-axles
7 CS4 Tractor-semitrailer combinations with 4-axles
8 CS5T Tractor-semitrailer combinations with 5-axles, two rear tandem axles
9 CS5S Tractor-semitrailer combinations with 5-axles, two split (>8 feet) rear axles
10 CS6 Tractor-semitrailer combinations with 6-axles
11 CS7+ Tractor-semitrailer combinations with 7- or more axles
12 CT34 Truck-trailers combinations with 3- or 4-axles
13 CT5 Truck-trailers combinations with 5-axles
14 CT6+ Truck-trailers combinations with 6- or more axles
15 DS5 Tractor-double semitrailer combinations with 5-axles
16 DS6 Tractor-double semitrailer combinations with 6-axles
17 DS7 Tractor-double semitrailer combinations with 7-axles
18 DS8+ Tractor-double semitrailer combinations with 8- or more axles
19 TRPL Tractor-triple semitrailer or truck-double semitrailer combinations
20 BUS Buses (all types)

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