Other Highway-Related Costs

In recent years there has been increasing interest in estimating the total costs of highway transportation, not just the direct agency costs. Executive Order 12893, "Principles for Federal Infrastructure Investments," requires that Federal infrastructure investment and management plans be based upon a systematic analysis of expected benefits and costs. Consideration is to be given to public and private, market and non-market benefits and costs. While the emphasis of the Executive Order is on infrastructure investment decisions, it pertains to decisions on financing infrastructure investment programs as well.

Costs discussed above have included only those borne by public agencies in constructing, maintaining, and operating highway and related transit systems. Social, economic, and environmental costs associated with highway construction and operation that are not borne by public agencies but that fall upon others must be considered in investment and other highway management decisions. The full range of highway-related benefits must also be considered in making both project and policy-level investment decisions.

Among the social costs of greatest interest to HCA and highway pricing and policy decisions are congestion, air pollution, noise, and crash costs. Social costs may be evaluated in different ways that each provide their own perspectives on policy issues surrounding the costs of highway transportation. One perspective is to examine marginal costs of travel by different vehicles. Marginal costs represent the added costs associated with an additional trip, and are particularly relevant for questions about prices that should be charged to improve economic efficiency.

Another perspective is to estimate total costs of highways use and operation. Information on total costs is not as applicable to evaluating efficient prices, but it does inform policy decisions regarding costs associated with operations of different vehicles and can contribute to evaluating equitable user fees that reflect social as well as agency costs. Examining the broader social costs and benefits of highway use and operation also supports (1) improved investment decisions including decisions to invest in mitigating adverse impacts of highway use; (2) more informed intermodal transportation policy decisions that reflect the full costs and benefits associated with operations of competing modes; and (3) improved regulatory decisions.

A comprehensive examination of the total costs and benefits of highways was beyond the scope of this study. Original work to develop new relationships between travel by different vehicle classes and various social costs associated with that travel likewise was outside the study scope. Data and analytical tools developed in other studies were adequate to assess costs associated with safety, noise, congestion, and many other social costs of highways, but no published studies adequately represented the costs of global climate change or air pollution.

The Intergovernmental Panel on Climate Change (IPCC) concluded that it could not endorse any particular range of values for the marginal damage of CO2 emissions on climate change, but noted that published estimates range between $5 and $125 ($1990 U.S.) per tonne of carbon emitted now. They noted, however, that this range of estimates does not represent the full range of uncertainty and that estimates are based on simplistic models that have limited representations of the actual climatic processes. The wide range of damage estimates reflects variations in model scenarios, discount rates and other assumptions. The IPCC emphasizes that estimates of the social costs of climate change have a wide range of uncertainty because of limited knowledge of impacts, uncertain future technological and socio-economic developments, and the possibility of catastrophic events or surprises. Because of the tremendous uncertainty in climate change costs, no estimates of costs related to highway transportation are developed for this study.

Because air pollution costs are so important in assessing both total and marginal costs of vehicle emissions, the Department currently is working closely with the Environmental Protection Agency (EPA) to estimate air pollution costs of highway travel. No reliable air pollution cost estimates could be developed in time to be included in this report, but the Department will present those costs in an addendum to this report.

While issues concerning social costs of transportation recently have received considerable attention, investment, regulatory, or pricing decisions that consider social costs of transportation must also consider highway benefits as well. Recent FHWA research has demonstrated substantial commercial benefits associated with highway system improvements. Highway investment has contributed substantially to productivity growth in a broad cross section of American industry and results in significant benefits to consumers as well in the form of reduced travel time, reduced vehicle operating costs, and expanded opportunities. This report does not examine benefits of highway investment in detail, but Appendix D to the main 1997 Federal HCAS report does reference recent work on commercial and other benefits of highway investment. The Department's biennial C&P Report summarizes the large user benefits of highway investment.

Marginal Highway Costs

In addition to developing improved methods to equitably allocate highway agency costs among different vehicle classes, the 1982 Federal HCAS also estimated how highway costs would be allocated among vehicles to promote economic efficiency. In general, the closer the price highway users must pay for each trip is to the total cost of that trip, the more efficient the utilization of resources.

Marginal costs reflect the change in total costs associated with an additional mile of travel by different vehicle classes. Marginal costs include costs of the additional trip to the highway user (e.g., added vehicle operating cost and travel time), costs to public agencies (added use-related 3R and maintenance costs) and external costs such as air pollution and congestion costs imposed on other motorists. Many marginal costs vary by either location or time-of-day. For instance, the incremental pavement deterioration associated with an extra mile of travel by particular vehicle classes depends on the region of the country and the highway system upon which that travel occurs. Costs associated with an additional mile of travel on rural Interstate highways are negligible, but costs on urban Interstate highways may be high, particularly if that travel is during peak periods when traffic volumes are at their highest.

With the exception of their own travel time, vehicle operating costs, and perhaps risks of having a crash, highway users normally do not consider many of these marginal costs when deciding whether to make a trip. In general, economic efficiency would be enhanced if users paid those costs they do not otherwise consider when deciding to make a trip.

Since many marginal costs vary according to when or where a trip is made, charges based on average costs will not necessarily promote improved economic efficiency. To achieve the greatest degree of efficiency, fees reflecting the marginal costs of trips made in various locations at various times of the day should be charged. Then, only trips whose benefits equal or exceed the full cost of the trip will be made. Implementing a Federal user charge system that could reflect locationally and temporally unique costs would be difficult, but it nevertheless is important to understand how current user fees compare to economically efficient ones.

Table 14. 2000 Marginal Pavement, Congestion, Crash, Air Pollution, and Noise Costs for Illustrative Vehicles Under Specific Conditions

Vehicle Class/Highway Class

Marginal Costs (cents per mile)

Pavement

Congestion

Crash

Air Pollution

Noise

Total

Autos/Rural Interstate

0

0.78

0.98

TBD

0.01

1.77

Autos/Urban Interstate

0.1

7.70

1.19

TBD

0.09

9.08

40 kip 4-axle S.U. Truck/Rural Interstate

1.0

2.45

0.47

TBD

0.09

9.08

40 kip 4-axle S.U. Truck/Urban Interstate

3.1

24.48

0.86

TBD

1.50

29.94

60 kip 4-axle S.U. Truck/Rural Interstate

5.6

3.27

0.47

TBD

0.11

9.45

60 kip 4-axle S.U. Truck/Urban Interstate

18.1

32.64

0.86

TBD

1.68

53.28

60 kip 5-axle Comb/Rural Interstate

3.3

1.88

0.88

TBD

0.17

6.23

60 kip 5-axle Comb/Urban Interstate

10.5

18.39

1.15

TBD

2.75

32.79

80 kip 5-axle Comb/Rural Interstate

12.7

2.23

0.88

TBD

0.19

16.00

80 kip 5-axle Comb/Urban Interstate

40.9

20.06

1.15

TBD

3.04

65.15

NOTE: (1) S.U. = Single Unit, Comb. = Combination;
(2) Costs reflect middle range.
(3) TBD - To be determined. Air pollution costs will be estimated in an addendum to this report.
(4) Total excludes air pollution costs.

Table 14 shows 2000 estimates of marginal pavement, congestion, crash, and noise costs for selected vehicles operating under different conditions. Estimates of marginal air pollution costs and revised total marginal costs will be included in the addendum to this report. Congestion costs are measured in terms of the value of excess travel time due to traffic congestion; crash costs include medical costs, lost productivity, property damage, pain and suffering, and other costs associated with highway crashes; and air pollution costs will be measured in terms of the health effects of various highway-related emissions. Marginal costs on rural and urban Interstate highways represent weighted averages of marginal costs estimated for a broad cross section of highways on those two systems. Thus marginal costs shown in Table 14 are typical for rural and urban Interstate highways, but on particular highway sections costs could vary substantially. Variations in marginal costs among vehicles and locations are not uniform; they are highly dependent on the type of cost being considered. Pavement, congestion, air pollution, and noise costs are higher in urban areas than rural areas, but crash costs are higher in rural areas, reflecting the higher fatality rates for travel in rural areas. Cost differences among vehicle classes also vary widely. The 80,000 pound 5-axle combination truck operating in urban areas, has marginal costs many times greater than those of autos operating in rural areas, but marginal costs for 60,000 pound combination trucks operating in rural areas are less than marginal costs of automobiles operating on congested urban Interstate highways. The addition of marginal air pollution costs could change these relationships somewhat.

Figure 10 shows high and low ranges of noise, congestion, and crash cost estimates along with best estimates (middle range) of those costs based upon the best research in each area. The large uncertainty surrounding these estimates suggests that caution should be exercised in making decisions that could significantly influence either user costs or highway investment based upon these social costs.

Highway marginal costs cannot directly be separated into Federal and non-Federal costs. To compare cost allocations based on efficiency criteria with Federal user fee payments by different vehicles, marginal costs must be distributed among different levels of government. The 1982 Federal HCAS distributed marginal costs in proportion to the shares of total HURs produced at each level of government on the grounds that this would leave the relative roles of each level of government for financing and charging for highways unchanged. The same approach is used in this study.

Table 15 compares the estimated Federal shares of marginal costs from Table 14 to Federal highway cost responsibility estimated in the equity analysis and to Federal user fees paid by different vehicles. Comparing Federal user fees with the Federal share of marginal costs reflects the efficiency of the user fee structure while comparing user fees to program cost responsibility reflects user fee equity. Marginal costs and program costs are estimated by different methods for completely different purposes and cannot be added together.

With the exception of automobiles, Federal program costs are equal to or greater than the estimated Federal share of marginal costs for rural travel by each of the vehicle classes. This reflects the fact that marginal costs of congestion, noise, and safety are relatively low in rural areas; overall agency cost responsibility in rural areas exceeds the sum of the marginal pavement costs plus these other marginal costs. In urban areas the opposite is true. Not only are costs of congestion and noise higher in urban than rural areas, but marginal pavement costs also are higher, reflecting among other things the higher construction costs in urban areas and the delay incurred by users when pavements are being rehabilitated. For most vehicle classes, Federal user fees exceed marginal and agency costs in rural areas, but are less than those costs in urban areas. Among the trucks examined, the heavier the vehicle, the closer that agency costs come to marginal costs in urban areas. In the addendum to this report marginal costs of air pollution will be added to marginal costs included in Table 15. This could change the relationship between marginal costs and user fee payments for some vehicle classes.

Table 15. 2000 Comparison of Assumed Federal Share of Marginal Highway Costs to Federal Agency Costs and Federal User Fees (cents per mile)

Vehicle Class/Highway Class

Marginal Costs

Federal Program Costs

Federal User Fees

Autos/Rural Interstate

0.5

0.3

0.6

Autos/Urban Interstate

2.5

1.4

0.6

40 kip 4-axle S.U. Truck/Rural Interstate

1.5

1.7

8.5

40 kip 4-axle S.U. Truck/Urban Interstate

8.4

3.7

8.5

60 kip 4-axle S.U. Truck/Rural Interstate

2.7

7.1

9.2

60 kip 4-axle S.U. Truck/Urban Interstate

14.9

12.7

9.2

60 kip 5-axle Comb*/Rural Interstate

1.8

2.7

6.4

60 kip 5-axle Comb*/Urban Interstate

9.2

6.7

6.4

80 kip 5-axle Comb*/Rural Interstate

4.5

7.8

6.9

80 kip 5-axle Comb*/Urban Interstate

18.2

17.5

6.9

NOTE: Marginal costs do not include air pollution costs

There currently are no Federal, State, or local user fees imposed that directly reflect congestion, air pollution, noise, or other external costs of highway use. There is interest, however, among some State and local agencies in exploring the feasibility of congestion or time-of-day pricing to help manage highway travel in certain corridors. For instance on State Route 91 in California, four additional lanes were constructed with private funds on which tolls are charged that vary by time of day. A project is underway in San Diego under the Congestion Pricing Pilot Program that will have tolls which vary according to the level of congestion.

Fees on "gross emitters," the most polluting of vehicles that are responsible for large percentages of total pollutants, have been suggested as a way to charge the worst polluters for air pollution costs they impose, and general increases in fuel taxes have also been suggested to address air pollution costs. A gross emitter tax could directly reflect air pollution costs, but questions of equity and other implementation issues have prevented such a tax from being implemented to date. General fuel tax increases implemented at the local level would not be as sensitive to factors affecting air pollution as the gross emitter tax, but could reflect regional differences in air pollution costs.

While there are opportunities at the local level to develop user fees that could reflect congestion, air pollution, and other external costs, implementing Federal user charges that could reflect the locational and temporal variability or most such costs would be difficult.

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