Federal Highway Cost Allocation Study

DEPARTMENT OF TRANSPORTATION

Federal Highway Administration

[FHWA Docket No. 95-6]

Federal Highway Cost Allocation Study

AGENCY: Federal Highway Administration (FHWA), DOT.

ACTION: Notice; request for comments.

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SUMMARY: This notice requests public comment on issues related to a new

Federal highway cost allocation study (HCAS) that the FHWA is

initiating. Comments on recommendations emanating from an October 1994

cost allocation workshop are requested, in addition to comments on

other issues that should be considered in planning and conducting the

new study. Preliminary copies of the workshop proceedings are available

from Mr. James March, who may be contacted at the phone number shown

below.

DATES: This docket will remain open until the study is completed.

However, in order for comments responding to issues raised by this

notice to be considered during critical early stages of the study, they

should be received no later than April 11, 1995.

ADDRESSES: Submit written, signed comments to FHWA Docket No. 95-6,

Federal Highway Administration, Room 4232, HCC-10, Office of the Chief

Counsel, 400 Seventh Street, SW., Washington DC 20590. All comments

received will be available for examination at the above address between

8:30 a.m. and 3:30 p.m., Monday through Friday, except Federal

holidays. Those desiring notification of receipt of comments must

include a self-addressed, stamped envelope or postcard.

FOR FURTHER INFORMATION CONTACT: Mr. James March, Office of Policy

Development, at (202) 366-9237 or Mr. Steven Rochlis, Office of Chief

Counsel, at (202) 366-0780, Federal Highway Administration, Department

of Transportation, 400 Seventh Street, SW., Washington, DC 20590.

Office hours are from 7:45 a.m. to 4:15 p.m., e.t., Monday through

Friday, except Federal holidays.

SUPPLEMENTARY INFORMATION:

Background

The last comprehensive Federal HCAS was conducted from 1978 to

1982, pursuant to Section 506 of the Surface Transportation Assistance

Act (STAA) of 1978 (Pub. L. 95-599). That section stipulated that the

study was to investigate the distribution of Federal highway program

costs among the various classes of highway vehicles that occasion such

costs. It also called for an assessment of current Federal user charges

and recommendations for more equitable user charge alternatives. In

addition, Section 506 directed the Congressional Budget Office (CBO) to

develop guidelines for the cost allocation study, including procedures

to be employed in determining the equitable allocation of highway costs

and the information needed to apply those procedures.

Section 506 and the subsequent CBO guidelines established the

general scope of the 1982 Federal highway cost allocation study.

Specifically, the study was to focus on evaluating Federal highway

program costs, not highway costs incurred by State and local

transportation agencies. Also, the Federal user fee structure was to be

evaluated on the basis of equity rather than economic efficiency, with

equity measured in terms of the ratio of Federal user fees payments to

Federal program costs occasioned by different vehicle classes.

The CBO guidelines listed several factors underlying the need for

the 1982 Federal cost allocation study, including the effect of energy

policies on fuel consumption and tax revenues, the shift in the Federal

highway program's emphasis away from new construction and toward repair

and rehabilitation, the long time that had elapsed since the last

comprehensive Federal cost allocation study, and the fact that methods

used in previous studies could be improved upon in a number of

technical aspects and in the way they reflected the new mix of Federal

highway programs.

Similar factors are relevant today and suggest that a new Federal

cost allocation study would be timely. The last comprehensive highway

cost allocation study was completed over 12 years ago and much of the

data upon which that study was based are outdated. Energy and

environmental initiatives continue to affect fuel tax receipts, and

considerations leading up to reauthorization of the Intermodal Surface

Transportation Efficiency Act (ISTEA) of 1991, Public Law 102-240, 105

Stat. 1914, may require changes in current highway user fees. The ISTEA

made fundamental changes in the structure of the Federal-aid highway

program that have significant implications for cost allocation.

Proposals currently being discussed to consolidate Department of

Transportation programs could have even greater ramifications for

highway cost allocation.

The General Accounting Office recommended in its 1994 report,

Highway User Fees: Updated Data Needed to Determine Whether All Users

Pay Their Fair Share, (report number GAO/RCED-94-181) that a new

Federal cost allocation study be conducted as the basis for assessing

the equity of Federal highway user fees. Without explicit Congressional

guidance on the scope of a new cost allocation study, and recognizing

the many changes in the highway program since the last study was

completed, the FHWA conducted a two-day workshop in October 1994 to

discuss a range of policy and technical issues that might be considered

in the study. Over 75 persons representing Federal and State

transportation agencies, transportation industries, academic

institutions, consulting firms, and other organizations participated in

the workshop. Preliminary proceedings of that workshop, which include

many specific recommendations made by workshop participants, will be

available for inspection in the docket; copies may be requested by

calling Mr. James March at the phone number listed above under ``For

Further Information Contact:''. During the course of the cost

allocation study, working papers and other interim work products will

be placed in the docket.

Among other things, workshop participants recommended that the cost

allocation study consider:

(1) External costs of highway use and operation, such as

congestion, accident costs, and air and noise pollution costs, as well

as traditional highway agency costs;

(2) Alternative cost allocation methods, especially a marginal cost

approach, along with traditional cost allocation methods;

(3) Highway-related revenues and expenditures for all levels of

government, not just Federal revenues and expenditures; [[Page 8110]]

(4) Implications for highway cost allocation of multi-modal

investment programs; and

(5) Life-cycle cost analysis principles for estimating future

highway investment requirements.

Participants also recommended that, while many new issues deserve

consideration in the cost allocation study, a primary focus of the

study should be on allocating Federal costs using methods consistent

with the 1982 study.

Comments are requested on these recommendations and on other

technical issues and recommendations included in the workshop

proceedings.

A preliminary plan for the new cost allocation study has been

developed. The study will be divided into four phases: (1) Issues

analysis and workplan development; (2) update and refinement of highway

cost allocation data and methods; (3) analysis of highway cost

responsibility and the equity of the user fee structure; and (4)

evaluation of alternative cost allocation procedures. Work envisioned

under each phase is summarized below. Comments are requested on this

plan.

Phase I--Issues Analysis and Workplan Development

Many issues were raised at the October workshop concerning the

scope of the next cost allocation study and the advantages and

disadvantages of pursuing alternative highway cost allocation methods.

Several issues could have major implications for the direction of the

next study, including: (1) The extent to which marginal costs can and

should be reflected in the study; (2) the extent to which revenues and

expenditures by all levels of government can be estimated and

incorporated in the study; and (3) the extent to which cost allocation

can be applied to multi-modal transportation investment programs that

will replace mode-specific investment programs in the future. White

papers will be prepared to evaluate issues related to the analysis of

these and other concerns in the next cost allocation study. An

important factor that will affect the extent to which these issues can

be considered is the availability of needed data and analytical

methods. An assessment of data needs to evaluate the emerging cost

allocation issues will be conducted during this initial phase of the

study.

The FHWA has maintained a continuing research program to update

highway cost allocation data and methods. Research has focused

primarily on refining data and methods used in the 1982 study. A review

of current cost allocation data and methods is already underway.

Working papers will be prepared which discuss current methods for

analyzing cost responsibility for: Pavement, bridge, and other highway

costs; sources of data on vehicle miles of travel, operating weight

distributions, and registered weight/operating weight distributions;

estimates of highway user revenue contributions by each vehicle class;

and other aspects of highway cost allocation. Additional research and

data needs will be discussed in those working papers.

At the end of the first phase, the study work plan will be reviewed

based on analysis and data needs identified in the white papers and

technical working papers. Input from internal and external review

committees will be sought.

Phase II--Update and Refine Highway Cost Allocation Data and

Methods

Based upon the revised study plan developed in Phase I, data and

analytical tools will be updated and refined. Among the areas where

significant work already can be foreseen are improving pavement cost

models, improving the consideration of life cycle costs, improving

estimates of highway travel by different vehicle classes, improving

operating weight distributions for different vehicle classes, improving

estimates of operating weight/registered weight distributions, and

improving other data needed to estimate revenues generated by different

highway user fees. Data and information needed to apply alternative

cost allocation approaches identified at the workshop will be

collected, consistent with the relative importance of each approach and

the resources available.

Phase III--Analyze Highway Cost Responsibility and the Equity of

Alternative User Fee Structures

In this phase information from Phase II will be used to analyze the

highway cost responsibility and user fee contributions of different

vehicle classes and to evaluate the equity of the current user fee

structure. Alternative user fee structures will be analyzed to evaluate

improvements in equity and efficiency that potentially could be

realized through changes in highway user fees. Sensitivity analyses

will be performed throughout the course of this phase to evaluate the

most critical factors that affect cost allocation results.

Phase IV--Evaluate Alternative Cost Allocation Procedures

In this phase alternative approaches to highway cost allocation

will be evaluated, including application of a marginal cost approach,

analysis of the responsibility of different vehicle classes for

external highway costs and benefits, estimates of the overall

responsibility of different vehicle classes for highway costs at all

levels of government, evaluation of the overall equity of highway user

fees imposed by all levels of government, and consideration of applying

cost allocation principles to costs and revenues for all surface

transportation modes. The level of analysis for these issues will

depend on several factors, including the availability of data, the

relevance of each issue to broader policy objectives, and the time and

resources available to analyze the issues. Docket comments will be

considered in evaluating the type and level of analysis required for

these and other emerging cost allocation issues.

In addition to comments on this broad study plan, comments also are

requested on the following questions that arose from the cost

allocation workshop:

1. ISTEA provides greater flexibility in the use of Federal-aid

highway funds for transit and other expenditures not directly related

to the construction, operation, and maintenance of the highway system.

Many of these newly eligible costs are intended to promote broad

societal goals that extend beyond transportation goals. Should

expenditures of Federal-aid highway funds for such non-transportation

costs be allocated to highway users, and if so how? Is there a

rationale for allocating certain transit expenditures to highway users

and not others? Should all highway users share equally in such costs?

Should fuel taxes for deficit reduction be considered in cost

allocation, and if so, how?

2. Previous cost allocation studies have been criticized for using

different approaches to allocate different types of costs. Should cost

allocation methods be varied according to the types of costs and

differences in the incidence of those costs among highway users or

should the same approach be used for all types of costs?

3. The workshop did not explicitly consider alternative user fees,

but user fee issues will be important considerations in the cost

allocation study. Several alternative highway user fees were analyzed

in the 1982 cost allocation study and in subsequent FHWA studies.

Comments are requested on the advantages and disadvantages of potential

modifications to the existing user fee structure including new types of

fees that might be imposed, on the desirability of maintaining current

tax exemptions such as for various [[Page 8111]] alternative fuels, and

on other user fee issues.

Authority: 23 U.S.C. 315; 49 CFR 1.48.

Issued on: February 3, 1995.

Rodney E. Slater,

Federal Highway Administrator.

[FR Doc. 95-3425 Filed 2-10-95; 8:45 am]

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