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1 SUMMARY Costs of Alternative Revenue-Generation Systems This report was completed as part of NCHRP Project 19-08, which was designed to mea- sure the administrative, collection, and enforcement costs of alternative revenue-generation systems in transportation. Five revenue-generation systems are evaluated in this report: motor fuel taxes, tolling, vehicle miles traveled (VMT) fees, cordon/congestion pricing, and parking fees. Motor fuel taxes, which have been levied in the United States since 1919, have become the primary taxing mechanism used to fund the construction and maintenance of the nation's 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, however, have been proposed and are under construction around the country. In an effort to search for alternative revenue sources that can mitigate further decline in highway trust funds, interest in VMT fees and cordon/congestion pricing has been on the rise. Though VMT fee systems have been tested and proposed, no such systems are currently in use that levy fees for all vehicle types. Consequently, there is no hard cost data available except information developed for pilot tests or submitted by companies competing to build and oper- ate the proposed VMT fee system in the Netherlands. This report presents cost data collected for each of the aforementioned five revenue systems and presents a comparative analysis of them. For motor fuel taxes, the cost analysis is focused on eight states, which were chosen based on a set of criteria (e.g., geographic diversity, point of taxation). As part of this analysis, capital and/or operational cost data for 14 tolling agen- cies have been collected. These agencies include older turnpike systems, more recently estab- lished toll agencies, and private companies that operate toll facilities under concession agreements. For VMT fees, the costs examined in this report are based on the data for a pro- posed system in the Netherlands. For motor fuel taxes and tolling, 3 to 5 years of cost data have been collected. Cost data were also collected for four cordon pricing systems (London, Oslo, Stockholm, and Milan) and one parking pricing system (Westminster, United Kingdom). To normalize the comparisons among the three revenue systems for which detailed infor- mation was available (motor fuel taxes, tolling, and VMT fees), the following unit measure- ments have been used in the analysis: (i) average cost/lane mile, (ii) average cost/centerline mile, (iii) average cost/thousand VMT, (iv) average cost/transaction (or average cost/vehicle when data are available), and (v) percentage of total costs to total revenues. Table S1 provides a summary of the cost comparison for 2007. Based on the results presented in Table S1, a number of observations can be made for the costs of operating the five revenue-generating systems. Note that operating costs, as used here, are composed of administrative, collection, and enforcement cost elements. See Section 4.1 for
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2 Table S1. Cost comparison between revenue systems. Fuel Taxes1 Tolling1 VMT Fees2 Cordon Pricing Parking Pricing Average Cost Average Cost Average Cost Average Cost Cost of Single over States over Agencies over Providers over Providers Provider $ per lane mile $50 $150,595 $4,042 N/A N/A $ per centerline mile 108 829,991 8,245 N/A N/A $ per 1,000 VMT 0.10 38.58 6.26 N/A N/A $ per vehicle 1.22 N/A 75.16 N/A N/A $ per transaction N/A 0.54 6.95 N/A N/A % of total revenue3 0.92% 33.5% 6.6% 38.7% 56.6% (1) For the fuel tax and tolling systems, data were collected from 2003 to 2007. To make a consistent and accurate comparison between the alternative revenue systems, only 2007 data were used in developing these averages. (2) For the VMT fee systems, there is only 1 year of data available for comparison, and it is based on the revenue forecast to be collected in the Netherlands. (3) System-generated revenues only. a definition of each cost element and an overview of the cost accounting framework developed for this study. Principal observations derived from Table S1 are as follows: · The fuel tax system is the most cost-effective revenue system among those examined in this report and has the lowest operating cost for all unit measurements. The operating cost for fuel taxes is only approximately 1% of tax revenue and averaged approximately $1.20 per vehicle to operate and manage. · Although its annual operating cost may reach $75 per vehicle, the cost for the proposed VMT system is still reasonable when measured by the share of cost to revenue (approxi- mately 7% in the Netherlands). It would be a larger share of typical revenues in the United States. Further, the capital cost will be quite high if the system must be installed for the col- lection of VMT fees. · Although it might cost only $0.54 per transaction to operate and maintain the tolling sys- tems, tolling agencies spent 33.5% of revenues for toll collection, administration, and enforcement activities in 2007. · The operating costs for cordon pricing are comparable to tolling, at 38.7%. · The costs to operate the Westminster parking pricing system are 56.6% of total revenue. Thus, of the five revenue systems, parking pricing was the most expensive to operate based on the very limited data collected for this study. · For VMT fee systems, the biggest spending item is administration cost, which may reach 3.4% of revenue (based on the Netherlands system). Comparatively, collection and enforcement costs for maintaining a VMT fee system are relatively small. They may be near to or less than 1% of revenue. Collection costs for tolling systems are much larger than administration and enforcement costs. The evidence from the tolling agencies examined in this report indicates that approximately 20% of revenue may be spent on collecting tolls. This report also examines several technologies with the potential to support the implemen- tation of alternative revenue-generation systems for transportation. The selected technologies include the IntelliDriveSM system, satellite-based and cellular-based fleet management sys- tems (FMSs), commercial vehicle information systems and networks (CVISNs), and elec- tric cars/smart charging software. The status of these systems varies. Some of them are still in the development and testing stage, such as IntelliDrive technology, while others have been deployed or tested for trucks only, such as FMS and CVISN. For each system, the report discusses its objective, specifications, technology components used, and current status in terms of research, testing, and deployment. Table S2 summarizes and highlights the potential of and obstacles faced by each system examined in the report.
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3 Table S2. Characteristics of the potential alternative revenue-generation systems. System Potentials Obstacles IntelliDrive system Adds two-way communication Still in the testing stage capabilities to vehicles and links Several years away from them with transportation broad deployment infrastructure Has a tolling and electronic payment subsystem Uses dedicated short-range communication (DSRC) and GPS FMS Capable of tracking vehicles Needs to be tested on a large Uses satellite- and/or cellular-based number and variety of vehicles technologies May need to merge satellite- based and cellular-based communication technologies CVISN Successfully deployed in more than Lacks ability to track vehicle 20 states miles traveled and protect Cost-effective design achieved by privacy linking together existing states' Not originally designed to information systems support revenue-generation mechanisms Electric cars and Reduced emissions (zero tailpipe Uncertainty of battery smart charging emissions) charging/switching software Alternative fuels Costs of batteries Application of "smart charging" Uncertainty regarding the software to manage the supply and collection and distribution of demand of the electric grid and to utility taxes upload vehicle information This report includes a sensitivity analysis, which was designed to examine the impacts on operating costs caused by changing certain parameters (e.g., scale, technology costs, enforce- ment costs). It also assesses uncertainties and business risks involved in alternative revenue- generation systems and discusses issues related to evasion and implementation. Key findings of the sensitivity analysis include · Demand for motor fuel is relatively unresponsive to price; however, there are a number of other factors, including inflation, market penetration of alternative fuels, and increased motor fuel efficiency, that hold the potential to significantly erode the motor fuel tax in the next 20 years. While there is evidence to suggest that motor fuel taxes suffer from a persist- ent problem with evasion, there are trade-offs between the costs of enhanced enforcement and increased collections through reduced evasion. With that noted, the FHWA reported that it receives $10 to $20 for each dollar spent on audits and criminal prosecutions (FHWA, 1999), and a state-level study estimated that diesel tax revenues were enhanced at the rate of $321 per auditing hour (CSG & CGPA, 1996). · Tolling demand elasticity estimates are unique for each facility explored in this study, rang- ing from .02 to .42 (.2% to 4.2% reduction in demand for every 10% increase in price) for California I-15 to .90 to 1.00 for California SR 91. Economic conditions present at communities adjacent to toll roads, facility length, and feeder/competing routes also affect toll-collection rates and revenues. · Economies or diseconomies of scale and scope (e.g., the number of vehicles, geographic coverage, and range of uses for the system) affect both the cost and revenue of a VMT fee system. VMT systems have large costs associated with the onboard unit (OBU) needed to
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4 determine the location of vehicle use and the distance traveled. Thus, the cost of each sys- tem depends to some extent on the technology required to implement it. While the OBU will be a major cost of a VMT system, there is widespread expectation that this cost will continue to decline. For example, the cost estimate for the proposed Dutch system declined from 6180 ($225) per unit to a range of 685 to 6140 ($106 to $175) in roughly 1 year (Min- istry of Transport, 2009). In addition, most of the companies responding with cost esti- mates projected lower cost per unit in the future due to technological advances. Privacy and security measures are also important considerations, and failure of such systems would result in additional costs and other consequences. · With the exception of Singapore and Bergen, every cordon pricing system was established within the past two decades. Due to their relatively recent establishment, the newer conges- tion and cordon pricing systems use electronic collections systems and video enforcement technologies. This reduces the potential range of implementation options, resulting in a nar- rower range of collection costs. However, it should be noted that the sample size for cordon systems is smaller than for toll systems, cordon pricing systems have differing objectives (e.g., revenue generation, reduced air emissions, congestion relief), cities with cordon pric- ing systems have differing levels of transit service, and cities with congestion pricing have different growth patterns and geographic constraints. Each of these factors affects both demand elasticity and the costs of implementing cordon pricing systems. · There has been a great deal of analysis regarding the demand elasticities of parking rates, with results that include 0.46 (4.6% reduction in demand for every 10% increase in price) for single occupant vehicles in Portland, Oregon (Dueker, Strathman, and Bianco, 1998) and 1.2 for parking facilities in Chicago (Feeney, 1989). This broad range of demand elas- ticity values reflects the relative availability of lower-priced or free alternatives, the ability to shift parking duration, the ability to shift transportation mode, income, and other factors. The research results presented in this report are designed to provide information needed not only to promote a better understanding of the costs associated with each of the revenue-gener- ation systems but also to guide public- and private-sector decision makers and stakeholders in formulating policies. With this in mind, the report concludes with a plan for implementing research findings.