Federal Highway Revenue Estimation: Cost Allocation Perspective

Abstract

As part of a report on key cost allocation factors prepared for FHWA, a federal highway revenue estimation methodology is presented. Cost allocation studies seek to compare cost-revenue ratios for different vehicle classes from the standpoint of equity (and efficiency). Such an analysis is meaningful only when the estimates of the payments made by each vehicle class and estimates of their cost responsibilities are reasonably accurate. However, on the revenue side, accurate estimates are difficult to generate since Federal Highway Trust Fund revenues are not directly collected from the consumers. The revenue estimation methodology used in the federal highway cost allocation study (1982) and the developments since then are outlined. The question of what improvements in revenue estimation are needed from a cost allocator's perspective is then addressed. Suggestions include identification of optimal levels of disaggregation of vehicle classes, creation of more accurate information systems, and stochastic forecasting models. There is a need to analyze the effect of inaccuracies in the basic data on the cost-revenue ratios for the vehicle classes. Also recommended is the use of risk analysis methods in forecasting, to help decision makers by providing information on the uncertainties involved. Changing transportation patterns, including the growth of intermodal transport, the diversion of highway revenues to the general budget, and the link between user taxes and investment expenditures, are some of the other issues that should be addressed in the future.