ODOT Highway Cost Allocation Study Review: Challenges in Including Regional Revenues

This report, written for the Oregon Department of Transportation (ODOT) by Portland State University’s Northwest Economic Research Center, outlines the challenges that regional revenue collection poses for ODOT’s biennial Highway Cost Allocation Study (HCAS). The HCAS assesses the relative burdens of light and heavy vehicle classes on state infrastructure, in relation to the amount of revenue that said vehicle classes generate. In other words, it ensures that light vehicles and heavy vehicles are “paying their share” of state transportation expenditures. Differences in vehicle traffic or differential impacts to vehicle classes are the root cause of most of the problems that local revenue collection mechanisms pose. When revenues from a specific location or mechanism hit one class more heavily than the other, it becomes difficult to determine whether or not the two broad classes are in fact generating revenue that balances out their share of expenditures. If said local revenues are included in the HCAS, then the outcome of the study deviates from the ideal balanced ratio, and if they are not, then the HCAS ratio is incorrect. One potential solution to this problem is to calculate HCAS ratios for different regions within the state. However, as this would essentially require conducting the HCAS multiple times, there would be additional labor, especially in cases where data would need to be parsed down to the appropriate scale. In some cases, for instance when forecasting revenues, it would be necessary to actually conduct a forecast (if one does not exist), or use assumptions to adjust from the state forecast. Both approaches would introduce another level of uncertainty to the study ratio. Additionally, there are components to the model that would require reexamination and process adjustments. For instance, the current approach to estimating tax avoidance assumes that a certain flat percent of vehicle miles traveled within the state are fueled by gas purchased out of state (and therefore not subject to the tax). If regions are considered, then different rates in border areas would likely be reasonable. Estimating these rates is distinct separate analytical step, and there are other components of the tax avoidance and evasion protocol that might require similar separate estimations