IV. Allocation Formulas

IV. Allocation Formulas

Because there are several forms of transportation of highway and air transportation, federal revenues and expenditures for the highway and air transportation systems are allocated to the various forms of transportation that share them. The allocation formulas for air and highway revenues and expenditures, especially the allocation of highway trust fund expenditures, are important to this subsidy analysis. While the cost studies these formulas were based on relating trust fund revenues and expenditures to major classes of system users, these classes do not necessarily correspond to different forms of transportation. The vehicle classes for example include numerous classes of trucks, all of which were considered one form of transportation and, being freight, were excluded from this analysis. In the 1997 Federal Highway Cost Allocation Study, there are 3 non-commercial passenger vehicle categories, autos, motorcycles, and other light vehicles, all of which we aggregated into the highway passenger vehicle form of transportation[10]. By contrast, the bus category, which is one vehicle category in the Allocation Study spans multiple forms of transportation. In the Allocation Study this category includes school buses, transit buses, and intercity buses. We use these same subcategories to allocate revenues and expenditures. We used bus registration and usage data to break the category into those subcategories, as the FHWA Allocation Study did not itself break down the bus category by subcategory.

A potential obstacle in using cost allocation estimates for calculating subsidies is the need to account for expenditures used in building and maintaining restricted use facilities, such as HOV lanes or exclusive bus lanes, whose cost should be assigned to the particular modes that are allowed to use them. These expenditures frequently are part of larger construction and maintenance projects, and are difficult to isolate. This study does not separately allocate the use of such pieces of infrastructure to multiple forms of transportation (e.g. buses and high-occupancy vehicles) because data on how many of each type of vehicle use such facilities are not available. Instead we allocated expenditures on these facilities using the general formulas for highway infrastructure.

A similar problem arises when looking at intermodal connections. For example, should part of the cost of an access road to an airport or a light-rail system stopping at the airport be allocated to the air passenger mode? These are issues that are not included in this analysis, but should be considered for future work in this area. In this study, costs for a highway or transit line leading to an airport are attributed to the highway and transit modes, respectively.

We have been able to make some minor changes and improvements to the current allocation estimates to refine the cost allocations for transit and intercity buses, using Vehicle Miles Traveled to break down vehicle types into ones relevant to our modal analysis.

We have also applied the FHWA allocation formulas to non-FHWA funded highways (Forest Service funded highways, for example.) While allocation formulas specific to these highways would be preferable, they have not been developed and would make a minor impact on the overall highway allocation.

The issue of allocation of air revenues and expenditures is less complicated. Costs and revenues are allocated among passenger and freight infrastructure and services (similar to the division between highway passenger vehicles and freight trucks) and general aviation. The detailed summaries of the airport and airway trust fund cash flow accounts do not separate out freight versus passenger revenue or expenditures. However, cost allocation studies were conducted in the past, the latest one completed in 1995. That study allocates Federal Aviation Administration costs into six commercial user categories, three general aviation categories, and two other public user categories[11]. The user categories are detailed enough to distinguish between passenger and freight services. The cost allocation estimates, converted to percentages, can be used to allocate aviation expenditures among commercial air passenger, commercial air freight, and general aviation users.

We have not used an allocation formula for railroads, because rail infrastructure is in most cases privately owned, and rail carriers make explicit payments to the owner of the rail infrastructure for the use of the infrastructure. Passenger railroads such as Amtrak pay for their use of freight railroad infrastructure, and freight railroads pay for their use of Amtrak infrastructure in the Northeast Corridor. We have assumed that these payments adequately reflect the value of the infrastructure usage.

[10] Federal Highway Administration, 1997 Federal Highway Cost Allocation Study, August 1977.

[11] GRA Incorporated, A Cost Allocation Study of FAA’s 1995 Costs, FAA Office of Aviation Policy and Plans, U.S. Federal Aviation Administration, March 1997.