2. Definition of Transportation Revenue and Expenditure
2.1 Transportation Revenue
Within this report, the government refers to Federal, State, and local governments and also includes government enterprises that are government agencies such as the Panama Canal Commission and mass transit agencies. Government enterprises covered in this report pay most of their outlays by selling goods and services to the public and maintaining their own separate accounts. They also receive funds from Federal, State, and local governments for financing some of their outlays. Although some government enterprises such as Amtrak® also receive financial assistance from public agencies, their revenues and expenditures are not included in this report because they are not government agencies. However, if a transportation related government enterprise receives any government financial assistance such as Federal grants to Amtrak®, those grants are included in transportation expenditures.
To build and maintain the U.S. transportation infrastructure, the government relies on revenue generated and allocated for transportation purposes. The revenue dedicated to transportation is referred to as transportation revenue. Transportation revenue includes taxes and charges (i.e., fees) collected by the government from transportation and non-transportation-related activities and allocated to fund transportation programs. Income from investing transportation funds and receipts from compulsory payments to the government (i.e., fines and penalties) and donations from corporations and individuals for the cause of transportation are also treated as transportation revenue. For the purpose of reporting, transportation revenue is classified and grouped into three categories: own-source revenue, revenue directed to other uses, and supporting revenue.
Own-source revenue: Refers to taxes and charges levied on transportation-related activities and used specifically for transportation purposes. Revenue generated in this category includes the following:
- Exercise taxes such as motor fuel taxes and aviation taxes.
- Property taxes such as motor vehicle taxes.
- Income taxes such as corporate taxes paid by transportation companies.
- Charges such as tolls and motor vehicle license fees.
- Fines and penalties such as speeding and parking violation tickets.
- Investment income such as interest income from Highway Trust Fund balance.
- Income from concession agreements where publicly owned transportation infrastructure is operated on a concession basis by a private company.
Revenue directed to other uses: Includes funds that are raised from transportation-related activities but used to finance programs other than transportation. An example is receipts generated from motor fuel taxes that are directed to the general fund for other uses.
Supporting revenue: Includes funds that are collected from non-transportation-related activities but dedicated to support transportation programs. Examples include receipts received by State and local governments from sales or property taxes to finance transportation projects.
Figure 1 illustrates major categories of transportation revenue sources and uses. A more detailed discussion of revenue items within each of the three revenue categories is presented in Appendix A. The classification of transportation revenue into these three categories enables the tracking of critical relationships in public transportation financing. For example, it provides evidence on how much revenue is generated from transportation activities by looking at own- source revenue and revenue directed to other uses. It also shows how much the government spends on transportation by looking at own-source revenue and supporting revenue.
2.2 Transportation Expenditure
As one of the key players in building and operating the U.S. transportation system, the government is responsible for expenditures incurred in capital investment, as well as the operation, maintenance, and safety of the system. Transportation expenditures refer to outlays paid by the government for providing an efficient and safe transportation system, regardless of the sources of funding and of agencies that make payments.1
In addition, transportation expenditures include outlays of government as a user of the transportation system, only if the outlays have direct relevance to the government’s role as a provider of the infrastructure system. For example, government transportation agencies (i.e., mass transit agencies) assist people in commuting between residences and work places. As a result, the funds spent for that purpose are counted as transportation expenditures. Moreover, wherever there is an important transportation related public interest at stake, the special funding provided by the government to private companies to cover their capital and operating costs for the public interest is included in transportation expenditures. An example of such type of expenditure is the compensation to air carriers for their losses incurred as a result of the interruption of civil aviation after the September 11, 2001 event.
In this report, transportation expenditures are classified by the following categories:
- Level of government: Includes Federal, State, and local governments.
- Mode of transportation: Includes highway, transit, railroads, air, water, pipeline, and general support.
- Revenue sources: Include own-source revenue, supporting revenue, grants, and borrowing.
- Purpose of spending: Includes expenditures in capital investment, operations, and maintenance.
Transportation expenditures can be reported by the classification of one category or cross- classification of several categories. Figure 2 illustrates the relationship between revenue sources and expenditures.
2.2.1 Intergovernmental Transfer of Funds—Grants
A substantial amount of funds are transferred between Federal, State, and local governments in the form of grants. Grants refer to unrequited payments received from other governments and are given for specific projects or programs for general financial support or for any other purpose. They may be transferred in cash or in-kind. For example, FHWA provides funds to State and local governments through the Federal-aid highways program for construction and improvement of the urban and rural highway system. State governments provide financial assistance to local governments for specific programs or unspecified general purposes. A portion of certain types of tax revenue collected by States is redistributed to local governments where they are collected. Local governments also transfer funds to State governments, especially in the form of matching share of funds for projects administered by the State.
To avoid the double counting, grants received by government agencies will be taken into account as expenditures, while grants provided by government agencies will not be counted as expenditures. For example, grants received by a local government will be counted as part of transportation expenditures by the local government, but they will not be counted as Federal and State transportation expenditures.2
1 Expenditure by non-transportation government agencies on purchasing transportation services is not included because the expenditure is for the consumption of transportation services rather than for the provision of transportation services.
2An assumption is that government agencies will spend grants received from other levels of government in the same year as they receive them.