RESULTS OF THE KENTUCKY STATE HIGHWAY FINANCE STUDY

THE AUTOMOTIVE SAFETY FOUNDATION'S ENGINEERING APPRAISAL OF KENTUCKY'S ROADS AND STREETS DISCLOSED NUMEROUS DEFICIENCIES. IF THE VALUE OF THE HIGHWAY DOLLAR REMAINS CONSTANT OVER THE NEXT 20 YEARS, AN AVERAGE OF ABOUT $160 MILLION A YEAR WILL BE NEEDED FOR MODERNIZATION. ESTIMATED REVENUES UNDER 1955 LAWS, COMBINED WITH FEDERAL AID, PROBABLY WOULD BE SUFFICIENT TO COMPLETE THE IMPROVEMENT PROGRAM IN 20 YEARS, BUT THEY WOULD NOT BE ADEQUATE TO FOLLOW THE RECOMMENDED EXPENDITURE PATTERN, WHICH CONTEMPLATES COMPLETION OF TWO-THIRDS OF THE PROGRAM IN THE FIRST 10 YEARS. HIGHWAY COSTS MAY WELL RISE BY AN AVERAGE OF AT LEAST 3 PERCENT ANNUALLY. IF SO--ASSUMING THE 20-YEAR PROGRAM IS ADOPTED--CERTAINLY A USER TAX INCREASE, AND PROBABLY CREDIT FINANCING, WOULD BE REQUIRED. THE PRIMARY PURPOSE OF THE HIGHWAY FINANCE STUDY WAS TO DETERMINE HOW THE COMMONWEALTH AND ITS SUBDIVISIONS COULD MOST ECONOMICALLY FINANCE THE RECOMMENDED 20-YEAR PROGRAM. THE DIVISION OF COSTS BETWEEN HIGHWAY USERS AND NONUSERS WAS ACCOMPLISHED BY FIRST DETERMINING THE NONUSER SHARE ON THE BASIS OF PAST REVENUE CONTRIBUTION AND THEN ASSIGNING THE RESIDUAL AMOUNT TO USERS. UNDER THIS SCHEME, USERS WOULD BE REQUIRED TO PAY ABOUT 85 PERCENT OF THE TOTAL COST EXCLUSIVE OF FEDERAL AID. THE INCREMENTAL COST APPROACH WAS EMPLOYED TO OBTAIN A DIVISION OF USER EXPENDITURE RESPONSIBILITY AMONG USERS OF VARIOUS TYPES AND SIZES OF VEHICLES. A COMPARISON OF 1965 INCREMENTAL ASSIGNMENTS WITH 1965 TAX CONTRIBUTION ESTIMATES INDICATES THAT, WITH NO CHANGE IN 1955 TAX LAWS, SERIOUS INEQUITIES WOULD RESULT. DOMESTIC VEHICLE OPERATORS, IN TOTAL, WOULD CONTRIBUTE SLIGHTLY MORE THAN THEIR RELATIVE RESPONSIBILITY WHEREAS FOREIGN VEHICLE OPERATORS, IN TOTAL, WOULD MEET ONLY 90 PERCENT OF THEIR RESPONSIBILITY. AMONG THE TYPES OF DOMESTIC VEHICLES, PASSENGER CARS AND LIGHT NONFARM TRUCKS WOULD BE OVERTAXED AND FARM TRUCKS AND THE HEAVIER NONFARM TRUCKS WOULD BE UNDERTAXED. THE INCREMENTAL RELATIONSHIPS WERE ESTABLISHED BEFORE NONUSER CHARGES AND FEDERAL AID WERE DEDUCTED, THAT IS, THE ASSIGNMENT OF RELATIVE RESPONSIBILITY WAS DETERMINED INDEPENDENT OF THE METHOD OF FINANCING. EQUITY, ADEQUACY, MITIGATION OF ADMINISTRATIVE AND COMPLIANCE PROBLEMS, AND MINIMIZATION OF INTERFERENCE WITH TRANSPORTATION RECEIVED ATTENTION IN TAX PLANNING. THREE USER-TAX PLANS EMBODYING VARIOUS COMBINATIONS OF MOTOR FUEL, REGISTRATION, AND THIRD- STRUCTURE TAXES WERE DEVISED. THE MOTOR FUEL TAX WOULD ACCOUNT FOR ABOUT 83 PERCENT OF THE USER REVENUE UNDER EACH PLAN. A DIESEL FUEL TAX RATE DIFFERENTIAL OF 50 PERCENT WAS FOUND NECESSARY TO ELIMINATE INEQUALITY. FOR-HIRE CARRIERS WERE ASSIGNED THE COST OF REGULATORY FUNCTIONS, AND THIS ADDED RESPONSIBILITY WOULD BE RECOUPED THROUGH A UTILITY CERTIFICATE FEE. IF HIGHWAY COSTS RISE BY AS MUCH AS 3 PERCENT A YEAR, A GASOLINE TAX AS HIGH AS $0.11 PER GALLON MIGHT BE REQUIRED FROM ALL USERS. IN ADDITION TO FORMULATING TAX PLANS, POSSIBLE CREDIT FINANCING WAS EXAMINED. EXPENDITURE PROGRAMS INVOLVING THE USE OF VARIOUS AMOUNTS OF BONDS WERE COMPARED WITH A PROGRAM INVOLVING NO CREDIT. THE INTEREST COST OF EACH CREDIT FINANCE PROGRAM WOULD UNDOUBTEDLY BE MORE THAN OFFSET BY SAVINGS THAT WOULD RESULT FROM ACCELERATING THE CONSTRUCTION PROGRAM. THE STATE COULD REDUCE STOP-GAP WORK AND WOULD OBTAIN ADDITIONAL REVENUE FROM MORE EXTENSIVE USE OF THE MODERN FACILITIES AND MOTORISTS WOULD BENEFIT EARLIER FROM LOWER VEHICLE OPERATING COSTS, REDUCED ACCIDENT RATES AND TIME SAVINGS. IN ADDITION, ASSUMING A RISE IN HIGHWAY COSTS, THE EARLIER IN THE PROGRAM THE WORK IS DONE, THE LOWER WOULD BE THE COST. /AUTHOR/

Media Info

  • Monograph Title: Allocating highway cost responsibility: report on studies in five states
  • Serial:

Subject/Index Terms

Filing Info

  • Accession Number: 00200962
  • Record Type: Publication
  • Files: TRIS, TRB
  • Created Date: Sep 23 1994 12:00AM