In this criteria category, the Commission considered the revenue-raising potential of individual mechanisms as well as related factors of sustainability, flexibility, and justification for dedication.
Revenue Potential—the extent to which the mechanism's revenue potential at politically viable rates matches investment needs over the target time frame. Revenue potential is a measure of an individual mechanism's ability to generate significant revenue using politically and economically viable rates. This seemingly straightforward criterion becomes more complex when revenue potential is considered in the context of specific investment needs. For instance, a mechanism considered in the context of funding for the overall surface transportation system must generate significant revenue, such as can be achieved by the gas tax, in order | Congress as well as state and local policy makers will want to go through their own evaluation processes, applying their own balancing across criteria and relative weighting among them. |
to score high on this criterion. But a mechanism considered in the context of a subcomponent of the overall system, such as port access improvements, could generate much less revenue and still score relatively high. This criterion is further complicated by the imbedded and necessary assumption of what constitutes "politically viable" rates. For instance, while a 25$ increase in the federal motor fuel tax rates could raise enormous revenue ($45 billion per year in 2008 dollars), today many transportation funding experts believe that such a rate lies beyond the realm of political viability. Similarly, doubling the sales tax on trucks and trailers could raise $3.5 billion annually, but since truck sales are elastic and highly cyclical, such a policy could have a negative impact on truck sales in already adverse economic times. The Commission balanced these considerations to arrive at its final conclusions regarding the relative revenue potential of alternative revenue mechanisms.
Sustainability—the extent to which the mechanism self-adjusts or can be adjusted easily by system operators or policy makers from year to year in order to meet needs, including but not limited to adjusting for inflation.
This criterion focuses on a specific revenue mechanism's ability and likelihood either to provide organic revenue growth without specific action or to be adjusted over time to keep pace with inflation as well as funding demand changes. This evaluation factor also incorporates the relative scalability, or the extent to which the mechanism can be scaled upward or downward to meet specific funding demands or at specific levels of government; stability or the extent to which the mechanism provides a stable source of funding without significant deviation, for instance based on economic downturns or changes in travel behavior; and predictability, meaning that to the extent there may be variations in revenue generation, they are predictable and manageable, such as those created by seasonal variations.
It is important to note that to provide a baseline evaluation, application of this criterion assumes that the revenue mechanism being evaluated is not indexed for inflation. In most cases, use of indexing would improve the sustainability of an existing or potential funding mechanism. Indexing is considered as a separate option in this chapter, as an overall strategy applicable to many funding mechanisms.
Flexibility—the extent to which the mechanism is appropriate for a wide (and potentially changing) range of investments and can be redirected to meet changing objectives, market dynamics, technology options, etc.
Given the shifting demands of our transportation system, this criterion focuses on the relative ease with which a revenue mechanism can be adjusted and applied to shifting uses or transportation investment categories. Broad-based mechanisms such as the gas tax or general taxes, for instance, tend to have considerable flexibility, while more narrowly focused mechanisms, such as facility-specific tolls, generally are inherently less flexible. That said, current Highway Trust Fund resources come from a variety of sources and their use is co-mingled.
Justification for Dedication of Revenues to Surface Transportation—the extent to which it is appropriate to dedicate revenue from a particular mechanism to a specific use or set of uses, whether surface transportation generally or discrete subsets of surface transportation investment.
This criterion measures the strength of the argument for dedicating revenues from a specific funding source to surface transportation or, where appropriate, to a specific transportation investment or category of investments. The more closely aligned a mechanism is to its use, the stronger the case that can be made. For example, an argument can be made for dedicating toll revenues from a specific transportation facility directly to that facility or at least to the system of which it is a part. Conversely, dedicating a portion of a general tax, such as a corporate income tax or broad-based sales tax, exclusively to transportation or even to specific transportation investments can be more difficult (though, based on states' experiences, still possible) to justify.