I need help writing a 2-3 page paper on a highway cost study. The article and requirements are attached.

Required: 1. Review the study and assess the cost allocation methodology as presented. Do you find the conclusions of the study to be justified, given your assessment of the methodology? Explain briefly why or why not. 2. The study refers to marginal highway costs and provides estimates of marginal costs for highway use. Assess the methodology related to the determination of marginal costs and the conclusions of the study in this regard Instructions: Write a short paper (2-3 pages, 12 pt. double spaced) using appropriate business language, grammar, and formatting that addresses the requirements for the exercise. Federal Highway Cost Allocation Study by James W. March The U.S. Department of Transportation recently completed and sent to Congress the 1997 Federal Highway Cost Allocation Study (HCAS) - the first federal HCAS since 1982. An important objective of the study was to evaluate the equity and economic efficiency of the federal highway user-fee structure. The study also examined how changes in the composition of federal highway program costs, the user fees that support that program, and other factors have affected the equity and efficiency of highway user fees paid by different classes of vehicles since 1982. In this study, as in previous federal HCASs, highway-user fees paid into the Federal Highway Trust Fund (HTF) by different vehicle classes were compared to HTF expenditures for pavement, bridge, and other highway-related improvements attributable to each vehicle class. The closer the user fees paid by a particular vehicle class match that class's relative cost responsibility, the more equitable the user-fee structure is for that class. User-fee options, including changes in diesel fuel taxes, the heavy-vehicle use tax, and two weight-distance tax alternatives, are evaluated in the study to estimate the relative improvement in equity that could be achieved under each option. The costs of congestion, including increased operating costs as a result of delays, increased fuel expenses, and increased air pollution, are generally overlooked when highway users estimate the cost of a trip. This study also extends the analysis of highway cost responsibility to examine environmental, social, and other costs associated with the use of the highway system that are not reflected in highway improvement budgets. Marginal costs of highway use by different vehicle classes are compared with the user fees they pay to evaluate the efficiency of the highway user-fee structure. HCAS is an important source of input to analyses being conducted for the Department of Transportation's Comprehensive Truck Size and Weight (TS&W) Study. The TS&W Study uses analytical tools and data developed for the 1997 HCAS in estimating infrastructure, environmental, and other impacts of TS&W scenarios. Information from HCAS could also be used to estimate changes in user-fee equity associated with TS&W policy options. Summary of Highway Cost Allocation Study Methods Overall, the methods used in this study were similar to methods used in the 1982 HCAS. However, some improvements were made. The data on travel and operating weight distributions for different vehicle classes are more detailed than the data available in 1982, and more detail on the composition of the highway program is available from the Federal Highway Administration's Fiscal Management Information System (FMIS). Methods for allocating various types of costs among vehicle classes were refined, especially for pavement, bridge, and capacity-related costs, but the study retained the overall cost-occasioned approach used in 1982 for allocating highway-related costs. New methods were developed for allocating transit-related costs and other multimodal transportation costs that were not considered in 1982. The analysis of social costs associated with highway transportation was expanded to include not only the marginal costs but also the total social costs of highways. Social costs that could be quantified and attributed to different vehicle classes were considered in equity and efficiency analyses. Costs that could not easily be quantified were discussed in qualitative terms. Vehicle Travel Characteristics and Population by Different Vehicle Classes Passenger vehicles account for about 93 percent of total VMT in the United States. Single-unit and combination trucks account for 3 percent and 4 percent of total travel, respectively. Detailed data on VMT and the vehicle fleet were estimated for 20 vehicle classes, including 17 different truck configurations that vary by the number of axles and trailing units. The data needs of the TS&W Study were important considerations in selecting configurations included in the 1997 Federal HCAS. Because highway cost responsibility is so sensitive to vehicle weight, travel by each vehicle class in 5,000-pound (2268-kilogram) weight intervals was estimated for each of the 12 highway functional classes. Federal-Aid Highway Program Costs for 2000 The distribution of federal obligations by improvement type and highway functional class has a strong influence on the relative cost responsibility of different vehicle classes. Obligations for new capacity constitute about 20 percent of total federal obligations for highways under the federal-aid highway program. System preservation represents about 40 percent of total obligations; system enhancement about 15 percent; obligations from the Mass Transit Account (MTA) of the HTF about 13 percent; and other miscellaneous costs about 9 percent. The distribution of obligations by highway functional class is assumed to be the same in 2000 as in the 1993 to 1995 base period. Approximately two-thirds of federal obligations are on urban highways and one-third on rural highways. In both urban and rural areas, more federal monies are obligated for improvements on higher order highway systems (interstate and other principal arterial highways) than on lower order systems. Allocation of Federal Highway Program Costs for 2000 Federal highway program costs are divided into several categories, each of which is allocated among vehicle classes in a different manner: Figure 3 - Distribution of 2000 federal program cost responsibility among vehicle classes Figure 3 shows the estimated distribution of federal cost responsibility for 2000 by broad groups of vehicles. Automobiles, which account for 70 percent of all vehicles and about two-thirds of all travel, are responsible for 44 percent of federal program costs, followed by combination trucks, pickups and vans, and single-unit trucks. Estimates of Federal Highway User Revenues for 2000 Figure 4 shows the estimated share of federal highway user fees that will be paid by broad vehicle groups in 2000. Federal highway user taxes include taxes on various highway fuels, an excise tax on the sale of heavy trucks, a graduated tax on tires weighing more than 40 lb (18 kg), and a heavy-vehicle use tax on trucks with registered weights exceeding 55,000 lb (24,948 kg). Figure 4 - Distribution of 2000 federal user fees paid by vehicle class Although each of these taxes has been in place for many years, rates and the specific equipment that is taxed have changed from time to time. Historically, the primary purpose for imposing highway user fees at both the federal and state levels has been to raise revenues to finance highway improvement programs. The linkage between highway user fees and highway program costs is central to HCASs, which seek to determine whether fees paid by each vehicle class cover infrastructure and other transportation agency costs caused by those vehicles. The estimates of federal fees projected to be paid by the 20 vehicle classes in 2000 were based on the current federal highway user-fee structure. As figure 4 indicates, passenger vehicles, which account for 93 percent of total highway travel, pay 64 percent of total federal highway user fees. Combination trucks, on the other hand, pay more than 25 percent of total highway user fees even though their share of VMT is less than 5 percent. Federal Highway User Charge Equity Ratios for 2000 The equity of highway-user charges is measured in HCASs as the ratio of the share of user fees paid by each vehicle class to the share of highway costs for which that vehicle class is responsible. This ratio is often called a revenue/cost ratio or an "equity ratio." An equity ratio greater than 1.0 means overpayment; less than 1.0 means underpayment of federal highway user fees. Table 2 shows estimated equity ratios in 2000, assuming the current highway-user charge structure and the same highway program composition as the base period. As a class, automobiles pay the same share of federal highway user fees as their share of highway costs, but pickups, vans, sport utility vehicles, and similar light trucks pay substantially more than their share of highway costs. This difference is primarily attributable to the automobile's better fuel economy, which means that automobiles pay less fuel tax per mile of travel than pickups and vans. Table 2 User-fee equity for single-unit and combination trucks is highly dependent on the weight of the vehicle. As a class, single units will pay less than their share of highway costs, but the lightest single units will pay more than their share of highway costs. Combination trucks as a group will pay 90 percent of their highway cost responsibility in 2000, but like single units, results vary by vehicle weight. Combination trucks registered at less than 50,000 lb (22,680 kg) will pay 60 percent more in user fees than their share of highway costs, while combinations registered at more than 80,000 lb (36,288 kg) will pay on average only about 60 percent of their highway-cost responsibility. Significant variation exists even among combinations in the same weight group largely because of differences in the number and types of axles. In general, the more axles a vehicle has, the lower its cost responsibility at any given weight, and the more nearly it comes to paying its share of highway costs. Overpayments and underpayments clearly vary substantially with weight. At lighter weights, vehicles in each class pay more than their share of highway costs while all heavier vehicles pay less than their share of highway costs. The number of vehicles in each weight category varies widely for different vehicle classes. Much of the change in equity ratios for single-unit trucks is attributable to changes in federal highway user fees enacted in 1982 following the 1982 Federal HCAS. That study found most single units to be overpaying federal user fees and recommended reductions in user fees levied on those vehicles. Equity ratios for single units are now much closer to 1.0, but on average, single units now underpay. Whereas in 1982, they substantially overpaid. The most common over-the-road combination truck, the five-axle tractor-semitrailer registered at 80,000 lb (36,288 kg), pays about 90 percent of its cost responsibility, but the heaviest combinations pay only 60 percent or less of their highway costs. Highway Cost Allocation for All Levels of Government Comparisons of total user-fee payments and total highway-cost responsibility for all levels of government are important in evaluating overall subsidies, which might give some classes of vehicles a competitive advantage over other modes of transportation. In fact, state and local governments collect three-quarters of total highway-user revenues (HURs) and the equity of their user-fee structures is an important component of overall user-fee equity. Federal, state, and local highway user-fee structures differ in several ways. Fuel taxes account for almost 90 percent of federal user fees, compared to only half of state HURs and only one-third of local HURs. Vehicle registration fees account for one-third of state HURs and more than 40 percent of local highway-user revenue; however, the heavyvehicle use tax (HVUT) - the federal counterpart to the registration fee - provides less than 3 percent of federal highway-user revenue. Fuel taxes vary by extent of use, but registration fees do not. Truck registration fees generally are graduated by weight and can reflect the large differences in cost responsibility of heavy trucks compared to lighter trucks. Table 4 shows estimated ratios of user-fee payments to highway-cost responsibility by vehicle class for all levels of government in 2000. It is important to note that these results represent an average for revenues and expenditures for all state and local governments. Results for individual states could vary substantially from those shown in this table. It is also important to note that unlike other ratios of revenues and costs in this article, total revenues and costs for all vehicle classes are not equal. At the state level, total user-fee collections are approximately equal to total expenditures, but total local user-fee payments are only about 10 percent of local highway expenditures. At the federal level, expenditures on highways on federal lands, which are paid from general funds rather than from user fees paid into the Highway Trust Fund, are included in this table but not in other tables. Table 4 - Ratios of 2000 User Fee Payments to Allocated Costs for All Levels of Government Other Highway-Related Costs In recent years, there has been increasing interest in estimating the total costs of highway transportation, not just the direct costs to public agencies. Executive Order 12893, "Principles for Federal Infrastructure Investments," requires that federal infrastructure investment and management plans be based upon a systematic analysis of expected benefits and costs. Among the social costs of greatest interest to cost allocation and highway pricing decisions are the costs attributable to congestion, air pollution, noise, and crashes. Marginal Highway Costs Social costs may be evaluated in different ways, and each way provides its own perspective on policy issues surrounding the costs of highway transportation. One perspective is to examine marginal costs of travel by different vehicles. Marginal costs represent the added costs associated with an additional trip and are particularly relevant for questions about prices that should be charged to improve economic efficiency. In general, the closer the price of travel is to the cost of that travel, the greater the economic efficiency. However, highway users normally do not consider certain costs when they consider their cost of travel. These costs include: (1) government-borne costs of infrastructure deterioration and traffic services, which vary with the amount of travel, (2) user-borne costs, especially congestion and other costs that are imposed on other users, and (3) community-borne costs, principally air pollution, noise, global warming, and certain crash costs, which also vary with the amount of travel. For the system to operate efficiently, users should pay these costs they impose on others when they make a trip. Total Costs of Highways In addition to the interest in estimating marginal costs of highway use to estimate economically efficient highway user-fee levels, there is considerable interest in estimating the total costs associated with highway transportation. This information is useful for several purposes, including: (1) estimating the relative magnitude of various costs associated with highway transportation, (2) estimating how costs change over time, particularly in response to programs aimed at reducing environmental, congestion, and safety-related costs, and (3) evaluating overall costs and benefits of alternative public policies, such as investment, regulatory, and pricing policies. Estimates of costs for noise, congestion, and crashes total $406 billion for 2000. Crash costs represent 84 percent of these social costs; congestion 15 percent; and noise 1 percent. About 88 percent of these social costs are borne in the first instance by highway users. While social costs that are not borne by users are a relatively small percentage of the total, they nevertheless are significant - $50 billion in 2000. Estimates of total air pollution costs will increase the total social costs borne by non-users. Potential User-Fee Changes to Improve Equity A number of general user-fee options designed to improve federal user-fee equity were analyzed in this study. This article summarizes four options involving changes to existing user fees and two changes that would require imposing new fees. Options involving existing user fees include raising the diesel differential by 1 cent or 6 cents per gallon, eliminating the cap on the heavy-vehicle use tax, and adjusting the HVUT rate schedule along with lifting the cap. New user-fee options include imposing a weight distance tax (WDT) and an axle-WDT. These alternatives offer varying flexibility to address the cost responsibility issues of vehicle weight and VMT outlined in the following scenarios: 1.Scenario 1: Adding 1 cent per gallon to the diesel differential would reduce the underpayment of heavy trucks, but this is not sufficient to be reflected in improved equity ratios for those vehicles. 2.Scenario 2: Adding 6 cents per gallon to the diesel differential would reduce underpayment and improve the equity ratios for trucks, but it would not eliminate the underpayment by heavier trucks. 3.Scenario 3: Eliminating the cap on the heavy-vehicle use tax for all vehicles registered above 75,000 lb (34,020 kg) would somewhat reduce the underpayment by the heaviest vehicles, but it would do nothing to improve equity ratios for trucks registered at weights less than 75,000 lb. 4.Scenario 4: Creating a two-tier HVUT structure for single units and combinations with more progressive rates for the heaviest trucks could reduce underpayment by trucks as a group, but it increases inequities between low-mileage and high-mileage vehicles. 5.Scenario 5: Introducing a WDT can better reflect the influence of both weight and VMT on highway costs than the previous tax scenarios and the current federal user-fee structure. A weight- and distance-oriented highway tax structure provides more flexibility to the current tax structure. The equity ratios for trucks, including heavier and high-mileage trucks, improve as compared to the current user-fee structure. 6.Scenario 6: Imposing an axle-WDT provides more flexibility to address vehicle weight and mileage factors, and it provides the additional advantage of recognizing the relationship between the number of axles on a vehicle and that vehicle's cost responsibility. Study Conclusions Many factors affecting the equity and efficiency of the highway user-fee structure changed since the 1982 Federal HCAS. User fees were modified several times; the composition of the highway program changed; and the use of the highway system for personal and freight transportation changed. These changes are reflected in equity ratios estimated for the various classes of vehicles analyzed in the 1997 study. In general, the overall equity of highway user fees, as measured by ratios of federal user fees paid by different vehicle classes to their shares of federal Highway Trust Fund obligations, has improved since 1982. However, improvements within and among vehicle classes could be realized with changes to the current user-fee structure. Passenger vehicles (automobiles, pickups, vans) travel 93 percent of all VMT, account for 96 percent of all vehicles, and will pay about 64 percent of all federal highway user fees in 2000. Trucks, on average, pay almost 10 times more federal highway user fees per mile of travel than passenger vehicles. Overall, the federal user-fee structure is more equitable today than it was in 1982. Changes in the composition of the federal highway program and changes in federal user fees account for most of the difference. Passenger vehicles are expected to overpay federal user fees by about 10 percent, while single-unit and combination trucks will underpay by about 10 percent in 2000. These averages, however, mask inequities among vehicles. For example, while automobiles pay their share of highway costs, pickups and vans overpay. In virtually all truck classes, the lightest vehicles pay more than their share of highway costs, and the heaviest vehicles pay considerably less than their share of costs. In general, the more axles under heavy vehicles, the lower their highway-cost responsibility at any given weight and the more closely they come to paying their highway-cost responsibility. State governments collect more than two-thirds of total HURs, and the equity of their user-fee structures strongly affects the overall equity of user fees collected by all levels of government. Federal user fees are somewhat more equitable than average state user fees for lighter vehicles, but state user fees, on average, come somewhat closer to capturing the cost responsibility of the heaviest truck classes. Increasing the diesel differential or eliminating the $550 cap on HVUT could result in incremental improvements to user-fee equity. Modifications to the HVUT rate schedule or new taxes such as a WDT or axle-WDT could result in larger gains in equity. Safety, congestion, environmental, and other social costs of highway use remain large despite significant progress in reducing those costs through regulatory and highway improvement programs. Imposing charges to reduce those costs holds promise, but many social costs are highly localized and are more amenable to local pricing rather than pricing at the federal level