|Dr. Ken Casavant, a transportation economist with the Department of
Agriculture and Resource Economics at Washington State University,
presented their findings and conclusions. A copy of his powerpoint
presentation is attached to the minutes. He thanked Doug Benson with
the Idaho Transportation Department for his responsiveness in providing
Since background information on the issue was covered by Mr. Detmar,
Dr. Casavant discussed revenue impacts from the new truck tax system,
focused on Idaho-based firms (changes by vehicle weight categories),
compared the old/new systems on taxpayer (trucking firms) cost of
operation, and compared the old/new system on dollar per ton mile. He
also discussed revenue neutrality, looking at the potential existence of
any shortfall but also looked at the pre-payment magnitude that is part of
the data collection. He also discussed the enforcement/evasion issue,
and possible restructuring of the tax system, as well as the use of
temporary trip permits what he sees and how businesses are using that
as an avenue to make good economic decisions. Finally
recommendations will be offered as suggested by NIATT and the Idaho
He discussed revenue generation which indicates from 1999 to 2003,
looking at the foreign versus Idaho carriers impact, over time the foreign
payments have decreased by $8.2 million and local in-state payments
have increased by $3.6 million, so Idaho-based firms are carrying more of
the impact than they were earlier which was the mission of the lawsuit.
Perhaps some of the reasons the foreign payments have gone down is
because quarterly reporting has been allowed in-state, payment by
registration, a decrease in truck numbers, and an increase in the use of
temporary permits. Why the decrease? The available data, as far as
gross domestic product for the state of Idaho, suggests there is a
flattening but not a decrease in economic activity. One must look at the
distribution look at individual sectors. Those sectors experiencing GDP
growth were agriculture, retail trade, real estate, health services,
transportation and public utilities while manufacturing, durable goods,
industrial equipment, chemicals, and lumber/wood products experienced
a GDP decline. Truck-based industries are on both sides of the ledger
which would suggest the GDP was fairly stable and a decrease in
revenue could be the result of the change in the registration system itself.
Looking specifically at Idaho-based trucks from 1999 to 2003, there was
an increase in revenue of over 27% (Idaho calls it revenue, truckers call it
payments and user fees). Looking at revenue distribution by vehicle
weight category and size of truck, the 80,000 pound vehicles provide the
largest source of revenue (a 36.72% increase) followed by vehicles in the
50,000 to 80,000 pound category (29% increase). The number of
registered Idaho vehicles has decreased almost 15% from 1999 to 2003.
There is an increase in revenue occurring, spread out over fewer trucks.
The smallest decrease in Idaho registered trucks was in the large
commercial vehicles over 80,000 pounds (7.25%), the largest decrease in
registered vehicles (19.98%) was in the 50,000 to 80,000 pound range.
As these changes have been occurring, the annual vehicle miles of travel
(AVMT) per year has been slowing; in the last four years, the average
increase has been slightly less than 1% and for the last 20 years, it has
increased about 5%. (AVMT is a rough indicator of the consumption of
the infrastructure.) So there has been a continued increase in the use of
the road in producing benefits to Idaho, but the increase is slowing over
The study also looked at the following economic and administrative
impacts of the new system: impacts per ton mile, cost of operation per
mile, break-even mileage (old vs. new system), industry impacts, and
some administrative impacts for the Idaho Transportation Department.
Under the new system, trucks in either the 80,000 or 106,000 permitted
GVW categories with high-mileage (120,000 miles) end up with decreases
of 37% and 33%, respectively. Trucks in those same GVW categories
with low mileage (12,000 miles) have increases of 120% and 135%
respectively, in fees being paid by trucks. So those high-mileage vehicles
end up with a decrease in break-even costs. In looking at the
registration fees as a percent of total cost of operation under the new
system, 80,000 GVW, low-mileage vehicles (12,000 miles) experienced
an increased change of 139% while high-mileage vehicles in the same
category had a decreased change of 41%. The 106,000 GVW low-mileage vehicles (12,000 miles) experienced a 151% change (increase),
while the high-mileage (120,000 miles) had a decreased change of 50%
as a percent to total cost of operation. The new system allows a decrease
in registration fees as far as a percent of total cost of operation which
makes sense because registration fees have been designed as fixed and
if a person “runs the heck out of a truck,” he is going to lower the impact
of the registration fee on the truck itself. When looking at registration fees
and gas tax combined, doing the same analysis, the direction of change is
the same but is significantly less of an impact. So the lower mileage fees
have a positive impact as far as the cost of operation increasing, but the
high mileage fees are about a breakeven (the analysis says it is a -1%).
The result when combining the gas tax and the registration tax, there is
little or no impact on the high-mileage firms but an increase, but a lot
smaller, on the low-mileage firms.
Regarding registration tax costs per mile, analyses of what the differences
are by mileage, under the old and new systems, showed the break-even
point at 75,000 miles per year. Under the old system, it cost 4.49 cents
per mile and under the new system it costs 4.50 cents per mile. However,
if the mileage is 12,000 miles per year it could add up to a 104% increase;
or if the mileage is 120,000 per year, there would be a decrease of 38%.
Another characteristic (problem) with the existing system which could be
an incentive for under-reporting can be explained by the following
example: at 7,500 miles, the cost (rate per mile) figures out to be 6.4
cents. At the start of the next tier (7,501 miles), the rate jumps to 14.7
cents per mile, so there is a lot of incentive not to report that extra mile or
two. At 50,000 miles the cost is 4.6 cents and at 50,001, the cost jumps
to 6.7 cents per mile. These are challenges with tiered registration
systems that have large jumps from tier to tier. (The same situation
occurs in many other states.)
To summarize the economic impacts: (1) high-mileage firms gain as a
result of the new system because they experience decreases in costs, on
both ton-mile and total cost of operation basis. (2) when considering the
gas tax, increases are significantly less for low-mileage firms, and
decreases are smaller for high-mileage firms. (3) Firms above 75,000
annual miles gain under the new system and those under that mileage
feel an impact in the increased cost per mile. (4) A University of Idaho
pilot study on grains showed that little or no modal shifts would occur as a
result of being shifted between rail/truck or truck/barge as a result of
increases. Relative to the rest of the world, the Idaho grain industry did
not lose competitiveness, so there was no shifting competitiveness
between modes. As far as economic impacts, that particular study
indicated that competitiveness has not been drastically affected.
Those involved in the study spent a considerable amount of time looking
at revenue neutrality. In looking at the record and talking to those
involved, revenue neutrality became an accepted goal of participants in
the settlement; it was negotiated at the $41.3 million level – that was
revenue neutral relative to the prior versus the new system. The April,
2000, settlement stated, “The $41.3 million equals the approximate
amount of use fee revenue anticipated to be collected by the State in
Fiscal Year 2001.” The $41.3 million figure has become an operative
value and a goal and analysis has been done toward that.
Regarding the revenue analysis itself, a table was displayed to indicate
what the revenue neutral category would be in the years 2001, 2002, and
2003 and is identified as $41.3 million each year. The actual revenue
realized in that time was $64.5 million for 2001, $46.3 million for 2002,
and $38.8 million for 2003. Looking at revenue neutral as far as a
shortfall, in 2001 there was $23.2 million above the revenue neutral, $5.0
million in 2002, and in 2003 when the weight distance was taken out there
is a $2.5 million shortfall relative to the $41.3 million. To date, there is
only one year’s data, there is some indication the shortfall does exist in
2003. But as economists, Drs. Casavant and Jessup, looked at the $41.3
million and, assuming that amount was balanced relative to cost of
operating the infrastructure, cost of rebuilding, etc., the figure is at least
close to the CPI. They have some construction indices rather than the
CPI that might be more relevant to this analysis that is being accumulated
right now. Looking at the CPI growth over those years, by the year 2003
that $38.8 million becomes $42.9. It might be reasonable, based on the
fact that in 1997, $41.3 million was realized. Dr. Casavant feels that is a
conservative estimate at this time. The net result of that is when one
looks at revenue neutrality with a CPI, there is a prepayment amount of
$23.4 million that is above the existing, but in the year of 2003, there is a
revenue shortfall of $4.1 million identified.
In summarizing the revenue issue: (1) the policy change of collecting at
the beginning of the year versus the end of the year did have an impact.
When truckers were put in the same position as automobiles and other
vehicles (pay at time of registration), it did have an impact on revenue.
(2) the existing data does not allow for a definitive answer at this time.
There has only been one year (2003) where he thinks the noise of
change has been cleared up and that suggests that there may be a
revenue shortfall but it is a one-year sample. No economist nor academic
would say that becomes the answer – but it is an indication.
(3) Based on that, it appears that a $2.5 – $4.1 shortfall below revenue
neutrality may be occurring.
Dr. Casavant discussed some other related issues of importance to the
state of Idaho, truckers and policymakers. (1) Regarding enforcement
and evasion implications, there are incentives to under-report now, but
there were incentives to under-report previously. But previously, it was
based on mileage that had occurred rather than projecting into the future
what might happen. There is a slight weakness associated with that.
There is the possibility that the degree of enforcement has declined
because they investigated the number of personnel administratively
auditing this and that has decreased over time – a very cost-effective
move. Out-of-staters are no longer audited. That suggests the control or
amount of knowledge known is probably less than before. It is not known
if those reporting are declaring all of their mileage, but it is known that out-of-staters are no longer audited and Idaho is concentrating on Idaho-based firms. Administrative expenses have decreased for ITD – that is a
good thing as long as it is known what it costs in foregone revenue.
(2) There was an increase in temporary trip permits between 2002 and
2003 or a 20% increase. But both of those years are significantly down
from the previous year of 2001. The data would indicate that truckers for
a couple of years were trying to figure out what was happening — they
were trying to figure out what should they pay in the future, where should
they license their vehicles, if they had a fleet of five vehicles should they
only license four now and hold the fifth one back or should they use
temporary trip permits to meet the demands of the market. The good
news about this is that businesses are making rational economic
decisions. From the point of agriculture and forest products where there
is high seasonality, these folks may be responding to market demand.
They are there to provide a service but they are going to keep that truck
from being registered all the time. That is the implication and it may
suggest why truck registrations are down. The numbers are not definite
but it is a logical deduction. (3) Another related issue is potential
restructuring. The data being collected are incomplete because they are
captured, in most cases, by category rather than the actual experience of
the firm. The trucker knows why he puts the truck in a particular category
but collection of that data is incomplete at this time so economists cannot
be precise in the analysis. The International Registration Plan (IRP)
Agreement favors firms with high mileage out of state. If truckers travel
120,000 miles nationally, they get to pay at the high-mileage rate, which is
low per mile even though they only travel 10,000 miles in the state. So a
local trucker traveling 10,000 miles in the state pays a lot more than that
IRP vehicle that travels the same amount of miles but gets to register at
the 120,000 rate. Dr. Casavant also offered the point that there is some
administrative savings from the fact that every state takes care of itself so
there may be some administrative savings to the state of Idaho and other
states that might make it worthwhile. It is not yet known but it is a
potential issue. Another related issue is that low-mileage firms do absorb
significant impact – that has implications for registration, evasion and for
temporary permits. That will be determined over time. The last potential
restructuring issue is that the current fee structure does not incorporate
accepted highway impact/damage functions. The fee does not
specifically include the differing impacts when there are things like a fat
truck versus a skinny truck (a heavily loaded vehicle versus a lightly
loaded vehicle). He discussed a chart that shows that as the weight of the
vehicle is increased the damage or consumption to the road increases
exponentially. The large vehicle has a different stress factor, different
impact, and some would say, a different economic impact on the state.
The existing system is not responsive and does not reflect some of that.
Dr. Casavant concluded with the following recommendations.
(1) Regarding data collected, they would like to see actual experiences
collected if at all possible. When audits are done, the odometers are
checked, the information is recorded, but the information is never brought
together where all can see specifically what is happening. He
encouraged those in charge to look at foreign versus Idaho IRPs and
versus the Idaho Full Fee. The little bit of analysis offered here is from a
sample done by the ITD. That information needs to be made available to
policymakers and to ITD as implementors of the policy.
2) Some concerns about enforcement and evasion were identified. It is
not enough to say that “we need to enforce more” or “they are evading a
lot.” He suggested that costs and benefits be looked at at different
enforcement levels. Is revenue being lost? Are costs for truckers being
increased as the enforcement level increases? There should be some
understanding of that relationship.
3) Regarding a revenue-neutrality oriented system restructuring, there is
no question that an existing fee is more efficient from an economist’s
point of view than a flat fee. A flat fee is like a smorgasbord versus
individual pricing. When one pays per item, the costs and benefits of
every item are considered. A weight distance tax offers that ability and a
flat fee does not.
4) The question of equity as far as individual low-mileage vs. high-mileage
firms, there is an incentive for evasion.
5) Regarding impact on pavements, the study has identified a divergence
between what appears to be the consumption or impact on the highway
versus the existing registration system. Higher weight vehicles are not,
evidentally, bearing the brunt that they lay on the pavement itself. That is
something that legislatively needs to be handled.
6) Regarding administrative impacts, instead of seeing enforcement
versus equity considerations, it would be easy to look at what the benefits
of increased administration/data collection/enforcement might be relative
to revenue and equity considerations between high-mileage and low-mileage, high weight and low weight vehicles.
7) The temporary permit could be a good economic tool available to
truckers as they try to provide the service that Idaho industries need. It
could be incorporated into Idaho’s structure as it is, but right now those
doing this study are not sure what the use impacts are and are not sure
what the revenue impacts might be. There is currently only that little bit
of data as far as it was used a lot earlier which decreased significantly in
2002 and then increased by 20% in 2003. Truckers and motor vehicle
operators are learning how to work with the system in responding to their
customers’ needs. The role of temporary permits may have implications
for revenue generation and also for service to the industries.
8) It would be beneficial for Idaho to undertake a comprehensive
evaluation, to do an equity comparison to surrounding states fee
structure as to structure, implementation and impact on competition.
Idaho should know what the competition is for the truckers in other states,
and what the competition is among the sectors whether it is grain,
livestock, or forest products. Other states are competitors and it would
make sense to take a good look at Idaho’s system and see how it relates
to the other systems, both learning from theirs and seeing if a competitive
imbalance is being created. Indications are that is not the case, but Idaho
needs to know what the surrounding states are doing.
Questions directed to Dr. Casavant
Q: Senator Keough asked what Dr. Casavant’s involvement in the
ATA lawsuit was.
A: He was an expert witness for the American Trucking Association.
Q: Who was contacted or did you just use ITD audits for your analysis
or did you contact trucking firms?
A: We used the audits and we used information provided by Doug
Q: (Page 12 graph on decrease in truck numbers) part of that you
covered could potentially be happening in people managing their
fleets with temporary permits and not registering under the normal
system, but I suspect, and maybe you would know, if some of that
was lost to economic factors. Can you balance the shortfall in
revenues produced against the loss of trucking companies. Do
you do that type of analysis at all?
A: We can do that. The total amount paid by the Idaho-based trucker
increased. We don’t have it here, so that increased, even though
the number of trucks was decreasing. That would suggest that the
revenue per remaining truck was increasing over time.
Q: Page 12 graph – those are all negative numbers – what does that
A: There are still trucks in those categories but this graph was
designed to show, given the decrease in total that occurred, where
it occurred. It suggests that there was a decrease of 7% in the
large ones, almost 20% in the second category. So that graph is
designed to say that of the decrease in vehicle numbers, this is
where it occurred.
Q: The concept of revenue neutrality – that was a snapshot at one
point in time that was a negotiated settlement. Does it make
sense in your mind to continue striving for revenue neutrality when
we no longer have that system? We have a new system. Are we
to continue as a policy body to look at that point in time, and carry
that forward as some measurement as how we should structure
our system. Or should we say that happened then and here we
are today, and move forward?
A: We accepted that as a given. That was a revenue neutrality
figure and we did some analysis relative to that. Over time at least
the CPI is an appropriate way to indicate either the cost of new
construction (we are still trying to find some construction) so that
the concept can hold. That is a policy decision but the number
chosen should probably be sensitive over time to cost of
construction and vehicle miles traveled. One is consumption of
the road and the other is cost of rebuilding the road. These two
together, when one looked at the average vehicle miles traveled,
was close to 1% when we did calculate it and it didn’t show any
change. In the future, if the annual vehicle miles continues to
increase, that reflects use of the roads. Increasing it by the CPI or
a construction index indicates what revenue needs to be to attain
the same service to those who need the infrastructure. So I would
say at least those two would be appropriate to consider.
Q: Senator Little asked Dr. Casavant if he were to diagnose the
future, what the safety regulations would do to the average miles
traveled? Will there be enough drivers? There have been quite a
few protests that this is going to have a significant impact. Have
you analyzed where you think that’s going to be?
A: There haven’t been definitive studies done yet, but there is no
question that hours of operation are going to affect the costs for
the labor component of that truck. If the truck is on a trip and has
to sit, then the truck cannot achieve the same mileage that it had
before. So it is expected that both labor cost and annual mileage
achieved will decrease over time. So what does that do? It is
going to raise the cost.
Q: And lower the average miles traveled? I’m confused about actual
miles traveled. If you used audits, don’t the audits have the actual
miles traveled? What’s the problem with “trueing up” those
A: We did not get involved in the actual audit numbers from last year.
What we had was the reporting as far as revenue and the annual
mileage. The exact audit data was not part of this.
Q: If you had that, couldn’t you check out the hypothesis? Maybe
there wasn’t a hypothesis – that they were under reporting
A: It is a hypothesis. If we had those, the answer is yes. We did not
present it today, but the number of citations has slightly increased.
We have such a short window of information that I can’t say that is
a definitive statement that they are under reporting and then
getting caught. But we do know that with the number of audits –every 3 to 5 years someone might get audited–there might be
information to go in there and really test that. That is a good point,
something we have not done.
Q: Regarding the reduction in registration in small trucks, I know for a
fact when we repealed the personal property tax on farm
equipment, some of that equipment was licensed. Licensing was
cheaper than the personal property tax in some counties. With the
repeal of personal tax some of those registrations went away and
therefore those vehicles disappeared even though they are still out
there. I wondered on that end of the scale, on the 18,000 pound
and lighter trucks, if that wasn’t part of that falloff because that
would have been within the window of your study.
A: It easily could have been. It is not something we looked into or
had the information for. But I’ll agree.
Questions directed to Mo Detmar from ITD
Q/A: Mr. Detmar wanted to answer a question posed in JFAC a few
days ago by Senator Calabretta who asked what the current
revenue looked like for FY04. Understand we only have 6 months
in, but it appears by projections, we will come in at about $39.2
million. Again, that is projecting 6 months with 6 months actual.
Q: Senator Little asked what that means to those not sitting on the
JFAC? Above? Below?
A: FY03 was $38.8 million, so $39.2 further substantiates that we do
have a flattening of the system; in other words, we are getting a
stronger picture of what this system will deliver.
Q: Senator Ingram asked if the actual number of trucks in Idaho has
declined? Have we gained or lost truck drivers in Idaho? What is it
going to cost our shippers in Idaho? Are we going to be able to
compete, like shipping to the coast, or are we going to be beat out
again by the people in Oregon, Canada, and other places
servicing the same markets we do? It is one thing to be closest to
the market but if we can’t service them because of pricing that is a
problem. Are we getting into that area, or where are we?
A: We have certainly seen lesser Idaho-based trucks in Idaho. So
we have less trucks, less Idaho trucks, running on our roads
today. That is an absolute. This report shows that and our
information shows that. The amount of drivers, I have no clue
about that. I certainly can tell you our commercial drivers licensing
program is not decreasing. Maybe one of these gentlemen could
handle the question better than I. A program was created that I
was involved with to give some options or opportunities for the
trucker to make a valid budget business decision on why he would
register 5 trucks even though he owns six. It gives people an
opportunity to manage their fleets. There are some opportunities
there for someone to decide what to do when he runs against one
of the schedules. He can decide when he is about to hit 20,000
miles if he wants to continue running longer and go to the 25,000
tier where the rate or per mile cost of operating that truck goes up.
Or he can decide to let one vehicle sit and buy another truck, or
maybe bring that one vehicle on the fleet that he had not used. So
there is an opportunity to manage the fleet.
Q: The reason I am asking that question is because there is the
combination of fixed and variable costs involved. When you take
the fixed costs and allocate them across a number of miles, it is
one thing, and then you add the variable costs of fuel taxes and
other expenses. I am wondering if we are forcing some of our
people who traditionally run trucks into an operating ratio where
they are losing money and it is cheaper to take a carrier like
Snyders to put their products on because Snyders is willing to bid
theirs for anything covering variable costs so they can get their
trucks back home. I don’t think our truckers are second rate to
anybody, but I’m worried about the fact that if we’re losing trucks,
they may get rid of the ones that have market value to us and
leave us with an older fleet that needs more care and attention.
We would be forced out of the market and if we don’t have
adequate transportation we are not going to have economic
developments we are hoping for to get our products to market.
What are your thoughts on that?
Dr. Casavant answered the question.
A: Mr. Chairman, I think you put your finger on something that we
don’t know the answer to yet. A lot of the restructuring is not just
here, but in the U.S. whether it is hours of operation or something
else. Remember the double nickel – there was an increase in
labor costs because the trucker was not able to get the mileage
and productivity out of the vehicle because there were a lot of
unintended consequences. I don’t know if Snyder and others will
ever be able to compete with the personal service and
responsiveness of the Idaho-based trucker. But I do know that it
could make it more difficult for the Idaho-based trucker to compete
against those other carriers. I cannot suggest what the outcome
will be; but there is going to be a tightness as you suggest.
Q: Senator Calabretta asked to what degree the general driver
subsidizes the damage the trucks do to the highway for that
A: Idaho has done cost responsibility studies over the years and I
think the general finding was that revenues from trucks quite
closely approximate the cost of providing for highways. There was
some divergence between the sizes of trucking and who was
paying what. He will make that information available.
Question answered by Mo Detmar, ITD.
Q: Senator Keough asked Mr. Detmar to clarify his statement about
this being the final report. This final report talked about the degree
of enforcement having declined and that we are not auditing our
state firms. Could you address those elements.
A: In reference to final report, this is one of three reports the
Legislature asked us to do at the end of the weight distance and
going into a new system. In other words some folks were nervous
about what it would do and how it would impact, etc. So we made
a report the first year, and last year you may recall, we had some
difficulty with it, and truly did not make an official report, and this
being the third year or 2004 when the report is due. That is why I
am suggesting it is the final report, at least on that project and that
window of time that we are asked to report. Some comments on
the audit scenario and the issue of enforcement changes. You
have heard me talk about downsizing and the transfer of our motor
carrier audits from ITD to the State Tax Commission. It is true that
we have less auditors now. I would suggest that there may be a
few less audits done because of this, but I would suggest there is
a great deal of efficiency being gained.
I think it is pertinent you know how collections were going with our
auditors. For many years on weight distance, we were retrieving
in the neighborhood $3 to $1 in weight distance and it continued to
drop to less than $1 with the new system. In other words, we were
not returning the money which brought the suggestion that we
might spend less money, chasing less money. You can’t give up
your audit program because you have to have a presence to
maintain some level of comfort. So we did downsize.
The fact that we don’ t audit out of state is absolutely true. It is
only true to the fact that Idaho employees or auditors do not go out
of state to audit. Those trucks are being audited by the base state
jurisdiction much as our auditors here are doing audits for other
states. You might think that I would be more interested in
collecting Idaho dollars, but we have a strong allegiance across
the country to do these things to keep things in balance. So I think
it is fair to stay that we are still doing a reasonably good job of
Q: Senator Ingram related that when he was working at Boise
Cascade, the company had about 400 trucks in several different
types of fleets (private carrier, corporate ownership and also
contracted with contract carriers). In BCC’s private fleet there
were 7 or 8 combinations of trucks (that would run in Idaho only,
another group in north Idaho that would run in Idaho and
Washington, and another in Washington, Oregon and Idaho),
different combinations and mileage that we prorated out to keep
track of all this information and to minimize the expenses being
paid. We utilized the trucks to the best of our ability so we could
compete with the legitimate common carriers that were in those
areas. Are we still facing this with a lot of our motor carriers now?
Are they still struggling to do this? Are they block buying these
things? Are we seeing these trucks leaving our state and
registering in other states? Do you know what is happening that
might cause some of these changes?
A: Your question is, could BCC or other companies still operate with
several different looking fleets. Yes they do. You build your
trucking base by fleets, by groups of like vehicles that are running
in like jurisdictions. Yes they can still do that. Are we losing
trucks because of that? I am not sure. We see that we are down