Transportation Cost Allocation: Applying Cost Allocation in a Multimodal Environment

Abstract

The application of cost allocation techniques to an increasingly multi-modal or intermodal federal transportation program is discussed. Numerous statutory changes and policy developments in the 1990s have moved federal policy strongly toward an intermodal approach. As a result, highway cost allocation studies must address topics related to expenditures for multimodal improvements. The issues involved and the implications of a multimodal program for seeking cost-based pricing of transportation facilities are explored. Also examined are the feasibility of approaching cost allocation from a multimodal perspective, the challenges posed to past technical approaches and fundamental objectives, and several policy benefits that might be derived from taking a broader multimodal approach. An assessment of pros and cons is presented, followed by a wide-ranging set of conclusions and recommendations for federal cost allocation research. The central conclusion supports continued modal cost allocation studies emphasizing a comparable approach for each mode and developing information on spillover effects across modes.

Spatial and Temporal Variability of Rail Transit Costs and Cost Effectiveness

“…The research broadly shows that there are high marginal costs for providing peak period service ( 19 , 21 , 25 , 26 )). Although Vickrey theoretically showed that congestion pricing was warranted for the New York City Subway system because of peak-to-base cost and externality differences, Parody et al are credited for being the first to empirically estimate the time-variant cost recovery for rail transit ( 19 , 27 ).…”

“…But, like Parody et al, he focused only on base versus peak service and allocated capital costs using an arbitrary 85/15 peak-to-base ratio ( 19 ). His allocation of labor, however, followed Cherwony and Mundle by factoring peak costs using a relative productivity ratio ( 25 ). Some studies from this era suggest that peak service subsidizes off-peak service because the revenue generated by peak travel offsets the additional costs of serving it ( 28 ).…”