Tuesday, February 4, 2020

The $64 Billion Massachusetts Vehicle Economy

Policymakers and budgetary analysts have long argued that roads are heavily subsidized. The diffusion of spending among federal, state, and local government entities, along with the complexity of indirect costs, make it difficult to understand the fully loaded cost of the vehicle economy. Individual families may track the personal costs of car ownership to their budgets, but they rarely consider the total cost of operating and maintaining the vehicle economy because the vast majority of roads and parking areas are provided free at the point of use. This study is intended to increase transparency regarding road-related spending and to provide a comprehensive estimate of the economic cost of Massachusetts’ vehicle economy.
By B137 - Own work, CC BY-SA 4.0, https://commons.wikimedia.org/w/index.php?curid=48998674
The Massachusetts’ vehicle economy is based on nearly 37,000 miles of public roads, adjacent parking areas, and 4.5 million private passenger cars and light trucks. This system provides conduits for exchange and movement for millions of families, businesses, and services in the State.

[The authors] conclude that the total annual cost of the vehicle economy in Massachusetts is approximately $64.1 billion. Over half this amount, some $35.7 billion, is borne by the public in the form of state budgetary costs, social and economic costs (road injuries and deaths, congestion, and pollution), and the value of land set aside for roads and parking. The remaining $28.4 billion falls on private consumers in the form of financing and operating their vehicles.

Several important conclusions follow from [their] analysis. First, the public costs of the vehicle economy are substantial – amounting to $14,000 per family in Massachusetts, regardless of whether they own a vehicle. Second, this cost is highly subsidized by non-road users – just 1/3 of state budgetary costs (amounting to $5.7 billion) are covered by user fees and gas taxes. Third, the economic impact is regressive: non-car owners typically are lower income and disproportionately from minority communities.

The full cost of the vehicle economy should also throw into perspective the cost of investments in public transportation projects, because the counterfactual of simply relying on roads and vehicles is not free. For example, previous studies have found that that the North-South Rail Link would incur a one-time cost of $3.8 to $12.3 billion.

Publicly borne costs are resources, which include money, time, and land. Massachusetts residents incur these costs regardless of whether they own or operate a vehicle. We categorize this $35.7 billion in annual costs into three categories: public budgetary costs, indirect and direct economic costs, and land value commitments.

[Note that GHG emission costs are estimated at $1.28 billion and pollution costs at $1.2 billion.]
The cost of pollution relied on Parry and Small’s research that established a baseline of $0.019 in pollution damages per mile of vehicle traveled (Parry and Small 2005).15 The number of vehicle miles traveled (VMT) in Massachusetts was identified from Federal Highway Administration data (Office of Highway Policy Information 2018). The baseline cost was multiplied by the annual VMT in Massachusetts to arrive at a yearly cost of vehicle-related pollution.

Greenhouse Gas Emissions
The cost of greenhouse gas emission relied on the widely-cited cost of carbon, $40 per metric ton (Parry and Small 2009; “Technical Support Document: Social Cost of Carbon for Regulatory Impact Analysis - Under Executive Order 12866” 2010; “The Social Cost of Carbon” 2017).16 The annual amount of metric tons of carbon dioxide emissions from vehicles in Massachusetts was determined using data from the Federal Highway Administration the Energy Information Administration (“Table MF-21 Highway Statistics 2017 - Policy and Governmental Affairs: Highway Policy Information” 2019; “Greenhouse Gases Equivalencies Calculator - Calculations and References” 2015). The cost of carbon was multiplied by the number of metric tons emitted to determine the cost of greenhouse gas emissions.
Implications for Income Distribution
Policymakers may consider the large subsidy dedicated to the vehicle economy in several dimensions. The public costs of the vehicle economy do not result in equitable access across different social and economic classes in the state. According to the National Equity Atlas, over 90 percent of White households in Massachusetts have access to a vehicle. This compares to 74.3 percent for Black households and 73.7 percent for Latino households (“Car Access - Massachusetts” 2018).

People living in poverty are less likely to own a car, and thus benefit far less from the vehicle economy (Klein and Smart 2019). Moreover the cost per household of $14,000 is not spread evenly across the State. The indirect costs (pollution, congestion, land value and so forth) are certainly higher for those who live closer to Boston. The concentration of low-income and minority residents in these areas makes the system of subsidies even more regressive. And since the eastern part of the State bears the majority of the indirect costs, this amounts to a subsidy for the driving economy of Western Massachusetts – something that is largely overlooked when debating how the entire state should pay for rail and other transportation services located primarily in the East.

Ridesharing companies including Lyft and Uber benefit from the large public subsidy related to vehicles. The Massachusetts Department of Public Utility reported that rideshare companies provided 81.3 million rides in 2018 (Vaccaro and Hagan 2019). The shareholders of these companies and their customers (who tend to be higher-income consumers) benefit disproportionately from public spending on the vehicle economy. Moreover, studies suggest that rideshare companies reduce the usage of public transportation, which decreases user fees collected on those systems. By contrast, private companies are not permitted to use the public infrastructure of a rail system or an airport without an agreement that ensures safety, efficiency, and cost sharing.

by Stevie Olson, Phil Berkaw, Lucien Charland, Elizabeth Patton and Linda Bilmes
Harvard Kennedy School (HKS) Faculty Research Working Paper Series

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