HIGHWAY ADMINISTRATION
The systems of highway administration extant in the various political
units in the United States present a patchwork of overlapping
authority and undetermined responsibility. Highway laws are being
constantly revised by state legislatures and with each revision there
is some change in administrative methods and often the changes are
revolutionary in character. In most states, the trend is away from
county and township administration and toward state administration,
with provision for considerable participation by the federal
government.
It will be pertinent to consider briefly the present functions of each
of the administrative authorities having duties in connection with
highway work in the United States, although these duties vary greatly
in the several states and change periodically with the action of
legislatures.
=Township Administration.=--Township or "Town" authority is a survival
of the old New England town government and the town board consists of
three or more trustees who hold office for fixed terms. The usual term
is three years, but is less in some states. The incumbent is generally
a man who has other responsibilities of a public or private nature and
who gives but little of his time to highway matters. In some states
the pay is a fixed annual salary and in others a per diem with some
limitation on the amount that may be drawn in any one year, which
limitation may be statutory or may be by common consent.
The township highway commissioners or trustees have jurisdiction over
certain of the roads in the township, usually best described as all
roads not by law placed under the jurisdiction of some other
authority. In certain instances, the township authorities have charge
of all of the roads in the township, which would mean that no "county"
or "state" roads happened to be laid out in that township. It is a
matter of general observation that the trend of legislation is toward
removing from the jurisdiction of the township officials all roads
except those upon which the traffic is principally local in character.
The actual mileage of roads in the United States that is at present
administered by township officials is large, probably constituting not
less than seventy per cent of the total mileage.
In most states the township officials are responsible for the
maintenance of the roads under their jurisdiction and also supervise
such new construction as is undertaken. This includes the construction
of culverts and bridges as a rule, but in some states the county board
of supervisors is responsible for all of the bridge and culvert work
on the township roads. In other states, the township board is
responsible only for bridges or culverts that cost less than a certain
amount specified by law (usually about $1000) and the county board
provides for the construction and upkeep of the more expensive bridges
and culverts.
Funds for the work carried out by the township road officials are
obtained by general taxation, the amount that may be levied being
limited by statute and the actual levy being any amount up to the
maximum that the township board deems necessary for its purposes. It
is the general observation that the tax levy is usually the maximum
permitted by law.
In many states, township officials are permitted to issue bonds for
road construction, almost invariably, however, with the restriction
that each issue must be approved by the voters of the township. There
is always a provision that the total amount of bonds outstanding must
not exceed the constitutional limit in force in the state. In several
states, the townships have large amounts of road bonds outstanding.
=County Administration.=--In some states the county is the smallest
administrative unit in the road system. A county board, called the
board of county supervisors or board of county commissioners
consisting of from three to fifteen members, is the administrative
authority. Its members are elected for fixed terms which vary in
length from one to five years. The county board usually has many
public responsibilities other than highway administration, and is
generally made up of men with considerably more business ability than
the average township board.
The county board has jurisdiction over all of the highways in the
county in some states, and in others it has charge of only the more
important highways. In most states, the laws set forth specifically
what highways shall be under the jurisdiction of the county
authorities.
In addition to having direct supervision of the improvement and
maintenance of the roads assigned to county administration, the county
boards in some states arrange for the construction of all culverts and
bridges on the roads that are under township supervision, or at least
the more expensive bridges and culverts on such roads. Sometimes this
is accomplished by granting county aid for township bridges, under
which system the county pays a part of the cost of the construction of
bridges on the township roads. The amount of aid varies, but is
generally about one-half of the cost, and the township and county
officials jointly assume the responsibility of arranging for the
construction by contract or otherwise.
The county board obtains funds for road work through a direct tax on
all property in the county, the maximum rate being limited by statute.
County boards are also authorized to issue bonds for road construction
under statutory restrictions and limitations similar to those
effective in the township as to total amount issued, and many
millions of dollars' worth of highway bonds have been issued by
county authorities in the United States.
=State Administration.=--In a state, the administrative authority in
highway matters is vested in a board of commissioners usually
consisting of three or more members. In a few states, the
administrative authority is delegated to a single commissioner. Where
the authority is vested in a board, that board is usually appointed by
the governor. In several states one or more members of the commission
hold that position _ex officio_; for example, in several states the
governor is by law a member of the commission, in others the secretary
of state or the dean of engineering at the State University or the
state geologist is a member of the commission. Where the
administrative authority is a single commissioner he may be elected
along with other state officers, but this is the case in only a few
states.
The authority of the state highway department varies in the several
states, but in general the departments serve in the dual capacity of
general advisers to the county and township authorities on road
matters and as the executive authority responsible for the
construction of those highways that are built entirely or in part from
state or federal funds.
State highway departments consist of the commission or commissioner,
and the technical and clerical staff required to perform the duties
imposed on the state organization. To some extent the state highway
departments are able to encourage economical and correct construction
of highways by the township and county authorities by furnishing them
standard plans and specifications and by formulating regulations to
govern the character of construction, but such efforts are likely to
be more or less ineffective unless the state authority has supervision
of the allotment of state or federal funds to the various counties and
townships. Nevertheless, most state highway departments do a great
deal of advisory work in connection with the highway construction
carried out by county and township authorities.
State highway departments are supported by funds obtained in various
ways, laws differing greatly in this respect. The necessary support is
in some states appropriated from funds obtained by general taxation,
and is in others obtained from automobile license fees. In still
others, the funds are secured by a combination of the two methods
mentioned above. In addition to these support funds, a certain part of
the money obtained as federal aid may be employed for the engineering
and inspection costs on federal aid roads. The above mentioned funds
are required to maintain the state highway department. In addition,
the departments have supervision of the expenditures of construction
funds which can be used for road construction and maintenance, and may
not be expended for salaries or other overhead expense.
In a number of states, automobile license fees are set aside for
financing road construction and maintenance, and the work paid for
from the fees is carried out under the supervision of the state
highway department.
In a number of instances, state bonds have been issued for road
construction, and the expenditure of the proceeds of the sale of road
bonds has usually been supervised by the state highway department.
All federal aid funds allotted to a state must be expended under the
direction of the state highway department.
=Federal Administration.=--Federal authority in highway work is vested
in the Bureau of Public Roads of the United States Department of
Agriculture. The official head is the Secretary of Agriculture, but
the administrative head is the Director of the Bureau. In this Bureau
are the various instrumentalities needed for carrying on
investigations and furnishing information to the various states on
highway subjects. The Bureau also supervises the construction of
federal aid roads in a general way through district engineers, each
of whom looks after the work in several states.
Funds for the support of the Bureau of Public Roads are obtained from
congressional appropriations to the Department of Agriculture and from
a percentage of the funds appropriated for federal aid.
Federal aid is money appropriated by Congress to be distributed to the
various states to stimulate road construction. It is granted to the
states on the condition that the states will expend at least an equal
amount on the projects involved. The states in turn usually give a
suitable part of the state allotment to each county. There are various
limitations as to the amount of federal aid per mile of road and the
type of construction that may be employed, but these are matters of
regulation that change from time to time.
It will be seen that each of the administrative authorities, except
the Bureau of Public Roads, is to some extent subservient to a higher
authority, and the Bureau of Public Roads is supervised by the United
States Congress. Considerable diplomacy is required on the part of any
administrative authority if his contact with other officials is to be
without friction. This is especially true in connection with the
formulation of a policy regarding the types of construction to be
adopted for an improvement. The responsibility for the selection is
variously placed on the township, county or state authority, the laws
not being uniform in this respect. If state or federal funds are
allotted to an improvement, the state authority either makes the
selection of the type of construction or the selection is made by some
subordinate authority subject to the approval of the state highway
department. Where the improvement is paid for exclusively with
township or county funds, the selection is often made by the township
or county authority without review by higher authority. Many abuses
have crept into highway administration through the unscrupulous
methods of promoters of the sale of road materials or road machinery.
A great deal of the selling activity of the agents for these
commodities is entirely irreproachable, but it is well known that such
is not always the case. As a result, the tendency of legislation is to
require the state highway department to approve contracts for
materials or construction entered into by the township or county
authorities. The state highway departments can secure the requisite
technical experts to determine the merits of materials and equipment
and, in spite of some glaring examples of inefficiency or worse, have
made a good record for impartiality and integrity as custodians of the
funds for which they are responsible.
HIGHWAY FINANCE
The paramount problem in highway administration is the development of
an adequate financial plan for carrying on road improvement. The
necessary expenditures are enormous, although the money so expended is
probably much less than the actual benefit resulting from the
improvements.
=Special Assessments.=--There is presumed to be a direct and
recognized benefit conferred on farm lands by the construction of
improved highways adjacent thereto. Therefore, it is equitable to
charge a part of the cost against the lands so benefited.
The principle of paying for public improvements by a special
assessment upon private property has been long established and a large
proportion of the public improvements in the cities and towns have
been made financially possible through the medium of special
assessments on abutting and adjacent property. The same principle has
been applied to the financing of drainage projects for reclaiming farm
lands. Recently the special assessment method has come into limited
use in financing rural highway improvements. The policy in such cases
is to assess the abutting and adjacent property in a zone along the
improved road for a percentage of the cost of the improvement. The
amount so assessed does not ordinarily exceed one-fourth of the total
cost of the improvement and may be considerably less. The assessment
is spread over an area extending back from one to six miles from the
improved road. The assessment area is generally divided into about
four zones parallel to the road. The zone next the road is assessed at
a rate arbitrarily determined as a fair measure of the benefit, and
each succeeding zone is assessed at a somewhat lower rate. Generally
about three-fourths of the total assessment is placed on the half of
the assessment area lying next to the road.
Many systems of making assessments have been proposed which are
mechanical in application after the area and rate of distribution of
benefit have been established, but in practice it is always found
necessary to make adjustments on individual parcels of land because of
variation in benefits received and it is impossible to eliminate the
exercise of human judgment in equalizing the assessments.
=Zone Method of Assessing.=--The area to be assessed on each side of
the improved road is divided into zones usually four in number, but a
larger or smaller number of zones may be adopted. The rate for each
zone is then arbitrarily determined. For a typical case, the first of
four zones would receive an assessment of 50 per cent of the amount to
be borne by the area; the second zone 25 per cent, the third 15 per
cent and the fourth 10 per cent. Other percentages sometimes adopted
are 45, 25, 20 and 10 and 60, 20, 15 and 5. The set of percentages
first mentioned seems to insure the most equitable distribution for an
area all of which is substantially equally productive.
When a road, for the improvement of which an assessment is being made,
lies on two or more sides of a parcel of land all of which is within
the assessment area, the rate is arbitrarily reduced to relieve that
parcel of land somewhat, or the assessment is first spread as above
outlined and afterward equalized as judgment dictates.
In applying the zone method some difficulty is encountered in
determining an equitable distribution on those parcels of land lying
partly in one zone and partly in another, but the rate may be arrived
at with reasonable accuracy by pro-rating in accordance with the exact
conditions.
In. Fig. 1, let it be assumed that the assessment area is to be two
miles wide, one mile on each side of the road and the various
ownerships to be indicated by the parcels of land numbered 1 to 8, as
shown. Each zone for the assessment of the 3-1/4 mile section is 1/4
mile wide and the rates for the several zones are 50, 25, 15 and 10
per cent respectively. Let it be assumed that the portion of the cost
of the 3-1/4 miles of road to be assessed on the area shown is
$20,000. The assessment would then be as follows:
------+-------+----------------------+------------+-------------
| | Rate x frontage on | Amount of |
Parcel| Rate | improved road = | Assessment | Assessment
| | assessment units | per unit[1]|
1 | 2 | 3 | 4 | 5
------+-------+----------------------+------------+-------------
1 | a 50 | 50 x 2640 = 132,000 | $0.016655 | $1558.46
| b 75 | 75 x 1320 = 99,000 | | 1153.90
2 | 40 | 40 x 2640 = 105,600 | | 1230.77
3 | 10 | 10 x 2640 = 26,400 | | 307.69
4 | 25 | 25 x 1320 = 33,000 | | 384.66
5 | [2]85 | 85 x 5280 = 448,800 | | 5230.88
6 | 15 | 15 x 5280 = 79,200 | | 923.08
7 | [2]65 | 65 x 7920 = 514,800 | | 6000.00
8 | 35 | 35 x 7920 = 277,200 | | 3230.77
| | ------------------- | | -----------
| | 1,716,000 | | $20000.00
------+-------+----------------------+------------+-------------
[1] The assessment per unit is obtained by dividing the total
assessment by the total of column three.
[2] On these two parcels, it is decided that more than half of
the zone rate should apply to the half of the zone toward the
improved road, but some modification of the rates adopted might be
justified.
[Illustration: Fig. 1]
The assessment of the cost of the east and west one-mile section of
road is made up in like manner, and let it be assumed that the portion
of the cost of this road that is to be assessed on the area shown is
$5500. The assessment area will be one mile wide and each zone
one-fourth mile in width and the rates for each zone the same as
before.
------+-------+----------------------+------------+-------------
| | Rate x frontage on | Amount of |
Parcel| Rate | improved road = | Assessment | Assessment
| | assessment units | per unit |
------|-------+----------------------+------------+-------------
1 | a 75 | 75 x 1320 = 99,000 | $0.010417 | $1031.25
| b 15 | 15 x 2640 = 39,600 | | 412.49
2 | 75 | 75 x 2640 = 198,000 | | 2062.53
3 | 50 | 50 x 1320 = 66,000 | | 687.51
4 | a 25 | 25 x 1320 = 33,000 | | 756.25
| b 15 | 15 x 2640 = 39,600 | |
5 | 10 | 10 x 3300 = 33,000 | | 343.73
6 | 10 | 10 x 1980 = 19,800 | | 206.24
------|-------| | |-------------
| | 528,000 | | 5500.00
------+-------+----------------------+------------+-------------
It will be noted that the combined assessment for the two sections of
road is especially heavy on parcels 1, 2 and 3. In order to prevent
unjust charges against such properties, laws usually limit the total
assessment against any parcel of land to a fixed percentage of a fair
market value or of the assessed value. The assessment on these parcels
would be reduced as seemed expedient and the deficit would be
distributed over the remainder of the area in the same manner as the
original assessment was spread. In practice such re-distribution is
ordinarily made by the arbitrary adjustment in accordance with what
the authorized officials consider to be fair and equitable. The method
outlined is merely a mechanical means of securing distribution and
must not be considered as an infallible method of making the
assessment. It is always necessary to review the results in the light
of the actual benefits to be presumed for each parcel of land.
Nevertheless, the method outlined will prove equitable in a majority
of cases.
=General Taxation.=--There is a general community benefit derived from
the construction of good roads in that the actual cost of marketing
farm products is lessened with a resulting lowering of the price to
the consumer. The benefit also accrues from the greater facility with
which all community business may be conducted. The introduction of
better opportunities for social, religious and educational activities
in the rural districts which results from improved highways is also a
community benefit of no mean importance. A part of the cost of road
improvement may therefore be equitably paid from funds obtained by
general taxation.
A considerable portion of the current expense of maintaining the
township and county highway work and at least a part of the cost of
maintaining state highway activities is met from funds obtained by
general taxation. Likewise, the funds required for the amortization of
bond issues are often obtained from general taxation although vehicle
license fees are sometimes used for that purpose.
General taxes are levied on all taxable property in a political unit
under statutory provisions regulating the amount of the levy and the
purpose for which the revenue is to be used. In the aggregate, the
road taxes are large but in the township or county the rate is
generally small compared to some other taxes, such as the school tax.
=Vehicle Taxes.=--The great direct benefit derived by those who
actually operate vehicles over the roads justifies the policy of
requiring a vehicle to pay a license fee in lieu of other taxes, the
funds so obtained to be used for the construction and maintenance of
public highways. In practice, this method has already been applied to
motor vehicles in most states and has proven to be an important source
of revenue. Its application to horse-drawn vehicles has not been
attempted, due probably to the fact that such horse-drawn vehicles as
use the public highways are also employed about the farm or in the
towns and the determination of an equitable basis for taxation
involves many difficulties.
The rate of the fee for motor vehicles should be based on their
destructive effect on the road so far as that is possible. The scale
of fees should therefore take account of weight and speed of vehicle
and if the license is in lieu of all other taxes, it should also be
graduated with the cost of the vehicle.
When funds are thus derived, every precaution should be taken to
insure that the money is used judiciously for construction and
especially for maintenance on those roads most useful to motor
traffic.
=Highway Bonds.=--Bond issues for road improvement afford a means of
constructing roads and paying for them while they are being used. A
very large volume of such bonds are outstanding in the United States.
Road bonds should be issued only for durable types of improvement and
the life of the bond should be well within the probable useful life of
the road surface. It is customary and highly desirable that the
general nature and extent of the improvement be established before the
bonds are issued. It is desirable that bond issues be subject to
approval by referendum before issue and that is provided in every
instance.
Highway bonds are of three classes known as Sinking Fund, Annuity and
Serial Bonds, respectively. The earlier bonds issued were almost all
of the sinking fund class, but in recent years the serial bond has
been widely employed and is probably the most satisfactory to
administer.
=Sinking Fund Bonds.=[1]--When this type of bond is employed, the
amount of the expenditure for road improvement is determined upon and
the length of the period during which tax payments shall be made is
settled. To employ a concrete example, it may be assumed that $100,000
is to be expended for road work and is to be paid at the end of ten
years. The interest rate on the bonds will vary with the condition of
the bond market and the stability of the political unit issuing the
bonds, but is usually about 5 per cent. Knowing these factors, the
amount to be added to the sinking fund each year is computed. In order
to pay the interest on the bonds, a tax of suitable rate is levied,
and in order to retire the bonds at the end of the period, a sum is
set aside each year which is supposed to be invested and draw interest
which will be added to the principle, and the principle and interest
comprise the sinking fund. The principle of the sinking fund is
obtained by tax levies, a sum being added to the principle of the
sinking fund each year.
[1] For a more detailed discussion of highway bonds see Bulletin
136, U. S. Dept. of Agriculture, which is the basis of this
discussion.
The success of this method of financing depends upon the proper
administration of the sinking fund. It must be invested with fidelity
and the fund be kept intact. Usually the sinking fund cannot be
invested at as high a rate of interest as the bonds bear and there is
some loss as a result. Road bonds bearing 5 per cent interest can
usually be sold at par while the sinking fund will usually net about 3
or 3-1/2 per cent interest. The total cost of a bond issue will be
greater by the sinking fund method than by either of the other methods
described.
=Annuity Bonds.=--Annuity bonds are drawn in such a manner that the
amount of the payment for principle and interest is the same each year
during the life of the bond. When the amount of the issue and the rate
of interest has been determined and the amount of the desired annual
payment has been determined, the number of years the bonds must run is
computed.
This method is convenient in that the amount of the tax to be levied
each year remains constant.
=Serial Bonds.=--Serial bonds are drawn so that a uniform amount of
the principle is retired each year after retirement starts and the
total interest payments decrease each year after the first bonds are
retired. The first bond may not be retired for a number of years after
the issue of the bonds, but when it once starts retirement proceeds at
a constant rate annually.
=Comparison of Methods of Issuing Bonds.=--The relative costs of
financing by either of the three methods depends upon the rate of
interest in each case and the net rate secured on the sinking fund
provided for retiring sinking fund bonds.
For comparative purposes, some typical examples are given in Table 3.
These illustrate the differences in total cost of securing $100,000 by
each of the three methods at various interest rates.
TABLE 3
TOTAL COST OF A LOAN OF $100,000 FOR 20 YEARS, INTEREST
COMPOUNDED ANNUALLY
---------+---------------------------------------+---------+---------
Annual | Sinking Fund Compounded | |
Interest | Annually at | |
on Bonds +----------+----------------+-----------+ Annuity | Serial
|3 per cent| 3-1/2 per cent | 4 per cent| |
---------+----------+----------------+-----------+---------+---------
4 | $154,431 | $150,722 | $147,163 |$147,163 | $142,000
4-1/2 | 164,431 | 160,722 | 157,163 | 153,752 | 147,250
5 | 174,431 | 170,722 | 167,163 | 160,485 | 152,500
5-1/2 | 184,431 | 180,722 | 177,163 | 167,359 | 157,750
6 | 194,431 | 190,722 | 187,163 | 174,369 | 163,000
---------+----------+----------------+-----------+---------+---------
=Desirability of Road Bonds.=--In theory the bond method of financing
enables the highway authorities to construct a large mileage of roads
in a few years and spreads the cost over the period during which the
public is being benefited. Better prices are obtained on contracts for
a large mileage than for smaller jobs, and the community can receive
the benefit more quickly than where construction proceeds piecemeal
with current funds. The vital consideration is to insure that the term
of the bonds is well within the useful life of the road, and that
ample provision is made to maintain the roads during that period.
Under proper restrictions the bond method of financing is to be
commended. The bonds are an attractive investment and readily
marketable on satisfactory terms.