Value of Arizona’s State Highway System: Corporate-Style Financial Analysis

Abstract

Government agencies and private-sector corporations tend to approach financial reporting in different ways. Presentation of government-agency financial information by corporate-style reporting could accomplish two specific goals. First, it might provide a more economically sound picture of the financial status of governmental undertakings. Second, this approach may allow a better comparison of the net profit and return on investment that is generated from the state highway system and the true value of the highways to be made. The results of an analysis showed that Arizona’s state highways are at best a “breakeven” proposition that does not allow for traffic growth or other contingencies. The amount that is charged to the users of the state highways is approximately 2.5 cents/vehicle-km (4 cents/vehicle-mi), whereas the estimated minimum value of the combined vehicle-highway system to its users is in excess of 18.6 cents/vehicle-km (30 cents/vehicle-mi). This implies that fees could be increased to allow the state highway system to generate an appropriate return on investment without significantly depressing usage. The current system of pricing of highway resources is inefficient and may not generate monies sufficient to replace deteriorating roadways and to build additional capacity as demand increases. Implementation of a differential pricing strategy (for example, electronic tolling) would provide a more economic and socially efficient and equitable way to charge for transportation services. A corporate-style analysis allows an efficient price for these services to be determined, and electronic tolling provides an efficient method of collection of these revenues.