Local and Regional Funding Mechanisms for Public Transportation (2009) / Chapter Skim
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Pages 14-38
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From page 14... ...
Financing mechanisms most often commit future streams of revenue from many of the types of S E C T I O N 3 . 0 Current and Potential Sources of Local and Regional Funding for Public Transportation 3 The limitations of the NTD in this regard are discussed in more detail in Appendix C
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Advertising Revenues Concession Revenues Common Business, Activity, and Related Funding Sources Employer/Payroll Taxes Car Rental Fees Vehicle Lease Taxes and Fees Parking Fees Realty Transfer Taxes/Mortgage Recording Fees Corporate Franchise Taxes Room/Occupancy Taxes Business License Fees Utility Fees/Taxes Income Taxes Donations Other Business Taxes Revenue Streams from Projects (Transportation and Others) Transit-Oriented Development/Joint Development Value Capture and Beneficiary Charges Special Assessment Districts Community Improvement Districts/Community Facilities Districts Impact Fees Tax-Increment Financing Districts Right-of-Way Leasing New "User" or "Market-Based" Funding Sources Tolling Congestion Pricing Emissions Fees VMT Fees Financing Mechanismsa General Obligation (GO)
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3.2 Traditional Local and Regional Tax- and Fee-Based Funding Sources for Public Transportation The over 18,000 local units of government in the United States are overwhelmingly dependent on property tax revenues. According to the Tax Foundation, nearly 73 percent of total local tax collections come from property taxes.5 Support for public transportation derives from different sources, mostly likely to avoid competing with other basic public services such as health, education, police, and fire protection.
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Although these taxes are assessed locally, states and localities act to control valuations or otherwise provide some type of property tax relief in the form of targeted exemptions, or "circuit-breakers," limiting the percentage of income required to be paid via property taxes. "Special assessments" and "local improvement levies" are also types of property tax that are applied in direct relation to a benefit received from their imposition and expenditure, typically on local public improvements, as discussed in the section "Value Capture and Beneficiary Charges." Contract or Purchase-of-Service Revenues Transit systems often provide transportation services in addition to their regularly scheduled services for which revenues are received based on agreed-upon levels of service and rates.
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TCRP Report 31: Funding Strategies for Public Transportation, Volumes 1 and 2. Transportation Research Board, National Research Council, Washington, DC, 1998.
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Rental companies typically report and remit the tax to state revenue departments along with applicable retail sales tax receipts. Rental car revenues may be reallocated back to authorized local governments or agencies with funds often dedicated to specific projects or purposes, including public transportation.
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Typically, donations are directed toward a particular service, subarea, or client group. 3.4 Current Examples of Traditional or Common Local and Regional Funding Sources Table 3.2 lists the local and regional revenue sources currently in use among over 60 public transportation systems that were interviewed for this project.19 The database that accompanies this report contains additional information that relates the characteristics of each transit agency to the characteristics of each funding source used by that agency.
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Morgan, CO Paducah, KY Sturgis, SD Sales Taxes Chicago, IL (RTA) Denver, CO Harris County/ Houston, TX Las Vegas, NV Miami-Dade County, FL New York, NY (MTA)
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San Francisco, CA (MUNI) Virginia Beach/ Hampton Roads, VA Corpus Christi, TX Dayton, OH Flint, MI Grand Rapids, MI Lubbock, TX Salt Lake City, UT Spokane, WA Syracuse, NY Lafayette, IN Baldwin County, AL Park City, UT Ontonagon, MI Concession Revenues Chicago, IL (CTA)
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Joseph, MO Pullman, WA Income Taxes – Business Louisville, KY (corporate profits) Cigarette Taxes Portland, OR (State)
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A Snapshot of Recent Public Transportation Funding Initiatives in Major Metropolitan Areas In recent years, there have been increasing efforts at both the state and local level to enact new funding for transit and transportation, generally. CFTE has tracked referenda and initiatives all over the country in the past several years and regularly reports results on its website, www.cfte.org.
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Denver, Colorado, also has a highly successful and cost-effective regional, multimodal, public transportation system in development. To support continued transit expansion in the region, citizens in November 2004 approved by a 58-to-42 margin, the new 12-year, $4.7-billion FasTracks program developed by the Denver Regional Transportation District (RTD)
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Rather, the IBO suggested what may be the bottom line revenue strategy for most transit agencies in the future, "it is likely that remedying the problem will require a mix of actions and sources that will spread the burden across a broad range of the region's businesses and residents."23 Local and Regional Public Transportation Funding Among Small Urban and Rural Systems Prior to 2006, the NTD did not require reporting from small urban and rural transit systems. Enactment of SAFETEA-LU in August 2006 changed this by requiring simplified reporting by these smaller systems.
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Examples of Local and Regional Public Transportation Funding from Abroad As part of this project, a brief review was done of local and regional transit funding mechanisms outside the United States. The relevance of Canadian and European experiences with local funding is limited, however, because of the substantial differences in government structures, processes, legal frameworks, and philosophical traditions in revenue raising and budgeting.
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Since that time, 21 joint development projects have been initiated or completed.26 • In 2004, it was reported that developers invested more than $4 billion in 30 projects around Los Angeles Metro Rail stations -- including projects in downtown Los Angeles, Chinatown, Long Beach, North Hollywood, Lincoln Heights, Hollywood, and Pasadena and mixed-use projects around Metro Gold Line stations between downtown Los Angeles and Pasadena and within the transit mall loop on the Blue Line.27 Value Capture and Beneficiary Charges Value capture and beneficiary charges refer to circumstances in which the provision of a public service or facilities such as public transportation increases the market value of surrounding real estate, and measures are enacted to capture some or all of that increase to defray public expense. Various mechanisms are used to capture either the current or future value created by public investment.28 Impact Fees or "Exactions" Development brings with it a sizeable demand for new public facilities and services, including added transportation capacity.
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TCRP Report 31: Funding Strategies for Public Transportation, Volumes 1 and 2. Transportation Research Board, National Research Council, Washington, DC 1998.
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Finally, in recent years, it appears that there has been a greater use of creative methodologies (such as residential fees that vary by unit size) .30 Most recent surveys indicate that impact fees currently are not a common source of funding, specifically for public transportation, largely because the fees are charged to specific new developments while transit services are traditionally operated and supported on an areawide or jurisdiction-wide basis.31 Right-of-Way Leasing Linear rights-of-way owned and maintained by transit agencies providing fixed guideway services have the potential to serve a number of emerging private business needs.
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While newer, emerging proposals for toll facilities and pricing often include provision for, or special accommodation of, transit and other shared-ride vehicles, there are few examples of toll revenues being used to support public transportation in the broader regional sense. Noteworthy exceptions include the following: • New York State's MTA.
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From page 32... ...
While a VMT fee also represents a direct way to reduce congestion through reduced vehicle use, opponents suggest that VMT fees are less directly effective in addressing other urgent problems -- such as vehicle emissions, energy use, and air quality -- because VMT fees don't directly address the wide variability that exists in vehicle performance due to vehicle age, make, and model.39 Beginning in 2007, six states -- California, Idaho, Iowa, Maryland, North Carolina, and Texas -- embarked on a 2-year study of mechanisms and approaches to replacing fuel taxes with mileage fees under a $16.5-million federal project.40 In addition, the U.S. Chamber of Commerce has endorsed adoption, in the long term, of a two-tiered system of vehicle-mileage fees, including a state VMT fee as well as a local-option VMT fee to help ease metropolitan congestion.41 Ahead of the new federal initiative, Oregon has implemented a pilot project in the Portland region to demonstrate how a VMT concept might be implemented.42 Volunteers are using hybrid odometer/GPS technology on 280 vehicles as part of the Road User Fee Pilot Program to measure distance and assess costs at the pump.
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and PA Consulting, Inc., TCRP Report 89: Financing Capital Investment: A Primer for the Transit Practitioner, Transportation Research Board of the National Academies, Washington, DC, 2003.
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As of 2005, 33 states had SIBs in operation. In the aggregate, these states have entered into 457 loan agreements totaling over $5.0 million and have disbursed $3.7 million.49 3.7 Public Transportation Funding Mechanisms Not in Widespread Use Because of varying philosophies of governance and taxation across state and local governments, arriving at an acceptable mix of revenues to support public transportation has often resulted in combinations of unique revenue sources suited to the political and budgetary landscape of individual areas and jurisdictions.
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Motor Fuel Taxes Motor fuel taxes are a type of sales tax or excise tax applied by all states to gasoline, diesel fuel, and gasohol at varying rates. State gasoline tax rates range from 4 to 36 cents per gallon on top of the 18.4-cent per gallon federal gas tax.
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From page 36... ...
These are typically state-level taxing mechanisms, often with local analogs, that are used to support health and education programs and general spending, but are rarely used for transit investment. Exceptions include the use of state cigarette tax revenues to support Portland's MAX light rail transit system, the dedication of state lottery proceeds to transit services for elderly persons in Pennsylvania, and the use of a Casino Revenue Fund to support paratransit in New Jersey.
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Lotteries are established in 42 states, the District of Columbia, and the Virgin Islands. Typically, a significant portion of state lottery revenues are used to support state education programs and systems, although they frequently are used to support general fund expenditures.65 Several states use substantial portions of lottery proceeds to directly support public transportation.
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Revenue from special assessment districts represents "remuneration that a governmental unit may demand from property owners to fund a public project which creates a ‘benefit' in properties lying within a special geographic area known as a ‘special assessment district.' "72 State laws for the establishment of special assessment districts vary from state to state. While special assessment districts are in widespread use, there is little evidence of resulting revenues playing a major role in support of transit services.
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