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10 Table 2.1. U.S. public transportation funding profile for urbanized areas with population over 200,000 (2005). Operating Expenses Capital Investment Total $ Billion (%) $ Billion (%) $ Billion (%) Federal 2.2 (8) 2.4 (25) 4.6 (12) State 6.7 (23) 1.5 (16) 8.2 (21) Local/Regionala 8.4 (29) 4.4 (46) 12.8 (33) Other 2.1 (7) 1.3 (14) 3.4 (9) Fares and Earned 9.7 (33) 0b 9.7 (25) Income Total 29.1 9.6 38.7 Total 20.2 5.7 25.9 (Less Federal and State) Source: National Transit Database, 2005. Available at a NTD data incorporate most "regional" sources as "local." b Less than $20 million. for local/regional transit use, regardless of how funds are col- ing formal and informal agreements covering varying peri- lected, administered, or (re)allocated. ods of time. The following points provide a further elaboration on this Local general revenues and funds made available to tran- definition and its application: sit systems from local or regional "enterprise funds," regardless of their source, are considered "local and/or Taxes or fees specifically authorized and collected regional." This includes funds mostly raised locally from within the locality or region, processed (with or without sources over which local officials have budgetary control an administrative fee) by state or other agents, and fully and authority to appropriate and allocate funds within the allocated back to the originating jurisdiction(s) for tran- locality or the region. sit are considered "local and/or regional," as is the case in Revenues from private- or public-sector partners that gen- the use of many local option sales and motor vehicle taxes erally reflect negotiated project-oriented economic inter- and fees. ests are considered "local and/or regional." These typically Revenues earned by transit agencies from transportation include revenues from joint development, assessment dis- services or other business activities that are the initiatives tricts, public-private partnerships (PPP), and other value- of the transit agency itself, regardless of the scope or source capture mechanisms. of authority, are considered "local and/or regional" sources, Revenues that flow from financing mechanisms that typ- e.g., parking fees, revenues from advertising, property or ically involve capturing the value of future streams of local right-of-way leases, concessions, and fund-raisers.1 or regional dedicated revenues for current use under various Revenues from the purchase of service by units of govern- conditions and requirements are considered "local and/or ment and other public or private organizations, regard- regional." less of where their own revenues originate, are considered "local/regional" for the purposes of this project. These rev- 2.3 Profile of Local and Regional enues come most frequently from payments for the pur- Public Transportation Funding chase of transit service by businesses, school districts, Sources--2005 universities, and human service organizations under vary- Although a great deal is known about local and regional funding for transit, the information has been largely anec- 1 Although passenger fares may fit this definition, they are not included in this dotal. There are two major exceptions: (1) information from research. While important policy and political tradeoffs exist between what NTD, managed by FTA, and (2) information from the Center riders are expected to pay versus the costs to be borne by all local citizens, fare for Transportation Excellence (CFTE) on the results of state policy and strategy in the industry are addressed in great detail as a separate topic of research and analysis. The current effort focuses, therefore, on non- and local transportation and transit funding referenda and fare local and regional sources of revenue for public transportation. ballot measures around the country. In addition, a number of

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11 recent analyses have been conducted that provide further Income taxes (2.0 percent), detail on local and regional funding for transit. Tolls (2.0 percent), and The material that follows provides a profile of what types of "Other" (28.8 percent); local and regional sources of funding are being used by tran- Directly generated taxes accounted for about 16 percent sit systems in urbanized areas with populations over 200,000 of revenue: and by different types of agencies for both capital and operat- Sales taxes (45.5 percent), ing expenditures based on 2005 NTD data. Table 2.2 summa- Property taxes (7.0 percent), rizes aggregate sources of local and regional funding for capital Tolls (5.0 percent), investment, operating expenses, and totals in 2005, i.e., Gas taxes (0.2 percent), and Table 2.2 is Table 2.1 data, less federal and state funds. "Other" (42.1 percent); Features of interest from Table 2.2 include the following: Local general funds accounted for approximately 10 per- cent of revenue; and Nearly $26 billion was made available for transit from local Other local sources accounted for about 5 percent of and regional sources in 2005, including nearly $6 billion for revenue. capital improvements and $20 billion for operations; Fares and other earned income accounted for about 51 per- From 1995 to 2005, total revenues from local and regional cent of revenue, virtually all revenue used for operations; sources rose 15 percent in inflation-adjusted terms. The largest Local dedicated taxes accounted for about 18 percent of shifts among sources involved substantial increases in the revenue, including revenues from: proportion of funding from dedicated sources, both directly Sales taxes (57.5 percent), generated sources and local sources, and a corresponding Property taxes (5.8 percent), decline in the proportion from local general funds and other Gas taxes (3.8 percent), local sources. Most of this shift resulted from increases in Table 2.2. Local and regional public transportation funding sources for urbanized areas with population over 200,000 (2005). Capital Operating Total Investment Expenses Source $ Million Percent $ Million Percent $ Million Percent Fares and Other 13,109 50.6 1,284 22.5 11,825 58.5 Earned Income Dir. Gen. Ded. 4,227 16.3 1,819 31.9 2,408 11.9 Taxes Sales taxes 1,926 45.5 330 18.1 1,596 66.3 Property taxes 297 7.0 27 1.5 270 13.3 Tolls 213 5.0 0 213 11.2 Gas taxes 10 0.2 1 0.1 9 8.8 Other 1,781 42.1 1,460 80.4 321 0.4 Local Ded. Taxes 4,598 17.7 1,116 19.6 3,482 17.2 Sales taxes 2,646 57.5 618 55.4 2,028 58.2 Property taxes 268 5.8 66 5.9 202 5.8 Gas taxes 174 3.8 18 1.6 156 4.5 Tolls 92 2.0 0 0 92 2.6 Income taxes 91 2.0 22 2.0 69 2.0 Other 1,326 28.8 392 35.1 934 26.8 Local General 2,688 10.4 315 5.5 2,373 11.7 Funds Other Local 1,265 4.9 1,165 20.4 100 0.5 Total $ Billion 25.9 5.7 20.2 Source: National Transit Database, 2005.

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12 Table 2.3. Sources of local funding for public transportation capital investment and operating expenses by system size (population of area served). Percentage of Capital Investment Percentage of Operating Expenses > 1.0 200,000 50,000 >1.0 200,000 50,000- Local Funding Source Million 1.0 Million 200,000 Million 1.0 Million 200,000 Fares and Earned a 58.2 30.2 37.8 Income Sales Taxes 35.5 38.9 51.1 18.8 25.8 28.3 Other Directly 33.7 Generated Dedicated Funds Local General Funds 42.5 32.7 11.1 26.9 21.3 Other Local 18.4 Dedicated Fundsb Local Property Taxes 9.7 Other Local Sources c 8.2 c c c c Source: National Transit Database, 2005. a Dashes indicate a very minor contribution. b The high percentage of revenues available in larger systems from "Other Local Dedicated Funds" includes $1.4 billion from 10 systems of which $1.2 is reported from the New York City Transit Authority (NYCTA), i.e., budgets and expenditures in the New York region can overwhelm or mask patterns in the remaining large urbanized areas. c Majority or all of the remaining revenues. directly generated, dedicated sales tax revenues, i.e., agencies Fares and earned income are predominantly used to support empowered to directly levy sales taxes on a local or regional operations; basis. Other directly generated dedicated funds are most promi- nent in the largest systems; and Property taxes for transit are concentrated among smaller Local and Regional Public Transportation systems. Funding by System Size Overall, transit investment and use are heavily concen- According to 2005 NTD data, the importance of local fund- trated in the nation's larger transit systems. NTD data indi- ing sources is relatively consistent across areas of all population cate that the top 50 systems accounted for 83 percent of sizes, accounting for approximately 20 to 25 percent of rev- trips in 2005, 79 percent of total operating expenditures, enues for both capital and operations. Systems in areas with and 89 percent of total capital investment. Of the nearly a population over 1.0 million have a lower dependence on $26 billion in local and regional revenues expended in 2005 federal sources (under 20 percent) than systems in areas with by urbanized area systems, nearly 84 percent was expended a population of 50,000 to 200,000 (33 percent); however, sys- within areas served by the 50 largest systems. Table 2.2 indi- tems in areas with a population over 1.0 million have a higher cates the sources of the largest shares of local funding for dependence on fares and earned revenue (25 percent versus capital and operations. less than 10 percent).2 Table 2.3 elaborates on and reinforces several points made The most noteworthy change in local and regional funding earlier: flows from 1995 to 2005 is the growth in the percentage of revenues from sales taxes across area size. This change also Sales taxes serve as a major revenue source among systems reflects the rise of local and regional sales taxes. of all sizes; Local general funds play a large role in systems serving areas under 1.0 million; Fares and earned income are the largest source of operating support drawn from local areas; 2 National Transit Database, 2005.

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13 Table 2.4. Sources of local public transportation funding for capital investment and operating expenses by agency type (2005). Percentage of Capital Percentage of Operating Expenses Investment Municipal/ Municipal/ Local Funding Source Independent County Independent County Fares and Earned Income a 58.6 32.9 Sales Taxes 36.0 43.6 19.8 18.9 (directly generated or locally dedicated) Other Directly Generated 35.9 Dedicated Funds Local General Funds 6.6 13.0 8.9 34.4 Other Local Dedicated 20.2 13.8 5.5 5.1 Fundsb Local Property Taxes 16.1 Other Local Sources c c c c Source: National Transit Database, 2005. a Dashes indicate a very minor contribution. b See note to Table 2.3 on "Other Local Dedicated Funds" and the impact of data from the New York region. c Majority or all of the remaining revenues. Local and Regional Public Transportation Independent authorities are more often empowered to tap Funding by Type of Agency larger proportions of directly generated revenue; Fares and earned income (concessions, advertising, lease As suggested earlier, independent transit authorities and revenues, etc.) are a significant source of operating support services operated by municipal or county governments have regardless of agency type, but they represent a larger share different latitude and authority in seeking increased revenues. of operating expense in independent authorities, perhaps Likewise, independent authorities can be structured with widely due to the political difficulty of raising fares in the smaller varied authority as well. Table 2.4 summarizes the sources of markets typical of municipal systems; and local and regional transit funding for these two basic organiza- Property taxes are more often a source of revenue for tional structures. municipal and county systems. Table 2.4 also elaborates on and reinforces several points made earlier: More detailed system-level NTD data suggest that munici- Sales tax revenues are important regardless of agency type, pal and county systems often use a more varied mix of sources but they are particularly important for larger agencies and than independent authorities. independent agencies, where sales taxes typically are used Appendix C provides additional insights and observations to support large-scale capital programs; about the NTD and its usefulness in informing local and Sales tax or directly generated revenue sources provide over regional officials and transit professionals about alternative 70 percent of capital investment by independent authorities; local and regional sources of funds for public transportation.