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16 sources noted in the categories described above for current General Revenue investment. These financing mechanisms may be more accurately described as "project delivery" mechanisms The terms "general revenues" and "general funds" refer to rather than as sources of additional revenue because the revenues combined from any number of local and regional use of debt financing allows faster implementation and sources, including those described below. General funds serve related cost savings. as a resource to support any and all public purposes. Frequently, general funds are committed to support public transportation Not all potential funding sources listed in Table 3.1 have on an annual or biennial basis in amounts that can vary from been addressed in the same way in the material that follows. budget cycle to budget cycle depending on local budget priori- The focus of the current project is on the use of various forms ties. The sometimes uneven flow of general funds to transit on of tax, fee, and related revenue raised broadly from local res- annual or biennial budget cycles is contrasted with the more idents and businesses; therefore, individual agency experi- predictable and reliable flow of revenues from specific sources ences drawn from the interview process are focused on the dedicated all, or in part, to transit from sources such as those traditional tax- and fee-based transit funding sources and listed below. common business, activity, and related funding sources listed in Table 3.1. Sales Taxes Detailed documentation on the varied experiences of indi- vidual agencies with the remaining major categories of local As noted previously, sales taxes are the most widely used and regional funding: revenue streams from projects, new source of dedicated local and regional funding for transit. "user" or "market-based" funding sources, and financing Generally, sales taxes provide the greatest yield and stability mechanisms can be found in the literature referenced in as well as being among the most broadly acceptable sources Section 3.6. Readers are encouraged to use the references pro- of funding for public transportation. State funding for pub- vided to learn about the use and application of these funding lic transportation frequently relies on this source: all but sources. For each of these broad categories of local and regional five states have state sales taxes with rates ranging from 4 to revenue, Section 3.3 provides key descriptions, selected exam- 7.25 percent. At the local and regional level, additional sales ples of their use, and additional references, along with other taxes enacted for transit typically range from 0.25 to 1 per- issues associated with their enactment and application. cent. Some sales taxes are perpetual; others require re- Section 3.7 identifies additional local and regional revenue enactment or extension through periodic popular votes. Sales sources not currently in widespread use to support public taxes typically exempt various combinations of food, cloth- transportation. ing, and prescription drugs or apply lower rates to selected goods and services. "Use tax" is a term that describes the equivalent of a sales tax 3.2 Traditional Local and Regional that is applied to items that may not typically be covered by Tax- and Fee-Based Funding sales taxes, including lease or rental transactions and items pur- Sources for Public chased outside the taxing jurisdiction. Transportation "Excise taxes" also represent a type of sales tax, usually The over 18,000 local units of government in the United applied separately or in combination with sales taxes on States are overwhelmingly dependent on property tax rev- specific goods or services. Excise taxes may be charged on enues. According to the Tax Foundation, nearly 73 percent of an ad valorem basis as a percentage of the price, or as a total local tax collections come from property taxes.5 Support fixed dollar amount per transaction. Examples are dis- for public transportation derives from different sources, cussed below, including motor fuel taxes and a variety of mostly likely to avoid competing with other basic public ser- "sin" taxes. vices such as health, education, police, and fire protection. Basic descriptions are provided below for the more traditional Property Taxes tax- and fee-based revenue sources used to support public transportation that are listed in Table 3.1. Property taxes or ad valorem taxes on land and building value are generally the principal source of revenue for local governments and typically are unrestricted in their use. Portions of local property taxes are, however, also widely 5 authorized for use by special districts and authorities, Sagoo, S. (ed.). Facts & Figures on Government Finance, 38th ed. Tax Foundation, Washington, DC, 2005. Available at www.taxfoundation.org/ including transit authorities and school districts, and for publications/show/147.html. other specific public functions like police and sanitation.
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17 Revenues are generated by applying a tax or "mill rate" to Contract or Purchase-of-Service Revenues the value of the property. So-called "fair market" values frequently are adjusted to determine the "assessed value" Transit systems often provide transportation services in used as the basis for the mill rate. A mill is equivalent to addition to their regularly scheduled services for which rev- 1/1,000 of a dollar. Although these taxes are assessed locally, enues are received based on agreed-upon levels of service and states and localities act to control valuations or otherwise rates. Municipal government, individual businesses and indus- provide some type of property tax relief in the form of tar- tries, health and social service agencies, and educational insti- geted exemptions, or "circuit-breakers," limiting the per- tutions may purchase transit services. The revenues received centage of income required to be paid via property taxes. may or may not cover "fully allocated costs," or fully allocated "Special assessments" and "local improvement levies" are costs plus an added amount. The rates charged may be calcu- also types of property tax that are applied in direct relation to lated and applied on a per-hour basis, a per-vehicle basis, or a benefit received from their imposition and expenditure, typ- per-trip basis. New charter bus regulations issued by the FTA ically on local public improvements, as discussed in the sec- in May 2008 may serve as a constraint on contract or purchase- tion "Value Capture and Beneficiary Charges." of-service arrangements. Examples of Service and Revenue Arrangements with Colleges and Universities The availability of transit service has become an important element of student life and uni- versity economics across the country in recent years. Many colleges and universities have provided independent bus services for students, faculty, and workers and have invested heav- ily in surface and structured parking facilities. Over time, these costs have escalated, com- bined with growing enrollments, increased congestion, and related environmental effects. Many colleges and universities have turned to local public transit agencies to operate services of direct importance to their special communities. The result is a growing revenue source and expanded relevance in the community. Examples include the followinga: · The Greensboro Transit Authority (North Carolina) serves 130,000 student passengers on their Higher Education Area Transit (HEAT) services that are specially operated to meet the needs of seven area educational institutions, each of which supports the pro- gram financially. · The University of California at Riverside funds a U-Pass service in partnership with the Riverside Transit Agency as well as a free trolley shuttle for students who live off-campus. · At Iowa State University in Ames, students are charged $52.50 each semester and the University contributes half the cost of CyRide in Ames. Eighteen percent of the remain- ing funding is provided by the city and the balance from other sources. · Capital Area Transportation Authority (CATA), the transit system serving Lansing, Michigan, operates a bus service for Michigan State University at an annual cost of $2 mil- lion. With a student ID, students pay 50 cents a ride; without the ID the cost is $1.00. The balance of the cost of service is derived from housing and parking fees. · HomeRide, a private firm in Blacksburg, Virginia, provides a regional link among four colleges and universities, as well as a link to outside destinations on weekends and hol- idays, under a joint contract with the schools. These are just a sampling of the arrangements that are being pursued to gain ridership and revenue for transit agencies while relieving travel congestion and budget constraints for colleges and universities. a The examples are taken from "Transit Finds Increasing Connections with Universities," Passenger Transport, Vol. 65, No. 46, November 19, 2007, p. 8.