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20 and less frequently, public transportation.11 Rates are highly may be collected by local jurisdictions where state authority is variable across types of property and property value, ranging provided. Often these revenues are used for promotion of from 1/100th of a cent to 2 percent.12 tourism or construction and operation of tourism-related facilities, as in counties throughout the state of Washington and in Allegheny County, Pennsylvania.17 Corporate Franchise Taxes A franchise tax is a tax levied on the profit and taxable assets Utility Fees of a business or firm.13 Franchise taxes impose a tax on corpo- rations for doing business, employing capital, owning or leas- Utility fees can encompass taxes on a wide range of pub- ing property, or maintaining an office. Franchise tax is lic services and businesses, including telephone, sewer and water, electricity, gas, and garbage utilities. Revenues are a tax that corporations pay in advance for doing business within typically provided to a jurisdiction's general fund as well as the state. Franchise tax is based on the `par value of the corpora- to public works facilities. In Pullman, Washington, utilities tion's outstanding shares and surplus.' This is defined as the `total assets or the par value of issued and outstanding capital are paid monthly by subscribers (households and busi- stock, whichever is greater.'14 nesses). The prior month's fees are paid in turn to the city every month, i.e., there is a month's lag in city receipt of the Franchise taxes often are targeted to specific industries and fees. The tax is levied in lieu of a business and occupation economic activities. A corporate franchise tax on transporta- tax and a sales tax. Rates vary by utility from 0.10 percent to tion and transmissions companies, or a "long lines tax," is one 5 percent.18 of several taxes supporting transit services in the 12-county New York MTA region.15 Donations A franchise tax on oil companies applied in Pennsylvania imposes a cents-per-gallon tax on all taxable liquid fuels.16 Support for public transportation may also be available Revenues are deposited in various restricted and unrestricted through donations from various types of philanthropic, char- state funds. itable, service organizations like the United Way, as well as for- profit businesses. Typically, donations are directed toward a particular service, subarea, or client group. Room or Occupancy Taxes Sometimes called a hotel-motel tax, room or occupancy 3.4 Current Examples of Traditional taxes are consumer taxes on the cost of lodging at hotels, or Common Local and Regional motels, rooming houses, private campgrounds, RV parks, and Funding Sources similar facilities. They are frequently limited to a specified con- secutive period of days. Rates may vary depending on the size Table 3.2 lists the local and regional revenue sources cur- of the facility and/or by location. Revenues may be collected by rently in use among over 60 public transportation systems that the state and, where dedicated for local use, reallocated to the were interviewed for this project.19 The database that accom- levying municipalities and counties. Alternatively, revenues panies this report contains additional information that relates the characteristics of each transit agency to the characteristics of each funding source used by that agency. Table 3.2 reinforces much of what was revealed in aggregate 11 data from the NTD, particularly the dominance of sales taxes Hopper, K. Local Parks, Local Financing--Volume 1: Increasing Public Invest- ment in Parks and Open Space. The Trust for Public Land, San Francisco, as the local and regional transit funding source of choice across CA, 1998. Available at http://www.tpl.org/tier3_cdl.cfm?content_item_id= the country. In addition, Table 3.2 reveals a number of other 1048&folder_id=825. 12 National Conference of State Legislatures. "Real Estate Transfer Taxes." Available at http://www.ncsl.org/programs/fiscal/realxfertax.htm. 13business franchise tax. BusinessDictionary.com. WebFinance, Inc. Available 17 athttp://www.businessdictionary.com/definition/business-franchise-tax.html. http://dor.wa.gov/content/findtaxesandrates/othertaxes/tax_hotelmotel. 14 Missouri Department of Revenue at http://dor.mo.gov/tax/business/ aspx. Allegheny County Pennsylvania, "Hotel Occupancy Tax" (online arti- franchise/. cle). Available at www.alleghenycounty.us/treasure/hotel.aspx. 15 City of New York Independent Budget Office. "A Review of the Metro- 18 Price Waterhouse, LLP. "Dedicated Local Taxes." TCRP Report 31: Funding politan Transportation Authority's Financial Outlook and Options for Closing Strategies for Public Transportation--Volume 2: Casebook. Transportation the Gaps." New York, NY, June 1, 2007. Research Board, National Research Council, Washington, D.C. 1998. 16 Pennsylvania Department of Revenue. "Liquid Fuels and Fuels Taxes" Available at http://onlinepubs.trb.org/Onlinepubs/tcrp/tcrp_rpt_31-2-a.pdf. 19 (online article). 2005. Available at www.rev421.state.pa.us/revenue/cwp/ The list of transit systems interviewed for the projects is provided in view.asp?A=11&Q=48877. Appendix C.
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21 Table 3.2. Local and regional funding sources for public transportation. Selected Applications Funding Major Metro Large Metro Small Urban Rural Source > 1.0 Million 200,0001.0 Million 50,000200,000 < 50,000 Traditional Taxes and Fees General Chicago, IL (Pace) Allentown, PA Durant, OK Baldwin County, Revenues Miami-Dade County, Gulfport-Biloxi, MS Jefferson City, MO AL FL Lubbock, TX Licking County, OH Eureka Springs, Orlando, FL AR Oklahoma City, Waterloo, IA San Francisco, CA OK Ft. Morgan, CO (MUNI) Paducah, KY Virginia Sturgis, SD Beach/Hampton Roads, VA Washington, DC (PRTC) Sales Taxes Chicago, IL (RTA) Austin, TX Athens-Clark Park City, UT Denver, CO Corpus Christi, TX County, GA Harris County/ Dayton, OH Durant, OK Houston, TX Reno, NV Jefferson City, MO Las Vegas, NV Salt Lake City, UT St. Clair County, MO Miami-Dade County, Spokane, WA St. Joseph, MO FL New York, NY (MTA) San Francisco, CA (BART) San Francisco, CA (MUNI) St. Louis, MO (City) St. Louis, MO (St. Clair County, IL) Seattle/King County, WA Seattle, WA (Sound Transit) Tampa, FL Washington, DC (NVTA) Property Taxes Las Vegas, NV Ann Arbor, MI Athens, Clark Hanover, Minneapolis/St. Paul, Flint, MI County, GA NH MN (Metro Transit) Grand Rapids, MI Lafayette, IN Harper County, KS San Francisco, CA Lansing, MI Licking County, OH Hood River, OR (BART) Van Buren County, Marshalltown, IA Minneapolis/St. Tampa, FL Paul, MN MI Ontonagon, MI (Minnesota Valley Ottawa County, Transit) OH Van Buren, MI White River Junction, VT Contract/ Chicago, IL (Pace, Austin, TX Annapolis, MD Eureka Springs, Purchase-of- Metra) Allentown, PA Athens-Clark AR Service Denver, CO (RTD) County, GA Ft. Morgan, CO Ann Arbor, MI Revenues Orlando, FL Corpus Christi, TX Durant, OK Hanover, NH (continued on next page)
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22 Table 3.2. (Continued). Selected Applications Funding Major Metro Large Metro Small Urban Rural Source > 1.0 Million 200,0001.0 Million 50,000200,000 < 50,000 San Francisco, CA Dayton, OH Jefferson City, MO Hood River, OR (MUNI) Flint, MI Lafayette, IN Ontonagon, MI Tampa, FL Grand Rapids, MI Licking County, OH Ottawa County, Virginia Beach/ Oklahoma, City, Pullman, WA OH Hampton Roads, VA OK Paducah, KY Waterloo, IA Lansing, MI Park City, UT Louisville, KY Sturgis, SD Lubbock, TX White River Syracuse, NY Junction, VT Lease Chicago, IL (CTA) Lansing, MI Revenues Denver, CO Grand Rapids, MI Minneapolis/St. Paul, MN (Metro Transit) Orlando, FL San Francisco, CA (BART) Vehicle Fees San Francisco, CA White River (title, (BART) Junction, VT registration, Seattle, WA tags, and (Sound Transit) inspection) Washington, DC (NVTA) Advertising Chicago, IL (CTA, Corpus Christi, TX Lafayette, IN Baldwin County, Revenues Metra) Dayton, OH AL Denver, CO Flint, MI Park City, UT Las Vegas, NV Grand Rapids, MI Ontonagon, MI Minneapolis/St. Paul, Lubbock, TX MN (Minnesota Valley Salt Lake City, UT Transit) Spokane, WA Orlando, FL Syracuse, NY Portland, OR San Francisco, CA (BART) San Francisco, CA (MUNI) Virginia Beach/ Hampton Roads, VA Concession Chicago, IL (CTA) Eureka Springs, Revenues New York, NY (MTA) AR San Francisco, CA (BART) Common Business, Activity, and Related Sources Employer/ Portland, OR Louisville, KY Hood River, OR Payroll Taxes Car Rental Seattle, WA Eureka Springs, Fees (Sound Transit) AR Washington, DC (NVTA)
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23 Table 3.2. (Continued). Selected Applications Funding Major Metro Large Metro Small Urban Rural Source > 1.0 Million 200,0001.0 Million 50,000200,000 < 50,000 Vehicle Lease Fees Parking Fees Chicago, IL (CTA, Grand Rapids, MI Annapolis, MD Eureka Springs, at Transit Metra) AR Facilities Denver, CO Parking Fees San Francisco, CA at Municipal (BART) Facilities San Francisco, CA (MUNI) Mortgage New York, NY (MTA) Syracuse, NY Recording Taxes Realty Washington, DC Transfer Taxes (NVTA) Chicago, IL (CTA- 2008) Corporate New York, NY (MTA) Franchise Taxes (oil, transportation, transmission) Room/ Park City, UT Occupancy Taxes Business Louisville, KY Park City, UT License Fees Utility St. Joseph, MO Fees/Taxes Pullman, WA Income Louisville, KY Taxes (corporate profits) Business Cigarette Portland, OR (State) Taxes Donations Lynx-Orlando, FL Grand Rapids, MI Licking County, OH Park City, UT (foundation grants) Ft. Morgan, CO Lubbock, TX Hanover, NH Salt Lake City, UT Sturgis, SD White River Junction, VT Other St. Louis, MO Grand Rapids, MI Ottawa County, Business (pollution fines) OH Taxes (Sr. Service Levy) Park City, UT (resort tax) Note: Entries are from interview results as well as other sources, e.g., U.S. GAO, Mass Transit Issues Related to Providing Dedicated Funding for the Washington Metropolitan Area Transit Authority, GAO-06-516. GAO, Washington, D.C., May 2006.
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24 features about local and regional transit funding from around These experiences at the ballot box confirm continued strong the country: reliance at the local and regional level on sales tax revenues and, to a lesser degree, property taxes to support local and regional · General revenues, property tax revenues, and contract rev- investments in transit. Among the observations that are most enues all play a role in funding transit across areas of all sizes; significant from the 2006 ballot elections are these: · Lease revenues are found predominantly in larger metro- politan areas, where extensive transit systems have termi- · Over 30 ballot initiatives raising funds for transportation, nal and station facilities capable of supporting auxiliary including transit, were voted on in 2006 with a 71-percent businesses; approval rating, including several in California that required · Relatively little direct use is made of various motor vehicle a two-thirds ("supermajority") popular vote, based on 1986 related taxes and fees in supporting transit, a situation state law. that reflects the still dominant view that revenues from · Of 23 local or county initiatives passed: personal vehicle use should be directed exclusively to Ten featured sales taxes for terms of up to 30 years rang- roadway improvements for those who drive, especially ing in size from 0.10 to 0.50 percent; given the growing gap between roadway needs and avail- Eleven featured property tax increases ranging in size able revenues; and from 0.33 mills to 0.75 mills, with all but one of these · The use of broadly based taxes and fees (versus narrower occurring in Michigan; and "user" fees) to support public transit locally is firmly One featured a tax on commercial parking, an employer established, perhaps reflecting a recognition that transit tax, and a property tax increase. availability and benefits are linked to pursuit of broader community goals and objectives. In recent years, funding initiatives in major metropolitan areas with substantial transit systems, services, and plans have reinforced the continuing reliance on local and regional sales A Snapshot of Recent Public Transportation taxes as major revenue sources, particularly for capital-intensive Funding Initiatives in Major programs, as noted in the examples described below.22 Metropolitan Areas In recent years, there have been increasing efforts at both the San Diego, California. San Diego County has sustained state and local level to enact new funding for transit and trans- one of the most successful programs for local and regional portation, generally. CFTE has tracked referenda and initia- transit and multimodal transportation revenue-raising in the tives all over the country in the past several years and regularly country. reports results on its website, www.cfte.org. The CFTE report, In 1987, under the leadership of the former Metropolitan Transportation Finance at the Ballot Box, reports that of 202 Transit Development Board (MTDB), county voters enacted transportation funding measures in 33 states from 2000 TransNet, a 20-year, one-half-cent sales tax yielding $3.3 bil- through 2005, more than 130 were successful.20 In 2006, a total lion to support specific amounts and projects for transit of 47 transportation-related ballot measures were presented to expansion, highway expansion, and local street and roadway voters, 30 of which were included in the November 2006 elec- improvements. In 2003, long-range transit planning, program- tions. Twenty-nine of the 47 ballot measures were approved in ming, and funding decisions were consolidated within the San 2006. Figure 3.1 shows states that had ballot measures for Diego Association of Governments (SANDAG), the region's transportation in the years 2000 to 2006, based on the analysis metropolitan planning organization (MPO), to streamline by CFTE. During this same period, 2000 through 2006, specific decision-making in committing revenues to transportation funding measures supporting transit in whole or in part were improvements. Faced with continued rapid growth and the passed in 87 locales (see Appendix F for a listing of locales).21 expiration in 2008 of the original TransNet measure, in November 2004, county voters approved a 40-year extension of the one-half-cent TransNet sales tax, which will generate 20 Ballot measures are generally of two types: initiatives and referenda. $14 billion. Enactment occurred with over a 67-percent posi- Initiatives are authorized by 24 states and require a citizen-led petition tive vote, meeting the statutorily required two-thirds minimum process. Referenda are proposals referred to voters by locally or regionally for enactment of new tax measures. TransNet revenues will be elected or appointed bodies for approval and are the most commonly used ballot measure. See Center for Transportation Excellence, Transportation Finance at the Ballot Box: Voters Support Increased Investment and Choice, 22 The vignettes come from reporting and summaries of various years' bal- Washington, D.C. 2006. Available at www.cfte.org/CFTE%20Election%20 Trends%20Report.pdf. lot initiatives available in large part from the individual year summaries 21 Center for Transportation Excellence. "Past Elections" (online docu- found at the Center for Transportation Excellence, "Past Elections" (online ment). Available at www.cfte.org/success/pastelections.asp. document), www.cfte.org/success/pastelections.asp.
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25 Transportation Elections 2000-2006 Figure 3.1. States with transportation ballot measures (20002006). split into thirds: one-third for transit, one-third for highways, local and regional support of transit. Las Vegas, Nevada, pro- and one-third for local streets and roads, with specific amounts vides an example. dedicated to bicycle and pedestrian improvements. Las Vegas, Nevada. The Regional Transportation Com- Denver, Colorado. Denver, Colorado, also has a highly mission of Southern Nevada (RTC) is a unique organization successful and cost-effective regional, multimodal, public that serves as the region's MPO--guiding long-range plan- transportation system in development. To support continued ning, the region's highway agency, and the region's major tran- transit expansion in the region, citizens in November 2004 sit operating agency. Since a voter initiative in 1991, the RTC approved by a 58-to-42 margin, the new 12-year, $4.7-billion has had available to support overall regional transportation FasTracks program developed by the Denver Regional Trans- improvements revenues from the following: (1) a county gas portation District (RTD), including a 0.4-cent increase in tax dedicated to street and highway improvements collected RTD's existing 6-cent regional sales tax. The sales tax increase by the state and returned to the county, (2) a room tax (dedi- will be used, in part, to support bonding to leverage the full cated to improvements in the "resort corridor"), (3) a develop- investment needed to carry out the FasTracks program. ment tax on both residential and commercial property The FasTracks program will support 119 miles of new light (dedicated to Beltway construction), (4) a motor vehicle "priv- rail and commuter rail, 18 miles of Bus Rapid Transit (BRT), ilege tax" (also dedicated to construction of the Las Vegas 21,000 additional parking spaces at rail and bus stations, and Beltway), (5) a jet fuel tax (dedicated to airport-related expanded bus service in areas of the region. improvements), and (6) a 0.25-percent sales and use tax ded- icated to public transit development. Phoenix, Arizona. In November 2004, voters in the Phoe- In 2002, Las Vegas citizens approved a second initiative nix region passed Proposition 400, extending the Maricopa that extended the 1991 0.25-percent sales tax dedicated to County one-half-cent dedicated sales tax for transit over transit and added an additional 0.25-percent sales tax, half of 20 years. Revenues will be used to support creation of a multi- which also is dedicated to transit. In addition, the 2002 vote modal transit network through $16 billion to be invested in a expanded the types of projects eligible for funding from the 27.7-mile expansion of light rail, new and enhanced service on sales tax. Part of the new funding will be used to support 30 bus routes, creation of 10 new routes, service enhancements bonds and related debt service to speed up major regional on 26 existing express bus routes, introduction of 14 new BRT projects. routes, and a tripling of paratransit service in the region. In addition to these sources, transit is supported by rev- Even though there is a clear and continuing pattern in the enues coming to the RTC from county general funds. Finally, nature of local and regional transit funding, there are increas- nearly 6 percent of the overall RTC transportation capital pro- ing examples of unique and effective approaches that may be gram is supported by developer funding negotiated for partic- instructive to areas and decision makers looking to enhance ular projects.
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26 New York, New York. The scope, scale, and long history Local and Regional Public Transportation of public transportation in New York has given rise to a unique Funding Among Small Urban mix of funding to support the multimodal transit services pro- and Rural Systems vided under the aegis of New York State's Metropolitan Trans- portation Authority (MTA). These sources have been noted in Prior to 2006, the NTD did not require reporting from small Table 3.2, but are hardly "traditional" in their use across the urban and rural transit systems. Enactment of SAFETEA-LU industry. in August 2006 changed this by requiring simplified reporting Like most transit systems today, the MTA is facing an by these smaller systems. Future NTD reporting will, therefore, increasingly severe revenue gap. A recent analysis by the Inde- provide data containing funding information for small urban pendent Budget Office (IBO) of the City of New York noted and rural systems. (but did not recommend) these revenue-raising options: Concurrently with this project, TCRP Project F-12 exam- ined employee compensation levels among small urban and · Fares and Tolls. With a $2 full cash fare and a 16.7-percent rural transit systems and provided a timely opportunity to volume discount, the MTA currently funds over half its inquire about local sources of funding through an already operating expenses from fares, a percentage that is signifi- planned survey. The TCRP Project F-12 survey was useful to cantly higher than most large systems. In addition, tolls from TCRP Project H-34 in two ways: (1) it provided a broad set of its seven bridges and two tunnels provide the MTA with over responses on the types of local funding sources in use among $700 million annually for transit operations and debt ser- small urban and rural systems today, and (2) it provided a list vice on bonds used for capital projects. Increases averaging of potential interview candidates that helped ensure that the 36 percent would be required in the combination of fares widest possible range of experiences and potential sources and tolls to fill the projected gap. were captured from current practice. · Dedicated Taxes and Subsidies. The MTA receives rev- Responses to the TCRP Project F-12 survey were enues from four categories of dedicated taxes and subsidies received from 383 systems in 45 states. Findings indicate plus interest: the following: Four state taxes are imposed in the 12-county MTA region, including the Petroleum Business Tax, a · 53 percent use contract revenue from public or nonprofit 0.375-percent sales tax, a corporate franchise tax on agencies, transportation and transmission companies (Long Lines · 18 percent use contract revenues from private agencies or Tax), and a corporate surcharge that is applied on top of organizations, the corporate franchise tax. · 10 percent use property tax revenues, A group of petroleum business taxes and fees deposited · 9 percent use local sales tax revenues, into a Statewide Dedicated Funds Pool, 34 percent of · Only five systems use parking or other vehicle fees and only which is for the benefit of the MTA. one system uses employer taxes, and Two separate mortgage recording fees applied to borrow- · 32 percent use "other" forms of revenue. ers and to lenders of 0.3 and 0.025 percent, respectively. A two-tiered "Urban Tax" composed of a real property Of the transit systems indicating they have "other" sources, transfer tax and a mortgage recording tax on commer- examples cited included the following: cial property transactions. · Thirty-one systems indicated that they receive grants from The conclusion reached by the IBO did not involve specific local, county, and state programs; recommendations for specific revenue sources. Rather, the · Fifteen cited donations/fund-raisers, including 12 that IBO suggested what may be the bottom line revenue strategy cited United Way contributions; for most transit agencies in the future, "it is likely that remedy- · Sixteen cited cash fares; ing the problem will require a mix of actions and sources that · Twelve cited United Way contributions; will spread the burden across a broad range of the region's · Eight cited advertising revenues; businesses and residents."23 · Seven cited Medicaid funding; · Five cited university fees; · Four cited programs on aging; · One cited car rental fees; and 23City of New York Independent Budget Office. "A Review of the Metropolitan Transportation Authority's Financial Outlook and Options · One cited resort/business taxes and local property tax for Closing the Gaps." New York, NY, June 1, 2007. millage.