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27 While the TCRP Project F-12 results are sure to reflect some Revenue streams from individual projects, of the confusion about how revenue sources are defined that is New "user" or "market-based" sources, and noted in Section 2.2, the results provide a good base of infor- Financing mechanisms. mation where none had been compiled previously. The results illustrate the generally heavy reliance of smaller transit systems The sections that follow provide material excerpted from on a wider variety of sources than large transit agencies rely on key literature sources in which each of these broad topics has and the reliance of smaller transit systems on a range of con- been covered extensively in recent years. The material includes tract revenues and "other" sources specifically, which may or the following: may not be purely "local" or "regional" in nature. Definitions to provide a clearer understanding of the respec- tive revenue sources and their characteristics; Examples of Local and Regional Public Brief vignettes from the literature describing how varied Transportation Funding from Abroad sources have been applied in specific circumstances and As part of this project, a brief review was done of local and locales that can serve as a point of contact for readers who regional transit funding mechanisms outside the United want to explore specific applications more thoroughly; and States. The relevance of Canadian and European experiences The most significant sources and references on each of with local funding is limited, however, because of the sub- these categories of funding. stantial differences in government structures, processes, legal frameworks, and philosophical traditions in revenue raising 3.6 Revenue Streams from Projects and budgeting. Appendix D contains brief descriptions of local and regional revenue sources used for transit in eight This category of revenue sources reflects a wide range of major metropolitan regions of the world. Virtually all of the efforts by local jurisdictions, transit agencies, and private- regions described have extensive and relatively mature tran- sector partners to fund transit investments by either captur- sit systems that have major financial challenges; furthermore, ing the value to business and industry of proximity to specific virtually all are located and operated around multiple transit transit facilities and services, or by estimating the costs imposed modes and services, including fixed guideway systems. on local government by traffic from new development and More importantly, the major sources of revenue at the local directing some portion of development fees to mitigate these and regional level for these transit systems and U.S. transit sys- costs through transit investment. tems are generally the same. The major sources of revenue for These funding mechanisms are used largely in relation to Canadian and European transit systems include the following: specific projects or facilities or within relatively small, defined geographic areas where the dollar value of enhanced access (or Property taxes (Rome, Vancouver); the public costs of accommodating increased traffic) can be esti- Gas taxes (Toronto, Montreal, Vancouver); mated accurately and justifiably allocated to surrounding prop- Motor vehicle fees (Montreal); erty. Primary examples include the following (discussed below): Regional payroll taxes (Paris); Contract service fees (Montreal); Transit-oriented development (TOD)/joint development, Parking taxes (sales) (Vancouver); Value capture and beneficiary charges, and Income taxes (Barcelona, Madrid); Impact fees or "exactions." Value-added tax (Barcelona, Madrid); Congestion fees (London); Various business taxes (Madrid); and Transit-Oriented Development Hydroelectricity tax (Vancouver). (TOD)/Joint Development24 Numerous definitions of TOD and joint development 3.5 Other Categories of Local have been put forward in recent years. TCRP Research Results and Regional Public Digest 52: Transit-Oriented Development and Joint Development Transportation Funding There are numerous potential revenue sources available to support public transportation other than the traditional taxes 24 Much of the following discussion is taken from the following: Cervero, R., and fees highlighted above. The framework used here distin- C. Ferrell, and S. Murphy, TCRP Research Results Digest 52: Transit Oriented Development and Joint Development in the United States: A Literature Review, guishes three additional broad categories of funding sources Transportation Research Board, National Research Council, Washington, that may be used locally and regionally: DC, October 2002, p. 6.

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28 in the United States: A Literature Review identified common Angeles and Pasadena and within the transit mall loop on elements in the various definitions of TOD: the Blue Line.27 Mixed-use development, Development that is close to and well-served by nearby Value Capture and Beneficiary Charges transit, Value capture and beneficiary charges refer to circumstances Development that is conducive to transit riding, in which the provision of a public service or facilities such as Compactness, public transportation increases the market value of surround- Pedestrian- and cycle-friendly environs, ing real estate, and measures are enacted to capture some or all Public and civic spaces near stations, and of that increase to defray public expense. Various mechanisms Stations as community hubs. are used to capture either the current or future value created by public investment.28 It is in the pursuit of joint development, however, that sig- nificant opportunities arise to provide a new funding stream for public transit derived from the value to private businesses, Impact Fees or "Exactions" developers, and real estate owners of proximity to transit ser- vices and the expected or planned mix of uses typically associ- Development brings with it a sizeable demand for new ated with TOD. These revenue streams typically come in two public facilities and services, including added transporta- forms. Research has shown that nearly two-thirds of joint tion capacity. In urban settings particularly, it is increasingly development projects involve significant cost-sharing, one important to satisfy the need for additional transportation quarter involve new revenue generation to directly support capacity through multimodal strategies and investments, transit services and facilities, and 40 percent of joint develop- including additional public transportation services. Impact ment projects involve some degree of both. fees are frequently levied against new development to pro- There is considerable documentation of specific joint vide the revenues to meet the public facility demands of development activities and programs around the country. new development. The use of impact fee revenue to support Some of these activities and programs include the following: transit investment and operations, however, is not yet widespread. Washington Metropolitan Area Transit Authority Impact fees are typically one-time "charges on new devel- (WMATA) has collected among the largest amounts of opment to pay for the construction or expansion of off-site revenue--over $10 million annually--and off-set the capital improvements that are necessitated by and benefit the largest share of costs through joint development activities, new development."29 Impact fees are most effective in rapidly with over 52 projects undertaken over 20 years.25 growing areas where development markets are strong. Since Miami-Dade County adopted a joint development ordi- 1987, 26 states have passed impact-fee-enabling acts. Most of nance in 1978, a full 6 years before its Metrorail system these states are located in the western United States, the Great opened. In 1982, Miami-Dade Transit entered into its first Lakes region, and on the Atlantic coast. joint development agreement at its Dadeland South station. Unfortunately, many of these acts are as prohibitive as they Since that time, 21 joint development projects have been ini- are permissive. According to recent national surveys, about tiated or completed.26 60 percent of all cities with over 25,000 residents and almost In 2004, it was reported that developers invested more than 40 percent of all metropolitan counties use some form of $4 billion in 30 projects around Los Angeles Metro Rail impact fees. In California and Florida, 90 percent of cities and stations--including projects in downtown Los Angeles, 83 percent of counties use impact fees. Impact fees have con- Chinatown, Long Beach, North Hollywood, Lincoln tinued to increase significantly in popularity and use. It is now Heights, Hollywood, and Pasadena and mixed-use projects around Metro Gold Line stations between downtown Los 27 "Los Angeles MTA Showcases Transit-Oriented Development Projects at Rail-Volution." Progressive Railroading.com, September 20, 2004. Available 25 Cervero R. et al. TCRP Report 102: Transit-Oriented Development in the at http://www.progressiverailroading.com/news/article.asp?id=11618. 28 United States: Experiences, Challenges, and Prospects. Transportation Research Smith, J. J. and T. A. Gihring. Financing Transit Systems through Value Board of the National Academies, Washington, DC, 2004. Capture: An Annotated Bibliography. Victoria Transport Policy Institute, 26 Miami-Dade County, "Joint Development Program." Available at http:// Victoria, BC, Canada, November 2006. Available at http://www.vpti.org/ www.miamidade.gov/transit/joint1.asp. Cervero R. et al. TCRP Report 102: smith.pdf. 29 Transit-Oriented Development in the United States: Experiences, Challenges, See the category titled "General" under "Frequently Asked Questions" at and Prospects. Transportation Research Board of the National Academies, ImpactFees.com. Available at http://www.impactfees.com/faq/general. Washington, DC, 2004. php#.

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29 San Francisco Transit Impact Development Fee (TIDF)a,b Significant new downtown development in San Francisco led the San Francisco Board of Supervisors to enact the TIDF ordinance in April 1981. Because "exactions" like the TIDF have been the subject of protracted legal battles, care is needed in assembling a proposal. The San Francisco TIDF was developed with the following elements carefully researched and constructed: A justification; A clear delineation of the area in which the fee is to be applied; A fair and defensible methodology for assessing the fee; A description of how the services supported by the fee will benefit those paying the fee; and Mechanics for administering the fee, e.g. timing, method, enforcement, etc. The one-time fee, recalculated annually but set at a maximum of $5 per square foot, is applied only to office building development in a particular area on the basis of the premise that it is additional new peak period work trips that would stress the existing system and dis- advantage existing riders the most; the impacts of other uses and users are considered inci- dental. Payment is due upon 50-percent building occupancy, and funds accruing are shifted to Muni's operating revenue fund annually. As a one-time fee, the TIDF does not generate a consistent flow of funds for transit. Overall, annual amounts are small--$10 million/year-- and variable year to year. a Price Waterhouse, LLP; Multisystems, Inc.; and Mundle & Associates, Inc. TCRP Report 31: Funding Strategies for Public Transportation, Volumes 1 and 2. Transportation Research Board, National Research Council, Washington, DC 1998. b SPUR Transportation Committee. Planning for Growth: A Proposal to Expand San Francisco's Transit Impact Development Fee. San Francisco Planning and Urban Research Association, San Francisco, CA, June 20, 2001. Legal Aspects in Establishing Project- or Area-Specific Revenuesa Local enactment of the types of revenue-raising mechanisms described above (transit- oriented development (TOD)/joint development, value capture and beneficiary charges, and impact fees or "exactions") are based on either the general "police power" of local gov- ernments to protect the health, safety, and welfare of communities or on specific enabling legislation enacted at the state level on behalf of individual jurisdictions or classes of juris- dictions. The basis for raising revenues in these ways lies in the principle that development is a "privilege" for which developers can be made to pay. One advantage of raising revenues in these ways is that it can be done outside general tax limitations and restrictions. Successful enactment of these mechanisms generally requires that several legal tests be met, however: The improvements to be funded must be clearly related to the protection of public health, safety, or welfare; (continued on next page)

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30 The fee or exaction amount must be reasonably proportionate to the impacts of the activity being undertaken, based on factual analysis; The assessments must be equitably applied across like classes of projects/development; and Revenues must be used to mitigate the impacts created. In considering alternative means to capture revenues from projects or area-specific activities, state-enabling legislation and case law should be examined with the help of legal and financial experts. a Nicholas, J., et al. Impact Fees in Florida: Their Evolution, Methodology, Current Issues and Comparisons with Other States. White Paper prepared for the Florida City and County Managers Association, September 19, 2005. much more common for communities to recover full facility New "User" or "Market-Based" Sources costs than to discount them and charge less than full value. Increasing emphasis is being placed on a variety of revenue Finally, in recent years, it appears that there has been a greater sources with yields that are intended to vary based on market use of creative methodologies (such as residential fees that forces. These include the following: vary by unit size).30 Most recent surveys indicate that impact fees currently are Expanded road and bridge tolling, not a common source of funding, specifically for public trans- Congestion pricing, portation, largely because the fees are charged to specific new Emission fees, and developments while transit services are traditionally operated VMT fees. and supported on an areawide or jurisdiction-wide basis.31 Tolling Right-of-Way Leasing For 2005, FHWA estimated that there were 5,353 miles of Linear rights-of-way owned and maintained by transit tolled highways in the United States, split approximately 60/40 agencies providing fixed guideway services have the poten- between rural and urban settings. Tolling has become a sub- tial to serve a number of emerging private business needs. ject of widespread interest around the country as the concept Development of cable and fiber-optic networks, in particular, of managed lanes and the theory and practice of pricing can benefit from joint use of transit rights-of-way through has expanded into the metropolitan transportation arena lease arrangements, providing the transit agency with a new and technologies have emerged that allow for variable or source of revenue on the local and regional level. In addi- "dynamic" pricing as traffic conditions change. In the process, tion, there is the possibility that the network provided for tolling has become a two-pronged strategy to raise new rev- private-sector use and services marketed to the public can enues to support and expand highway infrastructure and to be utilized by the transit agency at a reduced cost for oper- influence more efficient traffic flow under congested condi- ational communications. tions. The notion of public-private partnerships in toll facility The Bi-State Development Agency (BSDA) in St. Louis, development and pricing has become a focus of attention as Missouri, the operator of the region's Metrolink rail transit well within the broader rubric of "Public-Private Partnerships service, entered into a partnership with WorldCom in 1991 (PPP) in transportation. Under the FHWA Value Pricing Pilot for joint use of its right-of-way. The agreement provides Program, pilot projects implemented to date include variable BSDA with access to the network for operational purposes at pricing of toll facilities in New York, New Jersey, and Florida a minimal cost and provides for projected lease payments as well as High-Occupancy/Toll (HOT) lanes in Texas and from WorldCom on a linear foot basis over a 25-year period. California."32 In addition, FHWA data currently identify 30 32 Federal Highway Administration. Toll Facilities in the United States: Bridges-- Ibid. 31 Roads--Tunnels--Ferries. FHWA-PL-05-018. U.S. DOT, Washington, DC, Duncan Associates. "National Impact Fee Survey: 2007." Austin, TX, August 2007. Available at http://www.impactfees.com/2006survey.pdf. June 2005.

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31 168 toll or related projects in 27 states, including 50 that are I-15 (San Diego, California). The I-15 FasTrak Express open, 25 that are under construction, and 90 in various stages Lanes are a two-lane reversible facility operated over of planning.33 8 miles in the median of I-15 in San Diego County. Two- In 2004, San Francisco Bay Area voters approved Regional person carpools, vanpools, buses, and motorcycles use the Measure 2. The measure raised the toll on state-owned toll facility for free. According to SANDAG, the project pro- bridges in the San Francisco Bay Area to fund congestion relief duces $2.0 million in revenue a year and is currently self- projects, including new ferry service across the Bay, BART supporting, providing $750,000 annually for operating infrastructure, construction of the new Transbay Terminal, costs and $60,000 for enforcement, with the balance of rev- more express buses, and planning for better transit connec- enues going to support transit in the corridor as required tions. In addition to capital investments, the plan includes by state law.35 operating funds for commuter rail, express and enhanced bus service, and ferry service, in the recognition that covering oper- Congestion Pricing ating costs for regional transit is a critical element in improv- ing service. Congestion pricing is a specific variant of tolling or pricing Typically, however, the use of revenues from highway, road, bridge, or tunnel use that is based on varying the cost to bridge, and tunnel tolls is carefully circumscribed through users depending on the volume of traffic and/or level of conges- legal commitments that restrict the use of revenues to the tion being experienced and the performance goals for the route facilities on which the tolls are collected and/or the programs or area in question. The objective is generally to set prices higher directed by the independent, state-empowered authorities in peak hours or to set prices dynamically through electronic authorized to collect the tolls and administer the facilities. means to ensure high speed and/or free flow along specific While newer, emerging proposals for toll facilities and pricing routes. A variation involves charging vehicles for access to and/ often include provision for, or special accommodation of, or through particular areas of a community to ensure that the transit and other shared-ride vehicles, there are few examples local street system can function efficiently throughout the day. of toll revenues being used to support public transportation in the broader regional sense. Noteworthy exceptions include the London, U.K. London instituted its congestion fee pro- following: gram in 2003, charging vehicles for weekday access to the cen- tral area between 7:00 a.m. and 6:30 p.m. Revenues are being New York State's MTA. Bridge and tunnel toll revenues col- used to improve transit services on a broad scale.36 lected by MTA Bridges and Tunnels, a subsidiary of MTA, New York, New York. PlaNYC, a long-term sustainability are used to support elements of the MTA transit system; Virginia I-95/I-395 HOT Lanes. Although it is not yet final- plan developed by New York City Mayor Bloomberg, included a proposal similar to London's, including charges for vehicles ized, a master agreement between a private consortium entering Manhattan south of 86th Street between 6:00 a.m. and and the Virginia Department of Transportation anticipates 6:00 p.m. Revenues would have been used to fund significant nearly $400 million to be invested in transit on the I-95/ transit improvements as well as street maintenance; however, I-395 corridor south of Washington, D.C. Details of the the New York State legislature failed to approve the plan.37 transit improvements are being developed in parallel with Other cities worldwide that have instituted similar con- negotiation of the master HOT lane agreement.34 Maryland HOT Lanes. The Maryland Department of gestion pricing schemes are Singapore; Bergen, Oslo, and Trondheim in Norway; and Stockholm, Sweden. Transportation is proposing multimodal improvements, including accommodation of both rail and bus services, in its HOT lanes proposal for I-495, the state's portion of the Emissions Fees beltway around Washington, D.C. Converging concerns about congestion, energy consump- tion, and air quality have heightened interest in charging emis- 33 Federal Highway Administration. U.S. Department of Transportation. "Public Private Partnerships" (online document). Available at www.fhwa. 35 SANDAG. FasTrak Value Pricing Fact Sheet. San Diego, CA, May 2007. dot.gov/PPP/toll_survey.htm. Perez, B. and Lockwood, S. Current Toll Road Activity in the U.S.: A Survey and Analysis. Federal Highway Administration, Available at www.sandag.org/uploads/publicationid/publicationid_831_ U.S. Department of Transportation, Washington, D.C. August 2006. 4185.pdf. 36 Littman, T. London Congestion Pricing: Implications for Other Cities. Available at http://www.fhwa.dot.gov/PPP/pdf/toll_survey_0906.pdf. 34 "Financially Constrained Long-Range Plan for 2030 Project Description Vancouver Transport Policy Institute, Victoria, BC, January 10, 2006, p. 6. 37 PlaNYC, Office of the Mayor, New York City, May 2007. http://www. Form." Draft. Metropolitan Washington Council of Governments, Washington, DC, March 15, 2007, p.3. nyc.gov/html/planyc2030/html/home/home.shtml.

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32 sion fees based on the amount of key "criteria pollutants" VMT concept might be implemented.42 Volunteers are using (hydrocarbons [HC], carbon monoxide [CO], and nitrogen hybrid odometer/GPS technology on 280 vehicles as part of the oxide [NOx]) released by individual vehicles. This effort can Road User Fee Pilot Program to measure distance and assess be thought of as part of a larger approach--charging "carbon costs at the pump. To gauge the impacts of the approach, three fees"--that would be potentially applied to all business and groups of participants are being evaluated: a group paying the industry, not just motor vehicles.38 Like congestion fees and regular motor fuels tax, a group paying a small VMT fee other roadway pricing schemes, emission fees represent an (1.2 cents per mile) for off-peak travel, and a third group pay- approach to achieving air quality goals, energy independence ing 10 cents per mile in congested areas.43 Model legislation goals, and congestion goals rooted in the application of eco- for consideration by the state legislature is expected from nomic incentives and disincentives. the pilot program by 2009. The Oregon experience is being No applications of emissions fees have been attempted to expanded through similar field demonstrations in Austin, date in the United States. To be implemented, emissions fees Texas; Baltimore, Maryland; Boise, Idaho; Eastern Iowa; the would certainly require federal and state authorization as well Research Triangle Area of North Carolina; and in San Diego, as application on a broader level than the local and regional California.44 level to be effective. Financing Mechanisms45 VMT Fees The current body of literature on "financing" and "innova- tive finance" is also extensive, and the use of debt mechanisms The concept of basing fees on VMT is getting much greater to support transit investment is broadening as innovative attention as concern mounts over the inadequacy of federal financing mechanisms evolve. For the purposes of this study, and state motor fuel tax revenues as a continuing funding the term "financing" refers to any of a variety of borrowing or source for highway and transit investment. While a VMT debt mechanisms (bonds or other types of debt instruments) fee also represents a direct way to reduce congestion through to support current or planned spending on public projects. reduced vehicle use, opponents suggest that VMT fees are less Repayment to bond purchasers typically is guaranteed from directly effective in addressing other urgent problems--such as general funds or specific designated sources of future revenue. vehicle emissions, energy use, and air quality--because VMT In essence, financing mechanisms move future streams of rev- fees don't directly address the wide variability that exists in enue forward to provide a source of capital for use in carrying vehicle performance due to vehicle age, make, and model.39 out current projects on more expeditious timetables. From Beginning in 2007, six states--California, Idaho, Iowa, that standpoint, they may more accurately be considered proj- Maryland, North Carolina, and Texas--embarked on a 2-year ect delivery rather than strict revenue-raising mechanisms. study of mechanisms and approaches to replacing fuel taxes The interest earned on municipal bonds or other debt issued with mileage fees under a $16.5-million federal project.40 In by units of government is generally not taxable (tax-exempt) at addition, the U.S. Chamber of Commerce has endorsed adop- either the federal level or in the jurisdiction in which the bond tion, in the long term, of a two-tiered system of vehicle-mileage or debt is issued, making municipal bonds or debt issued by fees, including a state VMT fee as well as a local-option VMT units of government an attractive conservative investment for fee to help ease metropolitan congestion.41 individuals as well as institutions. Ahead of the new federal initiative, Oregon has implemented Transit systems of varying sizes and locations have benefited a pilot project in the Portland region to demonstrate how a from debt financing. Nonetheless, the majority of debt financ- ing is done by the nation's major transit systems, where capital investment needs as well as resources for repayment are largest. 38 Goldberg, L. Early Action Measures: Carbon Fee Phase-In. California Tax Reform Association, May 7, 2007. Available at http://www.caltaxreform. org/?p=42. 39 Cambridge Systematics, Inc. examined how to couple VMT and emissions 42 Oregon Department of Transportation. Road User Fee Pilot Program. charges through an emission-indexed VMT fee for California's South Coast Oregon Administrative Rules, Division 80. Available at http://arcweb.sos. Air Quality Management District in this study: Stanley, R. G., Sevigny, M., state.or.us/rules/OARS_700/OAR_731/731_080.html. and Reno, A. T. "Positive Feedback Approach to Mobile Source Emissions 43 Texas Senate Research Center. "Research Spotlight: Oregon's Road User Reduction in the South Coast Region" (Based on Final Report for the South Fee Pilot Program." Austin, TX, April 2006. Coast Air Quality Management District, under Contract AB2766/COO13). 44 Public Policy Center. Project Overview: National Evaluation of a Mileage- Presented at the 69th Annual Western Economic Association International Based Road User Charge. University of Iowa, Iowa City, November 1, 2007. Conference, Vancouver, B.C., 1994. Available at ppc.uiowa.edu/dnn4/Default.aspx?tabid=65. 40 Kuhl, J. "Road User Charge Study." Public Policy Center, University of 45 Much of the information in this section is summarized from the follow- Iowa, Iowa City, 2007. Available at http://www.ppc.uiowa.edu/dnn4/ ing: TransTech Management, Inc. and PA Consulting, Inc., TCRP Report transportationpolicyresearch/roaduserchargestudy/tabid/65/default.aspx. 89: Financing Capital Investment: A Primer for the Transit Practitioner, 41 Cambridge Systematics, Inc. Future Highway and Public Transportation Transportation Research Board of the National Academies, Washington, Financing. National Chamber Foundation, Washington, D.C., 2005. DC, 2003.

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33 A half dozen or so of the largest systems routinely undertake A limit of 10 percent on the proceeds that may be used by debt financing (or refinancing) with issuances typically rang- private parties, and ing from $100 to $500 million. In addition, it is typical for sys- A limit of 10 percent on the debt service that may be backed tems planning or implementing "new start" fixed guideway by private resources. projects to fund them partially by issuing debt, typically backed by a specific stream of revenues from a specific tax or source, Tax Credit Bonds the most popular being local or regional sales taxes. In contrast, many medium and smaller bus-only transit systems find that "Tax-credit bonds allow bondholders to receive a credit their capital needs can be met adequately by a combination of against their Federal income tax liability instead of cash inter- federal and state grants (without the added complexity of issu- est. . . . The range of potential issuers of tax-credit bonds spans ing debt). both governmental and nongovernmental entities. State and The major types of debt or "financing" mechanisms that local governments are candidates to use tax-credit bonds. have been used for transit improvements are described briefly Indeed, the only such bonds authorized to date . . . allowed below, along with additional sources of information. state and local governments to issue up to $400 million bonds each year from 1998 through 2003 to finance school renova- General Obligation (GO) Bonds tion and construction projects that met a set of qualifying cri- teria."46 Although no use has been made of credit bonds at the GO bonds are issued by municipalities, counties, states, and local or state level for transit, the approach may gain relevance special districts serving public purposes ("municipal bonds" in the 2009 reauthorization cycle of federal highway and tran- whether literally issued by municipalities or not). They are gen- sit programs, given the mounting investment needs. In all erally long term and are repaid along with tax-exempt interest prior proposals to authorize tax credit bonds, however, their from general revenues of the issuing jurisdiction. GO bonds are effect has been to provide a federal subsidy to entities outside secured by the "full faith and credit" of the issuing jurisdiction the purview of the federal budget, a notion that is not univer- rather than through the dedication of a specific tax or revenue sally embraced. source, a commitment that mandates repayment of the debt with interest regardless of the source of funds. Proceeds from Short-Term Borrowing Mechanisms GO bonds can be used to match federal grant funds. Because repayment is made from general revenues of the There are several alternative shorter term borrowing mecha- issuing jurisdiction, states and municipalities generally oper- nisms that serve the same purpose as longer term bonds, i.e., to ate under legislated bond caps and debt ceilings and/or rely on advance future streams of revenue for current use. Sometimes specific authorizations that limit the amount of GO debt out- referred to as "limited recourse non-system revenue bonds," standing at any one time or the amount of new debt to be these typically rely for repayment on specific taxes or streams allowed. One effect of the caps is to sharpen the competition of revenue. for GO bond funding between transit and competing public programs and projects such as schools. As a result, there has Grant Anticipation Notes (GANs). GANs are a variety of been limited use of GO bonds for transit improvements. debt whose purpose is to pledge funds from future federal or Among the systems that have used GO bond financing are state grants in exchange for immediately available funds offered TriMet in Portland; Metro Transit, serving the Minneapolis- by the note purchasers. Recently, GAN funding arrangements St. Paul region; and BART in San Francisco. have been covering a wider range of timeframes. GANs provide a potentially useful advantage in that they typically do not count against a jurisdiction's local debt limitations. Approximately Private Activity Bonds (PABs) one-third of the BART San Francisco Airport Link was sup- PABs are a special category of borrowing that may also be tax ported by $500 million in GANs. Rail transit improvements in exempt if certain conditions are met. PABs involve the private New Jersey, St. Louis, Salt Lake, and Dallas have also been sup- sector in projects or activities that serve specific public pur- ported by GANs. poses where project implementation and management skills may provide advantages for the public sector. The use of PABs is subject to strict limitations in federal law, however, includ- ing the following: 46Much of the information provided below is summarized from the follow- ing: TransTech Management, Inc. and PA Consulting, Inc., TCRP Report 89: Financing Capital Investment: A Primer for the Transit Practitioner, A total dollar limit per state and per capita on the amount Transportation Research Board of the National Academies, Washington, that can be issued, DC, 2003.