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Local and Regional Funding Mechanisms for Public Transportation (2009)

Chapter: Section 4.0 - Guidance in Considering New Local and Regional Funding Sources for Public Transportation

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Suggested Citation:"Section 4.0 - Guidance in Considering New Local and Regional Funding Sources for Public Transportation." National Academies of Sciences, Engineering, and Medicine. 2009. Local and Regional Funding Mechanisms for Public Transportation. Washington, DC: The National Academies Press. doi: 10.17226/14187.
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Suggested Citation:"Section 4.0 - Guidance in Considering New Local and Regional Funding Sources for Public Transportation." National Academies of Sciences, Engineering, and Medicine. 2009. Local and Regional Funding Mechanisms for Public Transportation. Washington, DC: The National Academies Press. doi: 10.17226/14187.
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Suggested Citation:"Section 4.0 - Guidance in Considering New Local and Regional Funding Sources for Public Transportation." National Academies of Sciences, Engineering, and Medicine. 2009. Local and Regional Funding Mechanisms for Public Transportation. Washington, DC: The National Academies Press. doi: 10.17226/14187.
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Suggested Citation:"Section 4.0 - Guidance in Considering New Local and Regional Funding Sources for Public Transportation." National Academies of Sciences, Engineering, and Medicine. 2009. Local and Regional Funding Mechanisms for Public Transportation. Washington, DC: The National Academies Press. doi: 10.17226/14187.
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Suggested Citation:"Section 4.0 - Guidance in Considering New Local and Regional Funding Sources for Public Transportation." National Academies of Sciences, Engineering, and Medicine. 2009. Local and Regional Funding Mechanisms for Public Transportation. Washington, DC: The National Academies Press. doi: 10.17226/14187.
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Suggested Citation:"Section 4.0 - Guidance in Considering New Local and Regional Funding Sources for Public Transportation." National Academies of Sciences, Engineering, and Medicine. 2009. Local and Regional Funding Mechanisms for Public Transportation. Washington, DC: The National Academies Press. doi: 10.17226/14187.
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Suggested Citation:"Section 4.0 - Guidance in Considering New Local and Regional Funding Sources for Public Transportation." National Academies of Sciences, Engineering, and Medicine. 2009. Local and Regional Funding Mechanisms for Public Transportation. Washington, DC: The National Academies Press. doi: 10.17226/14187.
×
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Suggested Citation:"Section 4.0 - Guidance in Considering New Local and Regional Funding Sources for Public Transportation." National Academies of Sciences, Engineering, and Medicine. 2009. Local and Regional Funding Mechanisms for Public Transportation. Washington, DC: The National Academies Press. doi: 10.17226/14187.
×
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Suggested Citation:"Section 4.0 - Guidance in Considering New Local and Regional Funding Sources for Public Transportation." National Academies of Sciences, Engineering, and Medicine. 2009. Local and Regional Funding Mechanisms for Public Transportation. Washington, DC: The National Academies Press. doi: 10.17226/14187.
×
Page 47
Page 48
Suggested Citation:"Section 4.0 - Guidance in Considering New Local and Regional Funding Sources for Public Transportation." National Academies of Sciences, Engineering, and Medicine. 2009. Local and Regional Funding Mechanisms for Public Transportation. Washington, DC: The National Academies Press. doi: 10.17226/14187.
×
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Suggested Citation:"Section 4.0 - Guidance in Considering New Local and Regional Funding Sources for Public Transportation." National Academies of Sciences, Engineering, and Medicine. 2009. Local and Regional Funding Mechanisms for Public Transportation. Washington, DC: The National Academies Press. doi: 10.17226/14187.
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39 The process of identifying, evaluating, and enacting new local and regional funding sources for public transportation follows a generalizable path and sequence of steps that has many variations from one locale to another. However, suc- cess in enacting new funding sources for transit requires an understanding of the following: • The general taxing and revenue-raising process and legisla- tive procedures at the local and regional level, • Contextual issues in local and regional funding for public transportation, • Basic advantages and disadvantages of local and regional funding mechanisms, and • Criteria in evaluating potential local and regional funding sources Each of these aspects is discussed briefly in the sections that follow. 4.1 General Process for Taxing and Revenue-Raising and Mechanics at the Local and Regional Level The authority to tax for public purposes is contained in the U.S. Constitution. The Tenth Amendment to the Constitution provides that all powers not explicitly granted to the federal government (or explicitly shared with the states) are retained by the states. “The states, however, retain the right to impose any type of tax except those taxes that are clearly forbidden by the United States Constitution and their own state constitu- tions.”73 Municipalities, counties (including parishes or bor- oughs), and special-purpose districts and authorities, in turn, are creations of state governments, and it is through the leg- islative actions of state governments that local and regional taxing authority is established for local and regional entities. Raising revenue at the local and regional level often times re- quires a popular vote locally in support of specific revenue- raising measures and expenditures as well as state-enabling legislation. 4.2 Contextual Issues in Local and Regional Funding for Public Transportation Not all potential sources of local and regional revenue used for or available for transit will be equally well suited or accept- able in all circumstances. The relevance and acceptability of various funding mechanisms at the local and regional level de- pends to varying degrees on a number of contextual factors, the most significant of which are discussed briefly below. Governance Traditions and Philosophies of Taxation and Spending A wide variety of traditions, philosophies, and legal frame- works have evolved at the state and local level governing how public funds can be raised and for what purposes they can be spent. According to the National League of Cities, “to speak about cities or other forms of local government in the United States is to speak about fifty different legal and polit- ical situations.”74 A simple comparison serves to illustrate how these traditions and philosophies might influence consideration of new local or regional funding mechanisms in a particular locality. In the state of Texas, the tradition and underlying philosophy guid- ing the provision of public transit is that local governments, S E C T I O N 4 . 0 Guidance in Considering New Local and Regional Funding Sources for Public Transportation 73 United States Department of the Treasury. “Fact Sheets—Taxes: State and Local Taxes.” Available at http://www.treasury.gov/education/fact_sheets/ taxes/state-local.shtml. 74 “City Charters.” National League of Cities website. Available at http://www.nlc.org/about_cities/cities_101/151.aspx.

cities, and counties should bear the responsibility for raising the funds needed to build and operate transit systems and services. As a result, the state provides little direct funding for public transportation, with the exception of very modest amounts for small urban and rural services. The state, how- ever, has provided legislative authority to local officials and residents to organize regionally and to design, build, and op- erate transit services. The state has also provided them with the authority to raise necessary revenues through local option sales taxes, conditioned on local popular approval. Under this tradition, new and expanding public transit systems and ser- vices are being developed and operated effectively in the state’s major metropolitan regions. In contrast, in Connecticut, a large number of independent transit districts have been established under state-enabling legislation organized to serve the needs of one or more Con- necticut towns. Funding for capital investment and operation of locally designed and managed transit services is provided from federal and state sources. The districts and local towns historically have contributed minimal financial support to their systems. In some cases, districts and towns have resisted being given the authority to enact local funding mechanisms and/or have chosen not to use local revenue-raising authority for public transportation where it does exist. The examples of Texas and Connecticut represent opposite ends of the spectrum in terms of local and regional transit funding and financing traditions and experiences. While each tradition/experience represents a legitimate posture or phi- losophy for taxing and spending in support of public trans- portation, each involves different political dynamics and leg- islative procedures, and these affect the sources to be targeted and the amounts of revenue that may be captured. Most expe- riences with local and region transit funding across the United States fall somewhere between the experiences/traditions of Texas and Connecticut, with significant funding coming from both state and local sources. Knowledge and understanding of these overarching revenue-raising and spending traditions and philosophies are essential to fashioning a workable and effective strategy for enhancing local and regional transit fund- ing mechanisms either by conforming to them or by attempt- ing to alter them. Types of Public Transportation Agencies Transit operating agencies are organized in several basic ways. Agencies are managed under particular statutory and regulatory provisions as well as through administrative pro- cedures that vary from state to state and locale to locale. The two most frequent organizational models are the following: • Independent authorities. Independent authorities are authorized and enabled by state legislation to perform spe- cific duties and provide specific services, often with author- ity to raise and dedicate for their sole use the revenues from specific revenue-raising mechanisms in member jurisdic- tions in their respective service areas. • Municipal transit systems. Municipal transit systems are operated as part of general purpose municipal or county governments, often drawing on general revenues of the ju- risdiction, along with other sources, both dedicated and not dedicated, to support transit services. In addition, there are several transit systems that are owned and operated by the states they serve, including the New Jersey Transit Corporation (NJ Transit), the Delaware Transit Cor- poration (DART First State), and the Rhode Island Public Tran- sit Authority (RIPTA). Decision-making dynamics and fund- ing mechanisms used to support transit in state-owned and -operated systems are different from those in independent re- gional authorities or municipally operated systems. It is critical to note as well that there is significant variation among urban regions with respect to (1) the number of po- litical jurisdictions included; (2) the geographic extent of the region being served; (3) the number of operating agencies providing service and sharing (or competing for) resources; (4) the nature of the travel markets to be served; and (5) the types of improvements for which funding is being sought— expansion versus maintenance and reinvestment. Table 4.1 shows the distribution of transit agencies by type, other than state agencies, based on 2005 reporting to the NTD, which contains financial and operating data from all systems receiving federal assistance in urbanized areas (areas with population greater than 50,000). Of the nearly 500 systems reporting their organization type: • Municipal systems are somewhat more prevalent (57 per- cent) than independent authorities (43 percent), and • The municipal model is far more prevalent in smaller ur- banized areas where nearly 7 in 10 systems are municipal in character. It is generally assumed that independent authorities’ ability to draw on or raise revenues locally or regionally to support transit services is significantly different than the ability of mu- nicipal systems to raise revenues. Municipal systems may be somewhat more restricted in the funding sources available to them and may have limited ability to independently seek funding sources outside of the broader municipal budgeting process. There may be a potential advantage, however, in the ability of municipal systems to better control costs through such mechanisms as municipal pooled or contract purchases of vehicles and fuel, lower insurance costs through municipal purchases, or more favorable borrowing rates under munic- ipal debt issuance processes and ratings. 40

For all the reasons cited above, it is evident that no single approach is suited to all areas seeking increases in local or re- gional transit funding. Funding Projects versus Programs There are obvious differences between the funding alter- natives that are best suited to support individual public transportation projects, which may require large infusions of capital funds over specific timeframes, and the funding alter- natives that are best suited to support ongoing programs, which require sustained levels of reliable and predictable support over long periods of time. Although it will seldom be the case that increases in one type of funding are needed without increases in the other, the funding sources from which transit project and program funds are drawn can vary significantly. A frequent strategy is for agencies to use some type of debt financing, e.g., bonds secured by a dedicated local or regional revenue stream, to ensure that major capi- tal projects can proceed on time and on budget. This strat- egy requires authority to incur debt as well as access to a rev- enue stream to support annual financing costs as well as retirement of the debt. These conditions may be somewhat more difficult to satisfy within a municipal organizational framework since capacity to issue debt and revenue streams to support debt are competed for by a variety of municipal services and operating units and are subject to overall bor- rowing and debt management limitations imposed on the municipality. Funding versus Financing Another way to view the difference between project and pro- gram funding is to recognize the distinction between “funding” and “financing.” “Funding” generally implies a “pay-as-you- go” process, in which a continuing revenue stream is drawn on for current ongoing expenditures and which allows lim- ited, if any, ability to spend beyond that revenue stream. “Financing” typically involves some form of debt, the advan- tage of which lies in allowing future streams of revenue to be available in the present to meet needs in a more timely and pre- dictable way. Debt financing allows systems to meet current needs from future revenues. The “cost” includes the attendant borrowing costs and the potentially diminished availability of those revenues in the future. As noted above, the ability and authority to “finance” transit investments, i.e., to incur debt, is not uniformly available across all agencies or types of agen- cies. Issuing debt to support municipal systems may be influ- enced heavily by state and/or local fiscal tradition and philos- ophy as well as by public needs for services that may compete for available funding. Current and Future Role of Transit in a Community There are persistent and differing views on the role of transit in various community and regional settings. The most limiting, but still common, view is the notion of public transit as a ser- vice intended largely to support the needs of transportation disadvantaged individuals in the community—the young; the old; those with disabling physical, mental, or emotional conditions; and low-income individuals or households. The broader human service and support needs of this client base are served by a large number of local, state, and federal pro- grams. These programs have increasingly become sources of revenue for transit agencies through locally negotiated purchase-of-service agreements with Medicaid; aging, men- tal health/mental rehabilitation, and job training social ser- vice agencies; and other local social service agencies. Funding and financing arrangements focused on serving transportation- disadvantaged citizens have become a focus of a federal coor- dination initiative, United We Ride; a new federal program, New Freedom; and a new federal transit and human service “coordination” planning requirement. At the other extreme, in terms of perceptions of the role of transit in a community, are those areas where transit is 41 Population Area Agency Type > 1.0 Million 200,000– 1.0 Million <200,000 Total Independent Authority 78 68 62 208 % 49 54 31 43 Municipal System 80 59 139 278 % 51 46 69 57 Total 158 127 201 486 Source: 2005 National Transit Database. www.ntdprogram.gov/ntdprogram. Table 4.1. Distribution of public transportation agencies by type and size of population area (2005).

considered an integral element of a multimodal network that is essential to maintain and enhance mobility, forestall increases in congestion now and in the future, and support local and regional economic growth and vitality. The stronger this notion is in the community, the more positive local community and/or political leaders may be with respect to consideration of new and innovative sources of revenue to support transit enhancement and expansion. In either case, understanding, developing, and advocating a clear, shared vision of the role of transit now and in the future is critical to the successful pursuit of the most appropriate and effec- tive local and regional revenues needed to make the vision a reality. 4.3 Basic Advantages and Disadvantages of Local and Regional Funding Sources Funding sources used to support public transportation have a wide range of characteristics. These characteristics— along with local, regional, and state taxing, funding, and budgetary policies and philosophies—determine the useful- ness of a particular source in a specific area or region. How- ever, in determining what sources may be appropriate in a given setting, it is important to understand and assess the basic advantages and disadvantages of particular sources. Table 4.2 highlights generally perceived advantages and dis- advantages of specific funding sources regardless of differences in local policies and philosophies. Because of their widespread use as state, regional, and/or local revenue sources, the general advantages and disadvantages of motor fuel taxes and “sin” taxes have been included in Table 4.2. 4.4 Criteria for Evaluating Potential Local and Regional Funding Sources Potential transportation funding sources are typically eval- uated across several basic dimensions using the criteria de- scribed below: • Revenue yield, adequacy, and stability; • Cost efficiency, including administrative cost to agencies, compliance costs to taxpayers, and evasion levels; • Equity with regard to cost burden and benefits accrued across income groups, different vehicle classes, and juris- dictions; • Economic efficiency, with particular emphasis on efficiency in pricing; • Political and popular acceptability; and • Technical feasibility. Each dimension is described in somewhat greater detail below, based on recent work done by Cambridge Systematics, Inc., for NCHRP Project 24(49), “Future Financing Options to Meet Highway and Transit Needs,” and published as NCHRP Web-Only Document 102.75 Revenue Yield Revenue yield is the single most important criterion in pursuing revenue sources for public transportation. Rev- enue yield measures whether the funding source can pro- vide a significant level of revenue given the expenditures required. Revenue yield should be both adequate and stable. “Adequacy” refers to present and future revenue in compar- ison with needs for current and projected expenditures. In addition to being adequate, resources under evaluation should be highly predictable in generating revenue. “Stabil- ity” refers to whether there are uncertain revenue fluctua- tions that can impact an agency’s ability to manage resources. Enactment of taxes and fees for any public investment is dif- ficult at best. If the effort is to be made, it should be focused directly on achieving adequate, predictable, and reliable rev- enue yields. Cost Efficiency Cost efficiency refers to maximizing benefits in relation to use of resources. Related considerations include “administra- tive cost” considerations in collecting the tax or fee; “compli- ance costs” passed on to taxpayers; and the potential for, and scale of, evasion and enforcement. Equity Equity generally refers to the fairness of the tax burden among different economic groups. Theoretically, a tax bur- den should be commensurate with one’s ability to pay or with the benefits received. User taxes, such as ones used to fund transportation, are somewhat less likely to have issues of eq- uity with regard to income level. Equity concerns about the fairness of relative user fee payments by various types of ve- hicles have been a major source of debate and conflict in highway taxation. A specific highway-industry set of “high- way cost allocation” procedures for attributing highway costs among vehicle types has grown up around the issue of equity in highway user fees. 42 75 Cambridge Systematics, Inc., Mercator Advisors, LLC, Pisarski, A. E., and Wachs, M. NCHRP Web-Only Document 102: Future Financing Options to Meet Highway and Transit Needs. Transportation Research Board of the Na- tional Academies, Washington, D.C., December 2006.

43 General Revenues Transit has benefits that are spread broadly across community and across users and non-users. Subject to annual appropriation/budgeting process. Traditional Mechanisms Advantages Disadvantages Typically requires no legislative action. Used to fund other local public services, which may have priority over transit. Sales Taxes Broad tax base; generally produces high revenue yields for a low marginal tax rate. Keeps pace with inflation. If already in place, very low cost for adjusting rates. Moderately equitable in that individuals of comparable means pay roughly the same amount of tax. All transportation system users pay, including commuters/visitors. General sales taxes Transit is linked to economic health. Revenues variable with changes in the economy, negative as well as positive. Considered somewhat regressive; burden is higher on poorer households although benefits of transit may be greater. Possible complications in the geographic limits of taxation and services delivered (users can be from outside the taxing jurisdiction). Must have state legislative authority in place for local enactment. Typically require voter approval for local enactment. Strong historic growth in yield from increases in ownership and use. Motor-vehicle- related sales taxes More progressive than general sales taxes. Significant potential for decline with economic downturns. Often difficult to divert from general funds. Revenues may decline in future with shifts away from petroleum- based vehicles. Property Taxes All households and businesses must pay. Generally a broad tax base. Revenues are generally not impacted dramatically with changes in the economy. Indexed for inflation (but only in property values). Relevant to and allowed for transit investment as a basic public service. Ease of administration and low evasion. Low compliance cost. Variable political and public acceptability. Moderately regressive; e.g., some households could be property-rich but income-poor (e.g., retirees). Revenue growth may be limited by tax limitation statutes in some areas. Susceptible to potential yield swings from periodic speculation and housing cycles. Contract/Purchase- of-Service Revenues Allows pricing to be tailored to service levels and their contingencies. Negotiated rates may or may not cover fully allocated costs. Terms typically reviewed/revised on a regular schedule. Table 4.2. General advantages and disadvantages of traditional local and regional public transportation funding sources. (continued on next page)

44 Lease Revenue Maximizes return/revenue to assets. Periodically responsible for response to markets. Integrates transit with other community interests. Marginal opportunity/yield except to largest systems. Requires market and lease transaction capacity. Vehicle Fees (Title, registration, tags, and inspection) Revenues are generally not impacted by changes in the economy. Allow for revenue collection from varied vehicle classes, differential value (i.e., a form of personal property tax) or vehicles using alternative fuels, etc., without establishing new collection mechanisms. Already in place; little added administrative cost for revenue increases. Flat fees are regressive. Potential for inequities among vehicle classes. Not indexed for inflation. Limited base; Only households that own vehicles pay. Relation to transit is often not acknowledged, e.g., drivers may benefit from transit improvements that reduce congestion. Typically require legislative action to change or increase rates, structure. Variable fees Revenues adjust to inflation. Ad valorem fees are more progressive. Advertising Revenues Increasing range of techniques and technologies available to expand reach, impact. Can be brokered through private agents. Low yield. Concession Revenues Revenue can be optimized by charging a premium based on location. Can be adjusted to reflect market conditions. Low yield, not traditionally a major revenue generating tool. Common Business, Activity, and Related Sources Employer/Payroll Taxes Ensures that commuters and businesses contribute to and support transit. Ease of compliance and administration. Responsive to inflation. Commuters have no say within the local government that imposes the tax. May provide incentive for businesses to locate outside the taxing jurisdiction. Car Rental Fees Easy to gain public support; most residents not subject to the tax. Revenues may be impacted by economic changes. Responsive to inflation if fee placed on value. People paying the tax have no say within the local government imposing the tax. Narrow tax base. Vehicle Lease Fees Responsive to inflation if fee placed on value. Assures collection with regard to leased vehicles. Narrow tax base. If not ad valorem taxes, not responsive to inflation. pay. Only households that lease vehicles Traditional Mechanisms Advantages Disadvantages Table 4.2. (Continued).

45 Parking Fees Ensures that commuters contribute/support transit services that benefit them. Highly progressive. Narrow tax base. Realty Transfer Taxes/Mortgage Recording Taxes New property owners pay a share of transit costs provided in the area. Highly related to economic activity. Responsive to inflation. Narrow tax base. Considered moderately regressive. Susceptible to potential yield swings from periodic speculation and housing cycles. Corporate Franchise Taxes Oil company franchise taxes Long line taxes (Franchise tax on transmission) transportation/ Ensures that employers contribute/support transit services that benefit them. Progressive in comparison to other options. More public acceptability since the tax is imposed on petroleum companies Same attributes as for motor fuel tax based on value Related to economic activity. May provide incentive for businesses to locate outside the taxing jurisdiction. Taxes usually passed on to customers Disadvantages similar to those for motor fuel taxes based on value. Likely small yield. Room/Occupancy Taxes Politically attractive; only visitors pay the tax. Generally based on value; inflation sensitive. People paying tax have no direct say in the local government that imposes the tax. Business License Fees Assures that businesses bare a portion of transit costs. Low yield unless set at very high rates. May induce businesses to locate elsewhere. Utility Taxes/Fees All households pay. Has proven to be a useful alternative funding source in areas where scale of the economy and sales taxes may not provide a broad tax base to support transit Revenues from some utilities are impacted by energy conservation policies. Income Taxes Individual and corporate All households pay (except those with very low incomes). Progressive, directly related to income status. Broad tax base. Indexed for inflation. Revenues may be affected during economic recession due to potential increases in unemployment. May be difficult to capture nonresident revenues. Donations No governmental actions necessary. Not a stable revenue source. Extremely low yields. Traditional Mechanisms Advantages Disadvantages Table 4.2. (Continued). (continued on next page)

46 Other Business Taxes Impact fees/beneficiary charges Direct relationship to transit and ease of access; new development pays for needed transportation improvements to support increased demand. Higher revenue yield in high- growth areas. Low public acceptability; subject to legal challenges. Motor Fuel Taxes Ease of collection/administration. Low compliance cost and low evasion. Directly related to transportation system usage. Can be multimodal in dedicated use. Steady growth rate over time. No decline in fuel sales expected over two decades. Lend themselves to indexing to avoid declines due to inflation effects. Have been shown to be inadequate by themselves to meet future needs. Moderately regressive, although low-income buy less gasoline. Yield negatively impacted by continued focus on per gallon taxes, future improvements in fuel efficiency, introduction of alternative fuels. Geographic issue; fuel can easily be purchased outside taxing jurisdictions. Use for transit sometimes considered a “diversion” when benefits of transit to overall travel are not acknowledged. Revenues are constitutionally or statutorily dedicated to highways in many states. Fixed rate Same as above. Same as above. Without indexing, real yield declines over time. Adjustable rate Same as for fixed rate. Responds to fuel price changes. Responsive to inflation. Same for all types. Sales Tax on Fuels Same as for fixed rate. Responds to fuel price changes. Responsive to inflation. Same for all types. “Sin” Taxes Cigarette taxes Alcohol taxes Lottery revenues/gambling taxes Fees collected from those who voluntarily engage in gambling. Visitors as well as locals contribute. Narrow tax base. Lottery fees are strongly regressive. Gambling may cause social and personal problems. Sources: Cambridge Systematics, Inc., Mercator Advisors, Pisarski, A. E., and Wachs, M., NCHRP Web-Only Document 102: Future Financing Options to Meet Highway and Transit Needs. Transportation Research Board of the National Academies, Washington, DC, December 2006. Goldman, T., Corbett, S., and Wachs, M., Local Option Transportation Taxes in the United States, (Part One: Issues and Trends). UCB-ITS-RR-2001-3. Institute of Transportation Studies, University of California, Berkeley, CA, March 2001, pp. 21–24. Price Waterhouse LLP, Multisystems, Inc., and Muncle & Associates, Inc. TCRP Report 31: Funding Strategies for Public Transportation—Volume 2: Casebook. Transportation Research Board, National Research Council, Washington, DC, 1998. Traditional Mechanisms Advantages Disadvantages Table 4.2. (Continued).

Economic Efficiency Economic efficiency in transportation is intended to reflect whether the marginal cost to all travelers and society as a whole of an additional trip taken is captured in the price paid by the trip maker. The concept is most familiar in congestion pricing, sometimes referred to as “value pricing.” The underlying issue in this research project is to what degree potential additional revenue sources enhance this balance or economic efficiency. Political and Popular Acceptability Political and popular acceptability is on the one hand a com- bination of all the other criteria and, on the other hand, a stand- alone factor in the decision process to employ new revenue schemes. Generally, a revenue source is acceptable when it is politically palatable on the key, or most salient, criteria. This implies that the revenue source is adequate, fair, simple, effec- tive, efficient, and easy to administer. While meeting the most important criteria is a necessary step, it may not be sufficient to obtain political acceptability, i.e., garner sufficient popular or legislative support to be implemented. The nature of the action required to implement new sources is also a key factor in polit- ical and popular acceptability, e.g., pursuing legislative action or passage of a binding public referenda at the state or local level is frequently more challenging politically than achieving changes in regulatory, administrative, or budgetary practices. Technical Feasibility Technical feasibility reflects how advancements, including geographic information systems (GIS), global positioning sys- tems (GPS), and electronic transfer mechanisms, may reduce the cost of administration and compliance in a broad array of areas, including taxation generally and transportation-related taxation and revenue handling, specifically. These technologies enable a more simple, straightforward, and accurate allocation of costs, but they can also pose difficulties for traditional methods of funding. 4.5 Performance of Tax and Fee Mechanisms The extent to which alternative tax and fee mechanisms sat- isfy the criteria described above will vary from one jurisdiction to another. Broad qualitative observations can be made, how- ever, about the degree to which each of the potential sources of local or regional funding satisfies the criteria. These general observations are presented in Table 4.3, in which H indicates strong performance, M indicates modest performance, L in- dicates marginal performance, and V indicates variable per- formance. As before, both motor fuel taxes and “sin” taxes have been included in Table 4.3 because of the widespread use of these taxes as state, regional, and/or local revenue sources, although not typically for public transportation. 47

48 Traditional Revenue Sources Source Revenue Yield Cost- Efficiency Equity Economic Efficiency Political, Popular Acceptance Technical Feasibility Adequacy, Stability Administrative, Compliance Cost Evasion General Revenues H H L M M H Sales Taxes H H L M M H Property Taxes H H L M M H Contract/ Purchase-of- Service Revenue L L L L H H Lease Revenue L L L L H H Vehicle Fees H H M M L H Advertising Revenues L L L L H H Concession Revenues L L L L H H Common Business, Activity, and Related Sources Employer/ Payroll Taxes H H M H L H Car Rental Fees M H L M M H Vehicle Lease Fees M H L M M H Parking Fees M H L M L H Realty Transfer Taxes/Mortgage Recording Fees M H L L M H Corporate Franchise Taxes Oil H H M M M H Long lines taxes M H L M M H Room/ Occupancy Taxes L M L L H H Business License Fees L M M M L M Utility Taxes/Fees M H L L L H Income Taxes H H H L L H Donations L L L L H H Revenue Streams from Projects Joint Development L L L L H H Value Capture L L L L M H Beneficiary Charges Districts L L M L M H Special Assessment L L M L M H Table 4.3. Performance of alternative local and regional public transportation funding sources.

49 Source Revenue Yield Cost- Efficiency Equity Economic Efficiency Political, Popular Acceptance Technical Feasibility Adequacy, Stability Administrative, Compliance Cost Evasion Community Facility Districts/TDDs L L L L M H Impact Fees M M M M M H Tax Increment Financing M L L L M H ROW Leases L H L L H H Airport Passenger Facility Charges M H L L M H “User” or “Market- Based” Sources Tolling V H L M L H Congestion Pricing V M L H L H Emission Fees V V L H L L VMT fees V V L H L M Financing Mechanisms GO Bonds Ha H L L H H PABs Ha H L L L H Tax Credit Bonds Ma H L L L H GANs Ha H L L M H GARVEEs Ha H L L M H RANs Ha H L L M H COPs Ma H L L M H SIB Loans Ha H L L M H Other, Less-Frequently Used Taxes and Fees Motor Fuel Taxes H H M M L H “Sin Taxes” (Cigarettes, alcohol, and gambling) M H L L M H Battery Taxes L L L L L M Road Utility Fees (Access charges) M M L L L M Airport Passenger Facility Charges M M L L M H Key: H Strong Performance M Modest Performance L Marginal Performance V Variable aNet revenues may be negative but projects are delivered more quickly. Table 4.3. (Continued).

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TRB’s Transit Cooperative Research Program (TCRP) Report 129: Local and Regional Funding Mechanisms for Public Transportation explores a series of transit funding mechanisms with a primary focus on traditional tax- and fee-based funding; and common business, activity, and related funding sources. The report includes an online regional funding database that provides an extensive list of funding sources that are in use or have the prospect of being used at the local and regional level to support public transportation. A user manual for the database is also available online.

Note: The database is a very large file and may take some time to download.

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