transportation funding ideas

First, some background. The California Department of Transportation (Caltrans) publication: Transportation Funding in California (2019), documents what funding is currently available in the state, but mostly serves to reflect how complicated the whole funding stream is. I don’t think this is an unintended consequence, but a design feature, as a complex system benefits engineers, planners and politicians by obscuring inputs and outputs.

Next, there are many useful sources of information on potential funding, but two I find useful are: Key Local Funding Options, by Transportation for America, and A Guide to Transportation Funding Options, by Texas Transportation Institute.

I don’t claim any expertise in transportation funding, but I am reading and thinking, and am presenting some ideas for your consideration.

This exploration is both the result of Sacramento Transportation Authority (SacTA) to pull the ordinance and request for ballot measure for the 2020 Measure A transportation sales tax, as well as an ongoing dissatisfaction with our current funding models. The current Measure A is a 30-year (2009-2039) transportation measure for the county of Sacramento which implements a half-cent sales tax. Though there are minor amounts of funding from other sources at the county level, and in the cities, this measure is the main source of local funding for transportation.

Sales taxes are regressive, in that lower income people spend a higher percentage of their income on sales tax than do higher income people. Of course most of our tax system is set up this way, as the higher income people, particularly the top 1%, buys politicians with political donations who will make sure that their tax burden remains as low as possible. The Trump tax cuts are just one example, where nearly all of the benefits went to high income individuals and large corporations. The huge income and wealth disparity in the US is no accident, it is the design of the taxation system. Nevertheless, it is worthwhile to talk about less regressive taxes.

A few alternative potential sources are listed. This is not meant to be an exhaustive list, please see the leading documents if you want a fuller list. Rather, it is ideas that appeal to me.

  • Income tax: While. in theory, income taxes are progressive, they have been made less and less so over time, and in fact are currently regressive because high income and high wealth individuals, and large corporations, write tax code that reduces their obligations. In fact many large corporation pay no taxes at all. Because California largely follows the federal tax law, California’s income tax is also regressive. Nevertheless, income tax is less regressive than sales tax. However, California does not allow local income taxes.
  • Property tax: Property tax is based on the value of land and improvements (at least theoretically, though assessment practices actually muddy the waters). This is the least regressive tax available, since the value of the property being taxes correlates highly with income and wealth. It is what should be funding most of our government services. But as you well know, Prop 13 corrupts that by holding the taxation rate on some properties to artificially low values. Proposition 15 (2020) will remove that limitation on commercial properties, but does not touch residential properties. Most of the billions in income from Proposition 15 will go to education, as it probably should, but some can be made available for transportation.
  • Property tax increment: When the value of property increases due to a specific transportation investment, the additional property tax collected can be used to pay for the investment, usually through bond repayment. Sounds good, but in California the tax increment has been so corrupted by giving tax breaks to large corporations that almost no one trust the funding mechanism anymore.
  • Property tax assessment: Taxes are raised on parcels that are expected to benefit from a transportation investment. This seems like a great idea, but from my understanding Prop 13 limitations mean that this is rarely done, and special assessments default to parcel taxes. Worth learning more about.
  • Parcel tax: These are flat rate taxes on property. Because every parcel pays the same amount, these taxes are incredibly regressive. Unfortunately schools and many other local taxing districts use parcel taxes. Their regressive nature should preclude their use for transportation.
  • Vehicle registration fee: These include a number of related fees, see if you want more details. These fees are based in part on vehicle value, so they are more progressive than many fees/taxes. It is not clear whether counties/cities/regions can charge vehicle fees. As a highly visible fee, this one tends to get a lot of attention from anti-tax people.
  • Fuel tax (or mileage fee): This tax, or fee, relates to fuel used or miles traveled. These taxes/fees are therefore a user fee, the user of the transportation system pays for the transportation system. However, I don’t think California allows such taxes/fees at the local level.
  • Parking fees: Parking charges are a variety of user fees, but instead of based on the vehicle when moving, based on when the vehicle is still. Parking fees are collected and expended at the local level, so this a strong nexus. In California, parking fees are theoretically only allowed to cover the cost of administering the parking, and not even the cost of constructing and maintaining the parking space, however, this is widely violated and is probably a ripe are for reform. Parking is in many ways a wasted part of our transportation system, socialism for car owners, so this one should be at the top of the list.
  • Congestion pricing: A fee changed to vehicles entering a defined area of the city where there is congestion of some sort. I think the term ‘congestion’ is unfortunately in this context, as it implies that congestion is something to be solved, but it is, for now, the commonly used term. Transportation use fee or something else might be better. At any rate, sometimes the fee is per vehicle, and sometimes it is adjusted by the weight (= pavement damage) or pollution output of the vehicle. Congestion fees have been criticized for having an inequitable impact on lower incomes, but this idea has been widely rebutted by the realization is that the most inequitable transportation system is on that requires people to own and use private vehicles.
  • General Funds: Cities and counties may of course, spend general funds, raised by any variety of taxes and fees, on transportation. But they rarely do. Part of the reason has to do with federal and state grants being a ‘free’ source of funds, that the local entity doesn’t have to raise or be blamed for, but flows freely from a higher level of government to the local. I would argue that at least some general funds should be spent on transportation, to provide at least a basic level of services and infrastructure.

This is just a quick run-through. Next post is about what I think should be emphasized for Sacramento county.

Myth: driving is supported by user fees

Another myth promulgated by people who support roads over transit is that transit has to be subsidized while motor vehicles pay their way. “Transit, particularly rail transit, is very expensive to build, operate, and maintain. While driving is pretty much self-supporting through user fees, transit must be heavily subsidized by taxpayers.”

Roads for motor vehicles are anything but self supporting. For the state and federal highway system (from the interstates all the way down to some arterial streets that many people don’t realize are designated highways), gas taxes pay for roughly half of constructing those roads. Where does the other half come from? Out of our pockets, from the general fund, through income taxes and other fees. You may have heard that the federal highway trust fund is out of money, but highways are still being built. How is that possible? Well, money keeps getting dumped into transportation to make up for the lack of gas tax income. Though it is now down to 50%, if the gas tax is not raised, it will be a continually declining percentage until nearly all of our transportation funds come out of the general fund.

So if the gas tax doesn’t pay for maintaining roads, what does? Nothing! Very little money is being spent on maintenance, and our roads have deteriorated in a way that is obvious to anyone who drives, or rides a bike, or even walks. Politicians give lip service to fixing roads, but when it comes to spending money, it is all about big new roads and ribbon-cutting opportunities. Or even big new transit projects and ribbon-cutting opportunities.

For local roads, those paid for by counties and cities, very little comes from the gas tax. Counties and cities in California do not have gas taxes nor income taxes (though they do in some other states). So where does the money come from? Sales tax, and out of the general fund, which is mostly property tax. Self supporting? Hardly. Counties and cities do get some state and federal funds, some of which comes from gas taxes, but it usually is only for new construction (not that it has to be, but that is what is asked for and given), and it is a small part of what it takes to build and maintain local roads.

And then there are the externalties of a car-centric transportation system. Climate change, air pollution, sprawl, unemployment or underemployment for people who can’t afford to get to jobs, death and severe injury on our roads ($80 billion per year, for just injuries, not including fatalities), high portions of both family income and family wealth devoted to just one purpose, the car, deteriorating infrastructure, foreign wars for oil (if you think the war in Iraq was about freedom rather than oil and profit for Halliburton and Dick Cheney, you haven’t been paying attention).

All forms of transportation get some subsidy. Motor vehicles, bicycles, buses, trains, airplanes (the subsidy here is probably the highest percentage of any), all get subsidized. Though rail freight is subsidized far less than other modes, which is why it seems to not be competetive with road and air, when it would be if the playing field were level. The real question is whether the subsidies result in a transportation system that serves all citizens, and not just those who choose to drive or are forced to drive by a lack of choice. My opinion is that we have our priorities all wrong.

So why do we still keep spending money we don’t have on highways and roads, rather than a rational transportation system? The “asphalt lobby” as it is called. This is a network of engineers, construction companies, government workers, and politicians who profit incredibly from continuing to spend our money on their pet projects. AASHTO (American Association of State Highway and Transportation Officials) and ASCE (American Society of Civil Engineers) are probaby the most prominent proponents, but there are organizations and lobbyists too numerous to list. OK, I can’t resist: the Asphalt Paving Alliance, the Asphalt Institute, the National Asphalt Paving Association. Not to mention: the American Concrete Pavement Association, the American Concrete Institute.

Time to stop!