Financing Options
Options For Funding Transportation Programs
~~~~~~~~~~~~~~
Victoria Transport Policy
Institute
~~~~~~~~~~~~~~~~~~~~
Updated
23 July 2008
This chapter describes various ways to fund transportation programs and evaluates the degree to which they support TDM objectives.
To be successful, transportation programs and projects require adequate funding. There are many possible funding sources, some of which also support transportation planning objectives, including efforts to reduce traffic and parking congestion problems, encourage more accessible land use patterns, or achieve equity objectives. Because they are new, TDM programs often require new funding sources. For example, a reliable new funding source may be needed to create a Transportation Management Association or implement Nonmotorized Transportation Plans. Below are examples of funding options:
· Parking Pricing. Some
jurisdictions and campuses dedicate public parking revenues to transportation
programs.
· Special Parking Taxes. Some jurisdictions impose special taxes on commercial
parking transactions or on parking facilities (Litman, 2006).
· Road Pricing. Some communities
use road tolls and congestion fees to fund transportation programs, including
roadway facilities, transit improvements and TDM programs.
· Fuel Tax Increases and Surcharges.
Some jurisdictions dedicate a portion of fuel tax revenues to special
transportation programs (such as dedicating 1% of fuel tax revenues to
nonmotorized facilities), or impose an optional, additional fuel tax for local
transportation programs.
· Carbon Taxes. These are
special taxes based on fossil fuel carbon content, and therefore a tax on
carbon dioxide emissions.
· Dedicated
local or regional sales taxes. This
may require a public referendum.
· Transportation Impact Fees. These are fees paid by developers based on the
transportation costs imposed by their projects. For example, a developer may be
required to pay for roadway improvements, public parking facilities (called in
lieu fees), to help fund a Transportation Management
Association, to pay for walking and cycling improvement, or to fund other
programs that mitigate local traffic impacts.
· Special Property Taxes. Some jurisdictions impose special property taxes in
areas served by transportation programs and services, sometimes called a Local
Improvement District or Land Value
Capture (Smith and Gihring, 2003; Wetzel, 2006).
· Vehicle
impact mitigation fees. This is a fee
on each vehicle registered in the region to pay for programs and projects that
serve motorists and mitigate the negative impacts caused by vehicle
traffic.
· Business or Employee Assessments. Some Transportation Management
Associations and Commute Trip Reduction programs are
funded by a special assessment on businesses in an area, based on floor area,
revenues or number of employees.
· Grants, such as foundation or government grants to help fund
programs and facilities, such as school transportation safety education, and
transit stations.
· Special Funding For Transportation Problem Solving. Various federal, state, provincial and private funds
may be available for transportation programs that address specific problems.
For example, TDM programs may qualify for
The best funding options reflect these attributes:
·
Stable and predictable.
·
Considered Equitable.
· Supports TDM objectives (reduces peak-period vehicle travel, encourages shifts to more efficient modes, supports Smart Growth, etc.).
· Relatively easy to administrate.
Fees and taxes support TDM objectives if they are based on the amount of automobile travel that occurs, particularly variable fees that are higher for peak periods and locations, and lower for off-peak. This type of Pricing encourages motorists to reduce their peak-period driving, reducing traffic and parking congestion problems.
Table 1 How Well Different Fees Support TDM Objectives
|
Rank |
General Category |
Examples |
|
Best |
Time- and location-specific road and parking pricing |
Variable Road Pricing, Parking Pricing (higher rates for peak periods and locations, lower rates for off-peak) |
|
Second Best |
Mileage-pricing |
|
|
Third Best |
Fuel charges |
|
|
Fourth Best |
Fixed vehicle fees |
Motor vehicle fees, vehicle purchase taxes |
|
Worst |
Not charged specifically to motorists |
General sales taxes, general property taxes, business taxes, employee fees and taxes. |
This table compares the degree to which various transport funding options support TDM objectives. Fees that are higher under urban-peak conditions are best. General taxes and fees are worst.
In other words, if there is agreement that some new source of revenue is needed, it makes sense to structure the funding system to support other strategic planning objectives, such as encouraging more efficient travel patterns and land use development. If property taxes are used to fund transportation services, they can be structured to support Smart Growth land use planning objectives, for example, by having fees that reflect the higher cost of providing public services in dispersed locations (Smart Growth Planning Reforms), and by providing property tax discounts for households that do not own an automobile.
Some people may consider it unfair to charge motorists for programs that benefit users of other modes, such as Transit Improvements and Walking and Cycling Encouragement Programs, but this criticism is generally inappropriate since motorists benefit from reduced congestion and increased safety when other travelers shift to alternative modes, and because motor vehicle use imposes various External Costs. Such funding can therefore be considered part of traffic impact mitigation and compensation.
There is sometimes a choice between public or private ownership of transportation facilities and services, which affect their funding and other planning factors. Public owned facilities and services tend to rely on tax funding, while privately owned facilities and services tends to rely more on user fees, but there are many variations; private facilities and services often receive public resources in the form of free or underpriced land, direct financial subsidies, and tax exemptions, while public facilities and services can have user fees.
There are advantages and disadvantages to both public and private ownership and operation of transportation infrastructure and services (Gomez-Ibanez and Meyer, 1994). Public ownership often allows cheaper financing through public bonds, and tends to increase public accountability and integration with other planning decisions, leading to facilities and services that better support overall community objectives. Privatization (private ownership) and contracting of services can allow more focused planning decisions (public facilities and services are often expected to address broader community goals, which adds costs and constraints), and may avoid restrictive planning and labor rules. Proponents of privatization argue that it increases service efficiency, but experience indicates mixed results (Morris, 2006). For example, public transit service privatization often reduces costs per transit vehicle-mile or passenger-mile, providing fiscal savings to governments, but this often result from reduced service quality which leads to reduced ridership, increasing other economic costs such as traffic congestion and road and parking facility costs (Grayling, 2001; Scholl, 2006). Private highways funded by tolls frequently require public subsidy and restrictions on competition (GAO, 2004), and toll rates have sometimes increased faster than originally promised in order to provide sufficient return on investment (for example, tolls increased substantially after Highway 407 in Ontario was sold to a private firm). In the past, many toll road planners exaggerated demand and potential revenues, resulting in financial failure, which has made toll road financing difficult (Vassallo and Sánchez-Soliño (2007).
Effective privatization and contracting therefore require that public agencies retain control over key planning decisions, and that service quality be a primary performance feature. For example, if transit services are privatized or contracted out to private firms, it is important that such services be integrated and comprehensive, rather than allowing private service providers to only provide services where it is most profitable. It is helpful to arrange bidding so private service providers compete on service quality and ridership goals, not simply on minimum cost.
Below are
recommendations for effective implementation of new transportation taxes, based
on interviews with various parking officials:
· The tax base should be broad and well defined. A broad tax base spreads the financial burden and does not give certain groups a competitive advantage. It is considered most equitable if it applies to publicly-owned as well as private agencies and facilities.
· Exemptions must be well defined and understood by all affected parties. For example, if a parking tax does not apply to churches and hospitals, these must be carefully defined.
· Enforcement must be effective, practical and given sufficient priority.
· Taxes and fees should be structured for efficient compliance and auditing.
· Work with stakeholders to develop efficient and fair regulations, administrative procedures and enforcement policies.
· Carefully assess the travel and economic impacts of a tax. Establish an evaluation program, with before-and-after analysis, to determine the impacts a tax has on local business activity, vehicle traffic, etc.
Since 17 February 2003 the
city of
Three Australian cities have levies on non-residential urban parking, intended to encourage use of alternative modes and fund transport facilities and services:
· In
·
In
·
In
Table 2 Parking Levy Comparison (Enoch, 2001 and other
sources)
|
|
|
|
|
|
Name |
Parking Space Levy |
Parking Licence Fee |
Long Stay Car Park Levy |
|
First Implemented |
1992 |
1999 |
2006 |
|
Annual Levy |
Central CBC: $800 |
Short stay: $155 |
$400 annually in 2006 $800 annually in 2007 |
|
Annual revenues generated |
AU$40 million |
AU$8.2 million |
$19 million first year $39 million second year |
|
Use of revenues |
Transport facilities |
Downtown transit services |
CBD transport improvements |
|
Exceptions |
|
|
|
|
On-street |
Exempt |
Not exempt |
Exempt |
|
Residential use |
Exempt |
Exempt |
Exempt |
|
Casual Parking (part time use) |
Pro-rated by use |
No reduction |
Exempt |
|
Publicly-owned parking facilities |
Exempt |
Not exempt |
Exempt |
|
Potential parking spaces, not currently used |
Not exempt |
Exempt |
Exempt |
|
Small businesses (5 parking stalls or less) |
Not exempt |
Exempt |
|
|
Disabled persons parking |
Exempt |
Exempt |
Exempt |
|
Loading zones – including taxi and bus bays |
Exempt |
Exempt |
Exempt |
|
Community service/ emergency service spaces |
Exempt |
Exempt |
Exempt |
|
Spaces for service vehicles (e.g., repairs) |
Exempt |
Exempt |
Exempt |
|
Car sales and service spaces |
Exempt. |
Exempt |
Exempt |
This table compares the per-space parking levies in
TransLink, the
· On-street parking facilities.
· Most buildings exempt from general property taxes (schools, churches, synagogues, etc.).
· The portion of parking facilities used for vehicle retail and rental business inventory storage, impounded vehicles, trailers of tractor-trailer units, vehicle servicing and fueling.
· Parking facilities owned by TransLink (including Park & Ride lots).
· Ferry loading queuing areas.
· Campgrounds.
Stormwater fees are special charges applied to impervious surfaces (pavement and buildings) to fund stormwater management systems (drain systems, treatment facilities, etc.). Such fees range from about $5 to $20 per 1,000 square feet, or about $1-7 annually per off-street parking space, as indicated in the table below.
Table 3 Stormwater Fees (PCW, 2002)
|
Jurisdiction |
Fee |
Per 1000 Sq. |
Per Parking Space (Annual) |
|
|
$39 annual 2,000 sq. ft. |
$19.50 |
$6.50 |
|
City of |
$4.00 per month per ERU |
$15.00 |
$5.00 |
|
|
$1.75 monthly per 2,000 sq. ft. |
$10.50 |
$3.50 |
|
|
$47.50 per 4,200 sq. ft. |
$11.30 |
$4.00 |
|
|
$4 monthly per 2,260 sq. ft. |
$18.46 |
$6.00 |
|
|
$10 annual fee per ERU. |
$3.13 |
$1.00 |
|
|
$4.75 monthly per 2,500 sq. ft. |
$22.80 |
$7.50 |
|
|
$50 annual per 3,600 sq. ft. |
$13.88 |
$6.50 |
“Equivalent Run-off Unit” or ERU = 3,200 square foot impervious surface.
The City of Austin, Texas has an innovative way of financing
transportation infrastructure which rewards households that reduce their
vehicle ownership (Austin City Code Chapter 14-10). City utility bills include
a “Transportation User Fee” (TUF) which averages $30 to $40 (
Value capture refers to special property taxes and
public private partnerships that recover some or all public investment costs
that increase property values, such as transportation facilities and other
infrastructure improvements, and programs that improve local security and
environmental quality. This allows highway projects and transit services to be
funded in part by the additional value they provide. For example, the
Washington Metropolitan Area Transit Association has purchased vacant land near
planned rail stations, and has mounted 66 joint development projects since 1976
which had generated $129 million in revenue by 2002, an amount expected to
double by 2007. Stations had attracted $30 billion in private investment by
2000: Between 1980 and 1990 40% of the region’s office and retail space was
built within walking distance, and between 1990 and 2000, another 20% was
constructed. As a result, the transit agency and local governments have
received a return on their investments.
The North Natomas Transportation Management Association (NNTMA) is funded through a special tax provided by residents, businesses and developers, called a Community Facilities District (CFD). An annual report is prepared each year that includes the tax roll for the CFD. The Public Works Special Districts Office produces an annual report which provides a background of the CFD, current status of land uses within the district, maximum special taxes for each CFD parcel, and the calculation of that fiscal year’s special tax levy. The current levy is $18 per year per single-family unit, $14 per year per multi-family unit, $0.03 per square foot for industrial, $0.06 per square foot for office, $0.10 per square foot for retail, and $200 per acre for sports complex uses. The North Natomas Transit Fee, a development impact fee that pays for transit services, including the formation costs of the TMA, will cover the administration costs of the CFD for the first five years of the TMA’s operation.
To help address downtown
parking problems the city of
The city formed a PMZ
advisory board consisting of business and property owners, which recommended
parking policies and set spending priorities for the meter revenues. This
approach of connecting parking revenues directly to added public services and
keeping it under local control help guarantee the program’s success.
Investments included new street furniture and trees, more police patrols,
better street lighting, more street and sidewalk cleaning, pedestrian facility
improvements and marketing (including production of area maps showing local
attractions and parking facilities). To highlight these benefits to motorists,
each parking meter has a small sticker which reads, Your Meter Money Will Make A Difference: Signage, Lighting, Benches,
Paving.
This created a “virtuous
cycle” in which parking revenue funded community improvements that attracted
more visitors which increased the parking revenue, allowing further
improvements. This resulted in extensive redevelopment of buildings, new
businesses and residential development. Parking is no longer a problem for
customers, who can almost always find a convenient space. Local sales tax
revenues have increased far faster than in other shopping districts with lower
parking rates, and nearby malls that offer free customer parking. This
indicates that charging market rate parking (i.e., prices that result in 85-90%
peak-period utilization rates) with revenues dedicated to local improvements
can be an effective ways to support urban redevelopment.
In August 2001 the German
cabinet has approved plans drawn up by transport minister Kurt Bodewig that
will introduce tolls on trucks using roadways beginning in 2003. Vehicles over 12
tons would be required to pay euros 0.14-0.19 (0.12-0.16
Phineas Baxandall, (2007), Finding
Solutions To Fund Transit Combining Accountability & New Resources For
World-Class Public Transportation, U.S. PIRG (www.uspirg.org).
Brian S. Bochner, Josias Zietsman, and Juan Carlos Villa (2006), Methods Of Increasing Transportation Funding, ITE Annual Meeting (www.ite.org).
Cambridge Systematics (2006), Future Financing Options to Meet Highway and Transit Needs, NCHRP Document 102, Transportation Research Board (www.trb.org); at http://onlinepubs.trb.org/onlinepubs/nchrp/nchrp_w102.pdf.
Congestion Mitigation and Air Quality (CMAQ) Improvement Program Website (www.fhwa.dot.gov/environment/cmaqpgs) provides information on special funding for transportation improvements that reduce traffic congestion and air pollution.
DfT (2002), Road User Charging And Workplace Parking
Levy Regulations, Dept. for Transport, (www.dft.gov.uk/stellent/groups/dft_localtrans/documents/page/dft_localtrans_503967.hcsp).
DPI (2002), Licensed Parking in Perth: A Guide for
Commercial Property Owners, Department of Planning and Infrastructure,
Government of
Marcus Enoch (2001), “Workplace Parking Charges Down Under,” Traffic Engineering & Control, Vol. 42, No. 10, (http://eeru.open.ac.uk/staff/marcus/Workplace%20parking.PDF), November 2001, pp. 357-360.
Marcus Enoch and
Stephen Ison (2006), “Levying Charges On Private Parking: Lessons From Existing
Practice,” World Transport Policy & Practice, Vol. 12, No. 1 (http://ecoplan.org/wtpp/general/vol-12-1.pdf),
pp. 5-14.
GAO (2004), Highways and Transit: Private Sector Sponsorship Of And Investment In Major Projects Has Been Limited, General Accounting Office, GAO-04-419 (www.gao.gov).
Jose A. Gomez-Ibanez and John R. Meyer (1994), Going Private: The International Experience with Transport Privatization, John Wiley and Sons.
Tony Grayling (2001), Any More Fares? Delivering
Better Bus Services, Institute for Public Policy Research (www.ippr.org).
European Transport Pricing Initiatives (www.transport-pricing.ne) includes various efforts to develop more fair and efficient pricing. Specific European transportation pricing projects are described below:
CUPID (Co-ordinating Urban Pricing Integrated Demonstrations), European Transport Pricing Initiative, Project No. GRD1-1999-10958, European Commission, Competitive and Sustainable Growth Programme (www.transport-pricing.net/reports22.html), November, 2001.
IMPRINT (www.imprint-eu.org) is an effort to promote implementation of fair and efficient transport pricing.
IBI (2000), Transit-Supportive Parking Policies: North American Experience and Model Policies for Municipalities, Canadian Urban Transit Association (www.cutaactu.on.ca).
Independent Evaluation Group (2007), Evaluation of Bank Support for Road Funds: For Evaluation of World Bank Assistance to the Transport Sector, 1995 – 2005, World Bank (http://go.worldbank.org/4I07UH5XH0).
Innovative Finance for Surface Transportation (www.innovativefinance.org) is an Internet based clearinghouse providing information on innovations in road pricing and user fees.
IPIRG (2007), Finding Solutions To Fund Transit: Combining Accountability & New Resources For World-Class Public Transportation, Illinois Public Interest Research Group (http://illinoispirg.org).
Douglas Kolozsvari and Donald Shoup (2003), “Turning Small Change Into Big Changes,” Access 23, University of California Transportation Center (www.uctc.net), Fall 2003, pp. 2-7; www.sppsr.ucla.edu/up/webfiles/SmallChange.pdf.
Charles Komanoff and Brian Ketchem (2003), The
Hours: Time Savings from Tolling The East River Bridges, Bridge Tolls
Advocacy Project (www.bridgetolls.org).
Todd Litman (1996), “Using Road Pricing Revenue: Economic Efficiency and Equity Considerations,” Transportation Research Record 1558, Transportation Research Board (www.trb.org), pp. 24-28, also available at www.vtpi.org.
Todd Litman (2003), London Congestion Pricing: Implications for Other Cities, Victoria Transport Policy Institute (www.vtpi.org).
Todd Litman (2006), Parking Taxes: Evaluating Options and Impacts, Victoria Transport Policy Institute (www.vtpi.org/parking_tax.pdf).
Eric Morris (2006), “How Privitization Became a Train Wreck,” ACCESS 28, (www.uctc.net), Spring 2006, pp. 18-25.
NSTIFC (2008), The Path Forward: Funding and Financing
Our Surface Transportation System: Interim Report of the National Surface
Transportation Infrastructure
Financing Commission, National Surface Transportation Infrastructure Financing Commission (http://financecommission.dot.gov).
OSR (2000), Parking Space Levy, Office of
State Revenue, NSW Treasury (www.osr.nsw.gov.au).
PCW (2002), Some Existing Water District Funding Sources, Legislative and Regulatory Issues Technical Advisory Committee, Project Clean Water (www.projectcleanwater.org).
SACG (1999), Transportation Funding Handbook, Sacramento Area Council of Governments (www.sacog.org/projectdelivery/funding.pdf).
Lynn Scholl
(2006), “Privatization of Public Transit: A Review of the Research on
Contracting of Bus Services in the
Elliott D. Sclar and Richard C. Leone (2000), You Don't Always Get What You Pay for: The Economics of Privatization, Century Foundation Books (www.tcf.org).
Jeffery J. Smith and Thomas A. Gihring (2003), Financing Transit Systems Through Value Capture: An Annotated Bibliography, Geonomy Society (www.progress.org/geonomy); also available at www.vtpi.org/smith.pdf.
TransLink (2006), Parking Site Tax and How It Will Be Applied, TransLink, Greater Vancouver Transportation Authority (www.translink.bc.ca/ParkingTax/default.asp).
TRB (2006), The Fuel Tax And Alternatives For
Transportation Funding, Special Report 285, Transportation Research Board (www.trb.org); available at http://onlinepubs.trb.org/onlinepubs/sr/sr285.pdf.
José M. Vassallo and Antonio
Sánchez-Soliño (2007), “Subordinated Public Participation Loans for Financing
Toll Highway Concessions in
Martin Wachs (2003), Improving Efficiency and Equity in Transportation Finance, Center on Urban and Metropolitan Policy, Brookings Institute (www.brookings.edu/es/urban).
Asha Weinstein and Jennifer Dill (2007), How to Pay for Transportation? A Survey of Public Preferences, Transport Policy (www.elsevier.com/locate/transpol), Vol. 14, No. 4, July 2007, pp. 346-356;
Dave Wetzel
(2006), “
This
Encyclopedia is produced by the Victoria Transport Policy Institute to help
improve understanding of Transportation Demand Management. It is an ongoing
project. Please send us your comments and suggestions for improvement.
www.vtpi.org info@vtpi.org
Phone
& Fax 250-360-1560
#119