The Future of California Transportation Finance Martin Wachs University of California, Berkeley.
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Transcript of The Future of California Transportation Finance Martin Wachs University of California, Berkeley.
The Future of California Transportation Finance
Martin WachsUniversity of California,
Berkeley
The Future of California Transportation Finance
Martin WachsUniversity of California,
Berkeley
A Quiet RevolutionA Quiet RevolutionThe nature of transportation finance is changing
fundamentally & on a large scale
The change is happening gradually, without much public notice or broad discussion
Question: Is the current direction of change desirable or not?
Implication…I think the answer may well be “NO”
Local Streets & County Roads
Local Streets & County Roads
Financed largely by property taxes on residential and commercial land….and ought to be …..
Most benefits come from “access” to property: postal delivery, ambulance, fire, police, water, sewer, telephone service.
Access gives value to property & value should be “recouped”
Local streets & county roads carry tiny % of all traffic
History of Transportation Finance
History of Transportation Finance
Local Streets and County Roads: Transportation Finance: 90%++ of System
State Highways Bankrupting States in 1915-25 period; Fastest Growth of Autos and Roads Ever….Led to innovation of “User Fees.”
Tolls most Desirable User Fee in PrincipleMotor Fuel Taxes and Various “Car Taxes”
adopted as “Second Best” but Workable
History of Transportation Finance
History of Transportation Finance
Motor fuel taxes enormously popularSupported by wide variety of constituenciesAdopted in every state by 1940Federal motor fuel tax in thirtiesFundamental finance mechanism for Interstate
System in fifties
History of Transportation Finance
History of Transportation Finance
User fees in USA became associated with “trust funds” and non-diversion constitutional provisions in many states; Article XIX in California
Elastic definition of user fees allowed expansion to transit and to environmental mitigation in many states
“Hypothecation” not common worldwide
Motor Fuel TaxesMotor Fuel TaxesUsually expressed as “Cents per Gallon”Must be raised by act of legislatureRevenue does not rise automatically with
inflation as does income tax or sales taxImproving Fuel Economy lowers revenue per
mile of drivingRevenue declining precipitously in relation to
VMT
Quiet Revolution Under Way
Nationally…..and in California
Quiet Revolution Under Way
Nationally…..and in California
State legislatures reluctant to raise user feesIncreasingly reluctant to directly raise fees or
taxes at allPutting measures on ballot for voters to enact
instead of taking action in legislatures
Fuel Tax Changes, 1957-2002
Fuel Tax Changes, 1957-2002
Average of Fifty States
State Fuel Tax in 1957: 5.7¢/gal If adjusted for Inflation in 2002: 31.0¢/galActual Current Fuel Tax: 20.3¢/galDifference 10.7¢/gal
Survey of Fifty StatesSurvey of Fifty StatesNumber of states granting authority to local
governments…..All since 1970
15 States: Local motor fuel taxes33 States: Local vehicle license/registration fees33 States: Local option sales taxes15 States: Local income/payroll taxesA few others….severance taxes; impact fees; real estate
transfer taxes, mortgage recording taxes
Change is happening quickly
Change is happening quickly
44 Transportation Finance Ballot Measures in US in 2002
32 Local/Regional in Nature 9 Statewide
20 Dealt with sales taxes 5 Property taxes 1 Gasoline tax 9 Bond issues
Changes in State & Local Transportation
Revenue,1995-99
Changes in State & Local Transportation
Revenue,1995-99 (National Totals) Billion$/Year % Change State User Fees 36.2-42.7 +18% Local Property Taxes 5.2-6.4 +22%Local General Funds 12.3-15.9 +29%Other State Taxes 6.6-8.6 +30%Other Local Taxes 4.5-7.1 +58%State Borrowing 4.3-8.3 +92%
VMT in California(billions of miles)
VMT in California(billions of miles)
0
50
100
150
200
250
300
350
1966 1970 1980 1990 2000
0
2
4
6
8
10
12
14
16
18
20
19232¢
19273¢
19474.5¢
19536¢
19637¢
19839¢
199014¢
199418¢
Summary of Gas Tax Increases
California’s Gas Tax
-100%
-50%
0%
50%
100%
150%
200%
250%
VMT
Personal Income($1970)Population
Gas Tax ($1970)
TDA ($1970)
Percent Change
VMT
Personal Income
Population
Gas Tax
TDA
Growth in Gas and Sales Taxes Since 1970 Compared to VMT, Personal Income and Population
Fiscal Year
Local Option Sales TaxesLocal Option Sales Taxes
Most popular and fastest growingNational survey and detailed study of California
(18 Counties; 80% of Population)Read ballot measuresInterviewed proponents/opponents/administratorsExamined projects built and not built, studied
budgets and costs
Major Features of LOSTS
Majority vote or supermajority
Project lists/categoriesSunset dates/reauthorizationImplemented by local govts.
Major Features of LOSTS
Majority vote or supermajority
Project lists/categoriesSunset dates/reauthorizationImplemented by local govts.
Issues Raised by LOSTsIssues Raised by LOSTsMove away from user fee philosophySales Tax is broad based taxRegressiveConsistency with Regional Transportation PlansProject deliveryLocal authority and responsibilityFlexibility versus specificitySalience of issue of “trust”
Trust of Politicians is Big Issue
Trust of Politicians is Big Issue
California Poll by Balldassare:
“Do you think people in state government waste a lot of the money we pay in taxes, waste some of it, or don’t waste much of it?
52% A Lot 5% Not Much 41% Some 2% Don’t know
Comments from Citizens…..
Comments from Citizens…..
“The whole system is a mess”“Officials don’t listen to us”“We don’t know where our tax money goes”“I’d like to vote on everything so they don’t make decisions for
us”“Politicians fix only what gets them elected” “I don’t trust where the money will go.” I just don’t think it will
do any good.”
Issues Raised by LOSTSIssues Raised by LOSTSChristmas tree measuresPay to play measures may be even worse
(California Proposition 51)Dissociation between projects and efficiency of
management of system
Broader Questions Worth Asking
Broader Questions Worth Asking
Why won’t politicians act directly?Revenue is just revenue
User fees are not understood Term limits are an issue
Broader Questions Worth Asking
Broader Questions Worth Asking
Is user fee concept still valid and appropriate?• User fees provide incentives to efficiency• Motor fuel taxes were second best, and may be
declining • Technology to the rescue/ A new era of tolls• Attitudes changing toward tolls, if you get
what you pay for• But realistically, there is a long way to go
Long-Term Future Long-Term Future Replacement of Petroleum FuelsUse of Pricing as Incentive to Change Type of
FuelCharge for Use of Particular Road at Particular
TimeGPSS MonitoringPrivacy IssuesExperiments Under Way
The Transition is Underway, but Difficult to Understand
The Transition is Underway, but Difficult to Understand
GPSS Truck Use Charges in EuropeFuel Tax Still Valid for Decades in USAIssue of Double Taxation if Tolls are Charged on
Existing RoadsProbability of Tolls on NEW CAPACITYShift is Already Happening
California Needs toCalifornia Needs to
Realize that the shift to local option transportation taxes is a short-term interim measure;
In the reasonably short term there may be a need to raise taxes and tolls;
In the longer term – 20+ years – we need to change the entire basis of user fees;
I believe that electronic toll collection is where we are heading, but I am not completely certain of that.