Tuesday, October 05, 2010

Transit, taxes and Tampa

This one is for transit and tax-policy wonks. It's a piece from Yonah Freemark, in The Transport Politic, about the problems many transit systems are facing with sinking revenues. "When the recession strikes, little maneuvering room for transit" He points out that one reason for the problem is over-reliance on a very volatile revenue stream: sales taxes.

Most cities have been especially affected by the recession because of their reliance on the sales tax to provide revenue. Of the recent referendums on transit expansion programs, almost all have involved a 1/2 cent or one cent increase in that tax; few cities have looked to other forms of revenue, like an income tax or a payroll tax. The consequences of this decision, however, have been devastating because sales tax revenues have fallen considerably as a result of the recession and the reduced standard of living experienced by the majority of Americans over the past few years. A more stable financing program for transit, using other forms of taxation, would ensure that planned projects actually get built.

If you want to get deep in the weeds of transit finance, follow the link on "financing program for transit," above. I haven't read it all the way through yet, but it looks at the New York and Paris transit systems and how they get and spend their money.

In other transit-related news, here's a piece about Charlotte that ran Sunday in Tampa, Fla., where voters next month will decide on – you guessed it, a sales tax – to pay for transit as well as roads and other transportation needs.

And here's a fun contrarian piece from the Market Urbanism blog, "The Great American Streetcar Myth," by Stephen Smith, who contends it wasn't General Motors and Standard Oil who killed off streetcars as much as the Progressive Era and New Deal planners and politicians. Fare-increase restrictions, labor union requirements, publicly paid street-paving and road-building all combined to finish off streetcars, he writes. It's an interesting perspective. Smith also points out:

"While the status quo’s more libertarian-minded backers will point to the gas tax as a user fee, the highway funds are hardly adequate to cover the true costs. Though state and federal governments do now cover most of the capital and operating costs of the highways, local roads are still paid for almost entirely out of general revenues. And when you consider the forgone taxes and opportunity costs, roads start to look severely underpriced – to say nothing of the last hundred years of subsidized road building (the mainstay of FDR’s WPA), eminent domain, anti-urban federal home tax breaks and lending programs, positive feedback loops, and density-limiting zoning and parking policies."


Anonymous said...

>> He points out that one reason
>> for the problem is over-reliance
>> on a very volatile revenue
>> stream: sales taxes.

This is why FARES should be set to cover 100% of the actual (capital PLUS operating) cost of transit.

Andrew said...

Two points -

Income taxes and payroll taxes tend to be even more volatile (and in sync with) sales taxes. Just look at the example of TriMet in Oregon. Its payroll tax revenue dove as unemployment rose.
I wonder if a property tax (possibly variable according to access to transit) would be a better way to stabilize revenues.

Also, separate from the tax subsidies that benefit motor vehicle users (noted in this column but almost unknown to the general public)... there is the matter of the different cost structure of transit and roads. Transit costs are largely operational, while road costs are heavily capital.

When tax revenues fall during a recession, agencies can delay road construction and maintenance without users noticing it much, because vehicle use drops, lessening both demand and wear-and-tear.

However, while transit agencies can (and do) reduce service when revenues are tight, dropping lines drives away customers (perhaps forever) and even if there are 10% fewer workers going to work on a specific line at 8a, it costs just as much to transport that smaller number, because it still takes one bus and one driver. So transit agencies may have less flexibility to reduce spending during dips.

And it is worth noting that a big chunk of the federal stimulus spending went to road construction and maintenance, another example of general revenues being used to benefit drivers of cars and trucks with relatively little going to benefit transit users (such as temporary support to mitigate service cuts until revenues come back up).

Sal said...

C'mon... We KNOW that the economy, and thus the available supply of money, fluctuates. Period. No mater what perceived cornucopia of funding the politicians dream up, it will dry up when times get tough and folks will be discomfited or outright hurt... The "Boys in the Band" buy votes with our money when times are good but have no way of sustaining programs when they get bad. Once dependent or acclimated to a government boon, it is damned near impossible to wean the populace. Keep spending low. Keep programs local as much as possible. Many programs demand that there be no surpluses thus obviating saving for a rainy day. Then when we have a periodic down turn, people get hurt. If any of us ran our personal finances the way Government runs we would all be bankrupt... Oh, wait, THEY ARE!!!