Bridging the Gap: Taxes, Fees and Tolls

Transportation funding in the Bay Area has become increasingly dependent on local voters, and the trend is likely to continue as the region faces financial shortfalls at every level of government, according to speakers at the annual Bay Area League Day in Oakland on January 25. They offered suggestions ranging from raising the federal gas tax to increased fees and tolls, but the most viable options would probably not appear on local ballots until sometime in 2004.

Steve Heminger, Executive Director of the Metropolitan Transportation Commission (MTC), described the "perfect storm" facing transportation agencies, due to the economic downturn, state budget deficit, and a distracted Congress which may delay reauthorizing transportation funds. He noted that a one-cent increase in the 18-cent federal gas tax would bring in $1.7 billion nationwide, and $30 million in the Bay Area, while costing an average motorist $6 per year. However, he and Elizabeth Deakin, Director of the University of California Transportation Center, agreed that raising the gas tax is unpopular and unlikely to occur.

Deakin explained that a gas tax is more progressive, and also has environmental and social benefits if it forces drivers to make choices about which vehicle to buy, or whether to take transit. However, a sales tax is sometimes seen as more fair, because it is spread over more people, although it has a greater financial impact on lower-income people. While a 5-cent increase in the gas tax has the same financial impact on households as a half-cent increase in sales tax, many people are not aware that the two options have an equal burden.

Studies show that voters prefer a sales tax measure, particularly when it includes a list of local projects, because there seems to be no question how the money will be spent, giving voters a feeling of control. However, Deakin commented that many of the projects have not undergone any environmental review when they are put on the ballot, and changes may be needed later. Jeff Davis, Administrator for Santa Clara County's Measure B Transportation Improvement Program, said that for many projects, sales tax money is only part of the budget, with the result that some projects become vulnerable when other transportation funding is not available.

Davis also observed that with changes in the sales tax base, such as increased Internet sales and a shift from merchandise to service industries, a sales tax may not be a stable funding source for long term transportation projects. In Santa Clara County, where sales tax revenues dropped 70% in 2002, projects currently in development will be shelved and the county is concerned about delivery of projects currently under construction.

In spite of these concerns about local sales taxes, they provide a significant source of the region's transportation funding, and both Davis and Heminger recommended dropping the threshold for such ballot measures to 55% or majority vote. They predicted that this would be necessary for reauthorization of sales tax measures in several Bay Area counties, especially if state budget difficulties result in an increase in the state sales tax. Deakin also suggested exploring a majority vote requirement rather than 2/3 for a potential regional gas tax measure. She strongly supported user fees such as gas taxes and tolls, and possibly road pricing in the future if the gas tax drops because of a switch to alternative fuels.

State-owned Bay Area bridges, already subject to a $2 toll, could see a rise to $3, with the extra $1 going to fund new transit projects which would relieve congestion in bridge corridors and provide sustainable traffic relief. Ezra Rapport, Consultant to the California Senate Select Committee on Transportation, described the tentative plan for using the third dollar which has been developed by a Bay Area advisory group convened by MTC (see below). If there is sufficient support from the region and the Legislature, the plan could be on the ballot in March 2004 in the seven Bay Area counties with toll bridges.

In fact, because of election schedules, voters are unlikely to see any transportation funding measures before 2004. Meanwhile, speakers had suggestions for federal gas tax changes, including taxing ethanol like other fuels, keeping the gas tax in the Highway Trust Fund and spending the Trust Fund instead of keeping a balance to offset deficit spending in other areas. Indexing the gas tax to keep pace with inflation was suggested for both federal and state policy. Another option mentioned for the state was a shift so that property tax would again go to cities and counties and the vehicle license fee would go to transportation. All speakers stressed that voters need a better understanding of the relative merits of different ways to fund transportation before effective funding measures can find support in the Legislature or be successful at the ballot box.