text:
Developing a Stabilized Public
Transportation Revenue Source
Final Report 620
Prepared by:
Kate Ernzen
1703 S. Roberts Rd.
Tempe AZ, 85281
Dr. James Ernzen, Director
Del E Webb School Of Construction
Arizona State University
Tempe, AZ 85287
January 2007
Prepared for:
Arizona Department of Transportation
206 South 17th Avenue
Phoenix, Arizona 85007
in cooperation with
U. S. Department of Transportation
Federal Highway Administration
The contents of the report reflect the views of the authors who are responsible for the facts and the
accuracy of the data presented herein. The contents do not necessarily reflect the official views or
policies of the Arizona Department of Transportation or the Federal Highway Administration. This
report does not constitute a standard, specification, or regulation. Trade or manufacturers' names that
may appear herein are cited only because they are considered essential to the objectives of the report.
The U. S. Government and The State of Arizona do not endorse products or manufacturers.
Technical Report Documentation Page
1. Report No.
2. Government Accession No.
3. Recipient's Catalog No.
5. Report Date
4. Title and Subtitle
Developing a Stabilized Public Transportation Revenue Source
6. Performing Organization Code
7. Authors
Kate Ernzen & Dr. James Ernzen
8. Performing Organization Report No.
10. Work Unit No.
9. Performing Organization Name and Address
Kate Ernzen Dr. James Ernzen
1703 S. Roberts Rd. & Del E Webb School Of Construction
Tempe AZ, 85281 Arizona State University
Tempe, AZ 85287
11. Contract or Grant No.
13. Type of Report & Period Covered
12. Sponsoring Agency Name and Address
Arizona Department of Transportation
206 S. 17th Avenue
Phoenix, Arizona 85007
Project Manager: John Semmens
14. Sponsoring Agency Code
15. Supplementary Notes
Prepared in cooperation with the U. S. Department of Transportation, Federal Highway Administration
16. Abstract
The objective of this research was to explore new dedicated funding mechanisms for public transportation for the State
of Arizona. The research work began with a search of the existing literature on the subject to determine what other
studies had been done about this topic and what innovative financing methods had been discovered. A great deal of
information was found addressing public transportation funding and unique funding methods used around the country.
Most of the research indicated that various taxes, especially motor fuel tax, provided the majority of funding for public
transportation thus far. One report in particular, the Survey of State Funding for Public Transportation 2005, published by
the American Association of State Highway and Transportation Officials ( AASHTO), proved to be particularly informative.
This report is published annually and surveys all 50 states and the District of Columbia for their public transportation
funding methods. The literature review was followed by a survey that was sent to each of the 49 other state departments
of transportation to further investigate the topic, determine if any programs were in use that were not included in the
AASHTO survey, and if any other states had conducted studies on public transportation funding not discovered in the
literature review. The survey also inquired about legislation that other states have used to secure funding for public
transportation. The survey results were disappointing with very few responses regarding innovative programs or sources
of funding. However, between the survey results and her own personal search, the researchers identified 23 pieces of
relevant legislation, any of which could potentially serve as a model for future Arizona legislation. It would appear that
innovative funding sources across the nation are very rare and often very personalized to the state affected. However,
the researchers investigated the programs and legislation provided by the survey, along with what was found by their
own research, in order to provide the most comprehensive report possible based on the limited response.
The population and transportation needs for the State of Arizona will continue to increase significantly into the future.
Finding a dedicated revenue source is the most effective way of ensuring adequate funding for public transportation that
will serve the needs of users. Researchers believe that implementation of one or more of the above potential options will
lead to more revenue dedicated to public transportation for the State of Arizona.
17. Key Words
public transportation, transit, finance, taxes, fees
18. Distribution statement
Document is available to the
U. S. public through the National
Technical Information Service,
Springfield, Virginia, 22161
19. Security Classification
20. Security Classification
21. No. of Pages
22. Price
23. Registrant's Seal
Symbol When You Know Multiply By To Find Symbol Symbol When You Know Multiply By To Find Symbol
in inches 25.4 millimeters mm mm millimeters 0.039 inches in
ft feet 0.305 meters m m meters 3.28 feet ft
yd yards 0.914 meters m m meters 1.09 yards yd
mi miles 1.61 kilometers km km kilometers 0.621 miles mi
in2 square inches 645.2 square millimeters mm2 mm2 square millimeters 0.0016 square inches in2
ft2 square feet 0.093 square meters m2 m2 square meters 10.764 square feet ft2
yd2 square yards 0.836 square meters m2 m2 square meters 1.195 square yards yd2
ac acres 0.405 hectares ha ha hectares 2.47 acres ac
mi2 square miles 2.59 square kilometers km2 km2 square kilometers 0.386 square miles mi2
fl oz fluid ounces 29.57 milliliters mL mL milliliters 0.034 fluid ounces fl oz
gal gallons 3.785 liters L L liters 0.264 gallons gal
ft3 cubic feet 0.028 cubic meters m3 m3 cubic meters 35.315 cubic feet ft3
yd3 cubic yards 0.765 cubic meters m3 m3 cubic meters 1.308 cubic yards yd3
NOTE: Volumes greater than 1000L shall be shown in m3.
oz ounces 28.35 grams g g grams 0.035 ounces oz
lb pounds 0.454 kilograms kg kg kilograms 2.205 pounds lb
T short tons ( 2000lb) 0.907 megagrams
( or " metric ton")
( or " t")
( or " t")
( or " metric ton")
1.102 short tons ( 2000lb) T
TEMPERATURE ( exact) TEMPERATURE ( exact)
º F Fahrenheit
or ( F- 32)/ 1.8
Celsius temperature º C º C Celsius temperature 1.8C + 32 Fahrenheit
º F
fc foot- candles 10.76 lux lx lx lux 0.0929 foot- candles fc
fl foot- Lamberts 3.426 candela/ m2 cd/ m2 cd/ m2 candela/ m2 0.2919 foot- Lamberts fl
lbf poundforce 4.45 newtons N N newtons 0.225 poundforce lbf
lbf/ in2 poundforce per
square inch
6.89 kilopascals kPa kPa kilopascals 0.145 poundforce per
square inch
lbf/ in2
2.31 Dedicated Taxes........................................................................................................ 13
2.32 Impact Fees ............................................................................................................... 14
2.33 Tolling....................................................................................................................... 15
2.34 Fares.......................................................................................................................... 16
2.35 Advertising................................................................................................................ 17
2.36 Private- Public Partnership/ Joint Development......................................................... 17
4.21 Motor Fuel Tax ......................................................................................................... 27
4.22 Sales Tax................................................................................................................... 28
4.23 Rental Vehicle Tax ................................................................................................... 30
4.24 Vehicle Registration Tax .......................................................................................... 31
APPENDIX A: Survey of State Funding for Public Transportation 2005 ................................... 41
APPENDIX B: Public Transit Funding Survey Form.................................................................. 43
APPENDIX C: Survey Cover Letter ............................................................................................ 45
APPENDIX D: Survey Contact List............................................................................................. 47
APPENDIX E: Model Legislation................................................................................................ 49
ALASKA – Laws of Alaska 2004 ............................................................................................ 49
ARKANSAS - Senate Bill 441 ................................................................................................. 49
CALIFORNIA – San Diego Association of Governments – AB 713 ...................................... 49
COLORADO – Senate Bill 1.................................................................................................... 49
DELAWARE – Title 2, Chapter 20.......................................................................................... 49
FLORIDA – 2006 Statutes – Chapter 212................................................................................ 49
FLORIDA – 2006 Statutes – Chapter 337................................................................................ 49
INDIANA – Sales and Use Tax................................................................................................ 49
MAINE – Transit Bonus Payment Program............................................................................. 49
MINNESOTA – Motor Vehicle Sales Tax Amendment .......................................................... 49
NEVADA – Impact Fees – 2003 SB 237 ................................................................................. 49
NEVADA – Senate Bill 440..................................................................................................... 50
NEVADA – Senate Joint Resolution 14................................................................................... 50
NEW MEXICO – House Bill 15 – GRIP ................................................................................. 50
NORTH DAKOTA – Senate Bill 2348 .................................................................................... 50
PENNSYLVANIA – Public Transportation Assistance Fund.................................................. 50
PENNSYLVANIA – Transportation Impact Fees – House Bill 1719 ..................................... 50
RHODE ISLAND – Motor Fuel Tax – Title 31 ....................................................................... 50
VIRGINIA – Commonwealth Transportation Trust Fund – Section 58................................... 50
VIRGINIA – Regional Motor Fuel Tax.................................................................................... 50
WISCONSIN – Vehicle Registration Fee................................................................................. 50
List of Tables
Table 1: Summary of Strategies & Techniques 12
Table 2: Maine Analysis Matrix 25
AASHTO American Association of State and Highway Officials
APTA American Public Transportation Association
AzDOT Arizona Department of Transportation
BTS Bureau of Transportation Statistics
CNYRTA Central New York Regional Transportation Authority
CTA Chicago Transit Authority
FDOT Florida Department of Transportation
FTA Federal Transit Administration
GRIP Governor Richardson's Investment Partnership
HHS Health and Human Services
HOT High Occupancy/ Toll
HOV High Occupancy Vehicle
ITS Intelligent Transportation System
JARC Job Access Reverse Commute
LLC limited liability company
MVST motor vehicle sales tax
NDOT Nevada Department of Transportation
PDC planning district commissions
PTAF Public Transportation Assistance Fund
RIPTA Rhode Island Public Transit Authority
RTD Regional Transit District
SANDAG San Diego Association of Governments
TIDF Transit Impact Development Fee
TPD Transportation Planning Division
TRB Transportation Research Board
T- REX Transportation Expansion
VDOT Virginia Department of Transportation
VMT vehicle miles traveled
VRE Virginia Railway Express
VTA Valley Transportation Authority
WMATA Washington Metropolitan Area Transit Authority
The funding available for public transportation at the state level is rarely sufficient for the goals
of the Department of Transportation. The purpose of this research is to investigate innovative
funding mechanisms to provide a dedicated revenue source for public transportation within the
State of Arizona. The Arizona Department of Transportation's ( AzDOT) Public Transportation
Division must have adequate funding in order to leverage Federal funding and secure
partnerships with other entities in the community. Therefore, the researchers were asked to
provide a report detailing the ways other states or agencies secure dedicated funding for public
transportation programs in their respective jurisdictions and the legislation those states used to
secure those funds.
The project is broken into three sections. The first section studies published literature on this
topic and related issues. The second section summarizes the results of a survey distributed to
DOT representatives in all 50 states to gain an idea of how other states are dealing with the issue
of dedicated funding. The survey was designed as a follow up survey to a previous study
conducted by the American Association of State Highway and Transportation Officials
( AASHTO) entitled Survey of State Funding for Public Transportation 2005 and intended to get
more detailed information about the data provided to AASHTO. The survey questions were
directed to gain a better understanding of how other states have dealt with the problem of
securing dedicated funding. The survey also intended to determine if any programs were in use
that were not included in the AASHTO survey, and if any other states had conducted studies on
public transportation funding not discovered in the literature review. Lastly, the survey inquired
about legislation that other states have used to secure funding for public transportation. A third
section investigates the current legislation that other states are using to fund their public
transportation programs that could be used as model legislation for the State of Arizona. The
principal findings of this report are listed below.
Literature Review
• The issue of dedicated funding for public transportation is diverse and widespread
throughout the country and the world. Many studies have been conducted regarding how
to best secure necessary funding and combat the shortage of funds.
• Several states have developed programs or taxes and fees to create a significant revenue
source for their public transportation programs. These sources are often analyzed in terms
of stability, efficiency, equity, and accountability.
• The American Association of State and Highway Officials ( AASHTO) published a report
in May 2006 entitled the Survey of State Funding for Public Transportation 2005. This
report detailed how each state funds their public transportation and includes the dollar
amounts generated each year through these various sources.
• Other states have implemented a variety of approaches to fund transit based on the
situation present in their respective state. These sources include:
o Fuel Sales Tax
o Tolling and Mile Tracking
o Sales Tax
o Payroll/ Income Tax
o Property Tax
o Access Fees
o Vehicle Registration Fees
o Block Grants from Non- Transportation Federal Agencies
• Regarding the existence or development of funding programs outside of federal, state, or
local assistance, few states reported having unique programs in existence to deal
specifically with funding for public transportation.
• Regarding research performed regarding funding for public transportation, almost no
states provided a copy or contact information regarding state research performed.
• Almost half of the survey responses provided information regarding state legislation to
secure funding. This was the most successful aspect of the survey.
• Eleven examples of model legislation regarding Taxation, including fuel tax, sales tax,
rental vehicle tax, and vehicle registration tax are provided.
• Three examples of model legislation regarding Joint Development/ Public- Private
Partnerships are provided.
• Three examples of model legislation regarding Government Appropriation are provided.
• Two examples of model legislation regarding HOT Lane Development are provided.
• Four examples of miscellaneous model legislation regarding transportation funds, impact
fees, and states bonds, are provided.
Recommendations regarding securing dedicated funding for public transportation methods
include implementing new dedicated taxes/ fees. Impact fees ( or fees on development) could
provide a viable option for dedicated funding because the high rate of development currently in
Arizona equates to a significant fee base. Also, no fee on rental cars dedicated to public
transportation currently exists in the state. With Arizona's growing as a tourist destination, a tax
on rental cars dedicated to public transportation could provide significant funding.
Other recommendations include the increase of existing dedicated taxes/ fees. Currently,
Arizona's annual $ 8 vehicle registration fee is the lowest in the nation compared with rates for
all fifty states and District of Columbia. An increase in the fee dedicated to public transportation
could generate significant annual funding while still remaining relatively low compared to the
rest of the country. Other recommendations include increasing the state's motor fuel and sales
taxes. Both tax bases are large enough to create significant revenue without significant costs to
the individual.
The population and transportation needs for the state of Arizona will continue to increase
significantly in the future. Finding a dedicated revenue source is the most effective way of
ensuring adequate funding for public transportation that will serve the needs of users. The
researchers believe that implementation of one or more of the above potential options will lead to
more revenue dedicated to public transportation for the State of Arizona.
The purpose of this research is to investigate innovative funding mechanisms to provide a
dedicated revenue source for public transportation within the State of Arizona. The Arizona
Department of Transportation's ( AzDOT) Public Transportation Division must have adequate
funding in order to leverage Federal funding and secure partnerships with other entities in the
community. Therefore, the researchers were asked to provide a report detailing the ways other
states or agencies secure dedicated funding for public transportation programs in their respective
communities and the legislation those states used to secure those funds.
This project began with a literary review of the current research that had been performed on the
issue of public transportation funding. An understanding of the existing literature on public
transportation provided a framework for the rest of the research. It revealed how some states
have developed programs or taxes and fees to create a significant revenue source for their public
transportation programs. It also uncovered a report that the American Association of State and
Highway Officials ( AASHTO) publishes annually entitled the Survey of State Funding for
Public Transportation 2005. This report detailed how each state funds their public transportation
and includes the dollar amounts generated each year through these various sources. The result of
this literature review is found in Chapter 2.
Upon completion of the literature search, a survey of all other state departments of transportation
was conducted to gain a better understanding of methods used. Because of the information
available in the AASHTO report, the researchers' survey was designed as a follow up to the
report and intended to get more detailed information about the data provided to AASHTO. The
survey questions were directed to gain a better understanding of how other states have dealt with
the problem of securing dedicated funding. The survey also intended to determine if any
programs were in use that were not included in the AASHTO survey, and if any other states had
conducted studies on public transportation funding not discovered in the literature review. The
survey also inquired about legislation that other states have used to secure funding for public
transportation. This data was then compiled in Chapter 3.
Chapter 4 investigates the current legislation that other states are using to fund their public
transportation programs that could be used as model legislation for the State of Arizona. It
includes the legislation examples provided by the survey responses along with some discovered
through the researchers' own investigation. Not all of the legislation provided is feasible or
applicable for the State of Arizona, but the examples provide a demonstration of what has been
attempted in other states. In some cases in this chapter, revenue approximations have been
calculated based on projected Arizona numbers. These calculations are purely estimations and
should not be interpreted as projected revenue for the State of Arizona.
Chapter 5 summarizes the researchers' conclusions for implementing or further investigating
methods of securing public transportation funds for the State of Arizona. It contains a brief
discussion of possible feasible options for AzDOT action to resolve the current funding needs.
Our literature search on the topic of " public transportation funding" yields varying results. A
variety of documents, including studies, reports, and websites, from state and national sources
were reviewed and eleven sources are discussed in detail in this literature review. The discussion
focuses on the sources that offered the most relevant or unique information to the researchers. A
great deal of the literature addresses the issues surrounding the popular fuel tax model, which
relies on gasoline tax to fund transportation divisions and projects for a majority of states. Other
taxes used include property tax, land development tax, general sales tax, and vehicle registration
and rental car sales tax. Alternative revenue sources include the possibility of joint partnerships,
toll roads, and vehicle miles traveled tracking. The first half of this literature review addresses
the broader issue of funding transportation through various means. The second portion of this
review addresses specific case studies where innovative financing techniques have been
implemented, or at least attempted, around the country and the results that followed.
This section of the literature review addresses the general issue of transportation funding and
summarizes a few of the various studies and surveys that have been conducted regarding the
issue. A good portion of this section addresses specific concerns regarding various funding
mechanisms, including the efficiency, equity, accountability, and stability measures associated
with each. This section includes studies conducted at the state and national level and reports
regarding single states and several states combined. Key topics discussed include:
• AASHTO's Survey of State Funding for Public Transportation 2005
• The advantages and disadvantages of the fuel tax model
• The importance of considering equity, efficiency, accountability, and stability when
choosing a funding source
• Innovative financing strategies used throughout the country
• The advantages and disadvantages of non- fuel tax models as dedicated funding sources
The purpose of this section of the literature review is to briefly discuss the type of research that
has been conducted on the topic of transportation funding as a whole.
The most useful and directly applicable literature piece found is an annual survey entitled Survey
of State Funding for Public Transportation 2005.1 Published in May 2006, this survey is
produced by the American Association of State Highway and Transportation Officials
( AASHTO), the American Public Transportation Association ( APTA), and the U. S. Department
of Transportation Bureau of Transportation Statistics ( BTS). The report provides a good deal of
1 Survey of State Funding for Public Transportation 2005. American Association of State Highway and
Transportation Officials, American Public Transportation Association, and Department of Transportation Bureau of
Transportation Statistics,. Washington D. C.: U. S. 2006.
the desired information related to this project, and therefore upon finding this publication, the
researchers decided to conduct their survey as a follow up to gain further information and insight
into the topic being researched. The AASHTO survey asks each state for the following
• Sources of funds
• Nature of programs
• Amounts of funding
• Eligible uses of funds
• Types of Funds
• Allocation mechanisms
The majority of the report details each state's response to the survey and makes historical
comparisons about the data based on results from previous years. In addition, the survey studies
several transportation- related ballot initiatives at both the state and local level to determine why
some initiatives aimed at increasing funding succeed while others fail.
The AASHTO report found that states spent $ 9.5 billion on public transportation in Fiscal Year
2005, compared to $ 7.3 billion provided by the federal government through the Federal Transit
Administration in the same year. This figure more than doubles the state funding in Fiscal Year
1990 of $ 3.7 billion. The survey found the most utilized sources of revenue included the
• General fund 19 states
• Gas tax 15 states
• Motor vehicle/ rental cal sales taxes 9 states
• Bond proceeds 8 states
• Registration/ title/ license fees 8 states
• General sales tax 7 states
This survey will be referenced further and discussed later in this report.
The Florida Department of Transportation's ( FDOT) Office of Financial Development published
Florida's Transportation Tax Sources: A Primer2 in January 2005 which outlines the varying
fuel taxes at federal, state, and local levels. According to the study, " highway fuel taxes
constitute the oldest continuous source of dedicated transportation revenues in the state." The
state uses a combination of a flat excise tax rate ($ 0.04/ gallon) and a Fuel Sales Tax ( on all
motor and specials fuels) with the proceeds designated for the FDOT. Initially, the Fuel Sales
Tax was applied like a sales tax at a flat percentage rate applied at the whole point of distribution
against a legislated retail price per gallon. The percentage rate is no longer a direct factor, and
instead a " floor tax" of $ 0.069/ gallon is indexed according to the Consumer Price Index and then
applied to the price. Also, the Florida state legislature allows its counties to " piggyback" on
2 Florida Department of Transportation. Florida's Transportation Tax Sources: A Primer. 605 Suwannee Street
Tallahassee, Florida 32399- 0450. 2005. http:// www. dot. state. fl. us/ financialplanning/ revenue/ primer. htm
additional excise taxes. These taxes are applied at a flat rate per gallon and provide a consistent
source of revenue for their respective counties.
In addition to fuel taxes, Florida also secures dedicated funding through several fees dealing with
vehicle ownership including the Initial Registration Fee, the Motor Vehicle Title Fee, and the
Rental Vehicle Surcharge.
The literature reviewed shows evidence that some concerns exist, though, about a system highly
dependent on gasoline and fuel taxes. As fuel efficient and alternative fuel vehicles grow in
popularity, gasoline taxes struggle to maintain the same revenue levels as in the past. The
Transportation Research Board ( TRB) released a special report in 2005 entitled The Fuel Tax
and Alternatives for Transportation Funding3 that states " a reduction of 20 percent in average
fuel consumption per vehicle mile is possible by 2025 if fuel economy improvement is driven by
regulation or sustained fuel price increases." The publication goes on to determine that offsetting
the revenue effect of a situation like that would require such dramatic increases in fuel tax that
increasing the tax will not be a viable option much longer. The TRB publication recommends a
dramatic restructuring of the funding system that incorporates increased tolling and tracking of
miles driven along with taxation on gasoline and alternative fuels.
Another possible obstacle in the fight for fuel taxation is a lack of legislative support. A National
Chamber Foundation publication, Future Highway and Public Transportation Financing, 4
claims the major reason for federal funding shortage is that " federal motor fuel tax rates are not
indexed to inflation and have lost one- third of their purchasing power since the last adjustment in
1993." The publication makes the point that with continually increasing needs and decreasing
purchasing power, the need for a dedicated funding source is crucial to avoid chronic funding
The 2005 Center for Neighborhood Technology publication Driven to Spend: Pumping Dollars
Out of Our Households and Communities5 highlights the concern of rising gas prices and their
regressive effects on lower income communities. This study argues against the use of increased
gas taxes as a means of funding transportation because these gas taxes unfairly target lower
income families. The study gives the following example of the effects of rising taxes compared
to the stationary income levels. " Gasoline and motor oil is approximately 16 percent of a
household's transportation expenditures. If this one component rose by 30 percent, we estimate
the total average expenditures on transportation by the end of 2005 will rise by 4.8 percent, or
$ 391, from 2002- 2003 levels. This rise is more than the typical household spends annually on
prescription drugs and medicines ($ 312) and dental services ($ 311) in fee- for- service health care
plans, fresh fruits and vegetables, and more than a month of utilities and phone service." The
2005 study highlights the need for alternative transportation methods and public transit without
raising the gas tax as a necessity for lower- income families.
3 National Research Council ( U. S.). Committee for the Study of the Long- Term Viability of Fuel Taxes for
Transportation Finance. The Fuel Tax and Alternatives for Transportation Funding. Special Report 285.
Transportation Research Board . Washington D. C., 2005.
4 Future Highway and Public Transportation Financing. National Chamber Foundation. Cambridge Systematics,
Inc., 2005.
5 Bernstein, Scott, Carrie Makarewicz, and Kevin McCarty. Driven to Spend: Pumping Dollars Out of Our
Households and Communities. Center for Neighborhood Technology. 2005.
Transportation Funding Options for the State of South Carolina, 6 published in October 2003 was
written to determine the different options for meeting the $ 56.9 billion target of the South
Carolina Multimodal Transportation Plan over the 20- year period from 2003 to 2022. The study
evaluates six scenarios based on current and alternative funding sources and measures each in
terms of stability, efficiency, equity, and accountability. At the time of the study, South Carolina
had the second highest dependency on motor fuel taxes in the country with state and federal fuel
taxes accounting for 88 percent of transportation revenues, despite having the sixth lowest
overall fuel tax rate in the country. However, the state of South Carolina found that the fuel tax
base alone could not keep pace with inflation and the growing needs of the communities.
Therefore, alternative sources were evaluated including, but not limited to, a vehicle miles
traveled ( VMT) tax, road damage or weight/ distance tax, alternative fuel taxes, environmental
levies, and privatization.
Each scenario includes federal funding ( at varying levels), current state and local sources ( at
varying levels) and a mix of alternative sources. Because future federal funding is uncertain,
each scenario is calculated with a " moderate" to " high" level of federal funding. Scenario 1
consists of only current sources and current federal funding and leaves a $ 30.6 billion gap in
budget. Scenario 2 only uses current sources and rates but increases federal funding. This
scenario still leaves, depending on the level of federal funding, a $ 22 billion to $ 27 billion
budget gap. Scenario 3 takes advantage of current and supplemental funding sources with
increased federal funding and leaves only a $ 4 billion to $ 9 billion shortfall in target budget.
Scenario 4 consists of current and supplemental sources with inflation- indexed fuel taxes and
vehicle fees, in addition to increased federal funding. This scenario is by far the most progressive
and is the only scenario forecasted to create a budget surplus ( between $ 1 billion and $ 4 billon
over the target budget). However, later analysis determined the difficulty in implementing this
particular scenario would limit its actual potential. Scenario 5 eliminates the supplemental
sources, using only the current sources with indexed fuel taxes and vehicle fees and increased
federal funding. The indexed fuel taxes and fees provide for a budget gap of $ 12 billion to $ 17
billion ( depending on the federal funding). Finally, Scenario 6 incorporates recommendations
from the Business Alliance for Transportation and increased federal funding. Even with the
recommendations of a professional working group, revenue still leaves a shortfall of anywhere
from $ 9 billion to $ 14 billion, based on the level of federal aid received.
In addition to evaluating the various scenarios, the study also examined the potential
supplemental fees and taxes in terms of efficiency, equity, accountability, and stability.
According to the study, an efficient revenue source is one in which " resources are allocated to
their highest and best use and net benefits are maximized." An equitable source is " fair to all
parties in terms of financial burden and access." Accountability is important in terms of
stretching the source to be as profitable as possible, and stability of the source is crucial for long
term benefits. This study was interested in finding the best mix in its revenue sources. For
example, many states use toll roads but South Carolina found that while it may be a stable
revenue source, tolling is not efficient or equitable as tolling rarely pays for its own operating
costs and unfairly targets those who travel between cities or counties without charging those
6 London, James B., Ellen W. Saltzman, John C. Skinner, and H. Gunsel Gunaydin. Transportation Funding Options
for the State of South Carolina. South Carolina Department of Transportation. 2003
whose live and work within one city. Similarly, the study found that sales taxes, while stable and
accountable, are not an equitable source because the tax is not directly linked to transportation.
Ultimately, the " Transportation Funding Options for the State of South Carolina" recommended
the state address its funding gap and begin to work toward new and innovative ways of raising
revenue for transportation. The report addressed that while the state fuel tax would remain the
dominant source, supplemental sources must be developed to broaden the funding base.
The Federal Highway Administration's Show Me the Money, 7 published in December of 2005,
summarizes the innovative financing techniques used by cities, counties, and regions around the
country to fund various projects and programs. Examples include the following: Anchorage
Traffic Department utilized grant funds awarded by a nation- wide insurance company to fund an
operational study; the Illinois Department of Transportation has a public/ private partnership that
utilizes user fees to maintain and manage weigh stations; developers in Los Angeles are required
to pay development fees that are used for transportation projects around the city; similarly,
developers in Montgomery County, Maryland, have to pay an impact tax prior to receiving
issuance of building permits; and the Texarkana Urban Transit District raises revenue by selling
the rear and sides of Fixed Route Vehicles for advertising. Most of these examples were not
initially intended for dedicated funding purposes, but a few ( such as the Maryland's Impact Tax)
have developed into more permanent situations. This report also exhibits the rising trend of
corporate sponsorships and partnerships as revenue sources.
In May 2006, the United States Government Accountability Office published " Mass Transit:
Issues Related to Providing Dedicated Funding for the Washington Metropolitan Area Transit
Authority." 8 The situation in this report is unique as the Washington Metropolitan Area Transit
Authority ( WMATA) is a multi- state compact involving three distinct legislative bodies with the
District of Columbia, Maryland, and Virginia, but the process of searching for the ideal
dedicated funding sources is universal. WMATA funds its operation through passenger fares,
parking and advertising fees, and local and state government payments. Each state/ district varies
in the sources it uses to pay WMATA. The District of Columbia's operating costs come out
D. C.' s general fund. Maryland uses a gas tax, vehicle title tax, and other fees while in Virginia,
individual cities and counties are responsible for making payments to WMATA. In determining
the most appropriate source of dedicated funding, all three distinct jurisdictions had to be taken
into account. As a result, six dedicated revenue sources were assessed on the basis of revenue
stability and adequacy, and equity and efficiency.
Sales tax was the first revenue source considered. Revenues from sales tax are more susceptible
to economic fluctuations than those revenues from property or fuel tax because they rely on
consumer purchases that change with income and they do not keep up with economic expansion
in the long run. Sales taxes have a low administrative cost and are relatively easy to collect as the
7 Public Technology Institute. Federal Highway Administration. United States Department of Transportation. Show
Me the Money: a Decision- Maker's Funding Compendium for Transportation Systems Management and Operations.
8 United States Government Accountability Office. Mass Transit: Issues Related to Providing Dedicated Funding
for the Washington Metropolitan Area Transit Authority. GAO- 06- 516. 2006.
systems are already in place, but they may not be as equitable as gas taxes because the consumer
paying the sales tax is not necessarily the same consumer driving on the roads.
Payroll or personal income taxes are also susceptible to economic fluctuations but they do keep
better pace with economic expansion than sales tax. As opposed to a sales tax, payroll or
personal income taxes are progressive in nature, which makes them a better fit with the ability-to-
pay principle. As consumers earn more income, they are taxed more as well insuring a more
even distribution of financial burden. The administrative costs associated with payroll and
personal income taxes remains low so long as they are collected at the state level as part of the
already establish income tax.
According to this study, motor vehicle fuel taxes are typically the most stable despite economic
fluctuations because fuel purchases do not change as drastically as retail purchases with income
changes. However, fuel taxes are more susceptible to random fluctuations as result of natural
disaster or oil supply disruption. Motor vehicle fuel taxes also require a larger tax rate because
the tax base is smaller compared to the tax base with sales tax and income tax. Equity
implications with fuel taxes are more difficult to predict because the fuel tax, like sales tax, is
typically regressive in nature.
Property tax revenues are difficult to pinpoint because the property market is so variable.
Typically, property taxes are moderately subject to economic fluctuation, but not as dramatically
as sales tax because it takes more time for property value changes to show up in property
assessments. Because a collection system is already well- established, administrative costs for
property taxes are very low but it is difficult to pinpoint the equity effect on consumers.
Typically, higher proportions of land are owned by higher- income individuals but that does not
mean the tax will always be fairly allocated.
Access fees are the rarest revenue source considered and therefore, the research and literature on
this type of fee is limited. An access fee is a fee charged to a property owner whose property is
benefited by the location of a nearby transportation resource, such as a transit station or highway
on- ramp. Access fees would be fairly stable in economic expansion if the fee rate were set on a
per- square- foot, but would not continue to create revenue in the long run unless the rate or
taxable space increased. The study comments that implementation and enforcement of these fees
would be substantial due to the need for local governments to develop the system. Also, access
fees tend to deter interest in land around the public transit station, defeating the purpose the
revenue altogether.
Vehicle registration fees are the final revenue source examined. Overall, they tend to be fairly
stable as any downturn in the automotive market typically occurs after the downturn in the
economic market, but the durability of this type of fee is uncertain because the car ownership
rate is already so high. The administrative costs associated with vehicle registration fees would
be very low, especially if added to those fees already in place. And the study forecasts that while
vehicle registration fees make owning a car more expensive, there would most likely be little to
no effect on the number of trips taken by most car owners.
At the time of publication, no final decision regarding the dedicated funding for the Washington
Metropolitan Area Transit Authority was available.
However, some states have used these innovative financing tools to fund big projects in order to
free up other monies to fund operating costs as well. The Transportation Research Board's 2001
report entitled " Advanced Public Transportation Systems for Rural Areas: Where Do We Start?
How Far Should We Go?" 9 points out the importance of not overlooking grants and federal
funds. For example, the Federal Transit Administration ( FTA) is the primary source of funding
for most rural projects, often requiring only a 50 percent match from local governments for
financial assistance. However, there are other federal agencies like the Department of Health and
Human Services and the Department of Housing and Urban Development that will grant money
for transportation projects as well. These human service agencies' programs are increasingly
funded on a " block grant" basis. These types of grants have less spending restrictions, therefore
giving local governments much greater autonomy in deciding the most effective use for the
funding. By utilizing these less restricted federal funds, states have more options with their
dedicated funding sources.
Similarly, the Virginia Transportation Research Council published a report in March 2006
entitled Alternative Transportation Funding Sources Available to Virginia Localities. 10 This
council defined alternative funding sources as " those that are not included in the annual
interstate, primary, secondary, and urban allocations available through Virginia Department of
Transportation's ( VDOT) Six- Year Improvement Program." The report details federal, state, and
local programs and their potential uses. For example, in 1997, VDOT and the Transportation
Planning Division ( TPD) initiated the Rural Transportation Planning Grant Program. Through
this program, VDOT and the TPD allocates $ 200,000 per fiscal year from the General Fund. The
program then acts like a competitive grant program at the federal level, but is intended to help
support rural transportation planning proposals. The rural planning district commissions ( PDCs)
must fund at least 20 percent with local funding and administrative charges not above 10 percent
of the total cost. This is just one example of the programs listed in Table 1, but it illustrates how
the Virginia Department of Transportation is utilizing alternative methods. Although most of the
programs are one- time contributions or federal programs, this Virginia Transportation Research
Council report provides an idea of how other states are solving the issue of securing dedicated
funding sources.
9 Nalevanko, Anna M. and Andrew Henry. Advanced Public Transportation Systems for Rural Areas: Where Do We
Start? How Far Should We Go? TCRP Web Document 20. Transportation Research Board, 2001.
http:// onlinepubs. trb. org/ onlinepubs/ tcrp/ tcrp_ webdoc_ 20. pdf
10 Grimes, Matthew C., Kimberly M. Mattingly, and John S. Miller. Alternative Transportation Funding Sources
Available to Virginia Localities. Virginia Transportation Research Council. Virginia Department of Transportation,
Table 1: Summary of Strategies & Techniques
Strategy/ Technique Advantages Disadvantages
Fuel Sales Tax Model - dedicated to transportation
- low administrative costs
- large tax base
- highly equitable to users
- fluctuating revenue levels
- regressive in nature
- difficult to acquire legislative
- susceptible to issues associated
with increased fuel efficiency in
Tolling and Mile Tracking - dedicated to transportation
- circumvents issues
associated with increased
fuel efficiency in vehicles
- highly equitable to users
- requires dramatic restructuring
in most states to accommodate
new technology
Sales Tax - low administrative costs
- large tax base
- susceptible to economic
- not necessarily equitable
Payroll/ Income Tax - progressive in nature
- low administrative costs
- large tax base
- susceptible to economic
Property Tax - low administrative costs
- fairly stable
- not necessarily equitable
- variable revenue source
Access Fees ( on property
near transportation
- fairly stable - limited tax base
- high administrative costs
- deter interest in property near
transit stations
Vehicle Registration Fees - dedicated to transportation
- fairly stable
- low administrative costs
- uncertain revenue source
because of already highly
saturated tax base
Block Grants from Non-transportation
Agencies ( i. e. Dept of
Health & Human Services)
- less spending restrictions
than Federal Transit
Administration grants
- give states more control
over funding
- limited availability of funds
- situational availability based on
grant criteria
This section of the literature review highlights specific case studies throughout the country that
have utilized various funding methods. The purpose of this section is to investigate the real-world
application of some of the hypothetical funding techniques and observe the results and
issue that arose with the actual implementation. The case studies cover the following funding
• Dedicated Taxes
• Impact Fees
• Tolling
• Fares
• Advertising
• Private- Public Partnership/ Joint Development
Not all of the options discussed would be practical for Arizona's situation and a few of the cases
studied discuss options already in place in the state in various capacities, but the purpose of this
section is to observe examples of methods that have been attempted and learn from what has
proven successful or unsuccessful in each case.
2.31 Dedicated Taxes
Fort Worth, Texas
Dedicated taxes are one popular means of securing dedicated funds for public transit. A 1998
Report published by the Transit Cooperative Research Program entitled, Funding Strategies for
Public Transportation11 cites several examples of this type of tax at both the state and local level.
The Fort Worth Transportation Authority in Fort Worth, Texas, has successfully utilized sales
taxes as a source of funding. In Texas in 1980, the governments of Dallas and Fort Worth put
together a joint referendum for a one cent sales tax for transit use that was defeated by voters.
Following the defeat, the City of Fort Worth studied several transportation systems and decided
that a sales tax was still the most feasible option for dedicated funding. To pass the tax, local
transit authorities hired a political strategy consultant to devise a sales tax campaign. The
consultant modeled a campaign focused on education and market segments. Also, one of the
terms of the agreement stated that the City Council would retain control over the new transit
authority board to ensure efficient and productive spending. In 1983, the referendum for a one-fourth
cent sales tax passed with a 55 percent vote. As a result of the sales tax campaign, the
transit- dependent precincts' voter turnout rate was higher than usual and exceeded other
precincts turnout rates. The tax structure in this case is fairly simple. The tax receipts, totally
nearly $ 25 million each year, are collected by the comptroller and passed on to the transit
agencies. 12
Pullman, Washington
Sales taxes are a straightforward and established means of raising funds, but in rural areas, sales
tax may not be as profitable or stable as other taxes used to raise funds for transportation. The
situation in Pullman, Washington was one example of this. In the 1970s, Pullman had no transit
system and the citizens began to lobby for options. Transit systems throughout Washington levy
a small sales tax to be used for transit, but Pullman is located only seven miles from Moscow,
Idaho, which has lower sales tax. As a result, the Pullman retail industry could not generate
enough revenue to support the up- and- coming transit system and needed other sources. Instead,
the Pullman legislature worked out a ballot measure to tax utilities up to two percent. A great
deal of time and effort went into educating citizens on the reasons behind and the uses for the tax
and the ballot was approved in November 1978. The utility taxes, levied on electric, gas,
11 Funding Strategies for Public Transpiration: Volume 1 and 2. Transportation Cooperative Research Program
report 31. Transportation Research Board. Washington D. C. 1998
12 Rocha, Dan, Ladonna Smith, Christie Jestis, and Omar Barrios. Texas. North Texas Council of Governments.
2004- 2006 Transportation Improvement Program for the Dallas- Fort Worth Metropolitan Area. 2003.
garbage, water and sewer, and telephone utilities, are collected by the utility companies, remitted
to the City of Pullman, and then transferred to the transit agencies. The tax revenues are matched
1: 1 by the State of Washington and Pullman receives no federal support for their transit system.
Both Fort Worth, Texas, and Pullman, Washington, have benefited greatly from dedicated taxes
as a funding source. However, both of these cases were initially met with opposition, but
ultimately succeeded in achieving their respective goals through extensive research and thorough
education of the voting sector. Each tax involves different risk though. Sales tax is highly
vulnerable to economic fluctuations and utility taxes require careful monitoring of the utility
companies involved, but each tax works for its specific situation.
2.32 Impact Fees
San Francisco, California
Another example of innovative funding techniques is the implementation of developer impact
fees in the City and County of San Francisco, California. This unique method follows the line of
reasoning that developing new urban areas creates added stress on the transit systems of that
area. Therefore, in order to maintain and improve those systems to accommodate the changes,
developers should pay a one- time, price- per- square- foot Transit Impact Development Fee
( TIDF) designed to collect money at the building's beginning to cover costs that accumulate over
the proposed 45- year life of the building itself. 13
For the City and County of San Francisco, the TIDF was decided to be the most logical and
profitable means of securing these funds. After spending significant time discussing the
necessary legal backing, the San Francisco Board of Supervisors passed the TIDF ordinance in
April 1981. The ordinance set the maximum rate at five dollars per gross square foot, and though
the fee is recalculated every year, the rate remains fairly constant. San Francisco's 2002
Countywide Transportation Plan14 states that from its inception through 2002, the fee has
collected over $ 144 million in revenue, and with its success, the county is proposing to increase
the rate and range of the impact fee to increase revenues and eliminate developer loopholes that
existed with the original model. Before the TIDF was scheduled for collection, it was challenged
in the California court system for six years against claims including double taxation, equal
protection, due process, and level of the fee. However, the court sided with the impact fee every
time. This attests to the careful preparation of the ordinance and anticipation of different types of
legal challenges. " The City of San Francisco's planning department recommends that any impact
fee ordinance be airtight: perform plenty of studies before adopting legislation, involve the
public in hearings, and write the language of the ordinance to stand up against class action suits."
As clearly seen, the impact fee ordinance requires careful preparation to be as successful as
Like all funding sources, impact fees have potential problems. The downside to this situation is
impact fees tend to be highly controversial with developers. Therefore, without strict policies for
13 Funding Strategies for Public Transpiration: Volume 1 and 2. Transportation Research Board. Washington D. C.:
National Academy P, 1998.
14 2002 Countywide Transportation Plan. San Francisco Transportation Authority. 2002. 31- 32.
implementation and enforcement, the fee may quickly become obsolete or endlessly challenged
in court. The San Francisco transit system, however, proves that the Transit Impact Development
Fee can serve as a viable means in securing dedicated funding.
2.33 Tolling
Toll fees are one of the oldest and purest forms of financing transit development, specifically that
of freeways and interstates. Dating back to the eighteenth century, private investors formed
tolling companies and used part of the income to improve and maintain the road while charging
the user. Also, until very recently, toll roads were typically associated with long lines to pay,
especially on busy roads. However, with new innovations in toll financing, they are once again
becoming a viable revenue source for transit agencies. 15
Port Authority of New York and New Jersey
One new concept being explored is value pricing where toll prices are varied based on the time
of day and amount of congestion present. For example, the Port Authority of New York and New
Jersey operates one bridge and two tunnels connecting New York City and New Jersey as well as
three bridges to Staten Island. To combat congestion issues on these very busy roadways, the
agency developed a value pricing plan that discounts tolls for motorists during off- peak hours. 16
This system also rewards those motorists who use the region's electronic tolling pass by offering
greater discounts during all times of travel. Despite slow progress, the reduction in congestion
promotes continued use and expansion of this system.
Orange County, California
Similarly, in Orange County, California, the 91 Express Lanes are a four- lane toll highway that
runs through the median of the 91 Riverside Freeway, which is one of California's most heavily
congested freeways. The 91 Express Lanes are the first fully automated toll road in the world and
use a varied pricing system, charging between $ 1.00 and $ 4.75 per trip, depending on the time of
day and current congestion. Also, High Occupancy Vehicles ( HOVs) pay a reduced toll for use
of the road. 17
In 2005, total vehicle trips exceeded 12.7 million with the average number of riders per car
( during peak hours) climbed 2 percent over 2004 to 1.52. The total revenue for the 91 Express
Lanes was $ 39.6 million for fiscal year 2005. Though privately owned and operated, this
particular toll road is being carefully monitored by CalTrans and the Orange Country
Transportation Authority to gain insight into how to implement similar value pricing systems in
the future. 18
15 Vuchic, Vukan R. " Financing of Transit." Urban Transit: Operations, Planning, and Economics. Hoboken: John
Wiley & Sons, Inc., 2005. 408- 428.
16 Public Technology Institute. Federal Highway Administration. United States Department of Transportation. Show
Me the Money: a Decision- Maker's Funding Compendium for Transportation Systems Management and Operations.
17 " Innovative Finance for Surface Transportation." 16 Mar. 2006. American Association of State Highway &
Transportation Officials. Summer 2006 < www. innovativefinance. org>.
18 Ten Years of Traffic Relief: Fiscal Year 2005 Annual Report. Orange County Transportation Authority. 2005.
Autumn 2006 < http:// www. 91expresslanes. com/ generalinfo/ 91annualreport. pdf>.
Tolling in the past has been a tedious method of collection and limited source of revenue.
However, with modern technology, including electronic collection mechanisms and innovative
value pricing systems, tolling on HOV and HOT lanes is definitely a candidate for dedicated
funding methods in the future.
2.34 Fares
Fares are one of the oldest means of collecting revenue for transit. While fares are typically
dedicated to transit's operating costs, they are rarely self supporting and therefore, not often
considered in discussions on innovative financing. However, new technology is changing the
face of fare collection and expanding its possibilities as a revenue source. 19
Springfield, Virginia
The Virginia Railway Express's Cashless Fare Program is one example of this new technology at
work. When the Virginia Railway Express began in 1991, it decided to cut down on the
operating costs associated with collection, security, and sorting of typical fare booths by cutting
out the cash payments. 20 After a thorough study of the average transit rider, the Virginia Railway
Express ( VRE) determined that most of its customers would have debit or credit cards and would
be able to use the system despite the lack of personnel. Thus eliminating cash as a payment
option would not significantly burden potential customers. VRE customers could purchase their
tickets through Automated Ticket Machines on the platform or through ticket machine vendors
located throughout the service area. Though there was concern with collecting on the debit and
credit card payments, on average out of every 100,000 transactions, only two have remained
uncollectible. Overall, the system has worked very well for VRE. Less money spent on handling
cash means more transit revenues for the agency. Though still not overly profitable, the cashless
system may be more efficient for some transit systems. 21
Denver, Colorado
The Eco Pass is another unique system intended to increase ridership, and subsequently
revenues, for the transit agency in the Denver/ Boulder metropolitan area of Colorado.
Essentially, the system works like employee benefits in a company. Employers in the Denver
area who choose to participate in the program purchase the Eco Pass for all their employees,
regardless of how many actually use the pass. The Eco Pass allows the user to ride the transit
system free of charge. Thus the pass is a tax- deductible recruiting tool for employers and an
untaxed benefit for employees. Implemented by the Regional Transit District ( RTD) in early
1990s, the Eco Pass performed so well, it exceeded all the agency set goals for increased
ridership and decreased vehicle miles traveled. Within five years of the program's
19 Vuchic, Vukan R. " Financing of Transit." Urban Transit: Operations, Planning, and Economics. Hoboken: John
Wiley & Sons, Inc., 2005. 408- 428.
20 Funding Strategies for Public Transpiration: Volume 1 and 2. Transportation Research Board. Washington D. C.:
National Academy P, 1998.
21 Virginia Department of Rail and Public Transportation. Rail, Public Transportation, and TDM Needs Assessment.
Chevy Chase: Cambridge Systematics, Inc., 2004.
implementation, over 35,000 workers were enrolled in the Eco Pass program. As of August
2006, between 80,000 and 90,000 employees work for employers that offer Eco Pass. Price to
employers is based on the business's location and employment rate and the RTD ensures the pass
price covers the administrative and marketing costs involved in the program. This system does
require more monitoring than the cashless fare system utilized in Virginia, but the resoundingly
positive response and the continued increase in ridership shows the program to be a success. 22
2.35 Advertising
Chicago, Illinois
Advertising on bus and rail transit systems is an easy way for companies to reach large numbers
of people in a very short amount of time. For an advertising agency, busses are essentially
moving billboards. Since 1989, there has been a tremendous increase in the advertising seen in
public transit systems. For example, the Chicago Transit Authority in Chicago, Illinois, uses
advertising on its bus transit systems to raise revenue.
The Chicago Transit Authority ( CTA) outsources its advertising program to industry specialists.
Every five years, a bidding process opens to the most attractive advertising offer. Once an
advertising contractor is selected, CTA provides only the vehicles and the station space and the
contractor is responsible for selling the space each month and ensuring the advertisements are
kept up to date. Then, every month, the contractor sends CTA 60 percent of its net advertising
billings. With this method, CTA has doubled its advertising revenues in the last decade.
Advertising revenue totaled approximately $ 20 million in 2005. Essentially, this advertising
program is a very low maintenance revenue source for the Chicago Transit Authority. 23
Overall, revenue from transit advertising is typically much smaller than other sources, but
remains fairly easy to maintain and collect. Recommendations for a successful advertising
campaign include enlisting an aggressive advertising vendor, strictly enforcing vendor
consequences for unused space or contract violations, and referencing the transit system in the
ads as much as possible.
2.36 Private- Public Partnership/ Joint Development
Syracuse, New York
Private- public partnership is growing in popularity as a means of raising funding for
transportation. Essentially, the theory behind the partnership is to create a mutually beneficial
agreement in which the public and private sectors work together to either raise revenue or
improve the value of an asset. Both the Central New York Regional Transportation Authority in
Syracuse, New York, and the Nevada Department of Transportation have utilized these
22 Funding Strategies for Public Transpiration: Volume 1 and 2. Transportation Research Board. Washington D. C.:
National Academy P, 1998.
23 " CTA Funding." Keep Chicagoland Moving! 2006. Autumn 2006
< http:// keepchicagolandmoving. com/ money. html>.
The Central New York Regional Transportation Authority ( CNYRTA) operates a bus system
providing service for 794 square miles in Syracuse and surrounding counties. The transportation
authority wanted to replace its diesel buses with natural gas vehicles because natural gas is more
environmentally friendly, more stable in price, and relative to diesel in costs. However, in 1996,
their natural gas fueling station was closed down and CNYRTA began looking for alternative
funding options. After researching different corporations, the transit authority chose Niagara
Mohawk, a local utility company, as their private sector sponsor because of the company's long-term
commitment to making the project work. To implement the project, Niagara Mohawk
agreed to provide the preliminary design, manage the contract, and pay the entire local share ( up
to $ 500,000) of the cost of the new fueling facility. Also, the utility company is responsible for
transporting natural gas to the new facility. In return, CNYTRA will approve the design plans at
each step along the way, as well as operate and maintain the facility upon its completion. As a
side note, the new facility includes a public fueling site and any profits from public sales will be
split evenly between Niagara Mohawk and the transit agency.
As of 2006, CNYTRA has increased its bus service to cover 657,715 surface miles, making over
4,000 trips daily. The system is funded by a mix of approximately 35 percent passenger fares and
65 percent local, state, and federal funding.
Las Vegas, Nevada
In a similar manner, the Nevada Department of Transportation and State of Nevada Department
of Business and Industry partnered with MGM- Bally's Monorail LLC to begin the city's
monorail in 1993 and then expand the system by seven stations in 2004. Costing $ 650 million
and funded by tax exempt revenue bonds, issued by Salomon Smith Barney and Nevada
Department of Business and Industry, the monorail now runs a four- mile route stopping at seven
stops between the Sahara Hotel and the MGM Grand. 24
Santa Clara, California
Similar to the public- private partnerships, the Santa Clara Valley Transportation Authority
( VTA) has been nationally recognized for its joint development projects, promoting transit and
pedestrian use, including the Tamien Child Care Center and Almaden Lake Village Housing.
The goals of these projects are to increase transit ridership and generate revenue by allowing
residents and employees easy access to the transit facilities through real estate development on
VTA's land. 25
Public- private partnerships can be highly profitable for transit agencies, but a long- term
commitment from the private sponsor is crucial for successful outcomes. Also, a high level of
communication between the parties involved is necessary to ensure all needs are being met.
24 " The Central New York Regional Transportation Authority." 2006. Autumn 2006
< http:// www. centro. org/ cnyrta/ info. htm>.
25 " Innovative Finance for Surface Transportation." 16 Mar. 2006. American Association of State Highway &
Transportation Officials. Summer 2006 < www. innovativefinance. org>.
Lastly, these partnerships may be helpful for large projects, but not as successful when used as a
dedicated funding source.
While much of the literature and case studies summarized did not provide direct answers to the
search for a dedicated funding source, all of the material related to funding transportation in a
number of ways throughout the country. The search for funding for transportation research,
development, improvements, and enforcement is not a new topic of interest, but headway is
being made in finding realistic and profitable long- term solutions. With the wide range of target
markets and goals, each state has unique needs and obstacles that must be met and overcome and
no one solution or funding source will be adequate for all states. However, despite possible
differing objectives, researching what other states have done to curtail the budget problems in
their own counties and cities provides insight and examples of possible solutions for Arizona's
funding needs.
One of the tasks of this project was an examination of all states in hopes of gaining a better
understanding of the variety of funding methods used and how other State Transportation
Agencies secure these funds. On May 1, 2006, the U. S. Department of Transportation Bureau of
Transportation Statistics ( BTS), in conjunction with the American Association of State Highway
and Transportation Officials ( AASHTO) and the American Public Transportation Association
( APTA), published the Survey of State Funding for Public Transportation 200526. In this report,
each state detailed its current methods of public transportation funding. The findings from this
AASHTO survey are discussed in more detail in Chapter 2.
Based on the information found in the AASHTO survey, the researchers chose to create a follow-up
survey to ascertain how each state went about securing funding through legislation and
program development. Traditionally, surveys sent out for research purposes have an average
response rate of approximately 40 percent. In order to ensure the most favorable response for this
project, the survey was kept to three questions with two of the questions limited to a yes/ no
response. The methodology behind the survey was to gain more extensive information about
transportation funding programs than what was published in the Survey of State Funding for
Public Transportation 2005 and to develop follow- up contacts for legislation concerns. A copy
of this survey can be seen in Appendix C
All 49 states ( except Arizona) and the District of Columbia were contacted and in most cases, a
state employee with experience in the transit system was identified. The three- question survey
was then emailed out to each state's contact person along with a cover letter from AzDOT
explaining the research and the purpose of the survey. A sample cover letter has been included in
Appendix B. A link to the Survey of State Funding for Public Transportation 2005 was provided
within the survey to assist the responder and to encourage consistency. Surveys were emailed to
the 49 states and the District of Columbia for which the researchers were able to secure a contact
person either from the list provided by the Survey of State Funding for Public Transportation
2005 or from the researchers' own investigation. Over the weeks following distribution,
responses were collected via email, fax, or phone from 39 states. The survey achieved a 78
percent response rate. However, despite this high return rate, a majority of the responses
provided no applicable response in addition to that provided in the AASHTO survey. The data
from the responding states were tabulated and sample results are shown.
Question 1— If funds from sources other than federal, state, or local government are used,
what is the typical or average annual amount, where do these funds come from, and how
were you able to accomplish this arrangement?
26 Survey of State Funding for Public Transportation 2005. American Association of State Highway and
Transportation Officials, American Public Transportation Association, and Department of Transportation Bureau of
Transportation Statistics,. Washington D. C.: U. S. 2006.
The first question of the survey simply asks the responder if his or her state utilizes funds from
sources outside of federal, state, or local governments, and if so, how the sources are arranged or
contracted. The researchers included this question to give the responder the opportunity to share
information about unique funding programs or opportunities within each respective state not
already mentioned in the Survey of State Funding for Public Transportation 2005 or to elaborate
further on a program already mentioned in the previously published survey.
Question 2— Has your State transportation agency performed research on the topic of
transit funding? If yes, please provide a point of contact through which we may obtain a
This question was asked to identify studies similar to this one that may have been performed
previously in states outside of Arizona.
Questions 3— Has your State used legislation to generate new funding mechanisms? If yes,
please provide a point of contact through which we may obtain a copy.
This question was asked to identify legislation in states outside of Arizona used to generate
funding mechanisms.
Question 1— If funds from sources other than federal, state, or local government are used,
what is the typical or average annual amount, where do these funds come from, and how
were you able to accomplish this arrangement?
Despite the high response rate overall, the survey results for this question were disappointing
because 31 ( 79.5 percent) of the 39 survey responses gave little to no information as an answer to
this question. Whether the low response rate indicates that the question was not well understood
or that all the information available was already indicated into the Survey of State Funding for
Public Transportation 2005 is not known, but only eight surveys gave a response to this
particular question.
" Alaska Mental Health Trust – Mobility grants $ 400,000 annually. [ This agreement was]
arranged by mutual agreement between Alaska Department of Transportation and Alaska Mental
Health Trust Authority."
" State funding is approximately $ 3,000,000 from Rental Car Tax."
" Local transportation planning agencies reported ( State Controller's Annual Report FY04- 05)
using $ 671 million in other unspecified ( but could include private funds) and $ 139 million in
developer fees. These are in addition to approximately $ 4.8 billion in combined federal, state,
and local funds."
" Colorado does not normally receive any transit funding from other than Federal sources. Having
said that, I would add on that one major project, the Transportation Expansion ( T- REX) joint
highway and light rail project on I- 25, some private funds were contributed for the construction
of pedestrian bridges to light rail systems."
" If you mean sources other than just appropriations from the General Fund, we do receive a
dedicated portion of the use tax on sale of motor vehicles and accessory equipment. This is
basically the sales tax on such items, but it goes for transportation rather than flowing into the
General Fund of the state. Transit currently gets 1/ 20th of the first four cents ( the total tax is five
cents on the dollar). This was accomplished in two steps, by transit advocates in the legislature
agreeing to support fuel tax increases for highways in return for transit being given a dedicated
share of the use tax receipts ( 1/ 40th the first time, then another 1/ 40th). [ At the time the tax rate
was 4 percent.] The key was that the highway lobby did not have the votes to get their fuel tax
increase passed without the transit support."
" Contracts between state Health and Human Services ( HHS) agency and other agencies and
transit providers, locally raised funds from private sector donations, charitable sources such as
United Way, farebox revenue, local hospitals, etc."
" The Acadia National Park had established an advertising program with L. L. Bean, where the
company donates $ 250,000 annually in four year contracts in exchange for heavy sponsorship
and advertising within the park."
" We have had employer contributions for operating costs in a number of Job Access Reverse
Commute( JARC)- funded projects, where employers and local project sponsors identified
significant direct benefit to employers. This would amount to $ 200,000 to $ 500,000 per year on
The results of our survey suggest that innovative funding sources are very rare, and innovative
funding sources that result in a dedicated revenue source are even rarer. Arkansas, California,
and Idaho each responded to this question with a different type of tax, besides that of fuel or
motor vehicle taxation. The survey response from Maine included information about an
advertising contract, but it was with the national state park areas and not considered a funding
method for the Maine Department of Transportation. Colorado, New Hampshire, and Wisconsin
each responded with situations where federal or private funds have been utilized, but typically
these sources are for one time projects and therefore do not qualify as a dedicated funding
method for the transit agency.
Question 2— Has your State transportation agency performed research on the topic of
transit funding? If yes, please provide a point of contact through which we may obtain a
Of the 39 responses, only 3 of the survey responses checked yes for this question and provided
either a contact or a copy of research. After further contact, each state provided a copy of the
research mentioned.
In July 2005, The Nevada Department of Transportation ( NDOT) published a draft report of the
Nevada Long- Range Mass Transit Study27. Because of the blend of rural and urban populations
within the state of Nevada, the 2003 Nevada Legislature passed a Senate Concurrent Resolution
to conduct a feasibility study on the state's current and long- range transportation needs within
those areas. Part of the study consisted of surveying transit providers in rural and small urban
populations to determine whether the existing services were necessary or adequate and what
additional services were most requested. Even though the publication is only a draft of the final
study, several key findings were relevant to the topic at hand in Arizona. A portion of the
Nevada findings concluded:
Public transit is crucial in rural areas due to the lack of nearby basic services, such as
groceries, post offices, and banking facilities, especially for the handicapped, disabled, or
senior populations within theses areas.
Lack of taxi service to rural areas increases need for public transit.
Weekend service is rare and often sporadic should be evaluated to determine possible
Coordination between transit providers could result in greater efficiency and lower
operating costs for all parties involved.
Traditional public transit in rural communities ( such as local bus transit, rapid transit,
intercity bus, and monorail) is feasible due to high costs and competition with urban areas
for federal dollars.
27 Nevada Long- Range Mass Transit Study Draft Report. Nevada Department of Transportation. Reno: Fehr & Peers
Transportation Consultants, 2005.
The Nevada study found that at the very least, the current public transit funding needed to remain
constant. The overwhelming response from the NDOT survey asked for increased funding so as
to increase vital services to their rural communities.
The Maine Department of Transportation's Office of Passenger Transportation published a Study
of Innovative Funding Methods in August of 200028. This report was designed to explore further
funding methods to support Maine's ever- growing transit needs. The report outlines Federal,
state, and local options, both dedicated and not dedicated, and then applies those tools to various
elements within the Main Strategic Passenger Transportation Plan. Obviously, because Arizona
and Maine face different challenges in terms of transit needs, the purpose of this report does not
align perfectly with Arizona's situation, but does provide helpful analysis of several similar
options, including advantages, disadvantage, applicability, implementation requirements, and
potential revenue. The report also cites other cities and states using the tool currently. Some of
the tools described included in Table 2.
Table 2: Maine Analysis Matrix
ITS/ Smart
1% Rental Sales
National Park
Service Fee
Rental cars
facility, intercity
bus stations,
parking garage,
Use in tourist areas
as means of on site
travel information
through Intelligent
System ( ITS)
Special tax to find
new infrastructure in
growing or tourist
Establish a user fee
for access to
national parks to be
collected at point
of entry
Advantages Lease revenue
could cover
facility costs
Cost for use could
generate additional
Growth in regional
economy funds
Will shift the
impact cost for car
users to
Disadvantages Potential needs
conflict between
partners; project
may not attract
Could possibly not
generate sufficient
revenue or be
perceived as
of facility
Could be interpreted
as simply additional
tax or unfair
treatment on tourist
between federal
and state
authority must
enter lease
agreements with
Fee agreements Legislation to
implement tax
between federal
and state
Though the needs and geographic challenges are different between the states, the Maine report
still offers valuable insight on a few unique funding methods as well as examples of other states
already utilizing those methods.
28 Maine Department of Transportation. Maine Innovative Financing Methods for Passenger Transportation. The
Louis Berger Group, Inc., 2000.
The Tennessee Department of Transportation provided links to the summary of the 2004
publication Tennessee Transit Tomorrow29. The report was designed to plan for the future of
transportation in Tennessee and the role the Tennessee Department of Transportation will play in
that future through the year 2025. Funding is a crucial part of this planning. In 2003, the urban
transit systems in Tennessee spent $ 106 million for operations with 29 percent from fares and
other generated revenues, 39 percent from local government funding, 16 percent from state
funding and 16 percent from federal funding. For the rural systems in Tennessee, operations costs
totaled $ 20.9 million in 2003 including 39 percent from contract fares, 3 percent from local
government funding, 26 percent from state funding, 29 percent from federal funding, and 3 percent
from other generated revenues. However, there are no financial sources dedicated to support transit
within the state of Tennessee. In terms of finding a sufficient and fair revenue source, the report
considers a number of options with dedicated funding potential. The state of Tennessee estimates a
required $ 2.98 billion dollars over the next 25- year period to attain its goal of tripled ridership. The
report states, " Although that seems like a large number, it is a manageable number spread over 20
years, rising in increments to a peak in 2016 and then declining. There are several potential
statewide tax sources that could generate sufficient revenues to fund those requirements. Another
option, rather than an increased tax or a new tax, is to dedicate a portion of existing gas tax or
other transportation revenues to the transit program."
Questions 3— Has your State used legislation to generate new funding mechanisms? If yes,
please provide a point of contact through which we may obtain a copy.
Of the 39 responses, 15 of the survey responses checked yes for this question and provided either a
contact or a copy of legislation. Details about this legislation will be detailed in the next chapter.
Overall, the survey results were fairly disappointing because the limited number of results and the
limited information provided. However, following up with those states that did respond with
information proved to be more successful. The first question on the survey was either
misunderstood or innovative funding programs are very rare throughout the United States. For the
second question, there was a very low response rate, but the literature received was helpful. The
Nevada study appears to be fairly close in nature to the research currently being performed by
Arizona. The report from Maine proved less helpful only because the situations and needs of the
state are different. The Tennessee literature did not provide as many possible options as the other
two reports, but it helped to reaffirm that other states are also searching for dedicated revenue
sources with limited success.
Perhaps the most successful aspect of the survey was the legislative contact responses. Almost 40
percent of the responses provided legislative contacts and a few provided more than one example
of legislation within their respective states. Not every piece of models legislation will be
applicable, but the examples provide valuable insight into transportation funding around the
country. The next chapter will focus on the legislative models received and the potential for similar
legislation within Arizona.
29 Tennessee Transit Tomorrow. Tennessee Department of Transportation. Parsons Brinckerhoff, 2004.
The following is a compilation of legislation regarding dedicated funding methods for public
transportation. A majority of the legislation cited was in response to Question 3 from the
researchers' survey, regarding legislative generated funding mechanisms. In addition, the
researchers included some legislation found through their own scan of online sources and
legislation databanks. The following provides a brief description of the legislation found; however,
the legislation itself can be found in Appendix E.
4.21 Motor Fuel Tax
VIRGINIA – Regional Motor Fuel Tax30
This legislation levies a 2 percent tax on all fuel sales in the northern regions of the State of
Virginia. The legislation delineates what specific districts are subject to the tax and the date the tax
shall become effective.
In Fiscal Year 2005, this tax raised $ 42.3 million for the state of Virginia. A portion of these funds
supported Virginia's share of the Washington Metropolitan Area Transit Authority ( WMATA) and
another portion of the funding supported the operating and capital expense of several transit
projects, including the commuter rail and local bus system. 31
NEVADA – Senate Joint Resolution 1432
In 2005, the Committee on Finance for the Nevada Legislature introduced Senate Joint Resolution
No. 14 that " proposes to amend Nevada Constitution to allow use of revenue generated from fees
and other charges related to operation of motor vehicles upon public highways of State and
revenue from gasoline taxes for other transportation needs." The resolution allows more flexibility
with Nevada's existing taxes so that the money may be used for public transit projects in the
future. The bill became effective July 1, 2005.
RHODE ISLAND – Motor Fuel Tax – Title 3133
The Rhode Island Statutes specify that all money from the state's Motor Fuel Tax be deposited
into the Intermodal Surface Transportation Fund for further allocation. This legislation then
allocates $ 0.0625 per gallon to the Rhode Island Public Transit Authority ( RIPTA) to be used as
dedicated operating assistance for the state.
30 State of Virginia. Regional Motor Fuel Tax. 2006 Virginia Code. 58.1- 1720. http:// leg1. state. va. us/ cgi-bin/
legp504. exe? 000+ cod+ 58.1- 638
31 Survey of State Funding for Public Transportation 2005. American Association of State Highway and
Transportation Officials. Washington D. C.: U. S. Department of Transportation Bureau of Transportation Statistics,
32 State of Nevada. Senate Joint Resolution No. 14. 2006 Nevada Law. S. J. R. 14.
33 State of Rhode Island. Motor Fuel Tax. Rhode Island Statutes. Title 31. 31- 36- 20.
In Fiscal Year 2005, this legislation resulted in $ 30,218,758 for RIPTA's Operating Assistance
program. Currently, RIPTA operates outside of the Rhode Island Department of Transportation,
but in Fiscal Year 2006 and afterward, the allocation will increase to $ 0.0725 per gallon, on the
condition of introducing a market research project to study the feasibility of moving the Authority
into the Department of Transportation. 34
Application to Arizona
Using information from the Bureau of Transportation Statistics on State Motor- Fuel Tax Rates:
2004,35 Arizona's $ 0.18/ gallon tax rate ranks 12th lowest compared with rates for all 50 states and
the District of Columbia. An additional $ 0.02/ gallon fee would change Arizona's rank to 21st
lowest, still in the bottom half of all states and the District of Columbia for the gas tax rates.
According to Arizona Department of Transportation Motor Vehicle Division Statistics, for the
2004- 05 Fiscal Year, 2,735,085,693 gallons of gas were sold. 36 Using this figure, a $ 0.02 fee on
each gallon sold dedicated to public transit would have generated $ 54,701,713 for this past fiscal
year. Similarly, an allocation of $ 0.0625 ( such as in Rhode Island) would have generated
approximately $ 170,942,856 for this past fiscal year.
4.22 Sales Tax
INDIANA – Sales and Use Tax37
In Indiana, the sales and use tax rate is 6 percent of the purchase price for retail items. Sales tax is
collected on the sale of merchandise within Indiana and use tax is collected on purchases made
outside of Indiana if sales tax is not collected. The merchants collect the tax and are then held
liable for the amount they should collect. This tax is then paid directly to the Department of
Transit in Indiana receives 0.775 percent of the Sales and Use Tax. In 2005, this tax raised $ 37
million for the Indiana Department of Transportation. Of that amount, $ 30 million was deposited
into the Public Mass Transportation Fund to be used for operating and capital expenditures. The
remaining $ 7 million is used as a dedicated funding source for the rail service between South Bend
and Chicago. 38
34 Survey of State Funding for Public Transportation 2005. American Association of State Highway and
Transportation Officials, American Public Transportation Association, and Department of Transportation Bureau of
Transportation Statistics,. Washington D. C.: U. S. 2006.
35 U. S. Department of Transportation, Federal Highway Administration. Highway Statistics 2004, Washington, DC:
forthcoming, table MF- 121T. http:// www. bts. gov/ publications/
state_ transportation_ profiles/ state_ transportation_ statistics_ 2005/ html/ table_ 06_ 12. html.
36 " Gasoline Gallonage." Arizona Department of Transportation. Fall 2006
< http:// www. azdot. gov/ Inside_ ADOT/ fms/ gasgals. asp>.
37 State of Indiana. Department of Revenue. Sales and Use Tax. 2006 IN Administrative Code. Article 2.2.
38 Survey of State Funding for Public Transportation 2005. American Association of State Highway and
Transportation Officials. Washington D. C.: U. S. Department of Transportation Bureau of Transportation Statistics,
COLORADO – Senate Bill 139
The Colorado General Assembly passed Senate Bill 1 ( SB 97- 001) in 1997 as a measure to
provide additional funding from sales and use tax revenues associated with automobiles. Due to
legislation, the Colorado General Fund may only increase by 6 percent annually. Senate Bill 1,
therefore, provided that all extra funds from the sales tax be transferred to the Highway Users
Tax Fund. Then in 2002, the Colorado Legislature passed a bill requiring at least 10 percent of
Senate Bill 1 transfers be used for transit. However, because the funds are dependent on excess
sales tax funds, there has been no funding due to Colorado's economic downturn. The Colorado
Department of Transportation is not anticipating any funding from this source until 2007 at the
earliest. 40
VIRGINIA – Commonwealth Transportation Trust Fund – Section 5841
In 1986, the General Assembly of Virginia increased the state sales and use tax by 0.5 percent to
help establish the Commonwealth Transportation Trust Fund ( as defined in § 33.1- 23.03: 1). This
legislation from Section 58 establishes that 14.7 percent of the trust fund is dedicated to the
Commonwealth Mass Transit Fund. The legislation is very explicit about how the funds are to be
divided up and used by the transit agencies.
The Commonwealth Transportation Trust Fund is supported by several general and motor
vehicle taxes and provides most state funding for transit in Virginia. In Fiscal Year 2005, this
legislation resulted in $ 109.1 million for the Commonwealth Mass Transit Fund for transit
projects throughout the state. 42
MINNESOTA – Motor Vehicle Sales Tax Amendment43
In Minnesota, the motor vehicle sales tax ( MVST) is the 6.5 percent sales tax applied to the sale
of new and used motor vehicles. The tax has changed several times since its institution and was
even abolished completely in 1992. However, the tax was reinstated in 2000, and in 2003, the
legislature increased the percentage of the tax dedicated to transit funding. In November 2006,
the Minnesota voters passed a constitutional amendment that would gradually dedicate all MVST
revenue to fund transit within the state by 2012. This tax will serve as one of the few dedicated
funding sources specifically for transit. 44
39 State of Colorado. Transportation Financing State Allocation. 2006 Colorado Statutes. 43- 4- 206.
40 Tom Mauser, Modal Planning Manager. Colorado Department of Transportation. Phone interview by the author.
September 22, 2006. 303- 757- 9768. Tom. Mauser@ dot. state. co. us.
41 State of Virginia. Disposition of State Sales and Use Tax Revenue. 2006 Virginia Code. 58.1- 638.
http:// leg1. state. va. us/ cgi- bin/ legp504. exe? 000+ cod+ 58.1- 638
42 Survey of State Funding for Public Transportation 2005. American Association of State Highway and
Transportation Officials. Washington D. C.: U. S. Department of Transportation Bureau of Transportation Statistics,
43 State of Minnesota. Transit Funds. 2005 Minnesota Statutes. 16A. 88.
44 Williams, John. Minnesota. Minnesota Department of Transportation. The Motor Vehicle Sales Tax Transfer:
Current Law. 2006.
Applicability to Arizona
According to the Arizona Department of Commerce, Arizona retail sales in 2005 totaled $ 46.3
billion. 45 A ¼ percent sales tax dedicated to public transportation would have generated $ 115.75
million for the fiscal year. A ½ percent sales tax dedicated to public transportation would have
generated $ 231.5 million for the fiscal year.
4.23 Rental Vehicle Tax
ARKANSAS - Senate Bill 441
During Regular Session of 2005, the General Assembly for the State of Arkansas enacted a 5
percent rental vehicle tax on the gross receipts of all motor vehicle rentals rented for less than 30
days. The bill prescribed that 75 percent of the funds shall be deposited into the Arkansas Public
Transit Trust Fund and 25 percent into the Department of Education Public School Fund. The
bill then states that the money in the Arkansas Public Transit Trust Fund " shall be used by the
Arkansas State Highway and Transportation Department for the purpose of acquiring federal
matching funds for the purchase of transportation vehicles, for public transit equipment or
facilities, and for the operation of the United States Department of Transportation Federal Transit
Administration Assistance programs." 46
In Fiscal Year 2005, this tax raised $ 2.8 million for the State of Arkansas which was used for
capital match and operating assistance for urban and rural systems and for expanding Arkansas's
5310 Elderly and Disabled programs. 47
FLORIDA – 2006 Statutes – Chapter 21248
The Florida State Statutes Chapter 212 contains information on the Rental Car Surcharge. This
statute states " A surcharge of $ 2 per day or any part of a day is imposed upon the lease or rental
of a motor vehicle licensed for hire and designed to carry less than nine passengers regardless of
whether such motor vehicle is licensed in Florida." The statute then specifies that of the revenue
collected, 80 percent of the proceeds are deposited in the State Transportation Trust Fund, 15.75
percent are deposited in the Tourism Promotional Trust Fund, and 4.25 percent are deposited in
the Florida International Trade and Promotion Trust Fund.
In Fiscal Year 2005, this rental car surcharge raised $ 91 million for the Florida Transportation
Trust Fund. Approximately 4 percent of the Florida Transportation Trust Fund supports transit
45 " Growth Indicators." Arizona by the Numbers. 2006. Arizona Department of Commerce. Fall 2006
< http:// www. azcommerce. com/ BusAsst/ Numbers/>.
46 State of Arkansas. General Assembly. An Act to Provide for the Distribution of the Rental Vehicle Tax; and for
Other Purposes. 85th General Assembly. Regular Sess., 2005. Senate Bill 441.
47 Survey of State Funding for Public Transportation 2005. American Association of State Highway and
Transportation Officials. Washington D. C.: U. S. Department of Transportation Bureau of Transportation Statistics,
48 State of Florida. Rental Car Surcharge. 2006 Florida Statutes. Statute 212.0606.
http:// www. leg. state. fl. us/ Statutes/ index. cfm? App_ mode= Display_ Statute& Search_ String=& URL= Ch0212/ SEC06
06. HTM& Title=-> 2006-> Ch0212-> Section% 200606# 0212.0606
within the state. Therefore, the rental car surcharge generated an estimated $ 3.6 million for
transit during the year. 49
4.24 Vehicle Registration Tax
NORTH DAKOTA – Senate Bill 234850
In 2005, the Legislative Assembly of North Dakota enacted Senate Bill 2348 which served to
amend two prior sections of the North Dakota Code relating to funding of public transportation.
North Dakota uses a flat vehicle registration fee to fund their public transit within the state. This
bill raised the fee from $ 2 to $ 3 per registered vehicle. These fees are deposited with the state
treasurer, who then credits the fee to the state's public transportation fund. The second portion of
this bill addressed the distribution of the funds to the state's transportation providers. Under Bill
2348, each county receives a base amount of $ 18,300 in addition to $ 1.50 per capita in the
county. This would change the transit funding from its current level of $ 12,200 base and $ 1.56
per capita per county. Unless provided by law, any remaining money in the fund is retained for
future distribution.
In Fiscal Year 2005, this tax raised $ 2.2 million for the State of North Dakota Public
Transportation Fund. However, this figure is based on the old figures of $ 12,200 base plus $ 1.56
per capita. In North Dakota, this state aid is not restricted and can be used for all transit costs,
including operations and capital costs, transit planning, and the costs associated with matching
federal transit funds. 51
WISCONSIN – Vehicle Registration Fee52
Chapter 341 of the Wisconsin Statutes provides for an annual $ 55 registration fee of all
passenger vehicles to be deposited in the State of Wisconsin Transportation Fund. The chapter
also details the fee collection, vehicle exemption, vehicle specifications, and penalties associated
with not following the correct procedure. These statutes also outline the registration requirements
for dealers, distributors, manufacturers, transporters, and finance companies.
In May 2005, the Wisconsin Joint Committee on Finance published Paper 718 entitled Vehicle
Registration Fee Increases for Automobiles and Light Trucks. 53 This publication proposed a $ 10
increase for the vehicle registration fee to $ 65 annually. If the proposal is accepted, the increase
49 Survey of State Funding for Public Transportation 2005. American Association of State Highway and
Transportation Officials. Washington D. C.: U. S. Department of Transportation Bureau of Transportation Statistics,
50 State of North Dakota. Legislative Assembly. An Act to Amend and Reenact sections 39- 04.2- 03 and 39- 04.2- 04
of the North Dakota Century Code relating to funding of public transportation. 59th Legislative Assembly. Regular
Sess., 2005. Senate Bill 2348. http:// www. legis. nd. gov/ assembly/ 59- 2005/ bill- text/ FBNU0200. pdf.
51 Survey of State Funding for Public Transportation 2005. American Association of State Highway and
Transportation Officials. Washington D. C.: U. S. Department of Transportation Bureau of Transportation Statistics,
52 State of Wisconsin. Registration of Vehicles. 03- 04 Wisconsin Statutes. Chapter 341.
53 Dyck, Jon. Wisconsin. Joint Committee on Finance. Legislative Fiscal Bureau. Vehicle Registration Fee Increase
for Automobiles and Light Trucks. 25 May 2005. Fall 2006 < http:// www. legis. state. wi. us/ lfb/ 2005-
07budget/ BudgetPapers/ 718. pdf>.
could result in an estimated increase in the transportation fund revenue by $ 23,201,300 in 2005-
06 and $ 47,656,300 in 2006- 07. The publication also recommended an increase in vehicle title
fee and replacement vehicle title fee for additional revenue. At the time of publication of this
report, there was no official legislation regarding the proposed increase.
Application to Arizona
Using information from the Federal Highway Administration's Summary of State- Motor Vehicle
Registration Fee Schedule54, Arizona's annual $ 8 vehicle registration fee is the lowest compared
with rates for all fifty states and the District of Columbia. This registration fee is extremely low
compared to the national average of $ 33.66 annually. Even if Arizona increased its current fee to
$ 18 annually, it would still rank in the lowest fifth of the country for registration rates.
According to Arizona Department of Transportation Motor Vehicle Division Statistics, the total
number of registered vehicles for Fiscal Year 2006 and Fiscal Year 2007 are estimated to be
6,318,402 and 6,408,067 respectively. 55 Arizona's current annual registration fee is $ 8. A $ 1 fee
increase dedicated to public transit ( similar to South Dakota's recent increase) would generate
$ 6,318,402 and $ 6,408,067 over the next two fiscal years alone. A $ 10 increase dedicated to
public transit ( similar to Wisconsin's recent proposal) would generate $ 63,184,020 and
$ 64,080,670.
FLORIDA – 2006 Statutes – Chapter 33756
The Florida State Statues Chapter 337 contains information entitled Lease of Property for Joint
Public- Private Development and Areas Above or Below Department Property. This statute states
" the department may lease to public agencies or private entities, for a term not to exceed 99
years, the use of department property, including rights- of- way, for joint public- private
transportation purposes to further economic development in this state and generate revenue for
transportation." The statute outlines the specifications required to entering into a public- private
development project including procedures for submitting and accepting a proposal, and the rights
and requirements for all parties involved.
DELAWARE – Title 2, Chapter 2057
Similar to the Florida Statutes, the Delaware Code has an initiatives program set up to facilitate
the use of public- private partnerships. The code recognizes that " a significant alternative to
54 U. S. Department of Transportation, Federal Highway Administration, Highway Taxes and Fees 2001,
Washington, DC: 2001. http:// www. fhwa. dot. gov/ ohim/ hwytaxes/ 2001/ pt11. htm.
55 " Arizona Statewide Registered Vehicles, by Category." Arizona Department of Transportation. Fall 2006
< http:// www. azdot. gov/ mvd/ statistics/ documents/ StatewideRegVehbyCategory. pdf>.
56 State of Florida. Lease of Property for Joint Public- Private Development and Area Above or Below Department
Property. 2006 Florida Statutes. Statute 337.251.
http:// www. leg. state. fl. us/ Statutes/ index. cfm? App_ mode= Display_ Statute& Search_ String=& URL= Ch0337/ SEC25
1. HTM& Title=-> 2006-> Ch0337-> Section% 20251# 0337.251.
57 State of Delaware. General Assembly. Public- Private Initiatives Programs in Transportation. 2006 Delaware
Code. Title 2, Chapter 20.
public revenue sources is a public- private sector initiatives program permitting private entities to
undertake all or a portion of the study, planning, design, development, financing, acquisition,
installation, construction, improvement, expansion, repair, operation and maintenance of public
transportation projects for the citizens of Delaware in exchange for the right to lease or own the
facilities for an agreed- upon period and earn a reasonable rate of return through tolls or user
fees" This code specifies the requirements for eligibility, proposal procedures, and rights of all
parties involved. It also outlines the Public- Private Initiatives Program Revolving Loan Fund.
In May 2006, the California Legislature approved Assembly Bill 1467 to extend the existing law
to " authorize the department and regional transportation agencies, as defined, to enter into
comprehensive development lease agreements with public and private entities, or consortia of
those entities, for certain transportation projects that may charge certain users of those projects
tolls and user fees, subject to various terms and requirements." The bill outlines specifications
and requirements, including how the proposals will be submitted and chosen and implemented,
how the money may be collected and used, and who will be affected.
ALASKA – Laws of Alaska 200459
The Alaska Mental Health Trust arranged an annual $ 650,000 grant with the Department of
Transportation/ Public Facilities to be used in part for public transportation operations and
facilities. These funds are currently used for planning and capital expenditures.
MAINE – Transit Bonus Payment Program60
Maine faces unique challenges in funding due to a constitutional barrier against using state
highway tax dollars for nonhighway uses. However, the state has established a local Transit
Bonus Payment Program which gives individual towns a bonus in their local accounts if they
increase transit contributions.
NEVADA – Rural Transit Operations Funding 61
In March 2005, the Nevada Legislature introduced Senate Bill 440 with the purpose of " making
a contingent appropriation to the Department of Transportation for Rural Transit Operations."
This bill provides for the appropriation of $ 761,391 from the State General Fund to the Rural
Transit Fund for Fiscal Year 2005- 2006 and Fiscal Year 2006- 2007. The bill states that the funds
must be matched by the cities and counties who will receive it. The Nevada Legislature is
currently working on a draft for the 2007 Legislative Session that would appropriate almost $ 5
million annually to the Rural Transit Fund for Fiscal Years 2007- 2008 and 2008- 2009. The draft
58 State of California. An act to amend Section 143 of, and to add Section 149.7 to, the Streets and Highways Code,
relating to transportation. 2006 California Laws. AB 1467.
59 State of Alaska. General Assembly. Laws of Alaska 2004. CCS HB 337, Sec. 5.
60 State of Maine. Transit Bonus Payment Program. 2005 Laws of Maine. Title 23, Section 1807.
61 State of Nevada. Senate Bill No. 440. 2006 Nevada Law. S. B. 440.
states explicitly how the funds are to be used, and any remaining funds at the end of the fiscal
year are to be returned to the Nevada General Fund. 62
CALIFORNIA – San Diego Association of Governments – AB 71363
As one of the earlier demonstrations for the High Occupancy/ Toll ( HOT) Lane model, in 1993,
the General Assembly of California passed AB 713 authorizing " the San Diego Association of
Governments ( SANDAG), in cooperation with the Department of Transportation, to conduct a
demonstration program pursuant to which single- occupant vehicles would be allowed to use the
high- occupancy vehicle lane on a specified portion of Interstate Highway Route 15 ( I- 15) for a
fee." The remainder of this bill outlined the requirements and specifications for the project,
including how the revenue generated was to be used and how the results of the project would be
reported to the Legislature. According to the Resolution signed by SANDAG on November 21,
1997, the fee would range from $ 0.50 to $ 8.00 per trip, depending on time of day and congestion
level. 64
In addition to the Private- Public Partnership information stated above, the California Assembly
Bill 1467 also " authorizes regional transportation agencies, in cooperation with the department,
to apply to the commission to develop and operate high- occupancy toll lanes, including the
administration and operation of a value pricing program and exclusive or preferential lane
facilities for public transit, as specified." The bill allows for four HOT Lane projects within the
state of California until January 2012. The bill outlines specifications and requirements,
including how the plans will be chosen and implemented, how the money may be collected and
used, and who will be affected.
62 State of Nevada. Rural Transit Bill Draft. 2006 Nevada Law.
63 State of California. Highway tolls: transit service: demonstration project. 1993 California Laws. AB 713.
64 San Diego Association of Governments. Adopting the Full Implementation Fee Schedule for the I- 15 Value
Pricing Project. 1997 SANDAG Resolutions. Resolution No. 98- 20.
65 State of California. An act to amend Section 143 of, and to add Section 149.7 to, the Streets and Highways Code,
relating to transportation. 2006 California Laws. AB 1467.
PENNSYLVANIA – Public Transportation Assistance Fund66
In 1997, the Pennsylvania General Assembly approved House Bill 357, creating the Public
Transportation Assistance Fund ( PTAF) as a dedicated source of revenue for public
transportation. The Fund combines a tire tax, rental vehicle tax, vehicle lease tax, and sales tax
transfer. The bill states a fee of $ 1 on all tire sales to be collected by the seller and remitted to the
Department of Revenue. Every motor vehicle lease is subject to a 3 percent tax on the lease
price. Rental vehicles incur a daily $ 2 fee to be dedicated to public transport oration. And finally,
a portion of the state sales tax is to be transferred annually.
In Fiscal Year 2005, this legislation along with state provided general funds generated over $ 175
million in revenue urban and rural transportation, community assistance, and technical
assistance. 67
NEVADA – Impact Fees – 2003 SB 23768
In 2003, the Nevada legislature passed Senate Bill 237 to increase impact fees for new
developments in Washoe County and its incorporated cities. The bill states how and when the fee
is to be collected and where the money should be deposited. Also, the bill specifies who shall
benefit from the revenue generated, including the Regional Transportation Commission and the
transportation projects deemed suitable. 69
According to the Washoe County 2030 Transportation Plan70, the fees were initially
implemented in 1995 and averaged annual revenue of $ 22 million over the first five years. The
fee and projected yields are recalculated every three years to adjust for inflation, and the fees'
expected yield through 2030 is $ 974.5 million. Though this fee is not dedicated specifically for
public transportation, it does provide an example of the types of revenues and impact fee similar
to this one could generate for Arizona.
66 State of Pennsylvania. General Assembly of Pennsylvania. House Bill No. 357. Session of 1997.
67 Survey of State Funding for Public Transportation 2005. American Association of State Highway and
Transportation Officials. Washington D. C.: U. S. Department of Transportation Bureau of Transportation Statistics,
68 State of Nevada. Senate Bill 237- Senators Raggio and Titus. 2003 Nevada Legislature. General Session SB 237.
http:// www. leg. state. nv. us/ 72nd/ Bills/ SB/ SB237_ EN. html.
69 " Local Policies: Impact Fees." Growth Management. Fall 2006 < http:// growthmanagementicsc. org/ local/
impactfees. asp>.
70 Washoe County 2030 Regional Transportation Plan. Regional Transportation Commission. 2004. Fall 2006
< http:// www. rtcwashoe. com/ planning/ downloads/ pdfs/ Chapter8. pdf>.
PENNSYLVANIA – Transportation Impact Fees – House Bill 171971
The 2005 General Assembly of Pennsylvania passed House Bill 1719 further defining the use of
Transportation Impact Fees for Pennsylvania development. The bill outlines the definition and
purpose behind the impact and assigns that the municipality shall be responsible for the
implementation, collection, and disbursement of the fee. This house bill also states very
specifically how the fees may and may not be used. For example, " Transportation impact fees
may be used for those costs incurred for improvements designated in the transportation capital
improvement program which are attributable to new development, including the acquisition of
land and rights- of- way; engineering, legal and planning costs; and all other costs which are
directly related to road improvements within the service area or areas, including debt service."
However, the fees are not to be used for the preparation, acquisition, operation, or maintenance
of new capital projects or land developments or to cover deficits from prior projects within the
NEW MEXICO – House Bill 15 – GRIP72
The 2003 New Mexico House Bill 15, otherwise known as Governor Richardson's Investment
Partnership ( GRIP), provides for the issuing of $ 1,585,000,000 in state bonds for special
transportation projects. The revenue from these bonds is allocated to fund numerous road
improvements and developments, but also provides for " the reconstruction and improvement of
interstate 25 to accommodate public transportation elements, including commuter rail from
Albuquerque to Santa Fe." The bill does not indicate specifically what percentage of the bond
funds are dedicated to the commuter rail or other public transportation projects but it does
represented a dedicated funding source through allocation of state bonds. However, there has
been some criticism of Richardson's transportation system regarding misappropriation and
overspending of the funds when actual expenditures exceeded projected costs. 73 This criticism
reaffirms that equity and accountability are important factors when choosing a funding
The legislation in this chapter illustrates some of the currently used mechanisms for securing
transit funding. Not all of the listed legislation models are feasible or applicable for the state of
Arizona and the goals of this project, but the examples provide an idea of what has been
attempted with success in other states with similar needs. In the case of the Sales Tax, Motor
Vehicle Tax and Vehicle Registration Tax, some revenue approximations have been calculated
based on projected Arizona numbers. These calculations are purely estimations and should not be
interpreted as projected revenue for the State of Arizona.
71 State of Pennsylvania. House Bill 1719. 2005 Pennsylvania General Assembly. 2005 General Session. HB 1719.
http:// www. legis. state. pa. us/ CFDOCS/ Legis/ PN/ Public/ btCheck. cfm? txt Type= HTM& sess Yr= 2005
& sessInd= 0& billBody= H& billTyp= B& billnbr= 1719& pn= 2187.
72 State of New Mexico. House Bill 15. 2003 New Mexico Statutes. 1st Special Sess. 2003. HB 15
73 Gessing, Paul J. " Richardson Railroads Taxpayers." National Review Online 1 Dec. 2006. 1 Dec. 2006
http:// article. nationalreview. com/? q= YjBhNWFjMGUwZGRjYmZmZDI5MjEyOWNhMDc1M2ZkMjA=.
The objective of this research was to explore new dedicated funding mechanisms for public
transportation for the State of Arizona. The research work began with a search of the existing
literature on the subject to determine what other studies had been done about this topic and what
innovative financing methods had been discovered. A great deal of information was found
addressing public transportation funding and unique funding methods used around the country.
Most of the research indicated that various taxes, especially motor fuel tax, provided the majority
of funding for public transportation thus far. One report in particular, the Survey of State Funding
for Public Transportation 2005, published by the American Association of State Highway and
Transportation Officials ( AASHTO), proved to be particularly informative. This report is
published annually and surveys all 50 states and the District of Columbia for their public
transportation funding methods. The literature review was followed by a survey that was sent to
each of the 49 other state departments of transportation to further investigate the topic, determine
if any programs were in use that were not included in the AASHTO survey, and if any other
states had conducted studies on public transportation funding not discovered in the literature
review. The survey also inquired about legislation that other states have used to secure funding
for public transportation. The survey results were disappointing with very few responses
regarding innovative programs or sources of funding. However, between the survey results and
their own personal search, the researchers identified 23 pieces of relevant legislation, any of
which could potentially serve as a model for future Arizona legislation. It would appear that
innovative funding sources across the nation are very rare and often very personalized to the
state affected. However, the researchers investigated the programs and legislation provided by
the survey, along with what was found by their own research, in order to provide the most
comprehensive report possible based on the limited response. The researchers' conclusions are as
1) Impact Fees - The study found that several states or counties are utilizing impact fees to
offset the cost of new construction/ development in both urban and rural areas. With the
amount of development planned for Arizona, this type of impact/ developer fee dedicated for
public transportation could provide a viable option for dedicated funding.
• Current high rate of development means significant potential fee base.
• Administrative costs may be high.
• This type of fee may not be considered as equitable as transportation specific fees,
but public transportation is an important aspect of any community, especially
newly developing communities.
2) Rental Car Tax – With Arizona's growing population and development ( especially in the
Phoenix Metropolitan area), the state is attracting an increasing number of tourists and
visitors each year. Currently, no fee on rental cars dedicated to public transportation exists in
• Tax base is large enough to create significant revenue without significant costs to
the individual.
• Administrative costs would be fairly low.
• Tax may not be as equitable as transportation specific fees, but argument could be
made that public transportation adds value to a community and attracts tourism.
1) Increased Vehicle Registration Fee - Based on the researchers' investigation, Arizona is
underutilizing the vehicle registration fee as a funding source potentially for public
transportation. Using information from the Federal Highway Administration's Summary of
State- Motor Vehicle Registration Fee Schedule, Arizona's annual $ 8 vehicle registration fee is
the lowest in the nation compared with rates for all 50 states and the District of Columbia. This
registration fee is extremely low compared to the national average of $ 33.66 annually. Even if
Arizona increased its current fee to $ 18 annually, it would still rank in the lowest fifth of the
country for registration rates.
• Annual registration required ensures continued source of funding.
• Tax base is large enough to create significant revenue without significant costs to
the individual
• Administrative costs would be fairly low.
2) Increased Motor Fuel Tax – Despite the controversy over only using fuel taxes to fund
transportation projects, increasing the motor fuel tax could be a significant and relatively
simple funding method for public transportation in the State of Arizona. Using information
from the Bureau of Transportation Statistics on State Motor- Fuel Tax Rates: 2004, Arizona's
$ 0.18/ gallon tax rate ranks 12th lowest compared with rates for all 50
Click tabs to swap between content that is broken into logical sections.