Funding Transportation Districts

Background

Funding for transit comes from federal, state, and local sources, but in Washington most of the funding is local level. State law allows the creation of Transportation Benefit Districts (TBD) with the authority to tax, and to spend the revenue to improve transportation in the district. These TBDs can use any one of the following taxes:

  • Sales tax up to .2%, requires voter approval. This is the most used funding source, but tends to be volatile.

  • Business and Occupation Tax. No limits, but does require voter approval.

  • Household Excise Tax. Limited to $1 per housing unit per month and requires voter approval.

  • Employer Excise Tax. Limited to $2 per month per employee and requires voter approval.

  • Property tax must be approved annually by voters

  • Vehicle license fees. There is a schedule for how much vehicle license fees may be levied each year without voter approval, starting with $20, two years later up to $40, two years later up to $50. Higher vehicle license fees may be levied if voter approved. This was voted out under I-976, but allowed back in when I-976 was declared unconstitutional.

  • Developer impact fees. Can raise money this way, but it is not a stable form of revenue.

So in terms of tax support, a transit agency must pick one of the available options, and is then limited to what revenue can be raised within the caps on that option. King County Metro, for example, has maxed out the amount it can raise from sales tax, and since only one type of tax is allowed, that is the most it can get from tax revenue. Statewide, the situation is a little better, but averaged over all, agencies are at 80% of allowable revenue via voter approval.

Transit agencies are also funded by fares; King County Metro gets about a third of its funding from farebox recovery.

Seattle has a Special Transportation District, as do Metro and Sound Transit. But Puget Sound is not alone in this: many regions in the state have their own districts with some level of transit.

Transit Capital Needs Assessment

This is a report from the State in 2019, which outlines trends in transit capital needs in Washington and has comparisons to other states: Transit Capital Needs Assessment. The report points out that in the Great Recession, most agencies continued service but that this was funded by pfutting off capital improvements. The report concludes, given the ages and expected lifespans of the buses, that transit agencies in the state are underfunded, and vehicle replacements are backlogged. Agencies have also not kept up with population growth, and in some cases are limited by their existing facilities; to expand, they would need, for example, new bus barns. There is no transit agency in the state that has a fleet at 50% of lifespan, and some have agencies average 20% or less. The transit agencies have sufficient funding to handle the capital needs, but they do not have funding do this and to restore system cuts made in 2008, or to grow operations to match population growth from the last 10 years. That report was in 2019, and assumed no economic downturn, but all of our transit operations have been hit hard by covid, and Federal funding has not been sufficient to fill the gap.

Note that with so many vehicles at the end of their lifespan, we should be allocating enough funding to replace with electric vehicles, which will decrease the maintenance and fueling costs significantly, while also improving air quality and reducing GHG emissions. It is also possible that if transit agencies partner up with utilities, they could get funding or financing from the utilities.

State Funding for Transit Compared Nationwide

Washington ranks #17 in the nation for transit funding per capita. We spend $14.07, which is well below the national average of $42.11 per capita. Most of these state are funding capital expenditures (including vehicle replacement), which leaves local agencies with just operating costs.

Alternative Funding Possibilities

Perhaps the biggest need is to remove the limit that TBDs may use only one type of taxable revenue. The State's report on Capital Needs suggests that given the amount of revenue required, a carbon fee, a payroll tax or funding via a transportation package would be the most feasible methods of funding transit.

For 2021, the state could give other taxing authority to local transportation districts. The Capital Needs report details these possible additional ways the state could allow local jurisdictions to fund TBDs:

  • Carbon Tax or Fee. Carbon pollution fee imposed on all fossil fuel sales within the state. The proceeds would go down over time, presumably.

  • Transportation Network Company (TNC) Fees. A pubic utility tax on a driver's gross receipts.

  • Transit Payroll Tax. As done in Oregon (see below), and could be managed similarly to the Paid Family and Medical Leave Program. Revenue should be very stable.

Suggested new forms of revenue from the Alliance for Clean Jobs and Energy include the following:

  • Employer Tax for Transit. Both New York City and TriMet in Oregon receive operating revenue from payroll-based taxes on employers. The NYC tax rate is graduated based on total payroll, while the TriMet tax is currently set at 0.7737% for all employers and self-employed individuals, and accounts for 60% of TriMet revenues. Both taxes are paid by employers, not employees. In addition, Oregon recently passed a smaller statewide transit payroll tax that is withheld from employee wages.

  • Parking Stall Tax. This tax could be based on square-footage or number of stalls and is targeted at large business or property owners that dedicate substantive amounts of land to non-residential free and unlimited parking for customers. Intended to disincentivize sprawl and auto-centric land use and revenue generated could support multimodal options.

  • Transit Assessment District. Assessment districts have been used to support public services and facilities over a century. Properties with values enhanced by nearby public services and facilities are assessed for their relative benefit over comparable properties further away from the services and facilities. Total assessments are based on the service’s or facility’s annual operating and capital costs including debt service and other non-current obligations, like net pension liabilities.

  • Air Quality Surcharge. A one-time charge on the sale or lease of new vehicles, as well as a one-time charge on the remaining life of vehicles being retitled/registered in Washington for the first time (preventing recent out-of-state purchases for the purpose of evading the charge). The charge would vary based on a vehicle’s estimated lifetime greenhouse gas pollution determined from a vehicle’s fuel economy (MPGe) rating from the EPA. It would create an immediate incentive to purchase more efficient, less polluting vehicles, cutting Washington’s greenhouse gas emissions and contributing to air quality. Since new vehicles are primarily purchased by more affluent people, this would be a relatively progressive charge.

It would also be better if the TBDs laws were changing to make it easier for council to approve taxes without going out to all the voters, and particularly (as for property taxes) to require a new vote every year.