Rebuilding Place in the Urban Space

"A community’s physical form, rather than its land uses, is its most intrinsic and enduring characteristic." [Katz, EPA] This blog focuses on place and placemaking and all that makes it work--historic preservation, urban design, transportation, asset-based community development, arts & cultural development, commercial district revitalization, tourism & destination development, and quality of life advocacy--along with doses of civic engagement and good governance watchdogging.

Monday, August 28, 2017

Funding WMATA by a regional sales tax

I haven't been writing about WMATA, the DC area subway and regional bus system, and its financial issues because it's been overwhelming. 

The steady drumbeat of bad news about the Metrorail system has overwhelmed my capacity to write about it.  There are just so many countervailing and conflicting issues that it makes it difficult to write the kind of supra-authoritative pieces that I tend towards.

Fortunately, even though the situation is complicated, I can fall back on a large body of work on the topic that I have produced over the years, including these broad themes:

1.  Needing to rebuild a regional consensus about what transit means, its importance, and how to go about achieving it

• St. Louis regional transit planning process as a model for what needs to be done in the DC Metropolitan region, 2009
• TriMet (Portland): CHALLENGES & CHOICES A Budget Discussion Guide, 2012
WMATA 40th anniversary in 2016 as an opportunity for assessment, 2014

2.  The failure of the area's Metropolitan Planning Organization, tasked by the federal government to do and coordinate transportation planning to execute that role to its logical extent, so that by default WMATA ends up being the primary metropolitan transit planner by default

• Metropolitan Mass Transit Planning: Towards a Hierarchical and Conceptual Framework, 2010
• Without the right transportation planning framework, metropolitan areas are screwed, and that includes the DC area, 2011
Route 7 BRT proposal communicates the reality that the DC area doesn't adequately conduct transportation planning at the metropolitan-scale, 2016

3. Various pieces about WMATA's current conditions in operation, financing and governance shaping today's crises

• Defining service standards down as an indicator of breakdown in metropolitan transit planning, 2012
• Getting WMATA out of crisis: a continuation of a multi-year problem that keeps getting worse, not better, 2015
What it will take to get WMATA out of crisis, 2015
What it will take to get WMATA out of crisis continued and 2016's 40th anniversary of WMATA as an opportunity to rebuild, 2015
WMATA and two types of public relations programs, 2015

4.  Related to point #2, it is possible to redesign the metropolitan and regional transit system in ways that achieve more and better service, but I am not holding my breath:

Will buses ever be cool? Boston versus the Raleigh-Durham's GoTransit Model, 2017
One big idea: Getting MARC and Metrorail to integrate fares, stations, and marketing systems, using London Overground as an example, 2015
The answer is: Create a single multi-state/regional multi-modal transit planning, management, and operations authority association, 2017

Competing recommendations.  There have been a variety of competing recommendations for its management and funding ("Metro GM proposes 'new business model' and $500 million a year in extra funding to save D.C.-area transit agency," Post), Virginia has organized a review led by former Secretary of Transportation Ray LaHood, and now there are proposals to enact a regional sales tax ("Regional Officials Call For Sales Tax To Fund Metro," WAMU/NPR).

For me, the various proposals and reports illustrate once again the reality that our region doesn't do true "regional transportation planning."

Ideally, the organization tasked with transportation planning responsibilities for the DC region, the National Capital Region Transportation Planning Board, would have led an impartial effort to figure things out.  What the problems are, what potential solutions could be, what the options are.

THAT hasn't happened.  At least not the way that I would do it.

The MWCOG did do a study, which recommended a sales tax, but the report ("COG analysis of Metrofinds more than $7 billion shortfall in capital and maintenance funding, presents options to close the gap," MWCOG press release) did not lay out all the possible options in the way that the Metrolinx report does.

The result is suboptimal outcomes.

Although in fairness to the Council of Governments, the fact that the system is in crisis now--the report outlines major funding gaps and argues that an additional revenue stream provided by dedicated funding is necessary by 2019--precludes a judicious consideration of the issues, and lining up support for the best funding program, which in the best of circumstances, takes years.

Crises are a bad time for innovation and measured thought.  While Rahm Emanuel has a famous quote about not letting crises go to waste, my sense is that crises are terrible times for innovation, because people are too confused and desperate to consider and reason clearly.
"You never let a serious crisis go to waste. And what I mean by that it's an opportunity to do things you think you could not do before." -- Rahm Emanuel
The debacle with WMATA--managing it, funding it, operating it--is proof that most places aren't capable of rising to the occasion of a crisis.   Furthermore, even in the best of times, it takes jurisdictions a long time to create the necessary consensus to support big projects, big funding initiatives, etc., especially in a region that does do big projects, but in a one-off rather than a coordinated fashion.

Report for Metrolinx lists 25 options.  I'm fond of a report done for Greater Toronto's Metrolinx, which listed 25 different funding options.  By including the full list, I don't mean to suggest that we need to enact every one of those taxes, I just like being able to see a complete list.

Personally, I think the best option would be to do a transit withholding tax--something that is done in parts of Oregon, in the area served by MTA (railroads and transit in New York City) in New York State--which was pioneered by the French with what they call the versement transport.

In France, governments are not exempt from the versement transport.  In Oregon and New York, governments are mostly exempt, in particular the federal government.  For this to work in the DC area, the Federal Government would have to agree both to allow their employees to be taxed and to pay the tax. In the current political environment, this will never happen.  Therefore, while ideal, it's not practical.

The WMATA sales tax proposal.  The sales tax proposal is controversial because:

(1) some jurisdictions don't want to participate

(2) certain advocacy groups argue that a sales tax is paid disproportionately by the less well off, who are more dependent on transit, but don't ride the subway as much and so they don't support a sales tax surcharge for transit ("Ahead of regional summit, left-leaning policy groups say 'No' to a sales tax for Metro," Post; Triple Whammy: A Regional Sales Tax for Metro, Like Fare Hikes and Service Cuts, Would Fall Hardest on Struggling Families, joint report by the DC Fiscal Policy Institute, Maryland Center on Economic Policy, and The Commonwealth Institute)

(3) DC Council Chairman Phil Mendelson argues that the funding formula for WMATA should be revised because DC pays disproportionately in terms of population ("New dispute over cost of fixing Metro pits District against Virginia, Maryland," Post)

(4) but the Washington Post disagrees with Mendelson ("The District’s death wish for Metro"), accusing the city of threatening Metro's success by complicating approvals for a dedicated funding stream.

Meanwhile, I lament that a reasoned approach to analyzing the options and making recommendations wasn't taken.

For example, counter to the Post's assertion, it is reasonable to make the regional funding system for WMATA to be "more equal," because DC pays more than it should based on the fact that many of the daily users are commuters and their income tax revenue goes to Maryland and Virginia.

Originally, too I was somewhat concerned about "a sales tax for WMATA" because I think it should be a "sales tax for transit," with the funding stream opened up to other transit investments.  That bothers me still, but a little less, because a recent Caltrain sales tax initiative--which would be assessed in addition to sales taxes that fund the Bay Area Rapid Transit (BART) system--is moving forward ("Poll: Caltrain sales tax hike draws huge voter support," San Jose Mercury News).

But since the desire for funding has been driven by crisis--the need to get WMATA to a place where they can do large scale debt financing--a reasoned consideration of the options hasn't occurred.

My recommendation: a combination of sales and property taxes.  Personally, I think a combination of sales taxes and a graduated property tax surcharge is in order.  By graduated tax, I'd argue that properties within the defined "transit shed" of the Metrorail system should pay at a rate reflecting the proximity to the network.  Closer in properties should pay more than those farther out.

(Note that we must recognize that when the economy undergoes recession these funding streams aren't impregnable--they drop too as many transit agencies relying on such tax streams were driven to the brink of disaster during the Great Recession.)

Tennessee does what Washington should have done: creates a transit funding calculator.  Nashville doesn't have rail transit, and they are considering it, along with other boosts to transit including bus rapid transit.  As part of the process of consideration of transit expansion and how to fund it, the Nashville Tennessean reports ("How much could different taxes generate for transit in Nashville region? There's now a calculator"):
... there's now an easy way to calculate the transit funding potential of four tax possibilities: increasing to sale tax, property tax, hotel/motel tax and wheel tax.

On behalf of the Nashville Area Chamber of Commerce, William Fox, professor of business and economic and the University of Tennessee, has created new revenue forecast models, Nashville Transit Revenue Forecast Model, that projects funding capacity over time for each of these taxes.

"We've developed the capacity for you to develop and create your own revenue estimates," Fox said at a Wednesday meeting hosted by the chamber to roll out its Moving Forward transit group's latest report. "It is so easy to use. Anybody can run this model easily and quickly." ...

There are different models for 10 counties including Davidson based on historic patterns and growth forecasts. It allows anyone to go online and see the potential of raising one of the four taxes by a certain percentage. The tool also allows one to see the impact of raising a combination of the four taxes.
The advantage that Tennessee has though is that they are at the start of their process.  Similarly, the BART system is funded in part by a sales tax assessed in participating jurisdictions. Same with Greater Atlanta, some counties opted out of participating in MARTA, which they mostly now regret.  Creating a dedicated funding system for WMATA should have been done at the start of the project, not 40+ years in after the system opened, and 50+ years if you start counting the planning, design, engineering, and construction period before the system opened.

26 ways to tax to fund transit
(Based on the report, Big Move Implementation Economics: Revenue Tool Profiles, produced for Metrolinx Toronto by AECOM and KPMG)

• Auto Insurance Tax
• Car Rental Fee
• Carbon Tax
• Cordon/Congestion Charge
• Corporate Income Tax
• Development Charges/Impact Fees
• Driver’s License Tax
• Employer Payroll Tax (Versement Transport)
• Fare Increases
• Fare Surcharges (There is a fare surcharge to use the SFO Airport via the BART system; "BART cuts surcharge for SFO workers," San Francisco Chronicle; Boston's Logan Airport is considering surcharges for passenger drop off and pickup to encourage use of transit, "Dropping off a friend at Logan? It could cost you," Boston Globe)
• Fuel Tax
• High Occupancy Tolls
• Highway Tolls
• Hotel & Accommodation Levy (Hawaii is about to approve this type of tax to help fund the commuter rail system in Honolulu, "After reaching deal, lawmakers to meet for special session on Honolulu rail funding," Hawaii News Now)
• Income Tax
• Land Transfer Tax
• Land Value Capture
• New Vehicle Sales Tax
• Parking Sales Tax
• Parking Space Levy
• Property Tax
• Sales Tax
• Tax Increment Financing (Special Assessment Districts)
• Utility Levy
• Vehicles Kilometers/Miles Travelled Fee
• Vehicle Registration Surcharges (this is allowed in Washington State, through what is called a Transportation Benefits District, and in the Puget Sound, a Regional Transit Authority fee for Sound Transit)

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At 8:11 PM, Anonymous charlie said...

Have you seen how far they need to extend the sales tax?

Again my argument is that DC needs to take over Metrorail.

Looking through your toronto list, in the DC area we already have a lot of those taxes/fees but not being spent on "transit".

And of course what all this is really about is then taking the "dedicated" revenue and issues sales tax bonds on them.. Mixing those stream would NOT be things that investor want to buy.

Off topic, did my first e-bike ride in Michigan this weekend.

At 8:28 AM, Blogger Richard Layman said...

where were you in Michigan? It's been so long since I've been there. Hopefully, next year. (I did ride an e-bike a couple times. They are heavy.)

... your point about DC taking over Metrorail is interesting. You know I argue for the DMVTA. But that still requires super-duper engaged and committed participants, and a separation of politics from transit. (Not that some politics doesn't get in there.)

The reality is that is what happened "back in the day." Many transit systems serving a metropolitan area ended up being owned by the center city, because they were bigger and had more money, and because the value of a functioning transit system mattered to the center city the most. E.g., Detroit's DSR (Detroit Street Railway) is an example.

Why transit authorities in New York City and Boston became state-run was because the demand for money/financing exceeded the capacity of the locality.

(All this is complicated by the private vs. public thing. Eventually private operation of transit stopped working economically. As you know.)

OTOH we know with both Cuomo and Baker that the "state" tends to have different interests and can shift funds and priorities in ways that aren't beneficial. Similarly, politics can get in the way too.

Somehow though, with Connecticut as an example what you suggest could work. E.g., the various New Haven lines called Metro North serving Connecticut are owned by the State of Connecticut but the service is provided by Metro-North/MTA under contract.

I don't know how the suburban jurisdictions would put in money though with DC still calling the shots.

Let alone that the current debacle proves that DC doesn't have the vision capacity to step up to the plate.

I don't know much about WASA, but it is a different example of the other jurisdictions dealing with DC, even though DC has more control--it's not an equal split.

about bonds, I guess sales taxes, property taxes, tolls, congestion charges, and a withholding tax would be the most stable streams attractive to bond purchasers.

At 11:46 AM, Anonymous charlie said...

western MI, on the lake.

Yes, heavy. Don't want to lug around to store it. Also the price is enough that theft is a real deterrent.

If it takes off, a big push to make smoother bike lanes.

Again back to sales tax, how far? PW county? Loudon?

Model of DC ownership is better. WASA is a great example. IF MD and VA want reasonable fares they can pay. If not they get $25 commutes. They do not get board seats.

Not sure tolls and congestion charges could be securitized into bonds. Sales tax, property tax or withholding tax could be. Future federal revenue could be.

I also can't see what WMATA can't issue more bonds based on GO bonds the 3 jurisdictions put out. I guess DC does not have that capacity.

At 1:00 PM, Blogger Richard Layman said...

Good points as always. Yes, you've mentioned GR in the past...

wrt theft considerations and e-bikes, that's another endorsement for the need to create more widely available secure bike parking.

you know more about financing than me (a lot more), but my understanding is that because WMATA is funded by appropriations from the jurisdictions not tax revenue streams, they can't issue bonds in the same way.

DC does issue, I think, tax anticipation notes. I suppose that WMATA could issue the equivalent. But they would be "appropriations anticipation notes." And in either case, I think they function more like commercial paper, with short terms.

At 10:00 AM, Blogger Richard Layman said...

Some Scotland cities will be imposing a pollution tax on heavily polluting vehicles


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