New taxes for transit?

New taxes for transit?
While a transportation planning firm has concluded transit spending is not meeting demand, others question the notion that new revenue sources are warranted. Photo: freepik.com

Investments at the local and state levels on transit throughout Washington state isn’t keeping pace with economic growth, and new revenue sources such as a carbon tax could cover the gap. That was the argument made by transportation planners at the June 26 meeting of the Joint Transportation Committee in Spokane. However, some transportation analysts question both the idea of unmet demand and the need for more funding.

In a presentation discussing a new transit capital needs assessment report for the committee, Project Manager Tim Payne with Nelson\Nygaard outlined what his firm says is an untapped demand and possible funding options to meet it.

“There’s a half a billion dollar gap over the next 10 years for agencies simply to try and keep pace with the level of economic activity in the state,” Payne said.

Excluding Sound Transit, ferries and nonprofit transportation, there are 31 transit agencies in Washington funded primarily through local sales tax revenue that operate a total of 9,000 vehicles. The agencies provide 193 million rides and 9.5 million hours of service every year, the equivalent of 26 rides for every person in the state.

However, Cato Institute Public Policy Analyst Randal O’Toole wrote in an email that “this is insignificant enough considering the average Washingtonian probably takes well over a thousand automobile trips per year.”

The assessment argues that transit could provide 15 million more rides annually “if they could reallocate existing local funding spent on capital to providing service.” Local funding makes up 89 percent of all transit spending, with 76 percent local taxes. Transit fares cover just 13 percent.

However, Payne says that due to financial constraints created by funding sources “most agencies in the state are really unable to catch up to their communities. They’re continuing to lag behind the growth of the communities and the economic activity in their communities. Part of that is because there is not enough capital…available to buy the…assets required, nor is there enough money to operate those capital assets to allow agencies to keep up with the economic activity of their agencies.”

The new assessment examined six case studies of transit agencies to determine their capital investment needs over the next decade by estimating the average lifespan of vehicles, their remaining usefulness and the condition of transit facilities. Its conclusion: between now and 2028 transit agencies will face $2.10 billion in costs on fleet and facility replacement, $3.97 billion on service restoration and $.598 billion in planned expansions. It also found that there are 2,090 vehicles in need of replacement which is estimated to cost $503 million.

Payne added that “if we then go to what is actually contained in state transit development plans…over the next decade, (a) big gap grows to $2.6 billion….and that does not include the money to operate those assets.

“It’s one thing to have the buses to run; it’s another thing to have a place to bring them, to dispatch them out of, to do preventive maintenance on them, to store them.”

The assessment offers a list of possible new taxes to cover additional transit spending, including:

  • Sales and use tax;
  • Household excise tax;
  • Employee excise tax;
  • Carbon tax; and
  • Payroll tax.

Also suggested is a transportation package approved by the legislature. All but the sales and use tax would require legislative approval.

However, some analysts like Washington Policy Center Transportation Director Mariya Frost are skeptical about the claims of unmet demand. She points to a study released earlier this year by the University of Kentucky showing decreased transit demand nationwide; all major cities except for Seattle had fewer riders since 2016.

That view is also shared by O’Toole, writing that the report “greatly overestimates” the need and demand for transit outside Seattle. “Is it really worthwhile spending a bunch of tax dollars where people won’t use it?”

And in cases where transit ridership in Washington state has dropped, agencies such as Ben Franklin have actually increased spending, she added. “Instead of cutting back on sales taxes they impose and looking for ways to right-size the agency to the ridership need, agencies are seeking to expand service.”

During the June 26 meeting, Rep. Keith Goehner (R-12) wondered if any unmet demand stemmed from the “expectation of service in areas that may not be really economically feasible, but yet because it’s part of a transit concept there is that demand.”

If there is unmet demand, Frost says private innovation as already seen with ride-sharing companies should be given a chance to meet it based on incentives. “Why give them (transit agencies) more and more money if they don’t have incentive to produce better results?”

One way to change that is “forcing transit to rely more on user fees,” O’Toole writes. That “would give transit agencies incentives to adapt to modern life and actually do things that transit riders need.”

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