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Transportation Funding Testimony

By

Pennsylvania Transportation Funding and Reform Commission

2006-09-18

Good morning. My name is Jim Swoyer, and I’m a Public Interest Advocate with the Pennsylvania Public Interest Research Group Education Fund (PennPIRG). The PennPIRG Education Fund is a non-profit, non-partisan public interest advocacy organization, representing thousands of citizens across the state. I would like to thank the Commission for giving me the opportunity to testify today. The PennPIRG Education Fund would also like to thank you for your ongoing hard work and commitment to an issue that is vital to Pennsylvania and its future. We also commend Governor Rendell for his leadership in convening this important commission.

I am going to spend my time today speaking about the public transit component of Pennsylvania’s transportation system. In brief, the PennPIRG Education Fund is advocating that the Commission recommend the expansion of existing revenue streams for public transit, such as the real estate transfer tax, the tire tax, and the rental car tax, as well as developing new funding mechanisms, such as a transportation impact fee, a vehicle sales tax based on weight and/or fuel efficiency, as well as several others.

Our public transit systems are in serious jeopardy, which is well documented by the Commission’s initial findings. I probably do not need to tell anyone in this room why public transit is so vital to the Commonwealth, but in light of our broader audience, let me say a few words about the importance of public transit to everyday Pennsylvanians.

Quality, affordable public transportation is vital to Pennsylvania. Students rely on public transportation to get them to school. Pennsylvania businesses rely on transit to get their employees to work, and shoppers to their doors. Tourists and business travelers rely on public transportation to take them to area attractions and events. Public transit combats air pollution and helps reduce the kind of road construction that destroys open spaces and creates sprawl. Transit provides consumers with an alternative to high gas prices and expensive automobile costs, and gives seniors and the disabled a way to get to doctors appointments, run errands, and otherwise get around.

Pennsylvania communities reap billions of dollars in benefits from the public transit system, and millions of riders depend on its services, both direct and indirect.

The public transit system directly employees thousands of people and creates thousands of additional jobs through third-parties. When combined, the individual systems spend more than a billion operational dollars in local communities, and over half a billion dollars is spent annually on capital improvements. These capital investments generate tens of thousands of additional jobs, and up to $4 in federal grant money for every $1 invested.

There are other ways the public transit system confers economic benefits to non-riders. The most obvious example is relieving congestion and reducing driving time. By reducing sprawl, transit saves government funds that would otherwise be spent on an over-extended public infrastructure. Transit increases property values near transit stops, saves energy usage, expands the available labor pool for businesses, results in cleaner air, reduces auto fatalities, and helps welfare-to-work programs to succeed. Transit also allows seniors and other citizens with reduced mobility to lead independent lives.

Commuters derive value from merely having transit as a viable option. They can rely on it when their car is in the shop, or when they need to go out of town. Public transit is available when roads are closed, or when parking is a problem. By reducing car traffic in cities, it also lowers parking costs and increases its availability. Public transit options are also terribly important in cases of natural disaster or public emergencies.

The benefits of transit will become increasingly important in the future. As a population ages, the number of citizens needing transit (because of impaired mobility) increases. Highway and road congestion is exacerbated by population growth and urban sprawl. As the destructive environmental effects caused by global warming intensify, communities need ways to reduce vehicle transmissions.

An adequate public transit system is also an essential component of increasing Pennsylvania’s economic competitiveness now and in the future. Good public transit helps build sustainable communities and increases value for homeowners. Pennsylvania already possesses an extensive and high quality higher education system. Public transit fosters the kinds of communities favored by the skilled workforce required for high growth industries. As such, public transit will play a key part in helping continue Pennsylvania’s transition to a post-industrial economy.

The put it most plainly, transit is a public good and it is essential that we adequately fund it. The PennPIRG Education Fund is proposing that the General Assembly institute or expand a series of revenue streams that will put our public transit systems on sound economic footing. There are a number of factors to consider when judging the appropriateness of potential revenue sources.Each option should be considered in terms of its ability to grow along with needs, and the degree to which it either distorts markets or better aligns markets with public and social costs. Above all, these revenue streams should be permanent, sufficient, and reliable.

Permanency: the majority of funding sources should not automatically expire after a particular time period, and the bulk of funding should not have to be reauthorized through yearly budget negotiations.

Sufficiency: At minimum, the agencies need enough revenue to close their existing budget shortfalls. However, the best public policy would be to dedicate revenue streams that can be expected to grow along with anticipated future needs, including the rising costs of fuel and health care as well as reasonable capital investments.

Reliability: Agencies need to know how much in-state subsidies they can rely on over time in order to plan for the future, and need to be assured that funding sources are stable enough to depend upon. This will also allow agencies to maximize their investments by allowing them to secure as many federal matching dollars as possible.

The PennPIRG Education Fund is advocating the following eleven avenues through which to generate a permanent, sufficient, and reliable revenue base for our public transit systems. All of these mechanisms have a logical nexus with the public goods conferred by transit, and help recoup the costs vehicular travel displaces onto the general public. We are not advocating for specific rates or fee amounts, but rather we are asking that the Commission consider these recommendations as viable and appropriate funding sources. Of course, we would welcome the opportunity to work with the Department of Revenue if these proposals are ultimately put in place.

First, let me address the expansion of existing revenue streams:

Real estate transfer tax – There is currently a 1% realty tax of which 7.6 mills ($7.60 per $1,000) is allocated to public transit. Accessibility to public transit increases property values so it makes sense to invest some of this benefit back into the system. Conversely, developments that are not located near transit stops require vehicular traffic that displaces costs onto the general public. It therefore makes sense to recover some of these costs by funding our transit systems which helps reduce the damage caused by excessive traffic. In response to fears that this may impact a slowing housing market, let me say that several states with high reality transfer fees have grown very fast, particularly Florida and Nevada. It should also be noted that the industry’s brokerage fees impose their own six percent levy on home sales which gets passed on to consumers. There should be a balance between their profit margins and the costs they disperse onto the general public.

Rental car tax – Increase the current $2/day auto rental tax. This makes economic sense because visitors in rental cars do not pay all the fees in-state drivers pay to defray the costs of driving.

Tire tax – Increase the existing $1 excise tax on the sale of tires. This tax makes sense because tires clog our landfills and pollute our waterways. Proper disposal of tires in government waste sites is expensive. The tax is also tied to the amount of driving one does: the more miles you put on your tires represents additional costs displaced onto the general public. It is logical to recoup some of these costs at the point-of-purchase.

Parking tax – Some municipalities such as Philadelphia, and some counties, like Allegheny for example, already assess a version of this tax. This fee would generally fall on those who could use public transit but choose not to. As such, the revenue is generated directly from individuals who are directly benefiting from the congestion reductions of transit, as well as recouping some of the societal costs imposed by their decision to forgo public transportation. If the tax is deemed too high, the payee will usually be able to use public transit as an alternative. The parking tax could be a percent surcharge on parking transactions or a flat fee for hourly/daily/monthly rates. A more efficient version would be a levy on non-residential parking spaces themselves. It could be imposed on each parking space or per volume of parking area. Such systems already exist in three Australian cities and Vancouver, British Columbia.

Next let me address some new funding mechanisms:

Transportation impact fees – These are charges paid by developers for placing a new burden on the road system to accommodate increased traffic flow. They can be assessed locally or on a state-wide basis. Planners already must calculate the estimated number of vehicle trips that new developments will generate. Impact fees would internalize the costs that the public currently pays to subsidize development, especially in areas with long commutes. The fees would also indirectly encourage smarter growth near public transit.

Stormwater Fees – These are special charges applied to impervious surfaces (pavement and buildings). Unlike gardens, yards, and undeveloped land, impervious surfaces prevent rain water from returning to the water table and therefore impose costs on the public by creating the need for infrastructure to provide drainage systems, treatment facilities, etc. This is a major environmental cost of sprawl that is normally pushed onto the general taxpaying public. Such fees exist in many cities and range from about $5 to $20 per 1,000 square feet, or about $1-7 annually per off-street parking space.

Vehicle Battery tax – This constitutes a disposal fee assessed because batteries are toxic and expensive to dispose of. It internalizes some of the costs that drivers currently impose on society and again it is tied to the frequency of vehicle use.

The PennPIRG Education Fund also asks the Commission to assess the viability of the following taxes and fees:

Added vehicle sales tax based on weight and/or fuel efficiency – This makes pure economic sense because heavy vehicles put more stress on roads and bridges and gas guzzlers have greater negative social impacts. These vehicles cause disproportionate damage to our transportation infrastructure and environment, so it is logical to recoup some of these costs by funding public transit, which reduces the stress placed on our infrastructure.

Adjusted vehicle registration fees based on weight and/or fuel efficiency – These would follow the same logic as the sales tax.

Before I close, I want to say two additional things. The PennPIRG Education Fund urges the Commission to reject any proposals to raise fairs. Higher fares deter ridership, which leads to less revenue for the agencies, and reinforces the underlying fiscal crisis. The state’s largest transit agency, SEPTA, already has the 2 nd highest cash fares in the nation at $2 per trip. With gas prices as high as they are, transit needs to be an affordable alternative to driving. The PennPIRG Education Fund also urges the Commission to reject any proposals that would reduce the overall quality and quantity of service.Transit agencies have reduced service over the last two decades to compensate for inadequate funding, and they have dipped into capital budgets for basic operating expenses. This impacts the overall quality of the individual transit systems, further deterring ridership. Pennsylvania needs to improve the quality of its public transportation systems, not allow them to backslide.

I want to thank the Commission again for giving me the opportunity to testify, and Governor Rendell for making this forum possible. Thank you.

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