New Funding Sources--Quick Ideas

Representative Hamos has issued a challenge to identify public transit funding sources other than an increase in the regional sales tax that the Governor has pledged to veto. Many of the comments thus far have been of the crackpot "tax the Machine" variety. Here's a few quick ideas before I attend to the chores.

Real Estate Transfer Tax: The Governor's opposition to SB 572 seems focused more on the proposed sale tax increase than on the imposition of a real estate transfer tax in the City of Chicago. The proposed real estate transfer tax covering all of the City of Chicago thus remains. The tax is extended to the collar counties in a limited fashion, applying only to real estate located within one mile of a CTA or Metra train line that is in operation or identified as a project in the FTA's New Starts program (e.g., STAR Line). Such a tax recognizes that public transit rail investments increase property values in the surrounding area and captures a small portion of that increase. Yield: $150 million.

Parking Lot Tax: For reasons that will be covered in a later post, a tax on parking spaces might make good sense. The RTA estimates that a $100/year tax on unpaid commercial parking spaces alone would raise $100 million. There may be better approaches as well. Such a tax promotes more efficient use of parking spaces, which has positive environmental benefits (parking lots have terrible environmental consequences and are empty most of the time). Such a tax encourages employers to provide "Commuter Choice" tax benefits to employees--allowing employees to buy transit using pre-tax dollars at a substantial saving and allowing employers to reduce their investment in parking spaces. Yield: $100 million.

Vehicle Registration Fee: Cars in the six-county region impose a cost that they generally don't elsewhere in the State, namely, they add to congestion that is adversely affecting the region's--and hence the State's--economy. Thus, vehicles in the six county region pay a higher registration fee. According to the RTA, a mere $10 increase raises $50 million. Let's add a $30 fee and raise $150 million. It is a condition of registration that each car in the six-county region have an I-PASS (see below). Yield: $150 million.

Bridge Program: The Illinois State Tollway would be directed to install I-PASS toll collection points on bridges on state highways and the interstates (to the extent allowed by federal law) over major rivers (e.g., Fox, Des Plaines, Chicago). After deducting its fully loaded costs the Tollway would turn the money over to the RTA. The net proceeds would be distributed as follows: (a) one-third goes to a fund dedicated for the repair, rehabilitation and replacement of highway bridges; (b) one-third goes for transit; and (c) one-third goes to the municipality or municipalities in which the bridge is located for local highway or transit (e.g., demand response service) purposes. Local governments could toll other bridges in their jurisdiction if (a) the RTA approved of the toll rate as consistent with regional bridge toll rates and (b) the proceeds were shared as described above.

The bridge program provides a framework for congestion pricing and a steadily increasing revenue stream as more cars over more bridges get tolled. Raising money for bridge repairs is a relatively easy sell these days, after the Minneapolis bridge collapse. The fact that the locals would get a cut of the bridge tolls would help make the program more palatable in the trenches. Yield: Substantial. Potentially several hundred million dollars each year.

These four approaches to raising money are much more closely tied to transportation than a sales tax increase. The real estate transfer tax captures a portion of the value generated by transit investment and service. The parking lot tax passes on to property owners and ultimately drivers the externalities associated with parking lots and, by extension, driving (e.g., runoff from parking lots). The same holds true with an increase in the vehicle registration fee. The bridge tolling program allows the region to develop an infrastructure for congestion pricing, possibly the most effective tool of traffic management, as well as fund key infrastructure, transit, and locally-run transportation programs.