Transportation Economics/Revenues
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Revenue and Financing
[edit] Logrolling
Logrolling and vote trading are ubiquitous aspects of public financing of infrastructure. They are also essential because simple majority decisions say nothing about the intensity of preferences. Yet when allowed to proceed too far, they create other inefficiencies -- there is a finance externality. Logrolling is only significant when minority feelings are more intense than the majority's, otherwise the majority prevails anyway.
Following Buchanan and Tullock, Imagine a simple logrolling model where improvements are determined by referenda.
Imagine N farmers, each on cul-de-sac like roads A, B, and C, off of a Major Road.
- Each referendum to repair a single road, paid by all fails, farmers on roads B and C won't vote for A, etc. --- Non-Cooperative
- Kantian road service standards, when in need of repairs, any road below some threshold gets repaired --- Cooperative, may require a "Constitutional Arrangement"
Formula are possible in a narrow domain such as road repair, but much harder when comparing between domains (roads vs. education).
[edit] Financing Mechanisms
- Statute labor, or the corvee, working out the road tax
- Donations
- Private subscriptions
- Assessments on adjacent property
- Tolls
- Fines for failure to perform statute labor
- Public lotteries
- Public land sales
- Military Funds
- Taxes
(Railroads have financed with 3, 5, 7, 8 and some public subscription. Public land sales were particularly important)
[edit] History
In the 1790s, Lancaster Pike was the first significant turnpike in the US. In 1808, Gallatin posited that it was legitimate for government to finance roads. Only roads with reasonable returns should be built, but effective transportation is vital to the national defense.
The Federal Road of Act of 1916 established formula funding, the state highway organization, and the relative roles of government.
[edit] Public Role in Private Sector
Traditional
- Private contributions - $, in kind
Facilitator
- Planning (Government coordination)
- Matching private $ affect government grants
- State as Broker
Investor
- State as stockholder in private investment
- Transportation corridor development corporation
- State as developer
[edit] Private Role in Public Sector
e.g. Highways
- Design
- Build
- Operate (Lease to city for tax advantages?)
- Transfer
- Maintain
[edit] Financing
Taxes relating to transportation
- Tax increment financing (Bonds issued against increment)
- Value Capture Districts (% increase in assessed value due to accessibility)
- Exactions and impact fees (proportionate to infrastructure or congestion created)
- Proffers
- Regulation with loopholes
Incentives to build infrastructure
- Tax Exempt Bonds
- Regulatory Exemptions
- Government Backed Bonds
- Eminent Domain
Alternative Private Ownership of Infrastructure
- Toll Road
- Local "Club"/Private Driveways
[edit] Cost Allocation Study
Highways
Passenger Vehicles 93% of Travel miles, 64% of costs
Combination Trucks 5% 25%
weight distance tax would improve equity in the system and efficiency
Over Pay
- Pickups and Vans
- 2-axle trucks
Under Pay
- cars, 3 axle-trucks, tractor trailers
- Buses
[edit] Transit Allocation
Transit 1997 Fares total $7.126 Billion,
Total Operating Funds, $17.931 Billion
Unlinked Trips 7.954 Billion
-> approximately $1 fare, $3 average cost, marginal cost probably less.
[edit] Financing Local Transportation Infrastructure
Disbursements for highways Minnesota ($ in '000)
| Category | State (1997) | Local (1996) |
| Capital | 558,716 | 724,807 |
| Maintenance | 268,519 | 443,418 |
| Administration | 146,587 | 220,608 |
| Interest | 4,484 | 49,586 |
| Bond Retirement | 12,785 | 194,313 |
| Grants in Aid to Locals/Payments to State | 459,304 | 36,934 |
| TOTAL | 1,450,395 | 1,669,666 |
[edit] Revenue for Highways in Minnesota
| Category | State (1997) | Local (1996) |
| Motor Fuel Taxes | 519,456 | 0 |
| Vehicle Carrier Taxes | 526,619 | 0 |
| Federal FHWA | 304,899 | 0 |
| Federal Other | 4,749 | 4,045 |
| General Fund | 0 | 430,700 |
| Property Tax | 0 | 399,416 |
| Miscellaneous | 66,647 | 55,424 |
| Bond Proceeding | 603 | 177,962 |
| Local Governments/Payment from State | 29,103 | 604,962 |
| TOTAL | 1,452,076 | 1,672,509 |
Notes:
- No local user tax, no local tolls
- State doesn't use tolls or general revenues
- Local Miscellaneous much higher in California
- Vehicle Tax has gone down since this data out (reduction in vehicle tab)
[edit] Financing Transit
| Revenue Category | Amount |
| Operating | |
| Fares | 43,698.50 |
| Fare Revenue Returned | 3.3 |
| Retired | 0 |
| Other Revenue | 1,324.50 |
| NonTransportation | 791 |
| Dedicated Other | 0 |
| UZA Formula | 3,377.20 |
| Other Federal | 238.1 |
| State General Revenue | 0 |
| State Dedicated | 206.6 |
| Local General Revenue | 20,200.00 |
| Dedicated Other (Local Property Taxes) | 56,095.50 |
| TOTAL | 125,934.80 |
| Capital | |
| Property Tax | 14,203.10 |
| Gas Tax | 86.4 |
| Federal Capital Grant | 5,173.40 |
| UZA | 13,408.90 |
| TOTAL | 32,871.80 |
Metro Transit (1995) From National Transit Database
[edit] Expenses
- Operating Expenses - $125,000,000 (837 vehicles -> $149,000 / vehicle)
- Capital Expenses - $33,063,000 (Rolling Stock 23,617,000; Facilities 6,277,000; Other 3,173,000)
| Cost Category | Unit Cost |
| operating cost / vehicle revenue hour | $75.80 |
| operating cost / vehicle revenue mile | $3.30 |
| maintenance cost / vehicle revenue mile | $1.10 |
| non-vehicle maintenance / vehicle revenue mile | $0.20 |
| general administration / vehicle revenue mile | $0.90 |
[edit] Financing Tools
[edit] Gas Tax
Federal - 18.4 cents/gallon State - 20.0 cents/gallon Range: 8 cents in Alaska to 30.8 cents in Pennsylvania (insert state gas tax table here, or graphic)
[edit] Development Regulation
- Developer Exactions
- Impact Fees/Taxes
- Tend to be for basic services and infrastructure
- Technically straight-forward
- Legal Basis
- Minimize Cost to Developers
- Cost Sharing
- Negotiations and Proffers
- Development Districts
- Road Clubs
[edit] Transit Operators
-
- See Cervero - Rail Transit and Joint Development
- Air Rights Leasing
- Benefit Assessment Districts
- Connection to Transit Charges
History of railroad and checkerboard pattern of development of American West
[edit] Other Financing Tools
- Local Option Gas Tax,
- Local Option Sales Tax
- Toll Roads, (Orange County, CA is building network)
- VMT (Odometer) Tax
- Private Roads
[edit] The Choice Between Taxes and Tolls
(Ref: Levinson () Why States Toll: An Empirical Model of Finance Choice)
[edit] Research Question
States can impose tolls, yet not all do.
- What are the explanatory factors?
- How significant are they?
- What would happen if transportation powers were decentralized to metro areas or counties?
[edit] Hypotheses
- Share of Toll Revenue Can be Explained by:
- Non-Resident Workers (+)
- Neighboring States’ Policies (+)
- Historical Factors (Miles of Toll Road before Interstate Era) (+)
- Perceptions of Toll Incidence
- Toll Incentives
| ' | ' | Workplace | ' |
| In (D) | Out (B) | ||
| Residence | In (C) | Local (Resident Worker) | Exported Labor |
| No incentive to toll | Small incentive to toll | ||
| Out (A) | Imported Labor (Non-Resident Worker) | Through | |
| Medium incentive to toll | Large incentive to toll | ||
[edit] Data by State
| ' | Percentage | ' | ' | ' | Miles | ' |
| STATE | Revenue from Tolls (S) | Workers Who Live Out of State (O) | Residents Who Work Out of State | Federal Land | Toll Roads in 1963 | Freeways, Expwy, 1995 |
| Alabama | 0 | 2.4 | 3.6 | 3.3 | 0 | 925 |
| Arizona | 0 | 1.1 | 1.6 | 41.5 | 0 | 1250 |
| Arkansas | 0 | 4 | 3.2 | 8.3 | 0 | 646 |
| California | 2.1 | 0.5 | 0.4 | 44.6 | 0 | 3750 |
| Colorado | 0.3 | 0.8 | 1 | 36 | 17 | 1170 |
| Connecticut | 0 | 4.6 | 4.7 | 0.2 | 194 | 542 |
| Delaware | 25.3 | 13.8 | 9.5 | 2.2 | 11 | 51 |
| Florida | 7.8 | 0.8 | 1 | 7.6 | 207 | 1861 |
| Georgia | 0.4 | 2.8 | 2.4 | 3.9 | 11 | 1413 |
| Hawaii | 0 | 1 | 0.5 | 8.5 | 0 | 77 |
| Idaho | 0 | 2.6 | 4 | 60.6 | 0 | 613 |
| Illinois | 9.3 | 2.8 | 2.9 | 1.3 | 185 | 2245 |
| Indiana | 4.3 | 3.3 | 4.8 | 1.7 | 157 | 1303 |
| Iowa | 0.1 | 3.7 | 4.3 | 0.2 | 0 | 781 |
| Kansas | 6.5 | 7.1 | 7.6 | 0.5 | 241 | 1008 |
| Kentucky | 0.8 | 6.3 | 6.7 | 4.2 | 205 | 855 |
| Louisiana | 2.9 | 2.1 | 1.9 | 2.8 | 0 | 929 |
| Maine | 10.5 | 2.1 | 3.1 | 0.9 | 112 | 383 |
| Maryland | 7 | 7 | 17.3 | 3.1 | 42 | 711 |
| Massachusetts | 10.4 | 5 | 3.1 | 1.2 | 124 | 762 |
| Michigan | 0.7 | 0.8 | 1.5 | 10.1 | 0 | 1458 |
| Minnesota | 0 | 2.3 | 1.8 | 3.1 | 0 | 1042 |
| Mississippi | 0 | 3.1 | 5.9 | 4.3 | 0 | 726 |
| Missouri | 0.1 | 7.2 | 4.8 | 3.8 | 0 | 1460 |
| Montana | 0 | 0.8 | 1.2 | 27.5 | 0 | 1190 |
| Nebraska | 0.2 | 4.3 | 2.3 | 1.2 | 0 | 497 |
| Nevada | 0 | 4.3 | 1.2 | 77.1 | 0 | 586 |
| New Hampshire | 11.8 | 8.5 | 16.8 | 12.8 | 77 | 266 |
| New Jersey | 27.3 | 7 | 11.7 | 3.3 | 309 | 728 |
| New Mexico | 0 | 1.9 | 2.5 | 33.9 | 0 | 1003 |
| New York | 33.2 | 5.1 | 2.4 | 0.7 | 629 | 2328 |
| North Carolina | 0.1 | 2.2 | 1.8 | 6.9 | 0 | 1237 |
| North Dakota | 0 | 5.9 | 3.7 | 4 | 0 | 570 |
| Ohio | 3.3 | 2.8 | 2.2 | 1.1 | 241 | 1937 |
| Oklahoma | 7.6 | 1.1 | 2.9 | 1.5 | 174 | 1064 |
| Oregon | 0.5 | 3.7 | 2.1 | 51.8 | 0 | 780 |
| Pennsylvania | 11.7 | 3.4 | 4.3 | 2.2 | 469 | 2087 |
| Rhode Island | 3.7 | 7.6 | 11.9 | 0.7 | 0 | 137 |
| South Carolina | 0 | 2.1 | 1.8 | 3.8 | 0 | 894 |
| South Dakota | 0 | 3 | 4 | 5.5 | 0 | 681 |
| Tennessee | 0 | 4.6 | 3.3 | 5.7 | 0 | 1176 |
| Texas | 2.5 | 0.9 | 0.8 | 1.4 | 30 | 4474 |
| Utah | 0.1 | 1 | 1.3 | 63.1 | 0 | 948 |
| Vermont | 0 | 4.9 | 5.8 | 6.4 | 0 | 1329 |
| Virginia | 4.7 | 6.5 | 9.3 | 9.4 | 35 | 339 |
| Washington | 4.1 | 1.5 | 2.7 | 24.1 | 0 | 1079 |
| West Virginia | 6.6 | 8.3 | 9.7 | 7 | 86 | 560 |
| Wisconsin | 0 | 1.4 | 3.2 | 5.3 | 0 | 830 |
| Wyoming | 0 | 2.6 | 2 | 48.5 | 0 | 916 |
Correlations Matrix
| ' | ' | ' | ' | ' | ' | ' | ' | ' |
| Toll Share (S) | Population (P) | Toll Mile 1963 | Imported Workers | Neighbor Effect (N) | Land | Density | Federal Land (%) | |
| Toll Share (S) | 1 | |||||||
| Population (P) | 0.27 | 1 | ||||||
| Toll Mile 1963 | 0.71 | 0.39 | 1 | |||||
| Imported Workers (O) | 0.49 | -0.27 | 0.16 | 1 | ||||
| Neighbor Effect (N) | 0.61 | -0.03 | 0.36 | 0.54 | 1 | |||
| Land | -0.32 | 0.36 | -0.22 | -0.5 | -0.45 | 1 | ||
| Density | 0.53 | 0.18 | 0.39 | 0.39 | 0.7 | -0.48 | 1 | |
| Federal Land (%) | -0.28 | -0.07 | -0.32 | -0.29 | -0.22 | 0.45 | -0.32 | 1 |
[edit] Results
| ' | Model 1 | ' | Model 2 | ' |
| Coefficients | t Stat | Coefficients | t Stat | |
| Intercept | -0.03 | -2.42 ** | -0.036 | -2.51 ** |
| Population (P) (millions) | 0.00383 | 3.20*** | 0.00386 | 3.15*** |
| Mile Ratio (M) | 0.3 | 4.13*** | 0.35 | 5.25*** |
| Imported Workers (O) | 0.85 | 2.92 ** | 0.84 | 2.85 ** |
| Neighbor Effect (N) | 89877 | 1.71 * | ||
| Regression Statistics | ||||
| Multiple R | 0.81 | 0.79 | ||
| R Square | 0.65 | 0.63 | ||
| Adjusted R Square | 0.62 | 0.6 | ||
| Standard Error | 0.04 | 0.05 | ||
| Observations | 49 | 49 | ||
| F | 20.87 | 25.76 | ||
| Significance F | 0 | 0 |
[edit] Conclusions
- Finance Choice depends on (positively) cross-border flows, neighboring state tolls, historical use of tolls, and population.
- Devolving power to metropolitan areas is insufficient to achieve significant road pricing.
- Under radical decentralization tolls may become widespread.
