How do we pay for transportation, anyway?

We have been talking a lot about our transportation funding needs and shortfall between now and 2040 – for Ada and Canyon Counties we project $359 million in annual transportation funding needs, but only $200 million in annual transportation funding, for a shortfall of $159 million per year.

You are probably aware that COMPASS supports increasing transportation funding to help bridge this gap, and that the transportation funding issue will likely be discussed in depth at both the state and federal levels in 2015. I encourage you to be part of that conversation; however, I know it can be difficult to do that without first understanding where the money comes from now. Let me try to shed some light…

Simply put, funding for our transportation system is first collected through taxes by various branches of our government, then distributed to transportation agencies to maintain and improve our transportation system. Transportation funding is designed to primarily be a user-pay system, with the majority of the money coming from fuel taxes. The concept is simple: the more you drive, the more fuel you use, the more you pay in fuel tax. That tax, in turn, is used to build and maintain the transportation system.

However, once we move beyond the very basics, it gets complicated quickly.  

Where does transportation funding come from, and who collects it?

As I mentioned above, most transportation funding comes directly from transportation “users” through fuel taxes, as well as registration fees, impact fees (fees paid by developers to offset costs due to growth), and public transportation fares. Some funding also comes from more general taxes, such as property taxes.

Fuel taxes are collected by both the federal government (18 cents per gallon for gasoline and 24 cents per gallon for diesel) and the State of Idaho (25 cents per gallon for both gas and diesel). It is important to note that these amounts have not changed since the mid-1990s and do not change with the price of fuel. Because the tax rates have remained unchanged for 20 years, they have not kept pace with inflation. This, combined with more fuel efficient vehicles and national trends that show that people are driving less, means that the “user-pay” concept isn’t working as it once was. Costs are continuing to increase, but the funds to pay for those expenses are not.

Vehicle registration fees are collected by the Ada County Highway District (ACHD), through a local option registration fee approved by voters, and by the State of Idaho. Valley Regional Transit and ACHD Commuteride both collect fares from users, and ACHD and the City of Nampa both also levy transportation impact fees on new development. In addition, local municipalities can use a portion of property taxes to pay for transportation infrastructure and services. Valley Regional Transit operations are mainly supported by local cities, primarily from property taxes.

How is transportation funding spent, and by whom?

Here is where things get really complicated. Unfortunately, there isn’t just one “pot” of transportation money to draw from. Each of the different types of taxes, above, have strings attached that limit how they can be spent. In addition, in some cases funding is further divided into different funding “silos,” even within one funding source. I’ve highlighted just a few examples below to give you a feel for how this works. 

• Federal Fuel Tax: Fuel taxes collected by the federal government are returned to the states. Idaho is in the enviable position of receiving more back from federal fuel tax than it pays in – at least $1.50 for every $1 contributed. A portion of the federal funding that comes to Idaho is specifically for the Idaho Transportation Department to use on state managed highways. The rest of the funding is for use by local transportation departments, based on size – some funding is for rural areas, some is for small urban areas, some is specifically for the “Boise Urbanized Area” (basically northern Ada County). Some of those funding “silos” are further divided, with specific funding allocated for safety, for bridges, for public transportation, for roads, etc. 

• State of Idaho Fuel Tax: Funding from this tax is divided between the Idaho Transportation Department to fund state highways and local transportation departments (cities and highway districts) to fund local roads. Per the Idaho constitution, fuel taxes cannot be used to fund public transportation, leaving Idaho without dedicated public transportation funding. 

• Impact Fees: These fees, collected from developers in the City of Nampa and within Ada County, can only be used for transportation projects related to new development, and cannot be used for maintenance or operating costs. For example, impact fees could be used to add stoplights to accommodate increased traffic, but not to pay snow plow drivers. The specifics of how these fees can and cannot be used is spelled out in state law. It’s important to note that those fees do not have to be used at the exact site of the development; they can be used for traffic improvements to address growth-related challenges within the jurisdiction of the agency that collected the fees, based on specific criteria. 

So, what does all this mean to me?

You will undoubtedly hear more about transportation funding at both the state and federal levels over the coming months. As you form your opinions on what should be done, keep the following points in mind: 

The current system of funding our transportation system primarily with gas taxes no longer works as intended. Something needs to change. This may be raising the gas tax, augmenting the gas tax with additional funding mechanisms, or changing our expectations of what our transportation system should do for us…basically, consciously choosing to forgo maintenance and not expand to accommodate growth. Personally, I think it will take a combination of all of these.

The “silo” issue needs to be part of the discussion when looking at transportation funding options:

• We can’t simply move money around to solve our funding problems. I’ve heard people say, “I don’t want X; spend the money on Y instead.” That often simply isn’t possible. For example, if we want to widen I-84, we can’t simply take our “public transportation” money and put it toward widening the interstate. Or, we may have federal money we can use to buy more buses, but we don’t have enough money for the fuel to operate them. We can’t simply use the money designated for buying buses to pay for fuel. Within the current system, our funding can only be used within the appropriate “silos.” 

• Funding a more robust transportation system isn’t just about raising more money; it’s also about raising money that can be used to meet identified needs. As we explore new funding mechanisms or increasing the amount we collect from current sources, moving away from “silos” would provide flexibility to allow an individual jurisdiction to use transportation funding to best meet its transportation needs, whatever those may be. 

Don’t let the Treasure Valley fall through the cracks.