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Non-Road Pricing Revenue: Sources and Tools

Local Non-Road Pricing Revenue

Local non-road sources of revenue have been playing an increasingly important role in funding transportation improvements. They represented about 38 percent of all funds spent on highway improvements in 2007. Traditional sources of local revenue include property taxes and use of the general fund. A variety of other taxes and fees, including the expanded use of the local option sales tax, land value capture strategies and other revenue sources such as advertisements and fares, are used to varying degrees by many municipalities. Information on value capture and transit-oriented development are available on separate webpages.

Local Option Taxes and Fees

A variety of local funding options involving taxes or fees are often options that are either authorized at the state level or approved by voters and levied at the county or municipal level. The local option taxes and fees discussed below include: local option fuel taxes, local option sales taxes, vehicle registration fees, income/payroll/employer taxes, local severance taxes, and hotel taxes.

  1. Local Option Sales Taxes - Local option sales taxes have become increasingly popular to support transportation investment, especially for transit projects. These sales taxes are typically levied at the local level, although some exist at the state level, and devote a percentage of a local sales tax to transportation purposes generally or to a prescribed program of projects with a defined expenditure plan.
    View more information at the National Conference of State Legislators.

    The examples below provide a sample of public agencies that use local options sales tax to fund transportation projects.

    Examples:
  2. Vehicle Registration Fees - Many states authorize local governments to levy local vehicle registration fees that can be used for local transportation needs.
    View more information at the National Conference on State Legislatures

  3. Income/Payroll/Employer Taxes - A few states provide authority to local governments to levy income, payroll, or employer taxes specifically dedicated to transportation.
    View additional information at the AASHTO Center for Excellence in Project Finance
    .

    Below are examples of local jurisdictions and enabling legislation that utilize payroll and income taxes for transportation.

    Examples:
  4. Property Taxes - Dedicated property taxes are generally used for local road and street capital and maintenance needs, although some states have authorized dedicated property taxes for transit. The following examples are links to case studies of cities that use property taxes to fund transportation projects.

    Examples:

Other Local Non-Road Pricing Revenues

Other local non-road sources of funding for transportation improvement projects include fares, advertising, naming rights, shared resources, concessions, and transportation utility fees.

  1. Fares - Fares are a user charge for public transit exclusively collected at the local level. As a revenue source, they are primarily used to fund the ongoing operations and maintenance of the transit system. To leverage future collections of transit fares, revenue bonds are often issued as a finance mechanism against farebox receipts.
    View more information at the AASHTO Center for Excellence in Project Finance

  2. Advertising - Advertising revenue can be derived by selling space on transportation facility assets; for example, inside transit vehicles, at transit stations or bus stops, or on billboards along highways. Most transit agencies currently have advertising programs that generate revenue for their systems. The revenue from transit advertising as a percent of the operating budget is small, but the total dollars are significant. The four largest transit agencies in the U.S., not including New York, average $6.1 million a year.

    Further discussion of advertising is available through the following Transportation Research Board and Transportation Cooperative Research Program Reports: The examples below provide links to transit agency advertising revenue programs and state DOT billboard/outdoor advertising programs.

    Examples:
  3. Naming Rights - Revenue from naming rights is derived from selling to the private sector the right to name a transportation resource such as a toll road or transit station.
    View more information at the AASHTO Center for Excellence in Project Finance


    The links below are examples of local agencies that have programs to sell naming rights to transportation facilities.

    Examples:
  4. Shared Resources - Shared resources are private donations of telecommunications technology (principally fiber optic communications), and sometimes cash, granted in exchange for access to public rights-of-way. The use of shared resources is an invaluable tool for states seeking to build a technological backbone for intelligent transportation systems (ITS). In addition to obtaining increased access to telecommunications technology, states can credit the value of the private donations toward their matching share of project costs associated with the deployment of ITS projects utilizing the donated technologies.
    View more information at the AASHTO Center for Excellence in Project Finance

  5. Transportation Utility Fees - Transportation utility fees (TUF) treat transportation networks like a utility, similar to other local services such as water and wastewater treatment that are financed primarily from user charges. TUF rates can be set using a number of different bases that are more closely related to transportation demand than the property tax, including fees that apply per unit of housing or per parking space, fees based on square footage or gross floor area, and fees that vary with the trip generation rate for a given property type. This strategy has faced legal challenges in the United States, most often on the grounds that it represents a tax, thus triggering referendum requirements in some local jurisdictions. Below are examples of TUF projects and programs.

    Examples:
Federal Highway Administration | 1200 New Jersey Avenue, SE | Washington, DC 20590 | 202-366-4000
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