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Transportation utility fees are periodic fees paid by a property owner or a building occupant to a municipality based on use of the local transportation system, the latter which can include local streets and bridges, arterials, sidewalks, bike lanes, and other public paths. TUFs treat the transportation system similar to a public utility, charging property owners or occupants for their share of transportation costs based on system use. "Use" is usually defined as the generation of trips, estimated by the Institute of Transportation Engineers (ITE) Trip Generation Manual, and fees are based on an estimated number of trips generated by different land uses.
TUFs ordinances are enacted by municipal governments under the explicit or implicit authority granted to them by State legislation in their respective States.
TUFs are often used to fund local road maintenance, especially for roads that are ineligible for Federal- aid highway funding. For example, the City of Newberg, OR, adopted a TUFs program in 2017 to close a
$1.9 million annual funding gap to maintain its streets.7 In May 2017, Highland City, UT, created a transportation utility fund dedicated to the operation, improvement, maintenance, and rehabilitation of roads.7
In rare cases, TUFs have been used to fund transit O&M expenses. Corvallis, OR, imposes a transit operations fee, adding a monthly $2.75 to single-family residential customers' bills, thereby eliminating bus fares.8
TUFs are also referred to as transportation maintenance fees, street maintenance fees, road use fees, pavement maintenance utility fees, street restoration and maintenance fees, or street utility fees.
Raising money for street maintenance through TUFs is arguably more economically efficient and equitable than other means such as property taxes or gas taxes. This is because TUFs better link the collection of monies for road maintenance to those who generate trips that create maintenance needs. By linking fees to transportation system use, TUFs may avoid property market distortions, which can occur if property taxes are used to fund transportation.9 Furthermore, the administration of TUFs is relatively efficient, since the majority of TUFs are collected with other municipal utility fees, including water, thus minimizing administration costs.
TUFs may also lead to a more equitable allocation of maintenance costs, as they more fairly allocate the burden of street maintenance to those who benefit from streets. For example, some municipal TUFs are lowered for those homeowners who do not own cars or if the home is vacant. Furthermore, many municipal TUFs programs address financial burdens by providing discounts to homeowners who are unemployed, have income below the local median income, and/or are elderly.
Furthermore, TUFs can provide greater transparency on how public monies are spent on local infrastructure. For municipalities that have TUFs, street maintenance programs usually are made up of only a handful of funding sources of which TUFs are often a major component. This transparency regarding how the funds are spent helps to build trust with local stakeholders who are affected by the fee.
6 Federal Highway Administration. Transportation Utility Fees. https://www.fhwa.dot.gov/ipd/value_capture/defined/transportation_utility_fees.aspx
7 For more information, refer to the Highland City, UT, website at https://www.highlandcity.org/index.aspx?NID=399.
8 National Academies of Sciences, Engineering, and Medicine. 2012. Implementation and Outcomes of Fare-Free Transit Systems. Washington, DC: Transportation Research Board, https://doi.org/10.17226/22753.
9 Carlon, Deven, et al. Spring 2007. "Transportation Utility Fees: Possibilities for the City of Milwaukee." Public Affairs Workshop, Domestic Issues, Public Affairs 869. The use of property taxes to fund transportation is often seen as creating a market distortion by not linking the tax paid with actual use of the system. In cities where residential properties account for the vast majority of all properties, residents may pay a greater share of transportation funding via property taxes than warranted by their infrastructure use, which could discourage home ownership in the city.
