Road taxes

[ UPDATE The article below was first written in 2011. Be sure and see public-safety-fee-going-into-effect beginning late 2018. This is the first significant change in vehicle use taxes in Arizona in nearly three decades ]

[UPDATE: Yet another externality of fuel is the uncompensated release of toxic, carcinogenic compounds into the air we breath gas-stations-venting-ten-times-more-gas-vapor-than-once-believed , primarily benzene. Another positive for zero tailpipe emissions vehicles like BEVs (battery electric vehicle); which receive significant tax breaks by not paying any road tax as well as reduced VLT ]

From time to time, we will see a recurring theme to the effect of “bicyclists don’t pay gas tax so they don’t deserve to use the road”. (for a good roundup of this and other similar issues see bicycledriving.org) There are certain elements of truth to this — bicyclists don’t purchase gas, it’s true. And there’s also an implication that motorist are “paying their way”, but that’s just not true. Gas taxes (and other direct taxes on automobiles) nowhere near cover the costs of building, maintaining, and operating roads. And that’s not to mention the (much larger) costs associated with death/mayhem and pollution impacts on human health and the environment. And none of that is to mention other more intangible costs like defending sea lanes worldwide; and propping up unsavory regimes so that oil can continue to flow freely.

Funding for local roads (the roads that both cyclists and motorists use) are paid for heavily through state and local tax general funds — not user fess like gasoline taxes. Cyclists are paying their way, just like everybody else.

Most/much of the direct user fees that motorists pay do go to fund freeways (limited access highways). These roads are used exclusively (with minor exceptions) by motorists — and yet even then the fees are not high enough, and have to be supplemented from other sources, like general sales taxes.

Specifics vary depending on location but the general theme is similar throughout the US.

What follows are specifics as we do things here in Arizona, and specifically Maricopa County and the Phoenix Metro area.

The HURF

Arizona levies two taxes directly upon motorists and the proceeds are termed the “HURF” (Highway User’s something Fund). The two souces are; motor fuel taxes, and VLT (Vehicle License Tax, a fee paid yearly based on the value of a motor vehicle).

Because the rate on gasoline is levied per gallon, 18.5 cents per gallon, and hasn’t changed since 199?, the amounts available to the HURF have been dwindling. Not only that, VMT per capita peaked in 2004 and has been headed down for years, and vehicles are ever becoming more and more fuel efficient (plus a tiny percentage of electric vehicles that pay no fuel tax). This all amounts to a triple-whammy of decreasing revenue to pay for new roads and maintain existing roads.

usgovernmentspending.com has some good charts of, e.g. ARizona state spending broken down in categories like education, police, transportation, etc.

Freeway Sales Tax / “Prop 400”

Maricopa county levies a 0.5% SALES tax to build freeways. First approved in 1985, it was set to expire in 2005 but extended for another 20 years by “Proposition 400”. The split was more favorable to public transit, but still heavily favors freeway spending. The most vociferous opposition came from those who specifically thought that not enough of the money would be used for freeways, and in particular hated that any monies would be spent on light-rail. See e.g. Prop. 400 foe wants to stop light rail., Arizona Republic, Sept 23, 2004. The Arizona Republic’s Prop400QampA mentions the funding breakdowns: 66% goes toward building roads;

Of the $15.8 billion dedicated to program funding, $9 billion, or 57 percent, would fund freeways; $2.7 billion, or 17 percent, would fund the regional bus system; $2.3 billion, or 15 percent, would fund light-rail expansion; and $1.5 billion, or 9 percent, would fund arterial streets. The remaining 2 percent would fund air-quality programs, bike and pedestrian routes and planning activities.

I note that bicyclists do not ride bikes on freeways (in fact, bicycles are banned from all freeways in the metro area). Here’s another reference that appears to be non-biased background material on Prop 400: Maricopa County Sales Tax Referendum Case Study. I’m not sure who or how these things get written, it’s through the TRB / NCHRP 20-24(62), associated with the National Academies.

So, the freeway sales tax is just another externality of automobility — drivers not paying their way.

Details of Transportation funding on ADOT’s website; in particular the Regional Area Road Fund (RARF) is the official name of where the Prop 400 money goes.

Pima County

Apparently Pima County also has a (voter?) 0.5% sales tax for transportation. It was discussed in this news article where county Supervisor Ally Miller claimed Pima county was mis-spending the hurf money by paying transportation staff (it wasn’t clear how she though they should get paid).

City Transportation Taxes

Several cities have dedicated sales taxes for transportation, among them are Tempe and Phoenix. Tempe’s tax is 0.5% and was passed by voters in 1997. Phoenix city voters approved a large increase in their rate in 2015, Proposition 104. The rate was increased from 0.4% to 0.7% and now sunsets in 35 years (2051, or something). The city funds are more heavily tilted towards public transit with the largest single piece going towards light rail expansion. A modest fraction going to street “improvements” and police; As of late 2018 there is a new potential referendum led by Councilman Sal Diciccio to eliminate light rail. DiCiccio really hates the light rail, saying “Light rail brings nothing but crime and blight to our neighborhoods“.

Penny Tax for Tank Leak Cleanup Insurance

One penny of the state’s 18 cents has been directed not to road building but to insure/fund cleanup when underground storage tanks leak [I believe that’s incorrect, the total tax is 19 cents inclusive of the penny]. I can’t unwind all this but there seems to be some cost-shifting and classic cases of socialized costs (the monies to clean up leaks) versus privatized profits (from selling the product). In any event, it’s money not available to build or maintain roads. The Arizona Republic did a long and deep history of the program Gasoline tax debate: Corporate welfare or necessary evil? on the occasion of the legislature possibly extending the program again. Fuel leaks cause devastating health and environmental problems and are very expensive to clean up.

HURF Sweeping / “Stolen” money

So there’s this urban legend going around that the AZ state legislature is “stealing” money from the HURF and spending it as general funds, rather than the dedicated purpose it’s intended for. This is TRUE; what’s not mentioned is it amounts to perhaps 10% of the HURF money. (I don’t have a handy way to look up the actual percentage. in round numbers: HURF is about $1B/year, and “since 2001, over $1.9B” has been stolen. So much crying and gnashing of teeth.

I get it, everybody wants more, not less, but people, let’s get a grip. The gas tax is drastically too low for “pay as you go”, 10% one way or another isn’t making a huge difference.

Here’s a letter, signed onto by dozens of local politicians, bureaucrats plus various crony capitalists:

Since 2001, over $1.9 billion of dedicated funding has been transferred from Highway User Revenue Funds (HURF) to pay for other government programs. In fact, this annual practice of diverting gas tax and other supposedly dedicated revenues for transportation increased this year as $141 million was diverted from much needed infrastructure investment. We urge you to stop these funding transfers.

Another point of reference, I found this nugget in Tempe’s transp. funding report March 2016, p. 14. Their HURF is like 8 to 10 million$ / year so over 11 years they got like $100 million and they felt they should have gotten $106.8M. Again, boo hoo:

The Transportation Fund receives the large majority of its funding from State-shared Highway User Revenue Funds (HURF). The City uses the money to fund street improvements. After sweeping over $6.8 million from the City’s distribution from 2004 through 2014…

.

Background on Federal Tax

The federal levy on fuel is much the same story — it is based solely on a per-gallon charge of 18.4 cents per gallon gasoline THAT HASN’T GONE UP SINCE !993! Of course, the price level has gone up a lot since then, so the amount of real dollars keeps falling. If 18.4 was the “right” amount in 1993, the rate should be raised to ~ 28 cents/gal (2011 dollars). These missing dollars of course still get spent, replace from other sources like general funds; funds that everybody pays, not just drivers.

A minority of the fuel tax funds (about 15%) is spent on mass transit, and 0.1 cents of it is spent on cleanup for leaking underground fuel storage tanks.

Historical gasoline fuel tax rates from Table 1 CRS report:

Rate of Tax in cents per gallon Period to Which Applicable
1.0 June 21, 1932, to June 16, 1933
1.5 June 17, 1933, to December 31, 1933
1.0 January 1, 1934, to June 30, 1940
1.5 July 1, 1940, to October 31, 1951
2.0 November 1, 1951, to June 30, 1956
3.0 July 1, 1956, to September 30, 1959
4.0 October 1, 1959, to March 31, 1983
9.0 April 1, 1983, to December 31, 1986
9.1 January 1, 1987, to August 31, 1990 (a)
9.0 September 1, 1990, to November 30, 1990
14.1 December 1, 1990 , to September 30, 1993
18.4 October 1, 1993, to December 31, 1995 (b)
18.3 January 1, 1996 (c), to September 30, 1997
18.4 October 1, 1997 (d), to March 31, 2005

There are also some excise taxes aimed at heavy trucks — based on the obvious theory that heavier vehicles cause more wear and tear on roads and bridges.

National / International reports

The USPIRG has a white paper / report: Do Roads Pay for Themselves?

“Fees” are not connected to “use” – The amount of money a particular driver pays in gasoline taxes bears little relationship to his or her use of roads funded by gas taxes—unlike other true user fees such as admission fees for state parks or turnpike tolls.
Drivers on local streets and roads, for example, pay gasoline taxes for the miles they drive on those roads, even though those taxes are typically used to pay for state and federal highways.

The Atlantic Cities / Citylab had a recent blurb linking to some 2013 academic research Debunking the Myth That Only Drivers Pay for Roads. And more recently the Atlantic Magazine did a longer piece highlighting an updated Spring 2015 USPIRG paper Who Pays for Roads? How the “Users Pay” Myth Gets in the Way
of Solving America’s Transportation Problems.

Fig 1. Percentage of Highway Spending from Various sources, All levels of Government

Also a Bloomberg article  written in 2015; Debunking the Myth That Only Drivers Pay for Roads. It had a pretty sweet chart, which is actually lifted from the referenced US PIRG report Who Pays for Roads? , referenced above.

17 thoughts on “Road taxes”

  1. Pingback: City Liability @ Arizona Bike Law Blog

  2. I haven’t visited this topic in awhile when i stumbled on this post over at

    tucsonbikelawyer.com (now via archive.org)

    Rick Risemberg had a good synopsis with some links to studies that are on-point
    excerpt:
    The latest wave of anti-bike arguments pounds on the following theme: “If cyclists want bike lanes, they should pay taxes and register their bikes so they can pay their way just like drivers!”
    Ignorant cyclists sometimes respond, “Well, I own a car too, so I do pay.”
    And actually, neither one pays enough to say that.

  4. Pingback: Sales tax shortfalls delay highway plans @ Arizona Bike Law Blog

  6. http://azdailysun.com/news/local/govt-and-politics/not-so-charitable/article_63cc04a8-d9ea-5ef1-8b3e-97c8c46cf150.html
    “The city has been receiving less each year from the state-shared gas tax and other highway user revenues. It peaked at $2.4 million annually and is now about $1 million a year to fix city streets”

    “One reason is a pending shift in city spending priorities to capital needs and potentially away from human services. City staff told the council during the budget retreat that they have identified more than $27 million in deferred maintenance, with a majority of that figure tied to fixing deteriorating streets”

  8. http://www.azleg.gov/const/9/14.htm (Constitution of Arizona)
    No moneys derived from fees, excises, or license taxes relating to registration, operation, or use of vehicles on the public highways or streets or to fuels or any other energy source used for the propulsion of vehicles on the public highways or streets, shall be expended for other than highway and street purposes

    Further codified in ARS 28-6533 http://www.azleg.gov/ars/28/06533.htm
    B. The revenues in the Arizona highway user revenue fund shall only be spent for the purposes prescribed in article IX, section 14, Constitution of Arizona. Counties and incorporated cities and towns shall not spend highway user revenue fund monies distributed to them pursuant to this article for enforcement of traffic laws or administration of traffic safety programs[…]

    See also 28-6501 and 28-6991 for a list of sources for the funds.

  10. Pima County Administrator Chuck Huckelberry on Thursday urged residents to send a copy of the Wizard of Oz to their congressional and legislative representatives: Fixing the transportation problem in this country and in the region is going to take the courage of the lion and the heart of the tin man, he said, but it has to be done.
    Huckelberry’s remarks came as he welcomed 1,500 participants to the 63rd annual Arizona Conference on Roads and Streets, and as speakers warned that an economic crisis is looming without congressional action to keep the federal Highway Trust Fund from going broke by September 2014.

    If that happens, it will put a grinding halt to federal dollars that flow through the states to fund road improvements, cautioned Frederick Wright, the former director of the Federal Highway Administration and the executive director of the American Association of State Highway and Transportation Officials.

    That means if a contractor finishes work on a project and submits a bill, he explained, either the states will have to float the money or the contractor will see a potentially lengthy delay in getting paid. More than 6,000 projects will not happen and 650,000 direct jobs will be jeopardized, he projected, potentially triggering another recession.

    Karla Petty, with the Arizona Division Administration for the Federal Highway Administration, said the office is providing monthly updates to states on the status of the fund so they can be prepared to float revenues or think about whether they may have to cancel projects.

    Wright noted that the average resident pays $46 a month in federal and state gas taxes – considerably less than the average $160 a month electricity bill or $124 cable bill. The federal gasoline tax hasn’t been raised since 1993. In Arizona, the state gasoline tax has remained at the same level since 1991.

    Huckelberry noted that transportation investment, from railroads to dams to interstates, has always led to economic prosperity. Sustained disinvestment has taken its toll, he cautioned, not only in the condition of our roads currently, but in fostering the next economic expansion in this country.

    Arizona in 1991 was able to invest $185 per capita in its transportation systems, Huckelberry noted, adding that between population growth and inflation, that number today is $85. “Everyone needs to understand that it’s going to take a little bit of courage to reinvest in transportation, but that investment has proven to pay off in economic stability and growth,” he said.

  11. What? a SALES tax? And you thought gas taxes paid for road construction?
    This one intersection, albeit a very busy one, alone is projected by ADOT to cost over $66 Million.
    Bell/Grand intersection project is moving ahead
    “The state would pay for the $66.7 million project using a voter-approved regional sales tax“

  12. Some interesting tidbits from Phoenix councilwoman thelda william’s Oct 2014 newsletter
    Note automobile use taxes (“HURF”) do not cover the cost of, e.g., the streets dept. Also the

    NOTES FROM CITIZENS COMMITTEE ON THE FUTURE OF PHOENIX TRANSPORTATION (CCFPT)
    Since late August, the CCFPT has worked to develop a transportation plan and funding strategy to recommend dot the Phoenix City Council. City Staff, led by Public Works Director, Maria Hyatt, explained the history and current status of the Transit 2000 tax. Before the tax, there was no Sunday service provided, the Public Transit Department only had 17 staff members, limited Saturday bus service was provided, and no light rail or RAPID bus service existed. With two recessions during the first 14 years of the Transit 2000 tax, the department will be unable to fully implement the Transit 2000 Plan. The planned light rail
    miles included 24 miles within the first 16 years and an additional 7-10 by 2020. We have built 16 miles and have capital funds to build an additional 4-5 miles if operating funds are identified. Local bus peak frequencies were identified in the plan and 26% of routes meet peak and 86% meet off-peak frequency goals. Due to funding shortages, the Public Transit Department was also not able to provide local bus service until midnight, but does run until 10 p.m. Thanks to Transit 2000, Phoenix’s transit service has grown extensively. Over the last 14 years, ridership as a whole has increased 60% while revenue miles have
    increased 45%. What this shows is that service is efficient. Phoenix’s farebox recovery has also increased during this time period.
    Ms. Hyatt also informed the committee that Phoenix has seen significant investment along the light rail line, with more than $3.6 billion in private investment and $1.4 billion in public investments. This includes residential, commercial and hotel growth. The Downtown Phoenix Partnership and Community and Economic Development Department indicated there are 48 new downtown restaurants since 2008.
    Proximity to high frequency public transit also has an impact on property values. A 2013 Urban Land Institute study noted that during the last recession, condos near transit outperformed those in the entire region by 30% and apartments by 80%.
    Once the T2000 tax expires in 2020, a $130M deficit is forecast. If the transportation tax expires, the lost tax revenue for 2020-21 equates to 62% of our operating budget. Ms. Hyatt estimated about 15% of the operating budget is administrative costs, and the remaining 85% direct service. Therefore, 85% of the 62% decreased revenues = 53% service reduction. Additionally, loss of service will result in a 30% loss of revenue. Ms. Hyatt stated that the estimated reduced fare revenues to be about 7% of the operating budget, and along with the 53% service reduction resulting from the lost tax revenue, would result in a 60% service
    reduction.
    Phoenix funds about 15.3M miles of bus service annually, and will be at 2.1M miles of rail service with the addition of NWE Phase I. Consequently, 9.3M miles of bus service would have to be eliminated and about and 1.3M miles (just 400K less than we currently fund) of rail service, assuming both services are reduced by 60%. This would put the Phoenix well below pre-T2000 service levels for bus, and really poor service for rail (probably service levels that would reduce ridership, thus reducing fare recovery).
    Ms. Hyatt informed the committee that a new website has been developed, http://www.talktransportation.org,
    which gives the community the opportunity to participate in discussions about what they want in regards to transit. Anyone can sign up and be involved in the discussion, and the ideas will be tracked and passed on to the committee. The website is just one of the many ways to encourage public involvement.
    Streets Transportation Director Ray Dovalina presented an overview of the City of Phoenix Street Transportation Department to the committee. The main focus of the department is to plan and provide for the safe and convenient movement of people and vehicles on City streets, maintain existing City streets, and design and inspect the construction of new streets to insure they meet specifications. The department also maintains 4,856 miles of streets, 95,592 Street Lights, 1,104 signalized intersections, 430 miles of bike lanes, 163 miles of bike routes, 582 bridges, uses 50,000-60,000 gallons of lane striping paint each year, fills 21,600 potholes each year, and sweeps 179,000 roadway lane miles each year.
    Mr. Dovalina explained to the committee that there was a large boom of road construction in the 1970’s and 1980’s, which makes those roads now 30 and 40 years old. The optimum overlay cycle is 30 years, but the City is currently on a 60-65 year schedule. Due to the economic downturn over the past six years, staffing numbers have decreased significantly, but the number of streets has not, forcing the department to manage a steady and somewhat increasing inventory of roadway miles with fewer staff. While putting the department in a position to be more efficient in how to manage, maintain, and build streets, it has reached the point where it is difficult to deliver the services and roadways our citizens expect.
    The Streets Transportation Department operating budget is comprised of funding from Arizona Highway Users Revenue (AHUR) ($47M), General Funds ($17M) Other Sources (Grants, Capital Construction Funds, City Improvement Funds, Other Restricted Funds) ($4M). The Capital Improvement Budget is projected to maintain a steady level of funding for the next 5-6 years. The department has a greater reliance on HURF funds for its daily operating needs due to decreases in general fund support over the past 7 years.
    Instead of using 28% of our HURF funds for operating activities, we are now using 45% of HURF funds, and a net increase of $10 million per year. This in turn has reduced the amount of HURF funds the department can use for capital expenditures.
    Mr. Dovalina then showed the committee the evolution of the street’s network and the five key initiatives:
    Phoenix Bikeway Plan, BikeShare Program, Complete Streets Policy, Downtown Transportation Study, and the ITS Strategic Plan. Some of the current construction projects currently underway are: 32nd Street Redevelopment, 107th Avenue Safety Enhancements, Avenida Rio Salado, Sonoran Desert Drive, and Black Mountain Boulevard.
    Looking to the future, Mr. Dovalina presented the committee with the future needs of the department: Revenue projections are $2 billion for next 20 years, there is an estimated $6 billion in projected needs, a shortfall of approximately $4 billion, and an estimated $509 million in critical needs (major maintenance, special projects, bicycle mobility, pedestrian mobility, drainage and bridges, and technology enhancements).

  13. This was interesting in that it details a couple of sales taxes in Flagstaff and/or Coconino county that are explicitly for road funds. It was contained in the December packet for the Flagstaff BAC…by the way, the prop apparently did pass easily:
    III. NEW BUSINESS 1. Proposition 406
    Kevin Burke, Flagstaff city manager, gave an informational presentation on Proposition 406, which would establish an additional City sales tax of 0.33 cents on every dollar to fund repair or reconstruction of City streets. The bond would also include money for on-going maintenance after the initial repairs have been done.
    He said that when a street is repaired or reconstructed, the sidewalks and curb ramps must also be fixed or replaced to meet minimum ADA standards. Repairs also provide an opportunity to add bike lanes when possible. Although it was the desire of the citizen’s committee to include construction of missing sidewalks, it was not included in the Council’s recommendation. He said that the ballot language was worded so revenues could be used to fund the shortfall in the Walnut-Florence underpass of the BNSF tracks.
    Councilmember Karla Brewster encouraged the group to vote for the proposition, and to encourage others to vote for it. She stressed that roads are vital to the economy, and although the Council has worked over the past several years to find way to invest in roads, the current funding mechanism is not working. The City needs to invest now in street repair in order to save money later.
    Lucinda Andriani, deputy public works director at Coconino County, provided information on Proposition 403, which would increase the county sales tax by 0.30 cents to fund on-going County road operations, including maintenance, snow plowing, safety projects, and equipment. She said the net increase would be 0.175 cents, because the existing CPOS (County parks and open space) tax is expiring.
    She said some of the money would be used to widen shoulders, and that she would like to see Flagstaff become a national destination for bicycling.
    County supervisor Matt Ryan said the County has been working to implement multimodal improvements on County roads, but that funding has become an issue. He said the bond is a stop-gap measure for funding rather than a cure. He asked the group to support the proposition and to help get the word out.

  15. South Mountain Freeway (SR202L)
    There are about $1.5B in the 2016-2020 ADOT 5-year plan.
    The funding sources are RARF and NHPP (Stands for Regional Area Road Fund, and National Highway Performance Program).
    Here is a definition of RARF from the adot website; it says these are purely Prop 400 (sales tax) funds. So I don’t know where user-based funds, i.e. HURF funds are?? Are there no HURF funds used to build this freeway?

    The National funds are presumably (mostly but not exclusively anymore) federal fuel tax revenue — but I am just guessing.

    Anyway, the line-items listed on p. 85 total to $1.5B, they list funding source but they don’t total by funding source; by eye, it looks like $900B is RARF and $600 is NHPP; in other words, most of the money is RARF. So I would like to delve into how much of the RARF money comes from sales taxes.
    I also don’t know where the rest of the money is? The road is normally quoted to cost $1.9B, see, for example this 12/28/2015 news story about when the contract was let by ADOT: Fluor, Granite, Parsons Brinckerhoff get $1.9B South Mountain contract.

  16. Hey, this is interesting pinal county, like Maricopa County, has a .5 percent transportation excise sales tax.
    https://www.inmaricopa.com/ohalleran-believes-deal-within-reach-for-sr-347-widening-and-overpass/
    That was recently ruled unconstitutional due to the nature of the two-tiered structure, the rate was a half a percent, but went to 0% above $10,000…
    https://www.inmaricopa.com/state-supreme-court-rules-on-transportation-tax/
    Prop 216 and 217, passed by voters in November of 2017.
    Remember the city of Maricopa is in Pina County! Go figure.

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