Transportation Funding in California

by Sonal Aggarwal, Associate Planner

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    Figure       SEQ Figure \* ARABIC
   1      : Sources of funding for California Cities, Source: Transportation Funding in California, California Transportation Commission, March 2017.

Figure 1: Sources of funding for California Cities, Source: Transportation Funding in California, California Transportation Commission, March 2017.

How cities and counties receive transportation dollars

Transportation funding in California is derived from a variety of sources, primarily from local and regional revenues. The rest comes from the federal and state government, through taxes and fees. Federal and state funds each contribute only about one-quarter of all funding. More than half of the total funding is derived from local sources.

These funds come from three basic categories: user fees, property access fees and subsidies.

Table 1: Transportation Funding Origination

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     Source: Introduction to Transportation Funding, Santa Clara Valley Transportation Authority

Source: Introduction to Transportation Funding, Santa Clara Valley Transportation Authority

Federal Transportation Funding

 

The federal government collects fuel taxes on gasoline, at 18.4 cents per gallon, and diesel fuel at 24.4 cents per gallon. These taxes are distributed to states and regional transportation agencies. Federal funding is distributed in a two-step process through: 1) Authorization and 2) Appropriations. The United States Department of Transportation (U.S. DOT) is the governing body which oversees the allocation of the funds.

1.     Authorization

Through authorization, the U.S. DOT funds programs within specified public policy areas, and for designated periods of time. These periods usually cover five to six years, with maximum funding limits set for each fiscal year of the authorization period. The current authorization bill for surface transportation funding is called Fixing America’s Surface Transportation (FAST) Act, which authorizes $305 billion over fiscal years 2016 through 2020 for highways, motor vehicle safety and public transportation.

2.     Appropriations

Every year congress considers appropriation bills for all federal agencies and departments. These measures provide legal authority to the agencies to spend money on the programs they administer in the upcoming fiscal year.
 

State Transportation Funding

California collects about $6 billion annually in revenues for the construction, maintenance, and operation of our transportation system from five main sources:

  1. State-Based Excise Tax on Gasoline: The state-base excise tax (Proposition 111, 1990) has remained at 18 cents per gallon since 1994. Cities and counties receive approximately 36% of these funds and the state receives 64%.
     
  2. Price-Based Excise Tax on Gasoline: In 2011 the state assembly passed AB 105 which created a price-based excise tax. In the current FY 2016-17, the state collected 9.8 cents per gallon which totaled $1.4 billion in revenues.
     
  3. Variable Excise Tax on Diesel: California collects 16 cents per gallon on diesel fuel through the Variable Excise Tax on Diesel. In 2016 this tax accounted for $500 million. Of this 64% was allocated to state needs and 35% was distributed to cities and counties. This tax helps to fund the maintenance and operation of the existing road system.
     
  4. Sales Tax on Diesel: The state collects an additional 6.25% excise tax on diesel. These funds are dedicated to transit and rail operations and capital expenditures. In the FY 2016-17, the state collected another $500 million through this tax.
     
  5. Weight Fees on Commercial Vehicles: The revenue from this tax is used to repay the state’s General Fund for debt service on transportation bonds. The state collects roughly $1 billion through this tax each year.
     

Regional Transportation Funding

For efficient flow of funds, the Federal Government has subdivided regions based on population. In California, regions which have a population greater than 50,000 must create Metropolitan Planning Organizations (MPO’s). There are 18 such MPO’s in California. California has further made 26 Regional Transportation Planning Agencies (RTPA’s) for areas which have populations of less than 50,000. These regional agencies are responsible for planning, coordinating, and administering federal, state and local funds to enhance their region’s multimodal transportation network. Each agency is responsible for developing an overall annual work program, a regional transportation plan (a 20-year planning and programming document), and a regional transportation improvement program (a 5-year financial document). The Bay Area is served by the Metropolitan Planning Commission (MTC), which covers nine (9) bay area counties including; Alameda, Contra Costa, Marin, Napa, San Francisco, San Mateo, Santa Clara, Solano, and Sonoma. These nine counties include 101 cities, 7.4 million residents and approximately 7,000 square miles of land.
 

Local Transportation Funding

  1. Local Sales Tax Measures (Self-Help Counties): To raise revenue for public transportation counties are allowed to collect sales tax. Any increase is subject to two-thirds local voter approval. Local sales tax measures are generally approved for 20-30 years.
  2. Transportation Development Act (TDA): According to the California Department of Transportation (CDOT): “The Transportation Development Act (TDA) provides two major sources of funding for public transportation, the Local Transportation Fund (LTF) and the State Transit Assistance fund (STA). These funds are for the development and support of public transportation needs that exist in California and are allocated to areas of each county based on population, taxable sales and transit performance. Some counties have the option of using LTF for local streets and roads projects, if they can show there are no unmet transit needs. The Transit Programs Branch provides oversight of the public hearing process used to identify unmet transit needs. It provides interpretation of and initiates changes or additions to legislation and regulations concerning all aspects of the TDA. It also provides training and documentation regarding TDA statutes and regulations. The branch ensures local planning agencies complete performance audits required for participation in the TDA.”
  3. Transit Fares: Transit agencies collect fares for their transit services to help off-set the costs of operation and maintenance of their vehicles.
  4. Local General Funds and Other Local Funds: Funds collected from property taxes, developer fees, street assessments, bonds, fines and forfeitures can be allocated for transportation related costs.
     

Figure 2: Overview of Transportation Funding. Source: Transportation funding in California, 2014, Caltrans

Bibliography

Transportation Funding in California, California Transportation Commission, March 2017. http://www.catc.ca.gov/reports/Commission%20Fact%20Sheets/Transportation%20Funding%20Overview%2003-10-17%20FINAL.pdf

Transportation Funding in California, Economic Analysis Branch, Division of Transportation Planning, California Department of Transportation, Caltrans, 2014. http://www.dot.ca.gov/hq/tpp/offices/eab/fundchrt_files/Transportation_Funding_in_CA_2014.pdf

Introduction to Transportation Funding, Santa Clara Valley Transportation Authority, http://www.vta.org/sfc/servlet.shepherd/document/download/069A0000001EOGZIA4

http://mtc.ca.gov/about-mtc/what-mtc/nine-bay-area-counties, (Accessed 9/20/2017).

http://www.dot.ca.gov/hq/MassTrans/State-TDA.html, (Accessed 09/19/2017).

 https://www.fhwa.dot.gov/fastact/, (Accessed 9/20/17)