Alternative Financing for Urban Transportation
Click HERE for graphic.
NOTE: This report is a review of alternative and innovative
approaches to financing urban transportation. Several of
the techniques are made possible by unique state or local
laws or conditions. Some of the material deals with
conceptual approaches which have not yet been implemented.
Readers should carefully consider their own local conditions
in evaluating specific techniques for implementation.
Alternative Financing
for Urban Transportation
The State of the Practice
Final Report
July 1986
Prepared by
Rice Center
Nine Greenway Plaza
Suite 1900
Houston, Texas 77046
Prepared for
Federal Highway Administration and
Urban Mass Transportation Administration
U.S. Department of Transportation
Washington, D.C. 20590
Distributed in Cooperation with
Technology Sharing Program
Office of the Secretary of Transportation
DOT-1-86-30
Table of Contents
Introduction i
Case Study Locations v
Matrix of Financing Techniques by Mode and Private
Involvement Applicability vii
I. Taxes 1
State Sales Tax and Sales Tax On Fuel
State of California 3
Motor Vehicle Excise Tax
State of Washington 6
Local Option Transportation Taxes
State of Florida 8
Sales Tax
Maricopa County, Arizona 10
Beer Tax
Birmingham, Alabama 12
Payroll Tax
Portland, Oregon 13
Tax Increment Financing
Prince George's County, Maryland 15
Lottery
State of Pennsylvania 17
II. Assessments 21
Metropolitan Districts
Arapahoe County, Colorado 23
Improvement District
Pleasanton, California 25
Transit Assessment District
Denver, Colorado 28
Special Benefit Assessment District
Los Angeles, California 30
Special Benefit Assessment District
Miami, Florida 32
III. Fees 35
Fair Share Contribution Ordinance
Palm Beach County, Florida 37
Highway/Traffic Improvement Fee
Upper Merion Township, Pennsylvania 39
Coastal Transportation Corridor Ordinance
Los Angeles, California 41
Development Impact Fees
Orange County, California 43
Facilities Benefit Assessment Program
San Diego, California 45
Capital Improvement Fee
Farmer's Branch, Texas 48
Transportation Utility Fee
Fort Collins, Colorado 50
Transit Impact Fee
San Francisco, California 52
IV. Negotiated Investments 55
Development Bonuses
New York, New York 57
System Interface Program
Washington, D.C 59
Transfer Center Investment
Portland, Oregon 61
Proffer System
Fairfax County, Virginia 62
Negotiated Investment
Dallas, Texas 65
V. Private Donations and Initiatives 69
Local Match Donation
Grand Rapids, Michigan 71
Private Initiative for Highway Construction
Houston, Texas 73
Private Initiative for Interchange Development
The Woodlands, Texas 75
Private Initiative for Downtown Improvement
Pittsburgh, Pennsylvania 77
Merchant Subsidy
Cedar Rapids, Iowa 79
Bus Shelter Development
St. Louis, Missouri 80
Texas Transportation Corporations
State of Texas 81
Rail Station Construction
Secaucus, New Jersey 83
Vl. Use of Property and Property Rights 85
Leasing Highway Air Rights
Boston, Massachusetts 87
Joint Development Program
Washington, D.C 9O
Leasing Highway Air Rights
State of California 92
Joint Development of Transportation Center
Cedar Rapids, Iowa 94
Leasing Highway Air Rights
Sparks, Nevada 97
Negotiated Land Lease
Tacoma, Washington 98
Leasing Facilities
Santa Cruz, California 100
VII. Private Development and Provision of Facilities and
Services 103
Privately Financed People Mover
Tampa, Florida 105
Privately Financed People Mover
Las Vegas, Nevada 107
Privately Financed People Mover
Las Colinas, Irving, Texas 109
Road Utility Districts
State of Texas 111
Private Toll Bridge
Detroit, Michigan 113
Contracted Bus Service and Maintenance
Johnson County, Kansas 115
Contracted Transit Service
Snohomish County, Washington 117
Contracted Taxi Service
Kankakee, Illinois 119
Contracted Taxi Service
Ann Arbor, Michigan 121
Transportation Zones
San Gabriel Valley, Los Angeles County,
California 123
VIII. Toll Financing 125
Dulles Toll Road
Fairfax County, Virginia 127
County Toll Road Authority
Harris County, Texas 129
State and Local Toll Financing
Tampa, Florida 131
IX. A New Approach to Developing Rapid Transit 133
Public Private Partnership in Rapid Transit Corridor
Development
Fairfax County, Virginia 135
Introduction
Alternative Financing Urban Transportation:
State-of-the-Practice is a summary of the use, by 52
agencies, of non-traditional techniques for funding
transit and urban highway services. This report is
designed to introduce public officials at the State and
local levels to a range of available funding sources and
to facilitate their efforts in determining whether these
sources will be useful in meeting their transportation
needs.
The 55 case analyses included in the report reflect the
variety of efforts being made by large and small
transportation agencies to cope with shortfalls in
funding. These efforts were selected for inclusion
because they entailed one or more of the following
characteristics:
o use of non-traditional sources of revenue
o strong involvement of the private sector
o use for the first time in the transportation
field (although there may have been previous
non-transportation applications)
o creative examples of public/private cooperation.
Overview
Alternative Financing Urban Transportation is divided
into nine sections:
I. Taxes
II. Assessments
III. Fees
IV. Negotiated Investments
V. Private Donations and Initiatives
VI. Use of Property and Property Rights
VII. Private Development and Provision of
Facilities and Services
VIII. Toll Financing.
IX. A New Approach to Developing Rapid
Transit
Taxes are the primary sources for local and State funding
of transportation. All of the taxes examined in this
section are dedicated for transportation uses.
Assessments ate taxes or fees on all properties within a
special district which pay for all or a part of specific
improvements made within that district. Assessments are
levied as one-time or recurring liens by city councils or
special districts.
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Fees are distinguished from taxes in that taxes are, for
the most part, levied on the general populace while fees
are used to segment a portion of the population that is
causing a significant impact on transportation, or that
particularly benefitting from transportation
improvements. Impact fees imposed on developers to
mitigate the impact of their projects on roads and
transit services are becoming increasingly popular.
Negotiated Investments include private sector
contributions or improvements exchanged for zoning
changes, building permits, or other public requirements.
The public sector often provides significant initiative
in negotiating for these improvements.
Private Donations and Initiatives result when a private
developer or individual wants an improvement in
facilities or services that may not be a high public
priority, or perceives that there is a benefit to be
obtained from participating in provision of a public
sector service.
Use Or Property and Property Rights to
generate additional revenues for the public sector
usually involves airspace, land, or facilities leases.
Leasing or selling development rights, also known as
joint development, is a method of capturing the full or
partial value of land holdings or unused space.
Private Development and Provision of Facilities and
Services focuses on the recent reintroduction of the
private sector into the public transportation industry,
which is part of a larger movement towards privatizing a
variety of public sector services. Privatization often
results in substantial public sector savings due to
creation of a competitive environment for service
provision.
Toll Financing has substantial historical precedent in
transportation, but has not been widely used for new
facilities in recent years. However, toll financing is
regaining popularity as an effective and efficient
technique for financing, building, and operating a
specific roadway that might otherwise be infeasible for
the public sector to construct.
A New Approach to Developing Rapid Transit examines
innovative public/private partnerships to finance
fixed-guideway rapid transit systems.
These categories are used to present the case studies as
logically as possible. A brief introduction precedes each
section, defining the technique and summarizing the
salient points of each case included. Not all of the
cases are easily classified; the rationales for these
decisions are explained as needed in the section
introductions.
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Case Analyses
Each case analysis of the 55 experiences with creative
financing techniques is divided into eight sections.
Overview Description of the experience and the conditions
under which a financing technique was used.*
Results The direct or indirect benefit to the transportation
agency and other parties participating in the
implementation of the technique.
Legal Any legislative or legal requirements
associated with use of the technique Issues and any
legal problems encountered.
Political Political events that helped or hindered successful
Issues use of the technique.
Timing The amount of time needed to implement the
technique.
Contact Name, address, and telephone number of the local
official(s) and/or private sector individual(s) to
contact for further information.
References Published documentation containing more detailed
information on the technique or experience.
Related Brief description of other experience compared or
contrasted to the Experience main case analysis.
*The Overview also contains population figures for each
area. Most figures are drawn from 1984 U.S. Census
updates, but in some cases other figures are used where
1984 numbers were not available or where more recent
information was obtained.
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Case Study Locations
Click HERE for graphic.
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Matrix of Financing Techniques by
Mode and Private Involvement
Applicability*
Click HERE for graphic.
*Numbers used in this table refer to pages in the report.
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I. Taxes
Taxes are the primary source for local and State funding
of transportation. Traditional taxing techniques for
transportation may be dedicated or non-dedicated, and
include ad valorem property taxes, registration fees and
motor fuel taxes. Cases included in this report do not
re-examine these techniques except where the example
demonstrates an unusual aspect of the mechanism or where
a program has an important effect on transportation
funding. All of the taxes examined in this section are
dedicated for transportation uses
The State of California Transportation Development
Act uses State fuel and sales tax funds to provide 20
percent of transit revenues in the State.
The motor vehicle excise tax in the State of
Washington provides 25 percent transit revenues
statewide.
While local option motor fuel taxes are enabled in 14
States, the State of Florida has made extensive use
of the tax; 56 of 67 counties have adopted it. Florida
law also authorizes three other local option
transportation taxing mechanisms.
The local option sales tax that has recently been
established in Maricopa County, Arizona is unusual
in that it is dedicated primarily to freeway construction.
The use of beer tax revenues in Birmingham, Alabama
for transit represents the first time these
funds have been dedicated for a transportation use.
The payroll tax to date has been authorized only in
the State of Oregon. The technique is being used
in Portland and Eugene.
The tax increment financing mechanism (TIF) resembles
assessments in the creation of special districts,
but property owners' taxes do not rise as a
direct result of TIF implementation. The ten TIF
districts in Prince George’s County, Maryland have
funded over 72 projects worth $14 million.
Although a lottery is not usually considered a taxing
mechanism, it has been included in this section because
the State "taxes" each chance purchased by earmarking a
percentage of lottery sales revenues for specific State
programs. It is rare for lottery funds to be dedicated
for transportation programs, as they are in the State
of Pennsylvania and the State of Arizona.
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State Sales Tax and Sales Tax On Fuel
Overview
State of California (1984pop. 25,622,497) - California
has developed a local transportation funding program
which encourages local support of public transportation
needs and provides municipalities and transit agencies
with a substantial funding source. The Transportation
Development Act (TDA)provides funding for public
transportation through two sources, the Local
Transportation Fund and the regional State Transit
Assistance Fund (STAF).
The Local Transportation Fund (LTF) receives revenues
from 1/4 percent of the 6 percent State sales tax (the
loss in General Fund revenues was offset by extending the
sales tax to gasoline). The LTF funds are turned back to
me county of origin and are apportioned within the county
to the incorporated area of each city and the
unincorporated area of the county on the basis of
population. Where a county has a transit district,
separate apportionments are made to areas within and
outside the district.
In general, LTF funds may be used in the following
manner. Counties with populations larger than 500,000
must use LTF funds for transit needs. Counties with fewer
than 500,000 may use LTF funds for local roads and
streets, once the local Transportation Planning Agency
(TPA), usually the Metropolitan Planning Organization
(MPO), has determined that all transit needs which
can reasonably be met have been met. Funds are allocated
from the county treasury to specific recipients for
specific purposes.
Before apportioning, the local TPA may reserve up to 2
percent of LTF revenues for pedestrian and bicycle facilities.
Up to 5 percent of remaining funds may be used for service for
the elderly and disabled.
Revenues for the State Transit Assistance Fund (STAF) are
derived from the State gasoline sales tax. Legislation
provided that revenues attributable to gasoline sales over
and above replacement of LTF to the General Fund, would be placed
in the Transportation Planning and Development Account;
these are known as spillover funds. The STAF represents
60 percent of the TPDA. Thirty percent of STAF funds are
allocated on the basis of operator revenues. A region
receives that portion of the 30 percent which equals the
ratio of its operator revenues to the statewide total of
operator revenues. The same process is used to calculate
the individual operator's portion of the funding within a
region. Operator revenue may include fares, discretionary
allocations from local governments, and revenues from a
local sales tax dedicated to transit - - consistent with
the State's view that local support includes all local
contribution to transit service.
Seventy percent of the STAF funds are allocated to the
regions on the basis of regional population. In counties
larger than 500,000, operators may only use STAF funds
for transit purposes. In counties under 500,000, the
funds may be used for transit or streets and roads where
no unmet transit needs exist.
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In order to qualify for funding under either program, a
transit claimant must maintain a ratio of fare revenues
to operating cost equal to the ratio it had during
1978-79 and equal to 20 percent if the claimant is in an
urbanized area, or 10 percent if the claimant is in a
non-urbanized area. In addition, the claimant must
maintain a ratio of fare revenues plus local support to
operating cost greater than the ratio it had during
1978-79 if its ratio was greater than 20 percent in an
urbanized area or 10 percent in a non-urbanized area
Determination of compliance with these requirements is
the responsibility of the local Transportation Planning
Agency.
Results The State is able to fund local public transportation
while controlling by statute the level of State subsidy. In
FY 1986 STAF funds totaled about $69.3 million, and the LTF
about $535 million. Together the funds account for nearly
23 percent of total transit revenue in the State as compared
to about 20 percent for farebox revenue.
Legal There have been no major challenges to the LTF
funding program. Issues However, several problems have arisen
with the farebox recovery requirements. In rural areas which have
been reclassified as urban since TDA was passed, meeting
the 20 percent farebox requirement has sometimes proven
difficult. Some operators have also protested that the
base year, 1978-79, was exceptionally good, and that they
are actually having to recover closer to 25-30 percent. A
bill currently under consideration by the State
legislature would allow TPAs in counties under 500,000 to
reduce the 20 farebox recovery requirement to between 15
and 20 percent, and would remove the cumulative effect of
penalties related to farebox recovery ratios. A
recommendation to eliminate the base year requirement
from the Act was deleted from the bill. Another bill
amending the TDA would allow operators to exclude
insurance costs in determination of their recovery ratio,
which would have the effect of raising their recovery
rate or decreasing the requirements. A second provision
of this bill would make ridesharing programs eligible for
TDA funds.
Political The State legislature is opposed to changing the
essential outlines of the Issues TDA. This year, however,
despite legislative efforts, the governor has moved STAF
funds to the general fund. Decreasing oil prices have made
the amount of spillover revenues decrease substantially.
Timing The Transportation Development Act was passed in
1971. In 1972 the Local Transportation Fund was created,
and in 1980 the State Transit Assistance Fund was
established. A Unified Transportation Fund was
established by law in 1981, but no funds have been
appropriated into the account, and the UTF legislation
was repealed in 1985. Both the STAF and UTF were subject
to appropriation by the legislature and inclusion in the
State budget, unlike the LTF.
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Contact Lee Deter
Chief, Mass Transportation Office
California Department of Transportation
1130 K Street
Sacramento, California 95814
(916) 423-0742
Helen Mullally
Administrative Officer
Southern California Association of
Governments
600 South Commonwealth Avenue
Los Angeles, California 90005
213) 385-1000
References State and Local Governmental Responses to Increased
Financial Responsibility for Public Transit Systems,
prepared by Erskine Walther, Transportation Institute,
North Carolina A & T State University, November, 1983.
Transportation Development Act: Statutes and
Administrative Code for 1984,State of California Business
Transportation and Housing Agency, Department of
Transportation, Division of Mass Transportation,
September, 1984.
Public Transit Farebox Ratio Requirements Report, Report
to the California Legislature, State of California
Business, Transportation and Housing Agency, Department
of Transportation, l:)Division of Mass Transportation,
December, 1985.
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Motor Vehicle Excise Tax
Overview
State of Washington (1984 pop. 4,349,002) -
Washington provides a dedicated source of funding for transit
which emphasizes local commitment to support transit.
Washington's Motor Vehicle Excise Tax (MVET) rate is 2.354
percent and is an
annual State excise tax on the fair market value of motor
vehicles. Cities and counties are permitted by the State
to direct nearly half (1 percent) of the MVET for local
public transportation needs. The remainder goes to the
State ferry system, (0.2 percent) and to the State
general fund (1.154 percent).
Any entity or municipality is eligible to collect the
MVET levy except for city systems with a sales tax
dedicated to transit where the system provides service to
an area greater than the units of the municipality. Only
funds generated within a transit system's service
area may be used. The MVET funds must also be matched
dollar-for-dollar using a local tax source from within a
transit system's service area, or local general service fund
revenues. Local tax sources may be a sales tax, or household or
business tax.
Systems using MVET funding submit budgets each year
to the State Department of License which projects tax
revenues. Actual tax receipts are submitted in April of
the following year, and compared with MVET disbursements.
The Department of License then adjusts current year MVET
funding as needed. The MVET funds are collected by the State
and disbursed quarterly with a six month lag.
The MVET funding for local public transportation may be
used for operating or capital expenses.
Results
MVET funds provide about 25 percent of transit revenues
in Washington State. In the 1983-85 biennium, $169
million was available from the municipal levy. Only about
$108 million was used, or matched, by municipalities and
transit agencies. Remaining revenues go to the State
general fund.
Legal
Issues
any municipality is eligible to collect the 1 percent
MVET, known as
the municipal levy. State courts have ruled that the 1
percent MVET municipal levy is a local tax and is not
subject to appropriation by the State legislature.
Political
Issues
No political issues were reported.
Timing
The municipal levy was first used in 1971.
Contact
Jim Slakey
Manager of Public Transportation Office
Washington Department of Transportation
KF01 Olympia, Washington 98504 (206) 753-2931
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References
State and Local Governmental Responses to
Increased Financial Responsibility for Public Transit
Systems, prepared by Ersldne Walther, Transportation
Institute, North Carolina A & T State University,
November, 1983.
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Local Option Transportation Taxes
Overview
State of Florida (1984 pop. 10, 975, 748) - Florida has
two types of local motor fuel taxes for transportation.
The first, the voted gas tax, was approved by the State
legislature in the early 1970s. This tax is limited to 1
percent per gallon and is subject to voter approval via
county-wide referendum. Twelve counties have exercised the
voted gas tax.
The second tax, the local option gas tax, was approved by
the State legislature in 1983. The tax rate is limited to
not more than 6 percent per gallon (in whole pennies).
Implementation requires a simple majority vote of a
county commission.
The State's Department of Revenue is responsible for
collection of local fuel taxes from retailers. For the
local option tax, 91.5 percent of the funds collected are
distributed, on a monthly basis, back to the
counties/cities according to a distribution formula
established in an Interlocal Agreement. The State
keeps 6 percent of the revenues collected to cover
administrative and overhead costs. A retail collection
fee of about 2.5 percent is also applied to revenues
from the local option and the voted gas tax.
Funds can be dedicated for any transportation need,
either highway-or transit-related.
Results
Twelve counties have passed a voted gas tax, and 56
counties now have a local option gas tax, 31 of which
have imposed the maximum amount. Each penny of the
Hillsborough County (Tampa) gas tax generated about $4.3
million in gross revenues in FY 1986. In Dade County
(Miami), each penny generated about $7.7 million in gross
revenues.
Legal Both the voted gas tax and the local option gas tax were
legislated by Issues the State to be carried out at the county
level. Both are optional taxes. The voted tax requires a referendum,
while the local option tax is implemented by a county
governing board.
Recent changes in the State legislation governing the
local option tax make it possible for a county commission
to impose the tax by a simple majority; a tax of 3 cents
or more formerly required approval by a majority plus
one. In addition, any number of gas tax pennies may now
be bonded, and any county which has imposed 5 cents may
participate in a program to match State funds in the
ratio of 80 to 20, percent for projects on the State
highway or county systems or on local roads which would
alleviate congestion on State highways.
Political
The voted gas tax has been more difficult to impose as it
requires Issues electoral approval. Most of the counties which have
adopted this tax successfully are geographically
concentrated along a major interstate highway. Therefore,
the tax has been largely passed on to tourists.
In the case of Hillsborough County, which has both types
of local fuel taxes, the voted gas tax failed the first
time it was put before the voters. The
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second time it was put on the ballot, a well-funded
and highly publicized campaign was mounted to
promote and advertise the tax.
Timing
Legislation for the voted gas tax was approved in the
early 1970s. It was first utilized in 1980. Local option
gas tax legislation was passed in April 1983.
Related
Experience
The State of Florida also has two other local transportation
taxes. The Charter County Transit System Surtax was authorized
in 1976 as a means to help fund Metro-rail in Dade
County. It is a discretionary sales surtax that may be
levied at 20 percent of the general sales tax rate by any
of five charter counties which adopted their charter
before June 1976. A referendum on the surtax failed in
Dade County and as of September, 1986 no county had
adopted the tax. The revenues would be used for costs
associated with a fixed guideway system.
The Metropolitan Transportation Authority (MTA) tax was
enabled in 1985. An MTA may be created in any urbanized
area with over 200,000 residents which is comprised of
counties which have levied at least 6 cents of the local
option gas tax. Nine areas in the State, comprising 14
counties, met these requirements as of September, 1986.
An MTA has the power to levy gasoline or property taxes
to fund arterial highway needs within its area Before a
county may levy taxes through an MTA, a plan for revenue
expenditure must be approved by countywide referendums in
each participating county. In the three counties
comprising the Orlando area, referendums on the MTA tax
were recently rejected four to one.
The charter county transit system surtax also requires
countywide approval.
Contact
Ron McGuire
Florida Department of Transportation
Office of Transportation Policy
Mail Stop 28605 Suwannee Street
Burns Building, Room 337
Tallahassee, Florida 32301 (904)
407-4102
References
Financing Urban Transportation Improvements, Report
3. A Guide to Alternative Financing Mechanisms for Urban
Highways, by Rice Center, June, 1984.
Florida's Transportation Revenue Sources, by the Florida
Department of Transportation, Division of Planning and
Programming, Bureau of Policy Planning, July, 1986.
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Sales Tax
Overview
Maricopa County, Arizona (1984 pop. 1, 714,809J - A new
V2 cent sales (transportation excise) tax has been
established in the county, the revenues of which will be
used to provide additional funding for the construction
of freeways, expressways, and parkways and the continued
development of public transportation.
The Phoenix metropolitan area greatly needs to expand its
freeway system. The area now ranks 61st in freeway
miles-per-capita of 62 metropolitan areas with more than
400,000 people. Compared to 18 metropolitan areas with
one to two million people, the area is last in freeway
miles, freeways per-capita, and the percentage of traffic
moved on freeways. Other existing sources of funding for
needed construction were insufficient to address the
problem.
Under a new law passed by the Arizona legislature in
1985, a referendum was held to establish an additional
1/2 percent sales tax-in Maricopa County which could only
be used to:
o Accumulate funds to be held in trust to design,
acquire rights-of- way, and to construct
controlled-access highways ($5.8 billion over 20
years).
O Service bonds issued to design, to finance
acquisition of rights-of way, and to construct
controlled-access highways identified in the Regional
Mobility Plan.
O Develop a regional public transportation system
plan for Maricopa County ($8 million).
O Increase funding to operate a regional bus system,
dial-a-ride, and other special transportation services
for Maricopa County ($5 million per year, increased
with inflation).
Results
The new tax was approved by the voters. The Transportation
Excise Tax took effect on January 1, 1986
and shall be in effect for a period of 20 years after
that date.
The tax is projected to generate $5.8 billion over
20 years. In 1986, $99 million will be generated. With
tax revenues increasing over the years due to population
and economic growth and inflation this figure is expected
to increase to $618 million by 2005.
When the planned construction is completed, there
will be 233.5 new freeway miles and expressway corridors
added to the existing 70.5 miles and 16 miles presently
under construction. A new regional transit authority has
been established to oversee rapid transit planning and to
oversee expenditure of the $5 million yearly allocation
to augment existing public transportation service.
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Legal
Issues
state legislation was required to establish the new tax.
The new law required in turn that the tax be approved by the voters
of each county in which it is to be collected.
The transportation excise tax money is collected by the
State Department of Revenue, placed in a new fund to be
held by the State Treasurer, and called the Maricopa
County Regional Area Road Fund. It may be used only for
the specified transportation purposes enumerated in the
enabling legislation. Food and medicine are exempted from
the sales tax.
Construction of the freeways, expressways, and parkways
will be supervised by the Arizona Department of
Transportation.
Political
Issues
A pro-freeway attitude and the willingness to pay for
roadways developed over the years as a reaction to increasing
frustration with worsening traffic congestion. Support for an
additional tax originated in the local business community which
was instrumental in securing State enabling legislation.
A coalition made up of citizens and community
leaders with support from the regional planning agency
and local governmental leaders, led the campaign for the
tax. Two groups opposed the initiative, one opposing any
form of new taxation and denying the need for such, the
other supporting new freeways but opposing the tax.
The proposal passed in the election with approximately 72
percent in favor.
Timing
The enabling legislation for the new tax was passed in
May of 1985. The Maricopa Association of Governments
(MAG) adopted the Regional Transportation Plan for
Maricopa County in July 1985. A resolution calling
for the election was passed by the Board of Supervisors
of Maricopa County, Arizona in August, 1985. The election
was held on October 8, 1985. The new tax went into effect
on January 1, 1986.
Contact
Jack Debolske, Secretary
Maricopa Association of Governments
1820 West Washington
Phoenix, Arizona 85007
(602) 254-6308
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Beer Tax
Overview
Birmingham, Alabama (Jefferson County 1984 pop. 671, 786)
- In April, 1982 a statewide beer tax was established in
Alabama. Prior to the bill, each county had set its
own beer tax; under the bill, the tax was levied at 1.625
cents for each four fluid ounces of beer. It is collected by
the assessing authority of the county or municipality. Each
county divides its portion of revenues from this tax differently,
according to the recommendations of the county delegation to the
State house and senate. In Jefferson County, three funds were
established to receive different portions of the revenues. The
third fund (Fund C), which represents 3/9ths of the tax received
(after 2 percent is removed for county administrative costs), is
distributed in part to the Birmingham-Jefferson County Transit
Authority. The Authority receives 50 percent of Fund C or $2
million dollars annually, whichever is greater.
Results
Revenues from the tax represent 17.8 percent of the
Authority's budget in each of the years since the tax was
dedicated to transit. Funds have been used for capital
expenditures.
Legal
Issues
Subsequent to the bill's passage, several counties
with beer taxes that Issues had been higher than
1.625 cents brought a lawsuit in State supreme court.
Other cities have challenged the beer tax as
unconstitutional but it has withstood this challenge
in court.
Political
Issues
No political issues were reported.
Timing The bill was proposed in the fall of 1981 as
an add-on, and passed in April, 1982.
Contact
Janet Dignazio
Birmingham-Jefferson Transit Authority
P.O. Box 10212 Birmingham, AL 35202
(205) 322-7701
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Payroll Tax
Overview
Portland, Oregon (1984 pop. 1,340,940) - The State of
Oregon has authorized local transit agencies to use a payroll
tax to generate revenue. Since 1970, the Tri-County Metropolitan
Transportation Authority has imposed a tax on employer
payrolls, and since 1982, a tax on the earnings of
self-employed people within the district. The State
government pays an amount in lieu of the tax on the
payroll of its employees working in the district. The
State legislature permits the district to adjust the tax
rate as long as the rate does not exceed the statutory
ceiling of 0.6 percent.
Taxes are paid quarterly, by employers within the transit
districts. The State Department of Revenues collects and
administers the tax. All revenues, after handling costs
incurred by the State are deducted are forwarded to the
transit district.
Results
In FY 1985, the tax generated a net of $41.1 million or
60 percent of the system's operating budget. In FY 1986,
the tax generated $44 million, or 65 percent of the
system's operating budget. The State government
contribution in lieu of a payroll tax on government
employees generated $1.2 million in 1986, while the
payroll tax on self-employed individuals yielded $3.4
million.
Legal
Issues
The Oregon legislature enacted a State statute, ORS
#267, in January, Issues 1970 which enabled the
creation of the Tri-County Metropolitan Transportation Authority.
The legislation also granted taxing authority to Tri-Met, including
the option for Tri-Met to impose a payroll tax of up to 0.6
percent. By law, government organizations are exempt from paying
the tax.
Political
Issues
After the tax became law, it was challenged in
court, but was found to be unconstitutional.
Timing
Tri-Met has used the tax since its authorization by
the State in 1970, and since 1982 Tri-Met has also
taxed the earnings of self-employed people within its
area.
Contact
Janet Jones
Manager of Financial Forecasting
Tri-County Metropolitan Transportation District
4012 S. E. 17th Avenue Portland, Oregon 97202
(503) 239-6401
Related
Eugene, Oregon (1984 pop. 101,602) - This
jurisdiction has also taken Experience advantage of Oregon's
payroll tax to support public transportation. Lane County Mass
Transit District imposes a 0.50 percent tax on the total payroll
of local businesses. Every year the tax rate is evaluated to meet
budgetary requirements. In FY 1985-86, Eugene received
$4.84 million, or 62 percent of its general fund
revenues.
-13-
Contact
Karen Rivenburg
Lane County Mass Transit District
P. O. Box 2710 Eugene, Oregon 97402
(503) 687-5581
References
Financing Transit: Alternatives for local
Government, prepared by the Institute of Public
Administration for the U. S. Department of
Transportation, Urban Mass Transportation Administration,
Office of the Secretary, Washington,
D.C., 1979.
-14-
Tax Increment Financing
Overview
Prince George's County, Maryland (1984 pop. 675,571) -
Since 1979, ten Tax Increment Districts have been formed
in Prince George's County, Maryland. The districts were
established for the purpose of funding public
improvements within each district. A base year assessed
property value was determined, and taxes collected on any
increases in property values above the base year value
are dedicated to the needed improvements. The additional
real property taxes received from the non-residential
property in these districts was exempt from a local
property tax cap imposed from 1980 through 1985.
The ten districts consist of industrial, commercial
or residential areas expected to undergo a large amount
of development or redevelopment. The benefit of TIF is
that funds can be earmarked for particular improvements
such as transportation, to assure that needed
infrastructure expansion takes place.
Seven capital projects are underway in Prince
George's County for FY 1987, worth a total of $1.1
million. The current year's levy is estimated at $8
million, and there is an $11.5 million balance from prior
years. The majority of the TIF fund, or $16.2 million,
will be transferred to the general fund out of which debt
payments will be made for current and future capital
projects.
Results
The Districts have benefited from the $14 million in
revenues generated. Some of the 72 completed projects
include Amtrak and Metro parking garages, a pedestrian
overpass, traffic signals, and various road projects.
Revenues from each district ranged from $36,675 to
$2.5 million from 1981 to 1984. Districts with steady
growth will continue to benefit from TIF expenditures.
However, districts with slow growth and small TIF
contributions will probably be dropped.
Legal
Issues
The Tax Increment Financing Act was passed during the
1980 Session of the State General Assembly. The Act allows local
governments to designate certain areas of the county as
Tax Increment Districts. In Prince George's County the
effect of TIF was to allow capital projects to be
financed at a time when other funding sources were
unavailable. Now that funding limitations have been
modified, there will be a return of general fund
borrowing as a financing method. It is easier to float
government funding bonds because they have fewer
restrictions.
The enabling legislation spells out two methods for
financing.
1. The annual increment of increased tax revenues is set
aside in a special fund for improvements in the tax
increment district.
2. The anticipated amount of tax increase is pledged to
repay bonds sold by the public body to finance
improvements.
Political
Issues
No political problems were reported.
-15-
Timing
The first TIFD's were created in 1979. Selected TIF funds
will be reviewed during F Y 1987 for viability.
Contact
Janet W. Everette
Management Specialist
The Prince George's County Government
County Administration Building
Upper Marlboro, Maryland 20772
(301) 952-3300
-16-
Lottery
Overview
State of Pennsylvania (1984 pop. 11,900,222) - In 1972,
the Pennsylvania legislature authorized a statewide
lottery to benefit senior citizens. The lottery revenues
were dedicated to programs by the State Department of
Aging, the Department of Transportation, and the
Department of Revenue.
The lottery law stipulates that 50-percent of the
proceeds be returned to the players in the form of
prizes. The remaining funds are to be appropriated
annually to two transit and two nontransit programs, all
for senior citizens. Funding which actually goes to
transit represents 8 to 12 percent of not proceeds from
the lottery. The Department of Transportation also offers
a 75 percent discount to senior citizens participating in
a shared ride, advance reservation service provided
through private taxicab contractors. The advance
reservation (24 hours) requirement allows for
multi-person scheduling and the use of vans and small
buses. The service is directed primarily to rural
customers.
Programs offered through the Department of Revenue
include "Property Tax and Rent Rebate" and a "Senior
Citizen Inflation Dividend." Lottery funds are also used
by the Department of Aging as matching funds for federal
grants. In addition, the Department uses lottery funds to
subsidize drug prescriptions. Operating the Pennsylvania
lottery is a complex business which includes marketing;
security, printing, packaging and distributing tickets;
sales; and developing rules and regulations to conduct
each game; and payment of prizes. Two functions are
considered to be essential to the success of the lottery:
(1) given the potential for fraudulent practices,
extensive security procedures and measures are needed to
guarantee the integrity of all lottery games; (2)
marketing efforts are needed to increase the number of
licensed sales locations and to promote ticket sales.
Total costs of running a lottery have run as high as $35
million in fiscal year 1984-85.
Results
The lottery has generated significant revenues for the
State of Pennsylvania. In 1985-86, gross ticket sales
were $1.32 billion, of which $733 million were net
proceeds. Transit programs for senior citizens received
$106 million of these funds. The remaining net proceeds
were used for other specific programs for senior
citizens, such as property tax, rent rebates, and
inflation.
Legal
In 1971, the State legislature passed a law (Act No. 91,
the Laws of Issues Pennsylvania, Session of 1971),
authorizing the establishment of a statewide lottery. The
law created a Division of the State Lottery within the
Department of Revenue and gave it a $1 million budget to
establish the lottery. The law specified that the lottery receipts
would pay for payment of prizes, for payment of costs of
operation and administration of the lottery, and for
subsidy of the senior citizen programs. The law was
amended in 1980 and 1981.
-17-
Political
In general, lotteries are controversial sources of revenue. In
Issues Pennsylvania, the law was enacted after a long period of
debate. Critics of the lottery pointed to the sins of
gambling, the opportunities for corruption and the high
rate of participation by the poor. The compromise was to
use lottery proceeds to subsidize senior citizens
programs.
Timing
After the lottery law was passed in 1971, it took the
Bureau of State Lotteries approximately six months to
establish the procedures for the games, the rewards, and
the distribution network of retailers who sell lottery
tickets. The senior citizen programs first received
lottery funds in FY 1972-73.
Over the past ten years, as the public has become more
familiar with the lottery, proceeds allocated to the
programs have increased significantly.
Contact
Richard Boyajian
State of Pennsylvania Budget Office
Strawberry Square, Room 733
Harrisburg, Pennsylvania 17120
(717) 787-5442
References
The Pennsylvania Lottery Annual Report, 1980-1981, by the
Commonwealth of Pennsylvania, Department of Revenue,
Harrisburg, Pennsylvania, 1981.
Related Experience
State of Arizona (1984 pop. 3,052,983) - The Arizona
lottery was established as a result of a citizen's
initiative, passed on November 4, 1980. The proceeds of
the lottery were originally slated to be placed in the
General Revenue Fund. However, in July, 1981, the
legislature earmarked $190 million of lottery revenues
over the next ten years for the Local Transportation
Assistance Fund. In 1991, the legislature will reconsider
the issue of allocation of lottery funds.
The funds are allocated to each incorporated city and
town in the State on the basis of population. The
legislature has committed itself to appropriate
sufficient funds out of other revenues if necessary, to
meet a target distribution of $23 million a year, but
this has not been necessary. For cities over 300,000,
namely Tucson and Phoenix, the funds must be spent on
mass transit, as capital or operating assistance. Cities
and towns under 300,000 may use their funds for any
transportation purpose, including road maintenance. Each
city or town is guaranteed to receive a minimum of
$10,000 a year.
Results
In FY 1984-85, a total of $72 million was generated by
lottery sales; the required $23 million was distributed.
In 1986, the target of $23 million was
-18-
also reached. The city of Tucson received $3.6 million
and the city of Phoenix, $8.4 million.
Contact
Tom Robinson
Marketing Research Manager
Arizona Lottery Commission
301 E. Virginia Street, #1200
Phoenix, Arizona 85004
(602) 255-1470
-19-
II. Assessments
A special benefit assessment district is a fee on
properties within a district to pay for all or a part of
specific improvements made within that district. The
boundaries of the district are defined to include all
properties benefitting from the improvement. With special
assessments benefit from the development of improvements
pay for those improvements commensurate with the value of
the benefits to be realized. Assessments are levied as
one-time or recurring liens by city councils or special
districts. Revenues are typically used to retire bonds
issued to finance construction of capital improvements;
but may also be used to fund maintenance or operating
costs.
Special State enabling legislation usually is required to
levy special assessments.
Assessment districts have been used for highway
improvements in Arapahoe County, Colorado and
Plessanton, California.
Maintenance funds for a transit mall in Denver, and
a portion of the construction funds for the Los
Angeles Metro Rail system and the Miami Metromover
system were also raised by assessment districts.
-21-
Metropolitan Districts
Overview
Arapahoe County, Colorado (1984 pop. 361, 744) -
The first major, privately funded highway project in the
Denver region, the Yosemite Street overpass, was financed
by a coalition of metropolitan districts.
Metro districts are quasi-public entities that may issue
bonds for capital improvements supported by property tax
levies. This funding is considered to be from the private
sector, because these metro districts consist almost
entirely of commercial property. The Joint Southeast
Public Improvement Association (JSPIA), includes eight
metro districts and 2,663 acres and will ultimately
include over 50 million square feet of office, research,
and commercial development.
When the JSPIA was formed in 1982, a list of six highway
construction projects and four improvement projects were
adopted. The total cost of these improvements is being
shared by JSPIA, the County, and the State Department of
Highways.
Funds for the JSPIA portion ($20.5 million) are collected
from an ad valorem tax levied above and beyond the
County's taxes, at a rate of 22 to 45 mils. Each district
shares the total JSPIA portion of the projects according
to the proportion of the districts assessed valuation to
the total valuation of all the member districts. This
proportion is adjusted annually. The part of these
revenues not used for JSPIA projects is spent by each
district on internal improvements such as drainage
facilities and local roads.
Results
All of JSPIA's projects have been completed or are
under construction. One particular project, the Yosemite
Street overpass, serves the Greenwood Plaza South
development, and its construction was made a condition of
zoning approval for the development. The developer formed
the Greenwood South Metro district, and in cooperation
with the Greenwood District, constructed the overpass at
an estimated cost of $4.5 million.
The Colorado Department of Highways obtained
completion of projects that had long remained
dormant, at a cost of only $2.9 million to the
department. Completion of the overpass is estimated to
divert 8,000 vehicles per day from an overloaded
interchange.
The developers involved obtained approval to continue
medium-to-high density development and helped to
relieve a major traffic bottleneck. The JSPIA also
wished to establish credibility with the State and to lay
the groundwork for future jointly-funded projects in
the corridor which benefit both developers and the
general public.
Because the metro districts can use property taxes to
fund bond issues, front-end costs required by the
private sector to implement infrastructure improvements
are reduced, and low-interest long-term payments are
provided for.
-23-
Legal
Issues
Metropolitan districts are authorized under Colorado's
Special District Act, Title 32, adopted as a general
statute in 1981. They provide various infrastructure
services.
In order to form a special district, petitioners must
first submit a service plan to the board of county
commissioners. After the plan is approved and a petition
is presented to the district court, the court holds a
public hearing and an election. Consolidation of
districts is also processed through the court.
Metro districts have many of the same powers as
municipalities, such as issuing bonds, setting rates, and
acquiring property; they also have special powers of
eminent domain, providing public transportation, levying
and collecting ad valorem taxes, issuing negotiable
coupon bonds, and issuing tax-exempt revenue bonds.
While the funds used for improvements are from tax
receipts, the taxes are levied by the private sector on
the private sector.
Political.
Issues
No political problems were reported
Timing
In January 1981, the Greenwood Plaza South rezoning plan
was submitted, and in June it was approved. The formation
of JSPIA was announced in April, 1982. Two months later
the construction contract was awarded and the final
design approved by the Federal Highway Administration.
Projects are ongoing.
Contact
Phil Sieber, Planning Director
Arapahoe County
5334 South Prince Street
Littleton, Colorado 80166
(303) 795-4450
References
The Use of Private Funds for Highway Improvements,
prepared by KimleyHorn and Associates, Inc., May 1983.
-24-
Improvement District
Overview
Pleasanton, California (1984 pop. 38,394) - An
improvement district has been formed in Pleasanton,
California, to finance major traffic improvements in the
northern portion of the city. Created with the support
and consent of area developers, the district assesses a
fee based on benefit from improvements. Only commercial
and industrial properties are included in the assessment
area, which is bounded on two sides by interstate
highways. The District includes about 949 (net) acres
located in North Pleasanton. Land parcels with
improvements are receiving approximately 20 percent of
the total assessment.
Pleasanton, near San Francisco, is experiencing
significant office, commercial, high technology, and
light industrial development, creating a need for new
and/or improved freeway interchanges, ramps, additional
lanes, and major thoroughfare access roads.
The property in the North Pleasanton Improvement District
(NPID) and surrounding areas is also subject to
additional assessments for other public improvements
required for the development of the property. Nearly all
of the undeveloped property in the District is proposed
to be developed over the next ten years.
There are several business parks and commercial
centers at varying stages of development located
within the boundaries of the District. Hacienda Business
Park, the largest development in the City, is a mixed-use
park which is being co-developed by The Prudential
Insurance Company of America and Callahan Pentz
Properties, Pleasanton. Hacienda includes approximately
695 (net) acres of land. Upon completion in about 20
years, it is expected to provide approximately 12
million gross square feet of office, commercial, and
industrial space, and to have a daytime population in
2010 of 35,000. Other major business parks include the
Meyer Center, the Pleasanton Park, the Stoneridge
Corporate Plaza, and the Stoneridge Regional Shopping
Center.
The total amount being raised by the NPID for
transportation improvements is about $142 million, which
includes $49 million for local roadways, and $93 million for
highways. An additional $9 million will be raised for
fire protection and water supply improvements. Prudential
and Callahan Pentz will be responsible for the largest
portion of the assessments. Prudential will receive an
assessment of about $88 million, or 58 percent of the
total, and Callahan Pentz will receive an assessment of
about S21 million, or 14 percent of the total. The
assessments are calculated on the basis of net acres;
both developed and undeveloped land will be assessed
for approximately $150,000 per acre.
The District's projects are in three phases, the first of
which are roadway improvements costing about $49
million. Prior to the establishment of the NPID,
Prudential, Callahan Pentz, and other developers had
already spent over $25 million on roadway improvements,
for which they were credited through a redistribution of
assessments for the $24 million bond issue which
-25-
funded the remainder of Phase I. Nearly one-third of the
current 53 signals in Pleasanton have been funded by the
NPID; and through NPID, North Pleasanton developers paid
for the installation of a master computer at City Hall,
the expansion of the building to accommodate it, a direct
wire connection for 13.3 miles of interconnect throughout
the City, and provided capacity in the master computer to
control 128 intersections. Traffic engineers and
consultants for the developers provided the feasibility
study, specifications, design, initial timing, and
ongoing signal timing at no cost to the City.
During Phases II and III, the NPID plans to fund 100
percent of the cost of improvements on two interchanges
and a majority percent of the costs of two other
interchanges. The NPID will also fund the construction of
auxiliary lanes on both I-580 and I-680 adjacent to
development in north Pleasanton. Auxiliary lanes will be
provided on both sides of the freeways for approximately
eight lane-miles.
Results
The city of Pleasanton is now undertaking the preparation
of a project report and an Environmental Assessment (EA)
for the interchanges and auxiliary lanes. As a result of
local efforts spearheaded by the City and agreed to by
the California Department of Transportation (Caltrans)
and the Federal Highway Administration, the usual four-
to five-year lead time from the beginning of an EA to the
beginning of construction of a project is expected to be
reduced to three years.
Proceeds from the initial sale of $24 million in
Assessment District bonds were used to complete the
financing of Phase I, which is nearly complete. It is
expected that additional improvement bonds will be issued
on a phased basis over the next ten years to finance the
freeway improvements. These bonds create a lien against
each property within the District for that property's
proportionate share of the improvements.
Legal
Issues
A State statute dating from 1913 allows cities to
establish special districts to support infrastructure
improvements by issuing tax exempt bonds. To establish
the District, property owners petitioned the City, which
performed a preliminary engineering study and calculated
assessments. At a public hearing only one company protested its
assessment.
Political
Issues
No political problems were reported during the first
phase of the NPID. Area developers supported the District as
a fair method of assessing for the. local impact of new
development. However, in developing Phases II and III,
problems have been encountered in determining the source of the
remaining funds needed to construct two interchange
improvements. Caltrans has decided not to commit State
funds for these projects, and is encouraging several of
the communities surrounding the District to contribute to
the improvements because the benefits are regional in
scope. Coordination with these communities is slowing the
funding and planning processes on the projects.
Timing
The first bonds were issued in October, 1985. The
remainder will be issued in at least two stages over the
next ten years. Phase I of the District,
-26-
including the signalization projects, is nearly complete.
Phase II, which includes design and engineering for the
highway projects, and Phase m, which is the construction
portion of those improvements, will extend over the next
ten years.
Contact
John Crawford
Assistant Civil Engineer
City of Pleasanton
City Hall, P. O. Box 520
Pleasanton, California 94566
(415) 847-8040
Joseph Elliot
Director of Public Works and Utilities
City of Pleasanton
City Hall, P.O. Box 520
Pleasanton, California 94566
(415) 847-8040
-27-
Transit Assessment District
Overview
Denver, Colorado (1984 pop. 504,588) - In October, 1982,
the Rapid Transit District in Denver, Colorado opened a
downtown transit mall which is located on 16th Street and
covers a 14-block area from Broadway to Blake Street. The
mall runs through the center of Denver and is bordered by
a mix of retail, high-rise office, and some residential
development. The mall offers continuous free transit
service via specially built shuttle vehicles.
Maintenance of the 14-block mall is being funded through
a special assessment charged to property owners
immediately adjacent to the mall corridor. The Assessment
District and its funding mechanism are unusual in that:
Assessments are based on the amount of land
area included in the individual property, rather than on
the square feet of improvements made to the land.
Assessment rates vary according to distance from
the mall and land use. There are ten categories of
properties that take into account differences in
distance from the mall and zoning limitations. Rates
vary from a high of 45 cents per square foot for land
adjacent to the mall to a low of 5 cents per square foot.
Funds raised by the District are not used for
construction costs, which is more common, but rather
for operations.
Results
The assessment and maintenance is being supervised by
Downtown Denver, Inc. (DDI), which represents a group of
downtown businesses. The assessment covers maintenance
services including administration; clean-up and snow
removal; maintenance of plants and flowers;
electrical/plumbing repair and replacement; capital
repair and maintenance; security; and supplemental water
and electrical service.
The DDI collected $1.67 million in 1984 through special
assessments for maintenance of the Denver transit mall.
The first formula, which assessed property owners on the
basis of expected increases in property values
attributable to the mall, proved to be unworkable. Under
the current formula, rates are adjusted annually as
needed to cover the District's budget. In 1984, the
assessment rates were increased by 6 percent.
Legal
Issues
Enabling legislation for the creation of the
special assessment district was passed by the Denver voters
in 1978. The legislation (1978 Charter Revisions, Section A2.29)
provides two methods through which a district can be
legally constituted: (1) if 35 percent of the property
owners agree to its creation or, (2) if the Denver
Director of Public Works establishes the district by
mandate. The latter was the approach actually used. DDI
had difficulty with the first approach due to its
inability to locate an adequate number of "property
owners," defined by the enabling legislation as those who
have authority to sell land within the district.
-28-
The enabling legislation which provides the authority for
the creation of the special district and assessment
collection expires ten years after its establishment.
Accordingly, DDI has signed a ten-year contract with the
City of Denver and the "Transit Mall Maintenance
District" to oversee the maintenance of the mall. The
contract will be reviewed annually to determine both the
adequacy of revenues derived from the special assessment
for covering maintenance requirements, and the fairness
of the formula utilized to derive income.
Political
Issues
The implementation of the assessment district
required skill in negotiation backed up by the ability to
follow through on the terms agreed upon in the negotiation
process. DDI was in a favorable position because of its
stature as a widely supported business organization, its
ability to hire consultants to provide needed technical material,
and its desire to gain control over mall maintenance,
management, and development.
Negotiations by DDI were conducted with three different
groups: the downtown property owners, to agree on the
boundaries of the assessment district; the city, to agree
on the maintenance contract; and the RTD, to arrange
provision of bus service and to agree on the final design
of the mall.
The greatest conflict occurred over the definition of the
district boundaries by the original independent
appraiser. In the original concept, two blocks on each
side of the mall were to be included in the District.
However, the appraiser recommended that benefits would
extend for only one block In each direction, and so the
District was redefined. A majority of property owners
within the one block District objected to the smaller
district, complaining that benefits actually would be
more widespread and that the limited district would place
the financial burden unfairly on a small number of
property owners. Fearing the assessment district plan
would fall through, DDI persuaded 7 percent of the
dissenting property owners to reverse their decision,
allowing the District to be defined as originally planned.
In return for the support, DDI agreed to redefine the
district's boundaries for the second year to include three
blocks northeast and two blocks southwest of the mall. The
new, broader district increased the base from about 200
property owners to over 850 property owners; the new district
was supported by 98 percent of the property owners.
Timing
After Denver voters approved the ballot measure, it took
one and a half years to complete the hearings required
to establish the District. During that time, the District
was contested by property owners as mentioned above.
Construction of the mall was completed in October, 1982,
at which time DDI began to provide maintenance service.
Contact
Richard C. D. Fleming
President & Chief Executive Officer
of the Demer Partnership, Inc.
511 16th Street, Suite 200
Denver, Colorado 80202
(303) 534-6161
-29-
Special Benefit Assessment District
Overview
Los Angeles, California (1984 pop. 7,901,220) -
California legislation (S.B. 1238) which allows special
benefit assessment districts to be set up around planned
Metro Rail rapid transit stations was enacted in 1983.
The bill amends the Public Utilities Code to allow
assessment districts for the construction, maintenance,
and operation of transit. (The Code already allows
benefit assessment districts for other types of
infrastructure, such as fire protection districts and
water districts.) Undeveloped land will be assessed
according to parcel size and improved land according to
total floor area.
The law allows Southern California Rapid Transit District
(SCRTD) to levy assessments on property owners within
these districts in direct proportion to the benefit their
property derives from proximity to Metro Rail. One of the
key aspects of the law is that it enables the District to
consider issuing bonds based on anticipated revenue to
help pay for the project's construction, operation, and
maintenance costs.
In January, 1985, the Benefit Assessment Task Force
established by SCRTD formally recommended that two
benefit assessment districts be established for the
initial segment of 4.4 miles (MOS-1): one for the
Wilshire/Alvarado station area and one for the Central
Business District (CBD) station area.
The district boundaries will be established based on
walking distances of 1/2 mile for the CBD and
approximately 1/3 mile for the Wilshire District.
Assessment rates will be applied uniformly through an
entire district. Offices and other commercial
improvements; retail stores, hotels; apartment hotels;
motels; labor-intensive, light industrial areas; and
income producing residences will be assessed. The initial
assessment rate will be set at 30 cents per square foot,
with a maximum allowable rate of 42 cents. The SCRTD will
review the rates at least every two years to determine
whether they should be adjusted as required by cash flow
needs or for changes in the amount of assessable square
feet in the District.
The assessment structure assesses either the improvement or
the parcel of land on which the improvement is sited.
Improvements such as offices, commercial, retail stores,
hotels, and motels are to be assessed for the square footage
of the improvements or the square footage of the parcel whichever
is greater.
Results
The first phase of Metro Rail will cost $1.25 billion to
construct. The Federal government is being asked to pay
$695.9 million, or 56 percent, and has signed its
commitment to MOS-1. The State of California will provide
$213.1 million, or 17 percent. The V2 cent sales tax in
Los Angeles County dedicated for transit will contribute
$176.6 million, or lA1 percent; and the City of Los
Angeles will provide $34 million, or 2.7 percent. When
these contributions are totaled, some $130.3 million in
additional funds
-30-
(approximately 10.4 percent of the MOS-1 construction
cost) are needed for the initial 4.4 mile segment, and
also to demonstrate to the Federal government that there
is strong local commitment to Metro Rail. Assessment
revenues will be used to pay for and finance these $130.3
million in construction costs.
A new task force will be formed to consider benefit
assessment districts for future segments of the Metro
Rail system, which are planned for each of the system's
18 to 20 stations.
Legal
Issues
Senate Bill 1238 amends the California Public Utilities
Code to allow special benefit assessment districts to be used
for mass transit. Public hearings were held by the SCRTD board and
the City Council before the resolutions were passed by
both bodies.
Political
Issues
At the SCRTD public hearing there was considerable
discussion of whether residential properties should be assessed.
The Task Force had recommended that income-producing residential
properties be assessed. However, the City Council decided
to not assess properties with residential improvements
except for hotels and motels.
Timing
S.B. 1238 became law in October, 1983. The Benefit
Assessment Task Force was formed in July, 1984, and made
its recommendations to the SCRTD board in January, 1985.
After a public hearing, the SCRTD Board approved a
resolution to proceed with the establishment of the two
benefit assessment districts, in February, 1985. The Los
Angeles City Council amended and approved the SCRTD
resolution on May 31, 1985. On July 11, 1985, the SCRTD
board adopted the resolution creating the two districts.
Contact
John A. Dyer, General Manager
Southern California Rapid Transit District
425 South Main Street
Los Angeles, California 90013
(213) 972-6474
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Special Benefit Assessment District
Overview
Miami, Florida (1984 pop. 1, 705, 983) - A special
assessment district has been formed in downtown Miami.
Its purpose is to generate $20 million, which was
established as the contribution from the private sector
toward the capital costs of implementing Miami's
Metromover project. The project will cost approximately
$148.2 million. The assessment district will replenish
the General Fund for an amount equivalent to a pro-rata
share of debt service on bonds at a fixed rate over a 15
year period. Bonds were backed by county utility service
tax revenues. Property owners being assessed in the area
are expected to benefit from the increased accessibility
to their properties increased sales and rents.
Results On November 1, 1984, Metropolitan Dade County began
levying and collecting this special assessment on
approximately 700 properties within the service area of
the Metromover. Based on net leasable square footage, the
special assessment is adjusted annually to account for
new development. The rate for the first year was 18 cents
per net leasable square foot, based on the January, 1984
property tax rate. At the end of 15 years, levies on
properties will have raised an amount sufficient to repay
approximately $7 million of debt service plus the $20
million of capital contributed toward the funding of
Metromover by the private sector. Churches and Federal
buildings are exempt from this charge. The district
included over 16.78 million square feet of net leasable
space when assessments were first levied.
Legal
Issues
The Dade County Manager commissioned a group of
representatives from private and public agencies to study
the Metromover's financing. They recommended the assessment
district to the Board of County Commissioners, which passed an
enabling ordinance in 1983. As the assessment basis is
not ad valorem, no referendum was required. The Dade
County Code limits the term of the special assessment district
to 15 years. The County Board will approve the assessment ratio
yearly, based on annual property appraisals. Assessments are
billed and collected as part of the tax collection process.
Tax certificates are sold on properties whose assessments are
delinquent.
Political
Issues
During the public hearings, some opposition arose from
property owners with under-leased buildings and owners who could
not pass on increased taxes to their tenants because of terms of
their contracts.
Timing
The Metromover project was initiated in September, 1982.
Enabling legislation for the assessment district was
passed in July, 1983. Bonds were issued in September,
1984 and will be fully retired 15 years later.
The Metromover opened in 1986.
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Contact
James Moreno, P.E.
Manager, Metromover Project
Dade County Transportation Administration
Metro-Dade Center
111 N.W. 1st Street, Suite 500
Miami, FL 33143
(303) 375-5902
Marc Samet
Citizens and Southern National Bank
P.O. Box 5367
1 Financial Plaza
Ft. Lauderdale, FL 33340-5367
(305) 765-2009
References
Financing and Implementing Special Assignments, by Mark
Samet, in Automated People Movers: Proceedings of an ASCE
Conference, Miami Florida, March 1985.
"Joint Use Right-of-Way Agreements for the Miami
Metromover System," by S. Zweighaft and J. Moreno, in
Automated People Movers: Proceedings of an ASCE
Conference, Miami, Florida; March, 1985.
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III. Fees
Fees are distinguished from taxes in that taxes are
usually levied on the general population, while fees are
used to segment a portion of the population which is
causing a significant impact on transportation
infrastructure, or which is particularly benefitting from
transportation improvements. Fees are becoming
increasingly popular and are receiving growing attention,
especially those imposed on developers to mitigate the
impact of new projects on roads and transit services.
These impact fees have been justified on grounds that new
development exacerbates peak-hour traffic or transit
problems and thus, developers should help to mitigate
actual and potential problems. The impact fees fall into
two general categories. The requirements may be
specifically set forth in local ordinances as a condition
for obtaining building or occupancy permits. Requirements
may also be negotiated by the developer and the local
zoning authority when a rezoning request is made. In the
case of negotiated requirements, local governments
withhold permits or approvals until commitments,
payments, or in-kind improvements have been made. Cases
examining the latter technique are found in Chapter IV.
Fees may be assessed on the basis of square feet of
development, units being constructed, or peak hour
vehicle trips generated. They may apply to a whole city
or county, or only a specific area, and may raise funds
for either road or transit improvements. Revenues are
usually spent for improvements in the area in which they
were generated. Fees require a high degree of
public/private cooperation. In some cases, the private
sector fully supports the use of impact fees as an
equitable method of financing necessary improvements. In
others, however, legal challenges to impact fee
ordinances have affected the ability of these ordinances
to mitigate transportation or mobility problems.
The examples of impact fees contained in this section
explore six highway-related projects and one involving
transit facilities.
Of particular interest is the ordinance in Palm Beach
County, Florida, which assesses a fee for impacts on
road facilities based on trips generated by the
development. The ordinance has served as a model
for other areas in Florida.
Upper Merion Township, Pennsylvania, Los Angeles, and
Orange County, California have adopted impact fee
programs allocating capital improvement costs by peak
period traffic generation.
San Diego adopted a facilities benefit assessment program
charging developers a fee for expanding the city's
infrastructure based on the number of forecasted building
units.
The city of Farmer's Branch, north of Dallas, established
a capital improvement fee per square foot based on a
comprehensive city capital improvement plan.
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Fort Collins, Colorado has instituted a Transportation
Utility Fee which raises funds citywide for road
maintenance. The fee is based on street frontage and
traffic generation.
The San Francisco case is an example of a fee ordinance
that dedicates revenues for transit facilities and
services.
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Fair Share Contribution Ordinance
Overview
Palm Beach County, Florida (1984 pop. 692,217)- In 1985,
Palm Beach County updated its Fair Share Contribution for
Road Improvements Ordinance (Ordinance #85-10) which
requires new land development activity to pay a fair
share fee for reasonably anticipated costs of new roads
needed by the development. However, the ordinance
clearly states that the impact fees are not to exceed the
activity’s pro rata share of the actual cost to make the
necessary improvements.
The ordinance sets forth a schedule of impact fees which
are based on trip generation by type of land use activity,
the cost of constructing additional lanes, and the lane capacity.
The collected funds are deposited in the trust fund of the
designated impact zone, 40 of which are created by the ordinance.
The zones are approximately three miles on a side. The funds
can be spent only for the following purposes in a particular
impact zone: design and construction plan preparation; right
of way acquisition; construction of new through lanes, turn
lanes, bridges, and drainage facilities; purchase and
installation of traffic signalization; construction of
new curbs and medians; and relocation of utilities to
accommodate new roadway construction. The main goal of
the ordinance is to raise funds to increase the capacity
of roads in the county.
The impact fees are levied at the time the building
permit is issued for any new land development activity
within the county and municipalities that have adopted
the ordinance.
Results
Under this ordinance, each of the 1,000 units of single
family houses under 2,000 square feet generates $804, and
each unit over 2,000 generates $1,045. A shopping center
of 20,000 square feet would generate $53,580 or $2.70 per
square foot. A general office building generates 48 cents
per square foot or $48,200 for a 100,000 square foot
building. The fee schedule is based on the following
formulas:
Residential Fair Share Fee: One-half external trips per
one lane capacity, multiplied by the cost of constructing
one lane for three miles.
Non-residential Fair Share Fee: One half external trips
per one lane capacity, multiplied by the cost of
constructing one lane for one mile.
Since collection began in FY 1985, approximately $18
million has been raised for improvements. Over $10
million has been obligated for expenditure in FY 1986.
The ordinance includes different formulas for residential
and non-residential traffic generators, because many non-
residential trips are captured or diverted from
traffic already on the road. Therefore, the formula for
non-residential development requires a fee sufficient to
replace capacity of fewer lane-miles than that for a
residential development.
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The ordinance is reviewed annually by the Board of
Commissioners to analyze the effects of inflation on the
actual costs of roadway construction and to ensure that
the fee charged will not exceed the pro rata share for
the reasonably anticipated costs.
Legal
Issues
Palm Beach County was very careful about designing an
ordinance that would be legally defensible. Its legal counsel
advised that the following criteria be incorporated in the
ordinance to withstand judicial scrutiny: (1) The growth
rate of the area must be such that the roads will have to
improve in the near future, if the existing level of
service is to be maintained; (2) There must be a rational
relationship between the traffic impact of the new user
on the roads and the necessity to improve the roads
because of the impact; (3) A reasonable and definable area
of impact must be established and fees earmarked for use
within the area; (4) The cost of providing the road improvements
must be determined; (5) The money available to provide the needed
road improvements must be taken into account; (6) The new
users may be required to pay the cost of road
improvements only to the extent that their presence
necessitates such improvements; (7) The fee cannot exceed
the pro rata share of the anticipated costs; (8) The new
and old users must share equally in maintaining the
original roads.
Despite the effort to design the ordinance in a fair and
equitable manner, the ordinance has been challenged
twice by the Home Builders Association. Both times,
the ordinance was upheld, but fee collection was slowed
as a result of the challenges. In addition, some
revenues were lost because some original owners liable
for the fee have sold their properties and moved away.
Political
Issues
The ordinance applies only to developments within
unincorporated areas of the county or within incorporated
municipalities that have adopted the fair share ordinance.
About one-quarter of the municipalities in the county have
adopted the fee. Others have not adopted the ordinance for
fear that developers will not accept both the county impact
fee and the municipality's existing road improvement
requirements. To overcome this concern, the County
has agreed to reduce the impact fee by the cost of road
improvements required of the developer by the
municipality.
Timing Proposals for the ordinance were under consideration as
early as 1978. The original ordinance was adopted in
1979, and was amended in 1981 and 1985. Because of legal
challenges, collection was delayed until FY 1985.
Contact
Andrew S. Hertel
Traffic Division, Palm Beach County
P.O. Box 2429 West Palm Beach, Florida 33401
(305) 684-4000
References
Infrastructure Task Force Summary Report, by the Palm
Beach County Department of Engineering and Public Works, 1984.
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Highway/Traffic Improvement Fee
Overview
Upper Merion Township, Pennsylvania (1984pop. 26,101) -
Upper Merion Township, a suburb northwest of
Philadelphia, has adopted a Highway Traffic Capital
Improvement Program to raise funds for needed
improvements resulting from increased development. The
Capital Improvement Program establishes a mechanism to
obtain funds necessary to provide and coordinate roadway
and intersection improvements within the Township. In
addition, the program identifies current highway and
intersection flow problems, establishes a baseline for
projected improvements, and provides a continuing
generation of funds necessary for the Township to
initiate and complete improvement on an "as needed" basis
and to accommodate new developments and contributions.
The key feature of the Capital Improvement program
is a funding fee formula which uses the total
improvement costs and benefits to calculate a "fair
share" cost allocation. The costs of constructing needed
improvements -- $33.2 million -- was divided by the
projected improved peak capacity, yielding a unit
cost per peak vehicle trip. The unit cost was divided in
half to allow for traffic already on the roads and for
other revenue sources. The final unit cost is $933 per
peak hour vehicle trip. The fees imposed by the ordinance
are calculated by applying the unit improvement cost to
the peak hour traffic generated by a project. Traffic
generation figures are drawn from the Institute of
Transportation Engineers Trip Generation Manual. Fees for
a single family residential of 1,000 units will total
$93,300 or $933 per dwelling unit, while the fee for a
150,000 square foot office building will be $298,094
or $1.99 per square foot. The fee for a light industrial
development of 100,000 square feet would be $111,960 or
$1.12 per square foot. The Capital Improvement Fund controlled
by the Upper Merion Township Highway/Traffic Authority funds
improvements.
Credits or reductions in the fee may be attributed to
localized traffic generators which serve a limited area
or which draw from traffic already on adjacent streets.
The program allows the fee to be updated annually, but
changes are not expected aside from adjustments for
inflation. Additional projects can be added to the
program needed. In essence, a Township-wide improvement
district was created so that the fees could be
collected in all areas of new development.
Results
The Township expects to raise the entire $33.2 million
needed for improvements caused by new development. Since
the fund was established, about $4 million has been
collected, and contracts have been signed for about $0.5
million.
-39-
Legal
Issues
Local ordinances were required to establish the fee
and the Fund. The Township created the program and passed
the necessary ordinances using existing authority. State
legislation followed, using the Township's program as a model.
Pennsylvania Senate Bill No. 825 provides for
transportation development projects by municipalities and
municipal authorities, and allows these entities to
create districts for the purposes of planning, financing,
and improving transportation facilities. The State
legislation has since been amended, changing the review
process for the community traffic study and fee
structure.
Political
Issues
The Township was careful to hold meetings with citizens,
members of the business community, and developers while
developing the Capital Improvement Program. After the initial
State legislation was passed, developers, bankers, and other
individuals pressed for changes which would require a
more stringent review of such fees and programs.
Timing
The Township-wide Traffic Study was begun in mid-1984 and
completed near the end of the year. The original
Highway/Traffic Capital Improvement ordinance was passed
in December, 1984, and collections began soon after. The
State legislation was passed in August, 1985.
Contact
Ronald G. Wagenmann
Township Manager
Upper Merion Township
175 West Valley Forge Road
P.O. Box H
King of Prussia, Pennsylvania 19406-0139
(215)265-2600
-40-
Coastal Transportation Corridor Ordinance
Overview
Los Angeles, California (1984 pop. 7,901,220) - As a
result of massive development planned near the Los Angeles
International Airport (LAX) by the Howard Hughes Corporation
and other large developers, the City of Los Angeles has
established the Coastal Transportation Corridor Specific Plan
ordinance No. 160394 which regulates development and
provides a funding mechanism for implementation of
road improvements in the LAX Corridor area Exemptions
to this ordinance include developments which serve
neighborhoods such as restaurants.
The LAX Corridor area encompasses 34 square miles in the
general South Bay area of Los Angeles County. Within the
next ten years, 41 million square feet of new office,
commercial, industrial, and residential development has
been proposed. Early in 1984, the Southern California
Association of Governments (SCAG) established policy
advisory and technical advisory committees to study the
situation and prepare alternative recommendations. In
November, 1984, the L A. City Council adopted a motion to
initiate a Coastal Transportation Corridor Specific Plan.
During the plan's preparation, the council imposed
interim restrictions prohibiting issuance of building
permits for commercial and industrial development within
the project area unless traffic impacts could be
mitigated. Area residents, developers, and governmental
agencies were involved in the process which created the
ordinance.
The Coastal Transportation Coalition (CTC), is an
alliance of business and development interests, and the
Coalition for Concerned Communities (CCC) is made up of
area residents. The charter members of CTC are Garrett
Corporation, Continental Development Corporation, Howard
Hughes Development Corporation, the Koll Company, Hughes
Aircraft Company, and Playa Vista Corporation. Each has a
vested interest in the total development of the corridor.
The Playa Vista mixed-use project alone is estimated at
build-out to cost $1 billion. According to L A. DOT, more
than $190 million will be committed to public transportation
improvements within the corridor. It is expected that the entire
amount will be paid for by private developers. The CTC became
directly involved with review and comment on the drafting of
the ordinance through cooperation with a consulting firm hired by
the City of Los Angeles.
The Coastal Corridor ordinance is intended to:
regulate land use development and transportation in the
area;
establish a transportation trust fund to cover costs
directly associated with construction of public
transportation facilities;
provide a funding mechanism for the plan to address
transportation needs;
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establish an impact assessment fee based on the number of
trips generated by the development. A one-time fee of
$2,010 per p.m. peak hour trip, or the equivalent of $5
per square foot has been levied on development to pay for
required transportation facilities in the corridor; and
provide developers with opportunities to reduce fees to
be paid if they institute trip reduction measures. The
rates are derived from trip tables developed in the
planning process by the LA. DOT.
Results
Off-site improvements to be paid just by the developer of
the 2.7 million square foot Howard Hughes Center will
total $13.5 million. These improvements include a $5.4
million freeway ramp, a $2 million park buffer zone with
approximately $1 million for expansion of an existing
ramp, road widening, and a transit center. An additional
$50 million are estimated for on-site infrastructure
costs.
In other areas $32,000 in Impact Assessment Fees have
been collected along with $1.2 million in letters of
credit.
Legal
Issues
A majority of the fees collected are being appealed to
the city council by the developers. The status of these appeals is
unknown at this time.
Political
Issues
Coordination between developers, the Coastal
Transportation Coalition,the Coalition of Concerned Communities,
and the city council was considered important in the establishment
of the ordinance.
Timing
The Coastal Transportation Corridor Specific Plan
Ordinance No. 160394
was passed into law on October, 1985.
Contact
Peter White Transportation Engineering Associate
L A. Department of Transportation
City Hall
Los Angeles, CA 90012
(213) 485-2286
-42-
Development Impact Fees
Overview
Orange County, California (1984 pop. 3075,7) - In Orange
County, California, the Irvine Company, a major
development corporation, has offered to make a number of
significant local transportation improvements. The
improvements are part of the company's efforts to improve
access to its land holdings which amount to 70,000 acres.
Projects include improvements on two interstate routes,
three new major thoroughfares, and various traffic
management improvements on local arterials.
The Irvine Company, together with other area developers,
is participating in a recently established development
fee program in the southern part of the county. The
program is expected to be able to finance about half of
the cost of designing and constructing three
thoroughfares in new transportation corridors --
Foothill, Eastern, and San Joaquin Hills. The total
estimated costs for the three freeways is $857 million.
The County and the area developers have reached an
agreement for payment of a one-time fee at the time of
issuance of building permits, ranging from $1.05 to $1.80
per square foot of office and commercial development and
$535 to S1,305 per residential unit. The Orange County
Transportation Commission was asked to serve as a
facilitator to encourage the affected cities to
participate in the program.
Results
Joint Power Agencies (JPAs) consisting of city and county
members have been formed in order to implement the fee
program on a regional basis and to develop a shared
decision-making process to finance, design, and construct
the thoroughfares.
Legal
Two out of the 12 cities within the proposed areas of
benefit for the
Issues three transportation corridors have not joined the newly
formed JPAs. These are the city of Laguna Beach and the
city of Irvine. Laguna Beach decided not to participate
in the program since it is opposed to building the San
Joaquin Hills freeway for environmental reasons. The city
of Irvine's decision has been delayed due to litigation.
An anti-growth group initiative for a city
election in Irvine on the fee was challenged in
court by the Builders Industry Association, the
Orange County Chamber of Commerce, and the Irvine
Chamber of Commerce, on the grounds that the
transportation facilities serve regional needs
and that such an issue could not be resolved in a
local ballot. An appeal to the State Supreme
Court is still pending.
Political
Issues
Orange County may adopt a fee program only within the
unincorporated areas. City and County cooperation is required for
successful regional program implementation.
Timing
On April, 1982, the Orange County Board of Supervisors
initiated a study of areas of benefit for a potential
developer fee program to assist in the financing of
the three major thoroughfares. In January, 1984 the
Orange County Planning Commission adopted a specific
Major Thoroughfare and Bridge Fee Program. In October,
1984 the County Board of Supervisors
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adopted a fee program for unincorporated county
territory. On June, 1985 representatives of ten cities
and the county agreed to support a revised two zone fee
program based on the location of the properties in
relation to the transportation facilities and a Joint
Powers Agreement. By early spring of 1986 only Laguna
Beach had not approved the fee program in the proposed
areas of benefit and two JPAs had been formed. The city
of Irvine approved the program but is restricted by the
pending court action. Irvine is collecting fees from new
development but is impounding the funds until the State
Supreme Court determines if the initiative is valid.
Contacts
Ron Cole Director of Planning and Programming
Orange County Transportation Commission
1055 N. Main, Suite 516
Santa Ana, California 92701
(714) 834-4333
John Boslet
Director of Regional Transportation
Irvine Company
550 Newport Center Drive, P. O. Box 1
Newport Beach, California 92652-8904
(714) 72~2361
Reference
Revised Major 7horoughfare and Bridge Fee Program
and Joint Powers Agreements, Orange County
Transportation, July, 1985.
-44-
Facilities Benefit Assessment Program
Overview
San Diego, California (1984 pop. 960,452) - Two
developers in North City West, a new community in
suburban San Diego, have paid the city of San Diego
$3.5 million for realignment and construction of a new
bridge that will improve access to I-5 in the
vicinity of their projects.
Baldwin and Company and Pardee Development Corporation
are in the process of developing 600 commercial
acres and 15,000 residential units in the relatively
undeveloped area of North City West. The $3.5 million
assessment is based on a formula adopted under the
Facilities Benefits Assessment program (FBA) described
below. Funds from the FBA are used for offsite
community improvements such as transportation, parks,
water, and sewer systems. FBAs are collected in
addition to the conventional subdivision requirements for
on-site improvements.
The FBA program provides San Diego with a technique for
charging developers a one-time fee for expanding the
city's infrastructure to accommodate new growth The FBA
places a fee on all new developers in 14 area
communities, small assessment districts with estimated
populations of 5,000 to 40,000 which are referred to as
"areas of benefit." The communities are defined as the
geographic regions in which new construction is likely to
occur over the next ten years. The developers in these
areas of benefit pay a predetermined fee for each unit
they plan to build when they apply for building permits.
The fee varies according to the number of units per lot,
the type of unit, and the cost of providing the
infrastructure deemed necessary to support the
development.
The fee schedule is based on a long-range financial
plan for each of the 14 communities, relating capital
needs and cost. This Infrastructure Development
Forecast is completed and updated annually by the city
engineering department with the cooperation of the
developer. It includes two components: the Development
Schedule forecasts the number and type of units to be constructed
for each of the next ten years or more, as well as the absorption
rate for commercial/industrial land; the Capital Schedule
estimates the cost of providing services to these
developments in a timely manner. These cost estimates
are allocated by a formula relating the number of units that
can or could be built on commercial or industrial land at the
maximum density for residential land, the level of public services
needed by the new population, and the capital expenditures
necessary to provide an adequate level of service. With this
information, the City can estimate the amount of money
that will be needed over the next 10 to 20 years to have
the infrastructure in place as the new growth occurs.
Each area of benefit has its funds deposited in a separate
account managed by the city manager. Because the funds of the
various districts cannot be combined, developers are assured
that the fees will be spent on improvements listed in the Capital
Schedule. Each year, the City reviews the development
schedules to see if construction is taking place as predicted,
and evaluates costs, whether there are an adequate number of
projects, interest, inflation, rezonings, and park development.
If no growth
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has occurred, no money will have been collected, and the
Capital Schedule will be postponed.
Once infrastructure needs and costs are determined for
each category of development -- single or multi-family
residential, commercial, or industrial - fees are
assigned to each development as building permits are
requested. Because the city of San Diego determines needs
and costs for each community separately actual fees vary
from place to place. Overall, however, fees of
$1,500-$2,500 have been assessed for a single family
residential unit, $1,000-$1,800 for each unit of a
multi-family residential development, $18,000-$27,000 per
acre for commercial development, and $5,000 to $11,000
per acre for industrial development.
Results
The City of San Diego has now collected $15 million
in assessments from two developers for transportation
improvements needed to support those new developments.
When all development is completed in North City West,
approximately $40 million will have been collected for
transportation and recreation-related improvements in the
area.
Legal
Issues
The home-rule city council passed the Procedural
Ordinance for Financing Public Facilities in Planned Urbanizing
Areas (Ordinance No. 0-15318) in 1981. The FBA programs for the
three areas of benefit have been challenged in court by a few
developers on two grounds: that the FBA is a tax, not an
assessment, and therefore is in violation of Proposition 13
the State initiative restricting property tax rates; and that
the FBA is unequitable, unfairly requiring new developers to pay
for improvements needed by older developments. The City
argued that the FBA program has been carefully designed
to relate the cost of the fee to the special benefits of
improvements provided to the new development, so that
FBAs are assessments for special benefits received, not
general taxes. The City also designed the ordinance to be
as equitable as possible by applying FBAs only to residential,
commercial, and industrial areas that were undeveloped at the
time the ordinance was adopted, and by designing the fee formula
to ensure that all new developments pay their pro rata shares
of the infrastructure cost. The City is currently using the FBA
schedule as the basis for individual agreements between
developers and the City as a condition of map approval
for new subdivisions in the areas of benefit. The
development agreement, authorized by the State, requires
the City to provide the improvements listed in the
Capital Schedule in a timely fashion. The FBA has been
validated by the California courts as of November, 1984.
The State Supreme Court ruled not to hear an appeal from
developers and, ipso facto, validated FBA at that level.
-46-
Political
The FBA program is the result of several developers' concern that
Issues Proposition 13 would severely limit the City's ability to
provide the infrastructure needed to support new projects.
Recognizing that they would have to assume greater financial
responsibility for these costs, they became concerned about
fair sharing. Consequently, the developers worked closely with
the engineering department on the preparation of the development
and capital schedules and the calculation of the FBA. The City
estimates that the FBA program has the support of 80 to 90 percent
of the developers in the two areas of benefit for which the program
has been established (North City West and North University City). A
few developers have challenged the program in court, however.
Timing
The ordinance was approved in 1981 after two years of preparation.
It takes at least a year to prepare and approve the development
and capital schedules.
There is an inherent lag factor in the FBA program,
since the funds are not collected until the building
permit is issued. Consequently, infrastructure
improvements often will not be completed until after the
development has been finished. The lag may be even longer
if completion rates are lower than were assumed in the
development schedule. This possibility is one reason the
development and capital schedules are reviewed annually.
In addition, the fees are adjusted annually for inflation
in order to maintain the purchasing power of the funds,
or to account for newly added or deleted projects.
Contact
James Fawcett Engineering & Development Department
City Operations Building 1222 First Avenue, M.S. 406
San Diego, California 92101-4154
(619) 236-6936
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Capital Improvement Fee
Overview
Farmer’s Branch, Texas (1984 pop. 26,464) - The City of
Farmer's Branch north of Dallas, adopted two ordinances
establishing a ten year capital improvement plan and a
Capital Improvement Fee of 50 cents per square foot to be
levied against all building areas at or above ground, in
the area of the designated "Improvement Area No. 1." The
fee went into effect in October, 1984.
The City developed a comprehensive ten year capital
improvement plan, including the expansion, maintenance,
and upgrading of streets, alleys, traffic control
signals, bridges, storm sewers, and drainage facilities
and other transportation facilities, in response to the
rapid growth experienced in the improvement area This
growth was responsible for an altered pattern of land use
that was significantly higher in overall density than the
previously planned land uses. The transportation
infrastructure was unable to adequately handle increased
use and to accommodate proposed additional growth.
As a result of a detailed engineering study, the City’s
Public Works Department determined the estimated total
cost of Capital Improvements over the next ten years at
$2 million. With the passing of Ordinance No. 1526, the
city council adopted the Capital Improvement Fee of 50
cents per square foot. This fee was the result of
dividing the $2 million in capital improvement costs by a
projected 4 million square feet of new development and
construction over the next ten years.
Payment of the Capital Improvement Fee, either in full or
over a ten-year period, must be made prior to issuance of
the building permit by the city. Because an earlier
ordinance, still in force, requires developers to finance
and construct all road improvements needed as a result of
new development, a pro rata refunding mechanism exists to
recover capital improvement costs that may be greater
than the assessed Capital Improvement Fee.
The ordinance calls for a yearly review of the Capital
Improvement Plan by the Director of Public Works to
determine whether the projected cost of Capital
Improvements and the projected total development within
the designated area is accurately reflected. A report
must be given to city council which may include a
recommended adjustment to the Capital Improvement Fee.
Results
Since the enactment of these ordinances there has
been no new development. Most developers seem to agree that the
ordinances are a fair method for financing road improvements.
Several developers would like to see a credit system for roadways
considering a similar ordinance for a larger section of land on
the east side of town which would include a slightly higher Capital
Improvement Fee along with a larger list of capital improvements.
This new ordinance might include Improvement Area No. 1 and address
several new issues including a credit system.
-48-
Legal
Both ordinances carry a penalty, not to exceed $200, for each day
a Issues violation exists. Both ordinances clearly state that the
policy established in Ordinance No. 1430, which required a
developer to construct, have constructed, or finance 100 percent
of the cost of all required public improvements that are located
within or contiguous to the property, will remain in force and
unaffected by these new ordinances.
Political
Issues
No political problems were reported.
Timing
Ordinances 1526 and 1528 were passed by the city
council of the city of Farmer’s Branch, Texas, on October
8,1984.
Contact
Larry Cenenka
Traffic Engineer
City of Farmer's Branch
Farmer's Branch, Texas 75234
(214) 247-3131
-49-
Transportation Utility Fee
Overview
Fort Collins, Colorado (1984 pop. 70,721) - Fort Collins is a
fast growing city about 60 miles north of Denver. The city
instituted a Transportation Utility Fee in 1984, to cover the
rising costs of road maintenance. The funds generated by the fee
are used for crack sealing, patching, surface treatment, and
overlay of residential streets. The fee assigns the cost of
maintenance to the property that creates the need for
street maintenance and benefits from it. This is done on
a sliding scale based upon the use of the property,
street frontage, and traffic generation.
In 1982, City staff began to examine the specific relationships
between street use, cost, and benefit. Variables used in allocating
costs to each property include traffic generation and front footage.
Street maintenance program costs were first analyzed. These costs
were divided by the total assessable front footage, yielding a base
rate per front foot. The fee was then proportioned on the basis of
traffic generation as determined by developed use of the property,
and front footage per property. The result is the following
formula:
Front Footage x Base Rate x Traffic Generation Factor =
Monthly Fee
Results
The fee is tied to the City's utility billing system, and is billed
so that the occupant of the property pays the fee, whether owner or
renter, although the owner remains ultimately responsible for
payment of the fee. A minimum of 75 cents per month is charged to
all properties. The total yield of this assessment is approximately
$450,000 each year. The Public Works Department can increase the
amount by raising the base rate, subject to the approval of the
city council. The Transportation Utility Fee represents a one
percent increase in the total utility bill paid by the average
resident.
Legal
In April, 1985, a group of churches filed suit against the City
claiming that Issues the fee is a tax, and that it was enacted
without exemptions for churches and other tax exempt organizations.
The plaintiff's complaint also challenges the validity of the fee
on various constitutional grounds. The case is still pending.
An appeals process was established for unusual situations
or where an error has been made in calculating the fee. A
rebate program also exists for people meeting certain age
and income guidelines to reduce the impact of utility
costs. This is an extension of programs already provided
by the City for other utilities.
Political
Issues
No political problems were reported.
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Timing
The enabling ordinance for the Transportation Utility Fee
was passed in January, 1984, with the first billing in
May, 1984.
Contact
Jay M. Kole
Special Projects Administrator
City of Fort Collins
P.O. Box 580, Fort Collins, CO 80522
(303) 221-6605
-51-
Transit Impact Fee
Overview
San Francisco, California (1984pop. 712,753) - The San
Francisco City and County Board of Supervisors in 1981
enacted the Transit Impact Development Fee Ordinance which
authorizes the city to collect a one-time fee of $5 per square
foot from owners or developers of new downtown office space. The
fee must be paid as a condition of obtaining a certificate
of occupancy. The proceeds from this fee can be used to pay for
the capital and operating costs of additional peak-period public
transit services.
The rationale for the fee has been that downtown office development
brings additional people into the city whose demand for service
creates additional costs for the transit system. For example, the
additional peak-period traffic may require San Francisco's
Municipal Railway System (MUNI) to acquire new buses, to install
new lines, and to hire more personnel to operate and maintain
the system. Therefore, it is argued, the new development should
pay for the incremental costs of expanding MUNI's capacity to carry
passengers generated by additional office use.
The fee is set annually by the Board of Supervisors and is
computed at a level so that the proceeds will be sufficient to
pay for all capital and operating costs incurred in providing
the additional peak-hour services. The fee is expressed in terms
of a sum per gross square foot using the following general formula:
annual peak-period MUNI person-trips per gross square foot
multiplied by the current cost per additional peak-period
MUNI person-trip. By ordinance, the fee presently cannot exceed
$5.00 per square foot. The proceeds from the fee are held in trust
by the city treasurer and distributed according to San Francisco's
budgetary process.
The Finance Bureau of the Public Utilities Commission
administers the program. It is informed of planned construction
or conversion work by the city's Bureau of Building Inspection when
a developer files for a building permit. After the developer is
notified of the development fee, the Bureau of Finance and the
developer agree on the amount of square footage that is subject to
the fee. Sometimes this agreement requires detailed review of the
architectural plans to ensure that common space is allocated
fairly.
Results Fees are being collected from developers and placed in
escrow until current litigation (see below) is settled.
As of July, 1986, the Bureau of Finance estimated that
149 applicable projects which have received permits since
May, 1981 will produce $75 million in fees for MUNI if
the legality of the fee is upheld by the courts.
Developers will benefit as well as MUNI. In the highly dense
and desirable downtown district of San Francisco, mobility is
essential to the success of any new office development. Expansion
of MUNI, financed by development fees, will improve access to
the downtown area, where the City Planning Department for several
years has been denying developers permission to construct
new parking spaces.
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Legal
The San Francisco County Board of Supervisors approved
the ordinance Issues in May, 1981. The City successfully argued
that office development creates more congestion at peak-periods
than any other type of development. The ordinance defines the
boundaries of the downtown district and requires that the
$5 per square foot fee be assessed on "all accessible
office space plus ancillary space," such as elevators,
lobbies, and other "common space." Hotels, restaurants,
and other non-office uses are exempt from the fee. In
buildings where hotels and restaurants are mixed with
office space, the fee is based on the square footage of
the office space plus a proportionate share of the common
space that can be assigned to office use.
Litigation has been filed challenging the legality
of the Transit Development Fee. The case was heard in
State Superior Court in mid-1984 and was decided in
the City's favor. This decision was appealed in the
Appellate Court in early 1985. Further appeal to the
California Supreme Court is anticipated.
Political
Issues
The May 1981 ordinance was approved amid political
controversy. Opponents of the ordinance objected on the grounds
that the fee was a mechanism to control growth and therefore
was not in the city's economic interest. Some developers whose
projects already were under construction protested that their
projects would be taxed unfairly in a retroactive manner.
Timing
The political controversy surrounding the fee proposal
delayed approval of the ordinance establishing the
$5.00 maximum per square foot development fee in downtown
San Francisco. The legal issues are not expected to be
settled until 1986 or 1987.
Contact
Leonard Tom
Public Utilities Commission
Finance Bureau
425 Mason Street, 4th Floor
San Francisco, California 94102
(415) 558-2075
References
A Guide to Innovative Financing Mechanisms for
Mass Transportation: An Update, prepared by Rice Center,
December, 1985.
-53-
IV. Negotiated Investments
Negotiated investments include private sector cash
contributions or improvements fulfilling public sector
requirements, and proffered in return for zoning changes
or building permits; and those projects initiated and
financed by the private sector which tend to benefit them
but are given low public priority. Under the first
category, requirements imposed on developers are intended
to help mitigate the impact of new projects on traffic
levels and roads.
Contributions that result from this technique are often
substantial. Four of the cases in this section report
transit related improvements and three cases are
primarily related to highway projects.
In New York City and Washington, D.C. zoning ordinances
provide developers an incentive to build functional
improvements to transit stations.
In Portland, Oregon the Planning Commission requires that
a developer participate in the construction of a
transfer station and a park-and-ride lot, in return for a
permit for a shopping center.
Fairfax County, Virginia and Orange County, California
provide two examples where developers have offered to
build highway improvements at their own expense in an
effort to improve access to their properties, or in order
to gain needed zoning changes.
In Dallas, Texas, a developer had to make a variety of
significant contributions including highway, transit, and
transportation system management improvements in exchange
for the City's approval of a planned development
district.
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Development Bonuses
Overview
New York, New York (1984 pop. 7,163, 702) - The Midtown
Special Zoning Section No. 81-00 et seq of the Zoning
Resolution of the City of New York established the
Midtown Special District which required developers, as a
condition to development, to relocate subway sidewalk
entrances inside property lines within the Midtown area
The owner or developer is required to provide an easement
to the New York City Transit Authority for transit
patrons who will enter/leave the subway station through
the building. In addition, the Zoning Resolution gives
developers an incentive to build a functional improvement
to a nearby or adjoining station. A developer receives up
to a 20-floor-to-area ratio bonus if the proposed
improvement is accepted by the City Planning Commission.
The City plays no role in actual construction of the
improvements; it is the responsibility of the developer.
The Metropolitan Transportation Authority (MTA) is the
State agency responsible for overseeing the improvements
made by developers. The MTA and the City Planning
Department review the conceptual plans. Working drawings
are submitted to MTA for final approval by appropriate
departments.
In the past few years, about 50 percent of the eligible
developers have taken advantage of the bonus, improving
passenger/pedestrian circulation, access for the elderly
and disabled, and aesthetics within subway stations.
At one major development, located at 599 Lexington Ave.,
between 52nd and 53rd, Boston Properties is creating a new
transfer connection facility between two adjoining subway
stations, one block apart, on Lexington Ave. This
facility will connect the IND Lexington Ave. Station with
the 51st Street IRT Station. The transfer passageway
traverses the building site and will be maintained by the
developer for the life of the building. MTA will put in a
new mezzanine at the 52nd Street end of the Interborough
Rapid Transit (IRT) Station, construct new platforms, and
undertake a modernization program for both stations. The
building will be completed in September of 1986 with the
transit connections being completed one year later. The
developer has committed to work valued at $3.3 million
toward the transit connections. The MTA will spend $8.4
million in the development of the 51st Street Station
mezzanine connection. At another site at 53rd Street and
3rd Avenue, developer Gerald Hines is constructing an
office building and will add an escalator from the
Lexington Ave. Station platform to street level at 3rd
Ave. The work will be completed in September of 1986 at a
cost of $5.25 million.
Results
The MTA estimates that over $125 million in improvements
to stations through the zoning resolution have been committed.
The requirement that owners/developers move the station entrance
inside their property lines has improved pedestrian circulation,
increased accessibility, and improved overall aesthetics.
Legal
Issues
No legal issues were reported.
-57-
Political
Issues
While there has been some reluctance by developers who
must participate in the subway stairs relocation and who do
not elect to quality for the FAR bonus, the development
community appears to heartily approve of the subway bonus
concept as an appropriate incentive.
Timing
The relevant portions of the Zoning Resolution of
the City of New York were enacted in May, 1982.
Contact
Donald Bloomfield
Senior Project Coordinator
New York Metropolitan Transportation Authority
347 Madison Ave.
New York, NY 10017
(212) 878-7205
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System Interface Program
Overview
Washington, D.C. (1984 pop. 3,429,613) - In 1969,
Washington Metropolitan Area Transit Authority (WMATA)
officials adopted a policy entitled Commercial Tie-In
with Metro Stations, also referred to as system
interface. This program allowed a framework for
negotiating the amount of compensation provided by
owner/developers whose property values increased due to
tie-ins with the Metro system. The WMATA Board policy
regarding system interface provides that:
Businesses construct entrances at their expense into
Metro "free areas" (areas through which a passenger walks
before fare),
Negotiations occur on a case-by-case basis,
Compensation to WMATA occurs where possible,
Each request for a connection is submitted to the Board
for authorization to negotiate and execute a contract.
The WMATA Board of Directors created a step-by-step
procedure controlling system interface projects. The main
elements include:
Identifying system interface prospects,
Undertaking design and financial feasibility
studies,
Project review by the local jurisdiction,
Review of project plan report by the Board of
Directors,
Board authorization for negotiations,
Review and coordination with local jurisdiction,
and
Final report and recommendation to Board.
Results
Since 1969, seven system-interface projects have
been negotiated. WMATA has been successful in trading
access rights for capital improvements. In addition,
WMATA has been granted property easements which have
reduced potential costs.
The Metro Center Station, which was negotiated in July,
1984, resulted in construction and equipment benefits to
WMATA in return for two direct pedestrian entrances to
Metro mezzanines from Hecht's department store. The total
project cost $1.6 million. In 1972, the Woodward and
Lothrop Department store saved WMATA $250,000 in design
and construction costs for a passageway between the METRO
concourse and the store. WMATA provided easements 50% of
fair market value, saving an additional $265,000.
-59-
Legal
Issues
The WMATA Board is empowered to negotiate with developers
for projects. No arrangement is made by WMATA without final
coordination and endorsement of local officials, who must
review the project from the standpoint of its impacts on
circulation patterns, utilities, and the like.
Political
Issues
In 1982 the WMATA Board re-evaluated the system interface
policy, in response to requests that they restructure the interface
charges so that they would be paid to local jurisdictions instead
of being paid into a fund for system-wide operations. The Board
decided to retain the policy in its original form, while requiring
a procedure to be followed in future projects.
Timing
The Interface
