THE FULL COSTS OF THE CAR III - March 1995
CAR SUBSIDIES IN A FREE MARKET
- AN ASSESSMENT OF THE MUNICIPAL COSTS OF AUTOMOBILE USE - Stanley Hart
- "ONE-CAR MORTGAGES" AND "ONE-CAR RENTS" - Patrick H. Hare
- PARKING GLUT LEECHES FROM THE PUBLIC PURSE - Angela Bischoff
- FISCAL PRACTICES ARTIFICIALLY STIMULATE PRIVATE-CAR USE
- PHASING OUT SUBSIDIES TO MOTOR TRAFFIC - Chas. Shrubsole
- TRANSPORTATION FUND SEQUESTERING IN VERMONT
CAR SUBSIDIES IN A "FREE MARKET"
1) AN ASSESSMENT OF THE MUNICIPAL COSTS OF AUTOMOBILE USE
Stanley Hart (shart@igc.apc.org)
December 24, 1985
Introduction
American automobile, truck ownership and use far
exceed those of other industrial nations. It is believed that
this can be explained, in part, by the hypothesis that the
use of automotive vehicles in the United States is
underpriced. While it is generally agreed that externalities
exist with respect to both economic and environmental
factors, it is thought that their magnitude is small and
that their correction would not alter current levels of
ownership and use. The hypothesis requires evidence that the
externalities are substantial and are, therefore, a
significant determinant.
If the hypothesis is correct, we could expect to find
evidence in three areas: first, the expense of services
provided free or at little cost to motorists and truckers by
local, state and federal governments; second, the rent of
real estate and improvements used for parking and operation.
The third category consists of environmental externalities:
air pollution, acid rain, noise, congestion, and traffic
deaths and injuries.
Externalities are important because they reduce the price
of motoring below the actual cost. Cost-based pricing is a
requis- ite for effective operation of our market system.
Our automotive sector is a major part of our economy. If
underpriced it would introduce important difficulties in the
allocation of resources. Competing modes would lose
patronage. Our society would become a less effective
producer, losing some of its ability to compete with more
efficient societies.
While municipal fiscal shortfalls are not the largest of
motoring externalities, their impact is important. This
study determines the auto-related expenditures of the City
of Pasadena for each of the fiscal years for the period 1965
to 1983. The contributions of motorists to city revenues are
also determined.
Goals and Procedures
Pasadena is one of 80 municipalities comprising the Los
Angeles metropolitan area. It covers 23 square miles and is
situated at the entrance of the San Gabriel Valley, northeast
of Los Angeles. It has 120,500 residents, 44,100 households,
and 82,200 automobiles and trucks. It is a conservative
city, proud of its history and of a reputation for sound
fiscal management.
City budgets, for the fiscal years 1965-66 through
1982-83, are the important source of data for this study.
These are supplemented by interviews with City officials and
references to City records. Budgets are of two types, the
"recommended" budget for each year, and the "adopted"
budget. Where the adopted budget is available it is used as
the preferable source. Later budgets included data on actual
expenditures for one or two prior years. These are used
where possible. However the differences among these data
sources are never critical.
In this analysis costs for auto-related services are
allocated for each department. Contributions to the City
originating as motorist charges are also identified. These
include the City shares of the fuel tax and the in-lieu tax
(license fee), parking charges, parking and traffic fines,
and miscellaneous smaller taxes levied on trailers and
trucks.
Methodology
The study determines amounts budgeted annually for
pertinent City departments. The budgets are arranged in
three groups in accordance with the manner in which
allocation has been treated:
Group A:
Board of Directors (City Council)
City Manager
City Attorney
Finance
Personnel
Administrative Services
Group B:
City Prosecutor
Paramedics
Fire
Police
Group C:
Public Works
Debt Service
Capital Improvements
Group A departments are administrative. A
determination of the proportion of Group A expenditures which
could be attributed to overhead (13.45%) had recently been
completed by the City. This percentage increase is applied
to the auto-related costs found in Groups B and C
departments.
Group B departments are those in which allocation of cost
is complex because both auto- and non-auto-related services
are provided by the same department but costs are not
segregated. The methodology for allocating costs is
described below.
Group C departments are those which furnish both auto-
and non-auto-related services but for which costs are
identified and segregated.
City expenditures for automobiles, trucks and other auto-
motive equipment are included only in the share they contri-
bute to auto-related services. For instance, the costs of
police patrol cars and fire trucks are a large part of the
respective budgets of the Police and Fire Departments. They
are included proportionately in the share of the funds spent
on services provided motorists. The costs of Park Department
cars and trucks are not included because the Park Department
does not provide services to motorists.
Police Department
Costs are allocated in proportion to salaries of service
personnel. Many of the auto-related functions are already
categorized since some personnel are assigned to specialized
"details" for which salaries are readily identified:
Auto-related details:
- motorcycle traffic-control
- auto theft
- parking enforcement
Non-auto-related details:
- rape
- homicide
- robbery
- assault
- burglary
- theft
However, a part of police activity is in the large
"patrol" detail in which both categories of service are
provided by the same personnel. In addition to
non-auto-related responsibil- ities, patrol officers write
half the traffic tickets, they report traffic accidents,
investigate auto theft, and aid in the recovery of stolen
vehicles.
Prevention is the principal goal of the Department.
Patrol officers are expected to make appearances at
locations which are frequented by petty criminals. A second
important routine duty is traffic ticketing. Officers are
expected to issue a number of tickets sufficient to satisfy
criteria established by the Northwestern Traffic Institute
(Northwestern Univer- sity). The Northwestern criteria, 30
moving violation summonses for each injury accident, is
believed to be an optimal level for the purpose of
maintaining an acceptable level of discipline among drivers.
There are four auto-related sub-categories of patrol
officer function: traffic accidents, traffic violations,
motor vehicle theft, and motor vehicle recovery. Incidents
in all categories are reported monthly by the Department.
Information regarding personnel assignments, salaries, work
habits, etc. were obtained through interviews with Police
Department administrative officers enabling me to estimate
officer time devoted to each incident category. This is used
to weight the data in order to compute salary amounts for
each category. The proportion of salary is used to allocate
the Department budget.
Traffic accidents typically require a one half-hour field
investigation (two officers), plus one half-hour
report-writing (one officer). Each accident is, therefore,
weighted at 1 1/2 officer hours.
Traffic ticketing requires less time. Each incident is
estimated at one-quarter hour (two officers). Weight 1/2
officer hour per ticket.
Motor vehicle thefts require field reports, written
reports, follow-ups with other jurisdictions, and occasional
court appearances. Each incident is weighted at 3 officer
hours. Motor vehicle recovery requires less time - the
estimate for each incident is 1 1/2 officer hours.
Non-auto-related incidents are uniformly weighted at 2
officer hours. The total weighted hours multiplied by
adjusted officer's hourly rate equals total patrol salaries.
The share of payroll devoted to auto-related activity is
39.9% (see Appendix A). This percentage is applied to the
budget for each of the fiscal years, thereby deriving each
year's auto-related Department expenditures.
Fire Department
Fireman assignments are not as specialized as those of
police officers. The Fire Department response differs
depending on the nature of the incident. For auto-related
fires (off-freeway) one engine only is dispatched.
Exceptions are rescue or first-aid incidents; these require
ladder trucks because they carry the hydraulic jaws used to
free trapped motorists as well as other special rescue
equipment. Two engines respond to incidents on freeways
because motorists reporting fires are often confused as to
location.
The alarm report file for the year 1981 was made
available. The reports identify both the incident and the
crew response; they describe the nature of the incident both
by code and by a report hand-written by the Captain
immediately after return to the fire-house.
Each report is identified as to whether it is
definitively auto-related. The total number of alarms for
1981 is 4218; 726 are auto-related. In addition, there are
1640 ambulance or rescue-assist calls; 328 are auto-related.
Only reports which are definitively auto-related are
counted, thus reports which are actually auto-related, but
not clearly described, are not included introducing a
conservative bias. False alarms (a significant number) are
also excluded increasing this bias since some false alarms
are auto-related.
Paramedics
The Paramedics, the Police, and the Fire Departments
comprise the Public Safety Department. Both the Paramedics
and the Fire Department maintain cooperative relationships
with neighboring cities. Pasadena furnishes paramedic
services to the City of South Pasadena. This may affect the
data, which consists of incident reports for the years 1982
and 1983. However, it is believed that the proportion is not
seriously altered by the inclusion of South Pasadena data.
Auto-related incidents are reported unambiguously. The
as- sumption is made that there is no difference between
auto- and non-auto-related incidents as to time and
equipment requirements The proportion of auto-related
incidents is 16.4%. It is applied to Paramedic budgets for
all fiscal years.
Public Works
The Public Works Department includes the offices of the
City Engineer, the Traffic Engineer, the Road Department,
the Department of Sewers, the Sanitation Department, and
others. Since the budget of each sub-department is available
in each of the annual budgets, expenditures are easily
allocated. Each year's budget can be determined separately,
avoiding the uncertainty of applying one year's experience
to other years.
Public Works Department budgets include the cost of
project planning, engineering and inspection. They also
include costs of street maintenance, street light
maintenance, street trees and other City responsibilities
essential to the motorist or on which automobile usage
imposes additional cost. Many maintenance services are
provided by City-employed crews and City-owned equipment
(often called "force-account"). Some construction is also
accomplished by force-account; small curb-and-gutter,
storm-drain projects, pavement repair or replacement. Other
work, usually larger projects, is done by contract; contract
expenditures are generally included in the "Capital
Improvements" category (see Table 2 & 4).
Debt Service
Debt service expenditures are the costs of servicing
bonds. The City finds it useful to finance its capital
expenditure programs in this manner. Since the budgets
identify the nature of the project, these costs are readily
allocated (see Table 3).
Capital Improvements
"Capital Improvement" expenditures are for comparatively
large projects which are contracted to private construction
firms for accomplishment. For instance, these include the
recent constr- uction of a new bridge replacing an
inadequate wooden structure; new traffic signals;
storm-drain projects; both auto- and non- auto-related
(sewerage, electrical, water-supply systems) projects.
Capital improvement projects are a large part of the City
budget; auto-related projects are a large proportion of
these. The share of City budgets devoted to construction
varies greatly from year to year, depending on the business
cycle, City fin- ances and the needs of the City-furnished
infrastructure (see Table 4).
Access for Public Safety and Service Vehicles
City streets are used not only by motorists, but by
public safety vehicles - police cars, paramedic ambulances,
and fire engines. Trucks and garbage collection vehicles use
the streets as well. All are automotive vehicles; it could
be argued that allocation of roadway costs could be made to
their function as in the case of auto-related expenses. This
argument is, perhaps, defensible in the case of garbage
collection and trucking. One might also argue that an
auto-less society would have found non-automotive means of
satisfying both safety and service needs.
It is preferred, however, to take the conservative
position, deducting the increment of cost from the
auto-related budget. If we assume that only service and
safety vehicles will occupy the road system a single 12 foot
lane with minimal 4" AC pavement will suffice. This roadway
section can be imagined as an altern- ative to all the
existing streets, arterial highways and free- ways in
Pasadena.
At present prices the annualized construction cost,
assuming 12% interest and a 25 year life for the pavement,
would be $136,000. Annual maintenance cost is estimated to
be $41,000. Cost of replacement plus maintenance - $177,000
per year.
This imaginary alternative road network would furnish
access for public safety, garbage collection and freight
vehicles at present service levels. It would also serve
pedestrians and bicyclists now served by sidewalks; thus
separate sidewalks would not be required in this
hypothetical community. The cost of sidewalks at $1.50 /sq.
ft. annualized at 12% and 50 year life is subtracted from
the cost of the alternative road network. The net cost to
the City of the alternative network is $166,000. This is
subtracted proportionately from the shortfall for each of
the fiscal years throughout the period.
Political Effects - Proposition 13
An interesting by-product of this study is the light
which it sheds on the events leading to the Proposition 13
election (June 1978). Figures 1 through 3 show that City
budgets rose during the several years preceding the election
in high correlation with the Consumer Price Index.
Meanwhile, the increase in motorist user fees was
negligible, leaving an increasing gap in City finances. This
was filled from the only source available to the Board of
Directors - the property tax.
The property tax increase was abetted by the steep rise
(steeper than inflation) in real estate values which occurred
at the same time. This was exacerbated by the Assessor's
practice of reassessing only 20 to 25% of the properties
during any one year. The unlucky taxpayers (those who had
been reassessed) saw the effect of 4 to 5 years of real
estate inflation in one steep increase.
Some were unable to meet this suddenly increased
obligation; the resulting foreclosures focussed media
attention. Calif- ornia's taxpayers were frightened and
outraged by the head- lines; local government spending
seemed to be wildly out of control; every homeowner seemed
threatened. This was the pol- itical climate at the
election. Proposition 13 passed by an overwhelming margin -
and became the beginning of the "tax revolt".
Other Externalities
Recent increases in State and federal fuel taxes have
made a minor correction in the tax imbalance. But, for the
past two years the State has preempted the in-lieu tax,
traditionally a source of city revenues, thereby worsening
cities' financial problems. However, this was a temporary
expedient to meet the State's crisis; new legislation, now
under consideration, will return these funds to the cities,
but in lesser amounts.
City ordinances also create privately financed subsidies
for motorists. For instance, developers planning to erect
commer- cial buildings in Pasadena must pay a "New
Development Impact Fund Fee", $1.09 per square foot of
building space - a recogn- ition of the impact of new
traffic demand on City infrastruc- ture. The resulting fund
will be used, beginning in 1985, to maintain roads, traffic
signals, street-lighting, sidewalks. This fee adds 1 to 3%
to the cost of commercial building.
The City's zoning ordinance requires construction (or
provision on adjoining land) of one parking space per 400
square foot of building space. This increases the cost of
office and commercial space by 25 to 35%.
Both costs enter the economy through the rent of building
space. Sometimes these costs are paid by the motorist. More
often, if parking fees are actually assessed, they are
validated by host office occupants to attract clients or
employees. However, parking fees are rising and validation
is becoming less prevalent.
Summary
In recent years the motorist enjoyed essential services
furnished by the City of Pasadena, but user fees fell far
short of meeting the considerable cost. The shortfall was
small in 1965-66, but it has increased markedly (see Figure
3) over the eighteen years of the study period, and is now a
substantial portion of the City budget and a significant
part of household expense.
For the most recent fiscal year, 1982-83, Pasadena's
auto- related expenditures were $15.7 million; the shortfall
was $11.8 million, more than 75% of expenditures.
Assuming that Pasadena is representative and that fuel
cons- umption/vehicle/year is 700 gallons, an increase in
the fuel tax (now 18c per gallon) to 39c would be justified
by the 1982-83 municipal shortfall alone, provided that all
the additional yield, 21c per gallon, is returned to the
cities as reimburse- ment.*
The shortfall is now made up by increased property and
sales taxes; this increment appears to be $270 per household
annually or about 1% of household income. This does not
include county, state and federal shortfalls, the rent of
real estate and improvements, and environmental
externalities.
The requirement of cost-based pricing for the automotive
sector in a constantly fluctuating economy would require
periodic reassessments and adjustments; but the mechanism and
authority to determine and impose reasonably accurate user
fees do not now exist.
* The figure of 21c per gallon compares reasonably with
the result of the Douglass Lee study of municipal
expenditures of the City and County of San Francisco. Lee's
figure for both governments was 13c.
Suggestions for Further Work
Pasadena may be representative of American cities; but it
is only one example. More cities should be examined. It is
believed that county governments also generate similar
shortfalls; this should be confirmed. State and federal
financing and tax policies should be explored. Land rent and
environment externalities should be measured. The effect of
the total of these on American economic and transportation
problems should be evaluated.
*******
2) "ONE-CAR MORTGAGES" AND "ONE-CAR RENTS" - Making Housing
Affordable by Reducing Second-Car Ownership - Patrick H.
Hare
Patrick H. Hare is a housing and transportation planner in
private practice in Washington, DC. (Land Development,
Spring/Summer 1994)
The most common route to affordable housing is a long commute
in an old clunker. It usually leads to a neighbourhood where
two adults cannot live without a second car and where the
walk to shopping and transit is long and dangerous. Under
these circumstances, the cost of owning and operating second
cars should be considered part of the cost of housing. But
almost all households and mortgage lenders fail to factor
automobile ownership into the cost of housing. Similarly,
few households or mortgage lenders recognize how much is
spent on cars.
Bureau of Labor Statistics for 1991 show that 16% of all
household spending is allocated to the automobile, almost
regardless of income group. For low- and middle-income
households with two cars, the expenditure on automobiles is
probably closer to 20% of total household spending.
How much does a second car typically cost? According to
Federal Highway Administration (FHWA) data, the cost of
owning and operating a 7-year-old compact car is $2,900 a
year. The American Automobile Association says an American
mid-size car owned for years costs about $5,300 a year.
Assume that the typical operating and ownership cost for a
second car totals $4,300 a year. The household that gives up
a second car saves $3,000 a year. This is the net saving
after paying for transit at $4 a day for 250 days a year and
for car rental at $25 a day for 12 days. Carpoolers and
bicycle commuters often save more because their alternatives
usually cost less.
This is news to most homebuyers~and to most mortgage lenders
as well. Mortgage applications list second cars as assets at
book value. They disregard all car costs except car loans.
They do not account for maintenance, repair, insurance,
depreciation, and fuel costs. Nor do they acknowledge that
one-car households have about $3,000 a year more to spend
than two-car households. At 1993 mortgage rates, $3,000 will
finance more than $34,000 in housing costs. If lenders
recognized the savings from not owning a second car, they
could increase the buying power on a $100,000 house by 34% of
the home's purchase price.
The change would affect cities as well as households. When
the savings from single-car ownership are ignored, they make
development of ex-urban homes look more affordable and city
living look less affordable. Failure to factor the savings
from single-car ownership shifts mortgage money and young
leadership out of urban neighbourhoods and into suburban and
exurban areas, thus contributing to decay and sprawl.
Mortgage approval practices that ignore the costs of car
ownership drain cities and stimulate sprawl, congestion and
pollution.
In suburban rental housing, the story is similar. The rent
payment in most suburban multifamily housing typically
includes free parking. In fact, the parking is not free. If
the land costs used in an Eno Foundation estimate of surface
commercial parking costs are halved, the foundation's data
suggest that a residential surface space costs about $50 a
month. For a $500 apartment, giving up the parking space for
a second car should translate into a $50 or 10% reduction in
monthly rent.
While requiring a minimum number of parking spaces is almost
univeral in suburban housing, some jurisdictions now place a
cap on the number of parking spaces that may be provided in
office developments. The caps are intended to encourage
transit usage, improve air quality, and reduce the amount of
pavement.
Based on these precedents, as well as the health, safety, and
welfare consideration of clean air, a zoning ordinance could
require landlords to charge separately for housing and
parking. Giving up a second car would then translate into
lower rent. Similarly, if mortgage lenders recognized the
savings that accrue from not owning a second car, their
lending terms could help make homeownership more affordable.
In either case, "one-car rents" or "one-car mortgages" would
reduce second-car ownership, congestion, and air-
pollution~without any expenditre of tax dollars. People
without any cars could benefit even more. At this time,
"one-car rents" and "one-car mortgages" are the critical
issue for most households.
Both sound too good to be practical. In fact, mortgages that
increase borrowing capacity for one-car households are a
reasonable approach to homeownership finance. Some housing
finance agencies (HFAs) would likely be eager to experiment
with home loans that simultaneously reduce congestion and
pollution. Given that many HFAs do not sell their mortgages
to Fannie Mae, they are at liberty to set their own mortgage
approval guidelines. Guidelines for one-car mortgages would
likely require a household transportation plan and budget as
part of the mortgage application.
What about the lender's risk if new homebuyers purchase a
second car? The question can be answered by considering the
lender's current risk. According to today's mortgage
practices, a household that barely qualifies for a mortgage
is in no way constrained from running up credit card debt,
taking out car loans, etc., any time after closing. What
about the environmental benefits if new buyers bought a
second car? If the economics of second-car ownership are as
unfavourable as they appear, few homeowners would be likely
to purchase another vehicle unless and until their income
increases substantially. The mortgage, the savings, and the
acclimatization to living comfortably with one car will
discourage purchase of a second car.
Other sources for "one-car mortgages" include creating
private mortgage insurance for the extra mortgage money
advanced, special second mortgages from affordable housing
loan funds, and filing public comments under the Community
Reinvestment Act to change mortgage approval procedures. The
comments would criticize lenders for failing to meet the
mortgage needs of low- and moderate-income urban communities
where it is easy to live with one car. Fannie Mae and
Freddie Mac should also be asked to amend their mortgage
approval procedures.
In the case of multifamily housing, it should not be
difficult to create a Planned Unit Development (PUD) zone
that requires separate rents for housing and parking.
Existing as well as new projects could apply for the zone.
Owners of existing apartment buildings would apply for
inclusion in the zone, which would also place parking
restrictions on adjacent single-family streets. Under the
PUD, surplus parking spaces could be allocated to a small
town center or general store for residents' use. Owners of
existing buildings would apply for the zone because
commercial rent will be more profitable than parking spaces.
The PUD zone should encourage businesses that reduce
automobile dependence: a convenience grocery store, a
delicatessen, daycare centres, ATM machines, video rental
stores, home office support services, etc. It should also
permit car rental agencies so that households have direct
access to an automobile at critical times. Ideally, bicycle,
stroller and shopping cart rental should also be available.
These suggestions only begin to identify a range of
incentives for one-car ownership. For those who accept the
premise that housing can be made more affordable by reducing
second-car ownership, one-car mortgages and one-car rents
offer a challenge to change the status quo. Unlike most
challenges, however, this one should find support.
The past 10 or 15 years have seen the emergence of a powerful
alliance of environmentalists and transit planners. Bonds
between the transit-environment alliance and housing
professionals and advocates could strengthen an already
powerful political force.
Once transit, environment and housing professionals and
advocates in a community understand and endorse one-car rents
and mortgages, the community should readily accept these
solutions to local affordable housing needs. Many elected
officials have long sought ways to provide more affordable
housing and reduce congestion. They will find it hard to
ignore solutions that help achieve both objectives~at no
public cost~particularly if the solutions are supported by a
strong constituency.
3) PARKING GLUT LEECHES FROM THE PUBLIC PURSE - Angela
Bischoff
Few would argue that free parking means subsidized parking,
but how many know that paid parking is also subsidized by the
public purse?
Underground, heated parkades cost $15,000 to $25,000 per
stall to build. If a parker were to pay $125 per month,
that's just $1,500 per year~only a portion of the real cost.
Who ends up paying? The public, that's who.
If you subtract revenues from expenditures (1993 City of
Edmonton budget) for Parking Operations for the City, you
come up with a loss~or a tax subsidy~of $2,347,000! Should
taxpayers carry this burden? No. Drivers should pay the
full costs of parking at those facilities.
The problem stems from an oversupply of parking, which
exceeds demand by two to one in the downtown core, contrary
to popular belief. A parking glut pushes prices down.
The concealed costs of parking are surprisingly large. A
recent study by the Transportation Research Board estimates
that residential parking requirements add more than $600 per
year ($50 per month) to the average cost of rental
housing~regardless of whether or not the residents use the
parking facilities.
Perhaps if employers or landlords offered their employees and
residents the cash equivalent of parking space, we'd see less
incentive to drive.
The City should pursue the authority to tax private parking
operations, pushing prices up across the board to better
reflect the true costs. (EcoCity Report, summer 94)
4) FISCAL PRACTICES ARTIFICIALLY STIMULATE PRIVATE-CAR USE
An American right-wing approach.
(A Position Paper prepared by the Modern Transit Society of
San Diego, via 'Modern Tramway' July 1992.)
INTRODUCTION
In a free economy, the use of any object or service, once
acquired or contracted for, is directly proportional to its
fixed cost and inversely proportional to its perceived
variable cost. In the case of the private car, both costs
are distorted in directions that ancourage additional car
use. Hence, high levels of car use cannot be accepted as
proof of real preference,
but rather as distortions which must be corrected in order to
lessen the car's wasted of petroleum, pollution, road deaths,
and cost.
PUBLIC SUBSIDIES
In the United States, gasoline taxes are too low to meet
the cost of the facilities and service that cars require.
The shortfall is made up via public subsidies at all
government levels - subsidies which include the failure to
tax land under road serfaces. As a result of this largesse,
the car owner is aware of only a fraction of the true cost of
his driving.
The system forces everyone to pay much of the cost of car
use, whether or not they drive. While manifestly unfair to
those who do not drive, the arrangement is also unfair to car
users since it deprives the of (a) the ability to reduce
costs significantly by restricting the amount of driving, and
(b) the right to know the true amount of this major part of
their personal budget.
To correct this situation, new legislation is required to
forbid the diversion of general taxes into road-related
purposes, and to recognize unlevied road land taxes as part
of the true cost of road use. Road subsidies would end.
Sales taxes, propperty taxes, and income-based taxes diverted
to meet road-related costs would be reduced, and charges
applied direct to road users would be increased to cover the
road costs. Total taxation would not increase, since higher
road-use charges would be balanced by reduced non-road taxes,
there would be a new ability to limit personal expenditure
by cutting car use. Concerns for the effects on the ability
of the poor tto afford
continued car use can be met out of welfare payments. But
there is no reason to continue giving indiscriminate
'welfare' payments to owners of Mercedes and Jaguar cars and
to heavy trucks.
PRIVATE SUBSIDIES
Businesses whould be encouraged to end the practice of
providing 'free' parking for customers and employeees. A
parking space costs thousands of dollars to provide, and
hundreds more per year to maintain - costs that are buried in
the prices of goods and services sold. All customers,
regardless of how they travel, pay the cost of 'free'
parking. This should be corrected so that businesses recoup
all the costs arising from car use from those who make them
necessary - the drivers themselves. Those who do not drive
should not be forced to help defray the costs of those who
do.
THE CAR'S EXCESSIVE FIXED COSTS
Major elements (purchase price, registration, licences,
and insurance premiums) of the total cost of oowning and
running a car cannot be reduced by driving shorter distances.
In fact, this part of the cost, totalling about half of the
quoted cost per mile of car ownership and use, works in the
opposite direction. Being fixed, the additional
distance-related cost looks more like a marginal cost and
impels people to use their cars, especially since reduced use
can be seen to increase the cost per mile.
To mitigate this condition, car insurance premiums,
registration, and licence fees should be collected as
surcharges on the gasoline tax. This change would replace
current high annual bills with incremental amounts paid as
the vehicle is driven (or not paid if the car is not driven).
In the case of
insurance premiums, there would be other advantages, since
payment would be in direct proportion to distance driven, and
since every driver would be automatically covered. Premium
adjustments for age, driving record, etc. would be handled by
invoices sent by mail, and drivers could still select their
preferred insurers to whom state-collected gasoline-tax
premium payments would be paid. Major advantages would
accrue to all drivers if these costs were placed on a 'pay as
you go' basis.
CONCLUSION
By giving consumers control over their travel
expenditure, these changes will enable people to vote
meaningfully with their money for the modes and levels of
transport that they genuinely prefer. By paying directly and
in proportion to use, consumer cash-votes will gain a
validity now denied to them.
And, with the full cost of car use perceptible to (and
unconcealable from) users, viability of alternatives would be
enhanced, and progress and private enterprise attracted back
into mass transit. With return of private capital, public
subsidy of public transport would end, and commodious rail
transport would again be provided without public cost.
Significant benefits in terms of reduced use of
petroleum, pollution, gridlock, safety hazards, and cost
would be achieved- without draconian measures and in a
politically-acceptable fashion - by following these
recommendations to move road transport into the framework of
the American Free Market.
5) PHASING OUT SUBSIDIES TO MOTOR TRAFFIC - Chas. Shrubsole
All levels of government are squeezed for funds and are
looking for ways to cut expenses. Unfortunately they are
failing to see what should be obvious, that cutting subsidies
to motor transport would be one of the most effective way to
save money. This subsidy has been estimated to amount to
about $2,750 per vehicle per year in direct quantifiable
public subsidy (CRD Task Group on Atmospheric Change,
Victoria, B.C., 1992), not counting long term effects and
indirect costs like environmental and social costs. Users of
motor transport should bear the full cost of road
construction and maintenance and other costs related to motor
transport, which should no longer be paid for out of general
revenue. Subsidies to motoring should be phased out.
PHASE I
The first step in eliminating public subsidies to motoring
would be to set up a Crown corporation, Ontario Motorroads
Ltd. or whatever, which we will call the 'Company' from now
on. Initially the Company would take over all limited-access
highways, that is, all roads which have the movement of motor
traffic as their sole purpose, and the Ministry of Transport
functions concerned with them. By the end of a specified
transition period it would be required to meet all its
expenses from user fees of various types, such as surcharges
on motor fuels, licenses and permits, tolls, electronic road
pricing, and so forth. These service charges would of course
be subject to PST and GST.
The legal status of the Company would be much like that of a
railway. It would pay municipal taxes on its installations.
The Company would establish vehicle standards and
regulations for road users. To enforce compliance with the
rules of the road, it could have its own police force, like
the railway police, or contract for the services of the
Ontario Provincial Police.
The Company's fee schedule would subject to the approval of a
suitable regulatory body, which would be required by law to
take into account the Company's obligation to cover all its
expenses from user fees. It should also consider fairness to
various classes of users. While users pay only a small part
of road costs, some pay more and some less than their share
of that portion. Rural and small-town drivers subsidize city
motorists, and owners of private cars and light trucks
subsidize heavy vehicles. Studies have estimated that damage
to roads increases proportionally to the fifth power of
vehicle weight, so a vehicle that weighs twice as much will
cause 32 times as much wear and tear on the road.
The same body would also rule on applications to abandon
uneconomic roads. The Company would be obliged to
rehabilitate for other uses the land occupied by abandoned
roads. Some of the rehabilitation cost could be recouped by
selling the former right-of-way for public transit or railway
lines, or for building sites.
PHASE II
Having the Company take over limited-access highways would be
only a start towards getting motorists to pay their own way
and not travel largely at the expense of the general public,
which includes those who cannot afford a car as well as those
who resent their taxes being used to promote an activity
which they consider undesirable. It does not take into
account the cost of measures (other than the construction of
limited-access highways) taken within cities to facilitate
the movement of motor traffic. Separating the cost of these
measures, which should be borne by road users, from public
works for the benefit of all, which are a legitimate
application of general revenue, is a bit more complicated.
To help unravel this complication, it is useful to make a
distinction between streets, for access to onlying
properties, and roads, for moving traffic. Whether we drive
or not, we need streets so goods and services can be
delivered, garbage picked up, and so forth. Streets and
concession roads, their rural equivalent, are a legitimate
municipal expense. Not so roads. The complication is that
some thoroughfares serve both purposes and some basis must be
devised for a fair division of costs between the Company and
the municipality, and hence between motorists and the general
public. Perhaps the best approach is to let a certain width,
required for the 'street' function, belong to the
municipality, and the rest be the property and responsibility
of the Company. The municipality would pay a share of
maintenance costs proportional to its share of the total
width.
Corner cutaways and right-turn cutoffs would of course become
Company property. The Company would also take over all signs
and signals for regulating traffic and absorb most municipal
transport department employees, except for those needed to
manage street maintenance, and public transit in cities where
it is responsibility of the municipal transport department.
Once the Company has taken responsibility for all motor
traffic, it should be obliged to reimburse OHIP for the
medical costs of traffic victims.
IMPLICATIONS FOR PUBLIC TRANSIT
In the long run, public transit should gain many more
customers once we stop paying people not to use it, and
perhaps could support itself from the farebox without public
subsidy. It is undesirable to subsidize any form of
transport; rather, we should encourage non-transport
solutions to problems, such as living closer to your job or
finding a job closer to home, and shopping locally. In the
short run transit will need increased subsidies. The
ridership increase will not happen overnight while having to
pay the full cost of road use will cause an immediate sharp
rise in operating costs. These interim subsidies should be
paid on the basis of transit system output, so much per km
or vehicle-hour of service or, better, per passenger. Paying
a subsidy related to road costs would amount to subsidizing
road use with public funds, which is what we are trying to
eliminate, and would not encourage public transit operators
to economize on road charges by using different types of
vehicles or escape them entirely by building their own
networks. A temporary exemption from municipal taxes for
such transit installations would also be in order.
Big buses are hard on roads and would have to pay heavy fees
to use them. Smaller, lighter buses should not have to pay
as much. Run more often to provide the same capacity, they
would provide more convenient service and attract more
customers. These economies might offset the higher labour
costs.
Other means of public transit would to a greater or less
extent or other escape these fees. Obviously subways and
other public transit lines that have their own rights-of-way
independent of the road system would be totally exempt.
Where streetcar tracks are imbedded in roads, the paving
around the track is generally the responsibility of the
transit company. Therefore, this part of the road should be
considered the property of the transit operation, which
should charge the Company a fee for its use by motor traffic,
or segregate it from road traffic if adequate payment is not
forthcoming. Trolleybuses are limited to stretches of road
which are wired for its operation, unlike motor buses, which
can go anywhere. Therefore it is easy to determine how much
actual use they make of Company roads, and they should not be
charged for travel on city streets or on rights-of-way owned
by the transit operation.
The Province should make funds available to help public
transit expand vehicle fleets to handle increased ridership,
buy new types of vehicle, and build independent
rights-of-way for transit operation, perhaps by lending money
to transit operations at provincial interest rates.
PRIVATE-SECTOR SUBSIDIES
These policies would largely eliminate direct public
subsidies to motor traffic, but the private sector also
subsidizes car use, mainly by providing free parking for
workers and customers. This also results in public costs
through reduced tax receipts.
Parking for workers should be considered a taxable benefit
for those who actually use it, as it is in Germany.
There is really no free parking for customers, it is paid for
in the cost of the goods they buy. What is unfair is that
those who arrive on foot or by public transit and do not use
the 'free' parking also pay higher prices to subsidize those
who do. As the cost of providing this parking is considered
a legitimate business expense, no tax is paid on it. To
stop this loss of tax revenue, and in the process encourage
a fair deal for non-motorists, provision of free or
subsidized customer parking should be disallowed as a
business expense. The cost of customer parking should be
allowed as an expense only if a charge is made for it, and
then only to offset income from parking fees.
Residential parking should also be charged for separately on
a full-cost basis. Only those who actually use it should
have to pay.
This is just a once-over-lightly treatment of the parking
question; the whole subject demands fuller treatment in a
separate article.
BENEFITS
These proposals would increase the cost of motoring but
decrease all manner of other personal costs. Municipal
taxes, and hence rents, could be much lower if the
tax-exempt status of motor roads were ended and the burden of
building and maintaining them lifted from municipal budgets.
By reducing the cost of doing business this should also
reduce retail prices, which would be further reduced once
the cost of parking space was shifted from customers in
general to those who actually use it. The rate of sales tax
paid on purchases could also be much lower if the Province
were to stop financing roads from general revenue.
Welfare payments could be reduced to correspond with the
reduced cost of living without hardship to recipients,
further reducing the need for tax revenue.
With more customers to support it, public transit should get
better. Just about all measures transit companies might
take to reduce or eliminate road charges would also enhance
the comfort and convenience of the service. Transit could
become self-supporting from fares, relieving provincial and
municipal taxpayers of the cost of transit subsidies.
With the cost of doing business reduced, more retailers would
be able to stay in business, especially those that are
marginally profitable because they cater to minority
interests or tastes. This would give shoppers a wider
variety of goods to choose from. Once car ownership and use
were no longer highly subsidized, more customers would
decide to rely on the improved public transit rather than
own a car, and thereby have thousands of dollars more to
spend on other things. Non-car-related businesses would
prosper accordingly.
The demand for parking space would be reduced; there would be
fewer motorists, and not as many of them would want it when
they have to pay for it as when they got it free. Parking
would be easier to find for those willing to pay the price.
Some land now used for parking would be put to more
productive use as it became surplus to requirements,
effectively increasing the density of development and
reducing the need for transport.
The balance betweeen car and transit use will shift towards
transit use, which is inherently more economical, and
towards local travel on foot, which is even cheaper, once
travellers have to pay their full costs. This will favour
local and downtown retail trade over car-oriented suburban
malls.
Reducing motor traffic would reduce air pollution and noise.
A shift towards electric transit technologies would also
help in both respects. There would be less loss of life and
limb from traffic mishaps.
Altogether, life should become more pleasant in cleaner,
quieter, safer, more affordable, more prosperous, livelier
cities.
6) TRANSPORTATION FUND SEQUESTERING
From: VGR@together.org (unknown)
To: alt-transp@uci.edu (Multiple recipients of list)
Subject: TRANSPORTATION FUND SEQUESTERING, FLINK
Date: Mon, 06 Feb
One of Vermont GrassRoutes's top legislative priorities
for the 1995 Vermont legislative session is to abolish the
distinction between transportation and general funds. We are
in the process of developing a brief about the issue and have
thus far collected two items (attached below).
THREE QUESTIONS TO GET THE DISCUSSION STARTED: WHAT
JURSIDICTIONS HAVE SUCCESFULLY REVERSED SEQUESTERED
(DEDICATED) TRANSPORTATION FUNDING? WHO SHOULD WE CONTACT?
WHAT LITERATURE SHOULD WE CITE?
**************
Here's a passage that discusses the transportation fund
sequestration that inflicts all levels of government in the
US. Thanks to Randy Koch for this transcription, which
includes a quote from Winston Churchill about fund
sequestration: "an outrage upon the sovereignty of Parliament
and upon common sense."
Quoted from James J. Flink's The Automobile Age, MIT
Press 1988 pps. 374 - 376
"Unlike the purchase of automobiles by individuals, which
falls within the American conception of transportation choice
being determined in the marketplace, providing the
infrastructure of highways and streets essential for
automobile use requires centralized planning here as well as
in Europe and emanates from political decisions and the
political process, not the market. What needs to be
accounted for is why, unlike European governments, the
federal, state, and local governments in the US have
consistently provided massive funds for building the world's
best highway infrastructure, to the virtual exclusion of aid
for the rail infrastructure. The answer lies in the historic
nondivertibility of highway revenues collected from gasoline
and other special user taxes.
"Paradoxically, the principle of nondivertibility was
innovated not in the US but in Great Britain, when a bargain
was struck between the government and upper-class motorists
in debate over the 1909 Development and Road Improvement
Funds Bill. The bill provided for a 3 pence per gallon tax
on imported gasoline and a graduated horsepower tax, to be
administered by a central board and spent on roads.
Chancellor of the Exchequer Lloyd George explained to
Parliament that the motorists were "willing and even anxious
to subscribe to such a purpose so long as a guarantee is
given in the method and control of the expenditure that the
funds so raised will...be devoted
exclusively to the improvement of roads." As Dunn observes,
however, ":there was a crucial difference between the British
style of earmarking and the subsequent American methods. The
promise to spend motor vehicle and motor fuel tax revenues
only on roads was made in Parliament and was thus on the
public record, but it was not written into the law! Nowhere
in the law was it stipulated that the Road Board had to spend
all the funds it received. Nor did it specifically prohibit
the government from withdrawing all or some of the unspent
road funds and using them for other purposes."
"The gentlemen's agreement between Parliament and British
motorist was broken in 1926 by Chancellor of the Exchequer
Winston Churchill, who called the idea of a nondivertible
road fund "nonsense," "absurd," and "an outrage upon the
sovereignty of Parliament and upon common sense."
"Earmarking not only came late--well after a mature
automobile culture had developed in the US--but cannot be
considered a manifestation of some unique American affection
for the road and the car. Both at the state level beginning
in the 1920's and at the federal level after 1934 and
especially in the 1950's, the nondivertibility of highway
revenues was achieved by the lobbying efforts of
special-interest groups of highway users, especially the
automobile industry and the automobile clubs at a time when
almost half of American families did not own automobiles
and were therefore dependent on some form of public
transportation. Thus, the irrational proliferation of the
American automobile culture during the period 1956-1973, and
the concurrent destruction of alternative transportation
systems cannot be explained away as the choice of the
consumers expressed in a free market, as the inevitable
result of the superiority of the road and the private
passenger car over other modes of transit or as the ultimate
consequence of a mystic and mythical American love affair
with the automobile.
*********************
FUNGIBILITY DEFINED
This is the fundamental concept that argues against fund
sequestration.
Quoted from The New Palgrave: a dictionary of economics
"Fungibility. Fungibility is a central notion in
economics, though often unnoticed and unnamed. It means
merely 'substitutable', and is in origin a Latin legal term
meaning 'such that any unit is substitutable for another'
(from *fungor* meaning 'do, discharge'). A debt can be
discharged with any money, not merely moneys from a
particular account. The task of a low-level administrator is
to make accounts fungible with each other, so that pencil
money may be spent for office parties when required; the
task of a high-level administrator is to prevent this.
Mother cannot give money 'for' a new refrigerator: the gift
merely raises the recipient's income. Likewise the World
Bank rule that the items 'financed by' the Bank must attain a
certain level of social return is pointless. The $100
million given to a government will be used anyway for the
marginal project in the government's list; the project 'for
which the money is given' can be claimed to be any
intramarginal one.
"Because demands for grain are fungible a cut in Soviet
orders for American grain does not cause a one-for-one fall
in demands on American suppliers.
Because money is fungible the prospect of a government
pension will reduce the incentive to save privately. The
last 'winning' points in a football game are in no coherent
sense *the* winning points, since points are fungible. On
the same grounds 'the reasons' for a decision are
meaningless: critera for the decision are fungible.
(Entry written by Donald N. McCloskey)
*************
Thanks for reading through this lengthy message. Look