Transportation Utility Fees:

1. Transportation Utility Fees: Possibilities for the City of Milwaukee May 11, 2007 Prepared by: Deven Carlson Bill Duckwitz Karen Kurowski Lamont Smith

2. Problem Statement • Milwaukee budget predicts a growing structural deficit • Exacerbated by existing revenue constraints • Threatens quality of Milwaukee’s transportation infrastructure • Equity concerns: payments do not reflect usage • We estimate single-family homes pay 3x their usage • Tax-exempt properties do little to fund infrastructure • Budget strategy to move toward user fees • Would a TUF be a solution for Milwaukee?

3. What is a TUF? • Treats transportation infrastructure like a public utility—paid as a user fee • Assigns fees based on estimated road usage: • Property characteristics: proxies (e.g., number of bedrooms, square footage); OR • Trip rates: estimated trips generated according to land use • Not subject to revenue/expenditure constraints • Applies to all properties—even tax-exempt

4. Evaluation Criteria • Equity • Benefit principle, Ability-to-pay principle • Economic Impact • Importing revenue, Market distortions • Budgetary Impact • Revenue adequacy & stability, Diversification • Feasibility • Political, Legal, Administrative

5. Assumptions • Each alternative would generate $17.8 million • Equal to property tax revenue Milwaukee will use to fund transportation infrastructure in 2007 • Intergovernmental aid, special assessments, and miscellaneous revenue unaffected • Each TUF alternative is revenue neutral • Each TUF would raise $17.8 million and property taxes would decrease by same amount

6. Policy Alternatives

7. Benefit-Principle Ratio • Ratio = 1 indicates cost proportionate to use • Our estimate of use is based on trip generation data, so trip generation TUF ratio is 1 by definition • Ratio > 1 indicates overpayment • Ratio < 1 indicates subsidy received

8. Benefit-Principle Equity under the Status Quo

9. Benefit-Principle Equity under a Flat-Fee TUF

10. Benefit-Principle Equity under a Hybrid TUF

11. Ability-to-Pay Equity for Residential Properties: Single-Family • All TUF alternatives are similar and slightly regressive • Example: under the flat-fee TUF, average wealth differs by $180,000 from poorest to richest quintile, but the fee charged increases only $4 • Status Quo alternative is perfectly equitable on ability to pay • All TUF alternatives are substantially more affordable for the vast majority of properties

12. Importing Funds

13. Market Distortions

14. Budgetary Impact & Feasibility • Budgetary impact: Revenue adequacy and stability • Each TUF alternative enables the City to adequately and stably fund transportation infrastructure • Budgetary impact: Diversifies revenue sources • TUF alternatives introduce new revenue sources • Feasibility • Overall, each of the four alternatives is politically, legally, and administratively feasible • Legal concerns pose greatest challenge in other municipalities

15. Comparison of Alternatives

16. Policy Recommendation • City of Milwaukee should adopt the hybrid TUF alternative • This alternative best aligns cost of transportation infrastructure with usage • Most likely to be ruled legal of all the TUFs • Minimizes financial burden on owners of residential property • Provides Milwaukee with revenue flexibility

17. Other Recommendations • Set a cap to limit the maximum fee • We suggest initially capping fees at the maximum paid by a residential property under the status quo • Consider trip-generation rate adjustments • Pass-by trips • Trip length • Design an effective appeals process

18. Concluding Remarks • Questions? • Contact information: • Deven Carlson: decarlson@wisc.edu • Bill Duckwitz: wpduckwitz@wisc.edu • Karen Kurowski: kakurowski@wisc.edu • Lamont Smith: lsmith3@wisc.edu