New funding sources

climate-protection-and-resilience

New funding sources

Each goal has strategies specific to achieving it. Many of those strategies apply to multiple goals. Throughout the planning process, we identified a set of broader strategies that may not be specific to a goal or set of goals but underlie the entire plan and play an important role in realizing our regional vision.

Find new funding sources

Our region may be at a crossroads about how we can fund future transportation needs as we anticipate shortfalls in traditional funding sources. Costs to build, operate and maintain the transportation system at acceptable levels are increasing while current funding sources such as motor fuel taxes and sales taxes are losing buying power. Based on projections of current transportation revenues versus the total value of projects submitted for this plan, there will be a deficit of at least $8.1 billion through 2050. All levels of government will be confronted with difficult choices between finding new sources of revenue or settling for smaller programs that may not meet the region’s future transportation needs. The financial analysis for this plan shows especially significant gaps in funding for public transportation and for projects on the Missouri state highway system. Federally and regionally we are faced with a choice between finding new sources of income or possibly settling for smaller programs that may look very different from the ones currently in place. This suggests that the region should consider new or additional funding streams to promote regional transportation projects and services. The region may need to use more local resources to complete regional projects than in the past. States and the region will need to implement new funding strategies that support regional, state and national priorities. The region will need to make significant decisions about the best way to balance priorities, needs, wants and expectations based on limited funding resources. Some options that may warrant special attention are road user charges based on vehicle miles traveled, new tolling technologies including managed lanes and demand-based pricing, increased motor fuel and sales taxes, value capture mechanisms from new development and redevelopment and opportunities to leverage private funding to support specific projects, programs and services. While there will be pros and cons to any of these approaches, many of these mechanisms may also provide opportunities to support other regional transportation, economic and environmental goals apart from their direct use in funding projects and programs. The region will need to make significant decisions about the best way to balance priorities, needs, wants and expectations based on limited funding resources. The following examples illustrate the revenue potential of several new funding sources as well as some of the policy considerations associated with them. This plan encourages regional leaders to develop one or more of these or other new funding sources to address future funding needs for the transportation system.

Regional investment district sales tax

Legislation currently exists in Missouri to allow the creation of a special funding district to collect up to a half-cent sales tax for public transit purposes (MO Rev Stat § 70.515-70.545), although it has not been implemented. Similar legislation would need to be enacted in Kansas and county-wide elections in one or more counties would be required to levy and collect the tax.

PROS

Pool funds raised across the region to pay for improvements that are regional in nature
Benefit residents throughout the metro area

CONS

As with other sales taxes, these would have a higher impact on low-income households as an overall percentage of their incomes than on higher-income households

Road user charges

Road user charges are distance-based taxes or fees typically calculated based on vehicle miles traveled. Under this concept, motorists would pay fees based on distance driven and, perhaps, on other costs. The methods of collecting these charges could range from electronic transmittal of mileage data directly from vehicles to manual reporting of a vehicle’s odometer reading, perhaps taken during an annual inspection.

There is federal debate on merits associated with implementing a road user type charge nationally. MoDOT received a grant from FHWA (Surface Transportation System Funding Alternatives in 2020) to evaluate miles-based user fees and road user charges. Road user charges would require new federal or state legislation. The estimates below are based on current annual estimates of regional VMT and a 1.7 cent per-mile tax or fee consistent with pilot road user charges programs in Oregon and other states.

PROS

Provide a direct connection between user payments and use of the system.
Could provide pricing signals to users via variable pricing or congestion to promote public benefits such as congestion mitigation and emission reductions.
Basic per-mile charge could be adjusted based on any number of factors, such as the time of day a trip is taken, the place of travel, the weight of the vehicle and the emissions of the vehicle’s engine.

CONS

Public concerns about personal privacy.
Higher collection and enforcement costs (estimates range from 5% to 13% of collections); the administrative challenge of collecting the charge.

Internet sales tax

One way of increasing transportation revenues is to create an internet sales tax for transportation. The concept is based on an idea that internet sales cause additional use of and stain on the transportation system and there should be an additional cost to support that use. The revenue estimates below assume that approximately 10% of all sales are online internet purchases.

PROS

Capture revenue from online sales that require transportation infrastructure for deliveries.
Partially mitigate one competitive disadvantage of local brick and mortar retailers versus out of region online sellers.

CONS

Sometimes internet business appears to operate from ambiguous locations increasing regulatory costs for identification and enforcement.
As with other sales taxes, these would have a higher impact on low-income households as an overall percentage of their incomes than on higher-income households.

Local motor fuels taxes

Traditional fuel taxes on gasoline and diesel as well as Leaking Underground Storage Tank fees are not indexed to inflation. Increases in fuel tax revenue is based on an increase in total gallons consumed. This assumes a one cent per gallon tax.

PROS

Higher gas tax rates prompt some people to drive less resulting in benefits for society and the environment.

CONS

Unless indexed for inflation, future purchasing power could decline with inflation and reduced fuel consumption.
As with other sales taxes, these would have a higher impact on low-income households as an overall percentage of their incomes than on higher-income households.

Sales taxes on motor fuels

Legislation introduced in Missouri in 2019 (HB 1157) would have created regional transportation funding districts with the capacity to collect sales taxes on motor fuels at the local level above the per-gallon motor fuels taxes collected at the state level. These would require authorization by counties and local elections to allow creation of the authority and collection of the tax. Since these would be based on the value of fuel sold, sales tax revenues on fuel could rise from year to year even if consumption does not increase. Conversely, however, a decline in motor fuel prices could lead to a reduction in sales tax revenue. Possible annual revenues are based on a four percent motor fuels tax.

Estimates

Estimates of potential annual gross revenues from the sources above are shown in the following table:

Kansas and Missouri departments of revenue 2018 sales
MARC travel demand model
Kansas and Missouri departments of revenue 2018 sales
U.S. Energy Information Administration
Kansas and Missouri departments of revenue. Sales subject to sales tax only. Does not include use tax.

Other potential sources

In addition to the area-wide funding sources described above, other funding and financing tools may be applicable for specific projects. These include the potential to toll certain bridges or roadways at fixed or variable rates based on demand, value-capture methods where transportation investments increase the value of adjacent land or property, public-private partnerships to share risk and accelerate project delivery where project revenues are available.