Finance: The Critical Link The Transportation – Land Use – Environment Connection Brian D....

Finance: The Critical Link

The Transportation – Land Use – Environment Connection

Brian D. Taylor

October 2003

Institute of Transportation Studies

Reflection in the Midst ofFiscal Crisis

• A apropos time to consider finance.


Reflection in the Midst ofFiscal Crisis

• The political consequences of this crisis have never been more visible.


Crisis as Both Constraintand Opportunity

• History of transportation finance:– The most creative changes to the status quo…– And the longest-lasting effects…– Emerged from times of fiscal stress.


The Missing Link:Transportation – Land Use – Environment – Finance

• A common view…

Finance is central to – but somewhat separate from – land use regulation, transportation policy, and environmental planning.



• Put another way…

First we figure out what we want to do, and then we figure out how to pay for it.



• But, in reality, what we want to do is influenced greatly by whether we can pay for it.

• And how we pay for things helps to determine what we want (and need) to do.


For example…• A travel demand study may forecast a significant

increase in travel over an already heavily used bridge.

• This forecast prompts proposals to construct a new parallel span to accommodate the growth in traffic.

• Which in turn leads to efforts by local officials to secure funding for the new bridge.


The Finance Link

• But how we fund the bridge influences its use.

• The decision whether or not to use tolls to help finance the new span will significantly influence the level of demand for the bridge.


The Finance Link

• Limitations on property taxes can encourage cities to zone for land uses that tend to generate more in tax income than they consume in local services.

• Which, in turn, can contribute to shortages of affordable housing.

• And an abundance of auto malls.


We Cannot Opt Out of Pricing

• Most public officials are loathe to think about pricing, which they see as inequitable or “social engineering.”

• But however we decide to tax land and finance infrastructure sends price signals to consumers.

• In other words, even making something free is a pricing decision.



Example: User Fees and General Taxes

in Transportation FinanceExpenditures

Transportation Purposes Non-Transportation Purposes

Transportation Sources

Transportation User Fees Motor fuel taxes for

highways and transit service

Transit Fares Bridge tolls to retire bridge

bonds

Transportation Taxes for General Purposes Fuel taxes for “deficit

reduction” Parking meter revenue to fund

libraries

Rev

en

ues

Non-Transportation Sources

General Taxes for Transportation Sales taxes dedicated to

transportation General obligation bonds

for transportation

General Taxes for General Purposes Income taxes for education,

health care, and national defense

Our Goal With This Symposium

Focus on how finance both shapes and is shaped by the transportation – land use – environment connection.


The Finance Link

• How do we define “successful” public finance programs.– Generate needed revenues.– Maintain sufficient popular and political

support.– Encourage efficiency, effectiveness, and equity

in land development, transportation systems, environmental management.


Example: Linking Finance ProgramsExample: Linking Finance Programswith Transportation Systemswith Transportation Systems

System Performance Program Performance

Effectiveness > Optimizes utlization of existing capacity. > Lowers transportation costs and promotes economic development.

> Is politically feasible: has stable political support, is popular with voters, and has little opposition from powerful stakeholders. > Revenues generated meet needs and are stable and predictable.

Efficiency > Optimizes provision of transportation service for a given level of expenditure

> Has low administrative and overhead costs relative to the revenue collected.

Equity > Provides all users with transportation access, regardless of circumstances (age, income, disability, etc). > Is progressive based on the ability to pay. > Charges users in proportion to the costs they impose on the system and society.

> Is perceived as treating places and jurisdictions fairly. > Major stakeholders and interest groups perceive they are treated fairly.

The complexity of these issues can make it easy for people to talk past one another

• The role of finance in the transportation – land use – environment connection involves…– Both private and public expenditures.– And both internal and external costs.


The Transportation – Land Use – Environment – Finance Link

• Transportation– Significant private expenditures on vehicles,

fares, fuel, insurance, etc.– But also substantial public expenditures on way

(such as roads) and terminals, plus some expenditures on vehicles, fuel, etc.



• Land Use– Mostly private investment, but publicly

regulated and taxed.– Such expenditures, however, directly affect

public expenditures on infrastructure, schools, parks, safety, etc., and on the taxes and fees used to pay for them.



• Environment– Environmental costs generated by private (and

public) actions, often related to transportation and land use.

– Funding of environmental regulation and mitigation programs.

– Pricing and regulation seek to internalize otherwise externalized costs.


Coming Up

• Transportation and Land Use in the Broader Context of Public Finance– Paying for Infrastructure: Implications for

Transportation Systems and Land Development.

– Managing Infrastructure Assets: Implications of New Accounting Guidelines.

– The Fiscalization of Land Use: Effects on Development and Travel Patterns, and Opportunities for Reform.


This Afternoon

• The Anatomy of Transportation Finance– Shifting Sands: The Evolution of Surface

Transportation Finance.– Where it Comes From and Where it Goes: The

Current State of Transportation Finance.– Reforming Surface Transportation Finance:

Needs, Opportunities, and Constraints.


This Evening

• Working With, and Against, Fiscal Politics to Improve Land Use, Transportation, and Environmental Outcomes– A moderating roundtable discussion.


Tomorrow Morning

• The Fiscal Link Between Land Use and Transportation: Assessing Research From Home and Abroad– The Fiscal Impacts of Alternative Forms of

Development: What Has the Evidence Shown?– The Role of Transportation Investments in

Shaping Land Development.– Using Public Finance Tools to Shape Land

Development and Travel Patterns in Europe.


Tomorrow Morning• Making Land Use and Transportation

Investments Work Together: Recent Innovations in Practice– Using Finance Creatively to Better Integrate

Public Transit and Land Development: Assessing Recent Efforts.

– Turning Small Change into Big Changes: Using Parking Revenues to Revitalize Commercial Districts and Neighborhoods.

– Commentary: Making Land Use and Transportation Investments Work Together.


Tomorrow Afternoon

• Linking Land Regulation and Transportation Finance to Environmental Quality– Measuring and Pricing Environmental Externalities

in Land Use and Transportation Systems.– Transportation Pricing as an Air Quality

Management Tool: Case Studies of Recent Practice– New Developments in Incorporating Environmental

Mitigation into Project Planning and Finance.


Tomorrow Evening

• Private Sector Views on Development, Land Use, and Transportation– A Moderated Roundtable.


Tuesday Morning

• Moving the Economy: Who Should Pay for Goods Movement? And How Should they Pay?– The Restructuring of Freight Logistics: Implications

for New Technologies, Land Use, and Infrastructure Finance

– Case Study: Financing Regional Goods Movement Projects in Southern California


Tuesday Morning

• The Political Challenges to Fiscal Reform– Moderated Roundtable on Improving the

Transportation – Land Use – Environment – Finance Connection.


Finance: Which Way Do We Go?

Finance: The Critical Link The Transportation – Land Use – Environment Connection Brian D....

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