Multi Objective Analysis for TransLink Finance Options

8/6/2019 Multi Objective Analysis for TransLink Finance Options

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A Multi-Objective and Multi-CriteriaAnalysis of Transportation Finance

Options for TransLink

A Directed Studies Project

By Tim Shah

July 1, 2011


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Introduction

This paper evaluates the objectives of TransLinks Transport 2040 plan wit h a particular focuson one of its major strategies: diversify revenue sources and pursue new and innovative ways to

fund transportation. There are a number of opportunities TransLink could pursue to find securedfunding for its transit operations, expansions and non-motorized options (e.g., cyclinginfrastructure); however, there are inherent political, bureaucratic and ideological challengeswith virtually any option. The paper will examine the objectives of the plan, evaluate a set of alternatives as funding sources and complete a multi-criteria analysis 1 to assess how well thealternatives mat ch TransLinks major objectives and the criteria developed.

TransLink is currently reviewing a number of different finance options (TransLink, 2011). Inorder to keep up with rising transit demand, along with being consistent with the MetroVancouver Regional Growth Strategy and the province/region environmental objectives toreduce greenhouse gas emissions (GHGs), an innovative finance solution will be of utmostimportance to continue to provide a well-operated and popular transit service. This paper seeksto analyze diverse alternatives and make a recommendation that can complement existingproposals to assist TransLink in finding a viable funding option. For the purposes of thisanalysis, each objective will be broken down by means and ends to achieve the objective.The means and ends are theoretical and will be included to provide further scope and context tothe objectives presented.

Problem statement: TransLink is facing severe budgetary constraints and will face imminent

challenges if it cannot find a sustainable funding strategy (TransLink, 2010). Under theTransLink Transport 2040 plan, there are a number of ambitious objectives that will be difficultto realize if no financial resources or pricing mechanisms come into fruition. Securingadditional/sustainable funding can help the organization upgrade, expand and ameliorate itstransit network for the Metro Vancouver region.

1 A multi-criteria analysis is a policy process used when many factors are considered important. The purpose of

using MCA is to aid decision-making rather than to evaluate options on monetary terms. It is useful in assessingoptions for adapting to climate change, for example, as there are many factors that need to be considered(Mukheibir & Ziervogel, 2007). It allows the analyst to weigh factors differently (i.e. health more/less important

than environment or cost), with different factors evaluated on criteria. After establishing a range of criteria anddisplaying/distinguishing among alternatives, the analyst discusses and recommends an option (Morrison, 2008).


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Background

In November 2010, it was suggested that the British Columbia carbon tax be considered as apotential future funding source for TransLink as there is consistency between the objectives of the Provincial carbon tax and TransLinks Transport 2040 goals for reducing GHG emissions(TransLink, 2010). In a Metro Vancouver Mayors Council meeting a couple of years ago, therewas discussion about using carbon tax revenue, estimated at $100 to $200-million a year for theregion, to fund transit instead of giving back to taxpayers as a climate-action credit or incometaxes which is the current strategy to make the tax revenue neutral (Bula, 2009). BC PremierChristy Clark recently announced her support of re-visiting the BC carbon tax legislation toconsider using the revenue for public transit; this announcement was coupled by Dr. NancyOlewilers comment about how recent polls state that people would prefer revenues to go totransit (Saxifrage, 2011). Further, she mentioned that from an economic policy perspective, it iswise to invest in areas that yield services over time because such capital expenditures will keep

giving back as the carbon tax revenues decrease (Saxifrage, 2011).

Securing another source of funding presents a promising opportunity for the Metro Vancouverregion in not only expanding a robust transit network, but in helping reduce traffic congestionand related greenhouse gas emissions from the transportation sector. TransLink has also gainedpopularity over the past 15 years; indeed, from 1998 to 2009, transit ridership increased by 52percent while the population grew by 15 percent (TransLink, 2008). Thus, a transportationfinance solution is warranted. Only time will tell which direction is pursued.

Figure 1. Metro Vancouver GHG Breakdown (TransLink, 2008).


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As shown in Figure 1, a large share of Metro Vancouvers GHG emissions comes from cars andlight trucks. While these statistics may hold true for other metropolitan regions in Canada, itpoints to the fact that automobility still has a substantial and negative impact on the environment.Among many of the sustainability projects this region embarks on in the coming years, publictransit is one area that is of utmost importance.

Public transit is financed and paid for through a number of different mechanisms. As shown inFigure 2, TransLink receives a large portion of its revenue from transit fares ($413 million perannum) and the provincial fuel tax ($319 million) accounting for 36 and 28 percent of the totalrevenue respectively.

Figure 2. 2010 TransLink Budgeted Revenue (Shiffer, 2011)

Transit agencies and/or transit providers can also use congestion charging, parking fees, propertytaxes and highway/road tolls (e.g., see Arnott, 1998, Levinson, 2002) to finance theirtransportation and public transit networks. Each of one these revenue generators is not thepanacea to financing a complete public transit system; transit agencies must be resourceful andcreative with their tools in finding and/or raising revenue.

Public transit in most jurisdictions around the world (with the exception of Hong Kong), are notmeant to be profitable (Guess, 2008). Public transit cannot be profitable because, as serviceincreases, fixed costs (average total costs salaries, maintenance, supplies, operations, and debtservice) usually increase by a greater amount (Guess, 2008, p. 33). Fares usually cover about 50


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percent of the operating costs of transit; they need to be set for non-financial purposes such asreducing urban congestion and providing access to all income groups (Guess, 2008).

In many cities, transit or public transportation is called a proprietary service, since it is abusiness-like activity in which users pay all or part of the costs of providing the service (Guess,2008). Guess continues: transit authorities could, in theory, cover full costs (direct + share of indirect) or marginal costs (market costs associated with the last unit of service) if fares werehigh enough. Costs of public transportation service are objectively measurable, andoutputs/outcomes are quantifiable. The major output is measured by vehicle miles of service,while outcomes , such as reduced congestion, health costs, and air pollution, are not hard toquantify but nearly impossible to attribute to urban transit (Guess, 2008). This is a majorchallenge when it comes to public transit financing.

When discussing a whole range of finance options, the benefits of reduced congestion, health

costs and air pollution do not always enter the debate despite the significant impact transit has onminimizing these negative externalities. Public transportation, unlike education or healthservices, has long been classified as a quasi- public or toll good that can and should pay for atleast most of its operating costs (Guess, 2008). This has meant that service, operations, andcapital financing must conform to multi-year hard budget constraints. Poorly run transit servicesthat run city treasuries into debt and cause problems for elected officials are not long tolerated bythe media and an electorate that finds its fees and taxes increasing (Guess, 2008).

Transit Governance

Transit governance is the decision-making process around who is involved and how transitdecisions are made. As transit agencies receive their funding from different sources and levels of government, their decision-making responsibilities can vary. Transit decisions range ineverything from finance decisions to strategies on how to improve overall level of service aroundtransit modes. Whether centralized or decentralized governance is more effective in transitprovision is still a debate in academia (e.g. see Katz & Puentes, 2005; King et al. 2007).However, scholars such as Guess (2008) suggest that decentralization of governance is oftennecessary for effective service delivery. This is especially true where daily service affects thelives of metropolitan areas and governmental institutions need to be responsive and accountable.Central governments may be responsible through transfers or loan guarantees for financing localtransit operations and capital investments; however, operational management responsibilities aregenerally decentralized as shown by TransLink.

To provide two Canadian examples of decentralized urban transit governance, Toronto andVancouver will be compared. In the 1950s, when Toronto was first starting to construct itssubway and transit systems, the Metropolitan government had all of the control in deciding what


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to build and how to build it (Bourne, 2001; Guess 2008). However, in the 1970s, the regulatoryframework changed to accommodate suburban growth, and Toronto began to suffer some of thesame problems of governmental fragmentation in service delivery, tax rates, and urbandevelopment found in nearby U.S. cities, such as Cleveland, Detroit, and Pittsburgh (Bourne,2001).

The challenge here is the urban centres attracted poorer and unskilled immigrants whoeffectively reduce the tax base and negatively impacted the revenue flow toward transitoperations (Bourne, 2001). In Toronto, the system is currently financed by shared provincial-local subsidies with no national level support. Transit capital investments have been approvedwithout rigorous economic reviews (i.e., political pressures) in several cases. Heavy rail orsubways continue to be the preference of leaders, despite cheaper and more effective options,such as light rail (Guess, 2008).Politics has also intruded into professional appointments. Forexample, in 1988, the Metropolitan Council replaced the entire board of the Toronto Transit

Commission (TTC) with serving politicians, a move that subjected important transportationdecisions to very parochial political factors rather than system-wide planning or professionalcriteria (Guess, 2008).

Vancouver also has a decentralized governance structure for public transit as the regional transitauthority, TransLink, makes decisions on planning and operation of all modes of transit in theGreater Vancouver area. TransLink, unlike the TTC in Toronto, has authority over multiplemodes for transit pricing, marketing, private involvement in financing investments, procurementof infrastructure, metropolitan land use, and transportation planning and collaborativeapproaches to community involvement (Guess, 2008).

Translink was created to empower local decision-makers with responsibility for regionaltransportation planning and financing (Guess, 2008). One scholar calls TransLinks decentralizedgovernance structure market driven transportation planning, as Vancouver has moved awayfrom the traditional model of public sector subsidy of operating and capital project costs toselective outsourcing and delivery of new infrastructure through private-public partnerships (e.g.the Canada Line) (Guess, 2008).

This paper now moves into the multi-objective and multi-criteria analysis first describing thegoals/objectives of TransLinks Transport 2040 plan, followed by alternatives, evaluation criteriaand the analysis of tradeoffs.

Goals/Objectives of TransLinks Transport 2040 Plan:

There are a total of six objectives but for the purposes of this paper, only three have beenselected. Objective IV is a theoretical objective added by the author; while it may be implicit in


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the first three objectives of the Transport 2040 plan, stating objective IV explicitly may give itmore weight and purpose when evaluating a set of financial alternatives for TransLink.

(i) Greenhouse gas emissions (GHGs) aggressively reduced

(ii) Most trips are by transit, walking and cycling

(iii)Funding is stable, sufficient and influences choices.

(iv) A reduction in urban traffic congestion in the Metro Vancouver region

This paper will focus exclusively on the four stated objectives above because they are highlyinter-related. GHGs can only be aggressively reduced if TransLink invests heavily in transit,walking and cycling initiatives. Urban congestion can only be reduced if there are viable and

efficient alternatives available to motorists. However, in order to achieve this, the organizationmust secure additional and secure funding that is stable, sufficient and provides choice for theregions residents. Thus, if an alternative can adequately satisfy one objective, it might be able tosatisfy all three.

The next section outlines the fundamental objectives. Using fundamental objectives areimportant for evaluating and comparing alternatives (Hammond et al. 2002). The emphasis of fundamental objectives below is different from the stated objectives above in that they includemeans and ends.

i. Greenhouse gas emissions aggressively reduced.

The means to achieving this objective would be to see a noticeable decrease in GHGs in thetransportation sector by 2040. Specifically, as per a report by TransLink, vehicle kilometrestraveled would see a reduction, along with a greater use of low emission fleet technology andimproved system operations and efficiency.

ii. Most trips are by transit, walking and cycling

The means to achieving this objective would be a substantial decrease in private vehicles tripswith a concomitant increase in transit, walking and cycling trips. Each sustainable mode wouldhave to see an increase of 15 percent by 2040. Specifically, this would require shifting fromprivate vehicle to transit, walking and cycling. For transit, the 2011 Supplemental Plan isforecasting an increase in transit boardings by roughly 8 per cent by 2015 (TransLink, 2010). Forcycling, there should be continued investment in cycling infrastructure by leveraging thecostsharing program with municipalities which increases the cumulative outcomes of the


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program. For walking, the 2011 Supplemental Plan supports increased walking trips throughimprovements in rapid transit stations areas, increased opportunities for transit and walking tripcombinations as well as bicycle and pedestrian infrastructure improvements (TransLink, 2010).

iii. Funding is stable, sufficient and influences choices.

The means to achieve this objective would be for TransLink to secure an additional fundingsource to pay for transit operations, expansion and improvements. Achieving this objectivewould mean that revenue would be collected by TransLink irrespective of price fluctuations inthe market place, through oil price volatility, reduced private vehicle trips or other. The revenueshould be committed to help TransLink with their day to day operations in providing a service.

iv. A reduction in urban traffic congestion in the Metro Vancouver region

The means to achieve this objective would be for TransLink to systematically and continuouslyreview land use decisions along major corridors (such as the Broadway Corridor) so as to ensurethat transit and pedestrian investments are made to complement increased residential density.With a more integrated land use and transportation process, non-car options can be more of aconsideration in the planning process so as to discourage automobility and alleviate trafficcongestion.

Performance Measures

In general, each objective should be quantifiable and have a set of performance measures to

ensure that they are meeting their objectives as outlined below.

1) Greenhouse Gas emissions aggressively reduced Every 5 years from now until 2040, there should be a 2-3 percent decrease in

GHG emissions from transportation2) Most trips are by transit, walking and cycling

There is an increase in walking, transit and cycling trips as reported in the datafrom the Canadian Census and TransLinks Travel Survey trip mode shareshould increase by at least 15 percent annually (or every 5 years) for walking andcycling by 2040

3) Funding is stable, sufficient and influences choices The funding strategy selected brings in a relatively sufficient amount of money

each year that assists TransLink with their transportation planning investments


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4) A reduction in urban traffic congestion in the Metro Vancouver region There is a 15 percent decrease in urban traffic congestion by 2040 as measured by

the reduction in delays and backups (in minutes) in the urban transportationsystem

TransLink Funding Alternatives

This section features a comprehensive set of alternatives that can act as funding sources forTransLink. Each alternative will be defined and subsequently explained in the context of how itcan raise or directly fund transit related operations and expansions. Each alternative draws onthe literature to provide multiple perspectives on the funding source.

Alternative A) Implementation of road pricing to shift peak road demand and utilize revenue to fund public transit and non-motorized transportation

Dont tax you, dont tax me, tax the fella behind the tree (Levinson, 1998)

Road pricing, depending on how it is implemented, refers to different schemes including tollrings, direct or electronic road pricing (Singapore) or zone-based systems (London CongestionCharge Zone) (Johansson et al. 2003). The economic theory behind road pricing is well studied(e.g. see Litman, 2005; Arnott 1998; Levinson, 2002), but the essence is to increase allocationefficiency by internalising externalities so that road users private costs of a trip coincide withthe social costs (Johansson et al. 2003). Further, it is widely accepted that the solution to urbantraffic congestion problems is to charge drivers for the full cost of their commute. This meant

adding a fee that charges drivers for the impact that their car imposes on the rest of the road. Thiswas, in short, a more efficient way to reduce congestion than increasing the supply of roads(Glaeser, 2011).

Londons Congestion Charge Zone (CCZ) is renowned as one of the worlds most successfulcases of congestion charging (Glaeser, 2011). Without going into details about how the CCZoperates, and for the purposes of this exercise, it has been effective because, by law, for the first10 years of its operation, all net revenue earned from congestion charging has to be invested inimproving transport in London, so everyone can benefit (Litman, 2005). In 2009/10 CongestionCharging generated 148m ($232 million Canadian) that was put towards making improvementsto transport in London, such as bus network improvements, road safety measures and betterwalking and cycling facilities (Transport for London, 2011)..The London experience has many lessons for Metro Vancouver. Small (2005) summarizes themthrough explaining the virtuous cycle:


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i. By clearing cars off the most congested streets, pricing sets off a virtuous circle for mass transit, especially bus transit

ii. More expensive rush-hour road travel encourages use of alternatives, includingmass transit. This builds the transit patronage needed for financial viability .

iii. Reduced automobile congestion speeds up transit vehicles sharing the streets withcars. This in turn creates two further favourable effects:

Patronage is further encouraged because public transit is now faster Higher speeds reduce costs to transit providers

iv. Higher patronage and lower costs encourage transit providers to add service in theform of new routes, greater frequency, or both. Lower costs also encourage lowerfares

v. Better and cheaper transit service further encourages patronage. More new riders arediverted from automobiles, thereby further reducing congestion

vi. This new patronage reinforces agency finances and service offerings; and so the circlecontinues

In a 1999 opinion survey among residents in London, residents were asked what they thoughtwould be the single m ost effective solution for reducing Londons traffic levels. See Table 1.

Table 1. Views on the Most Effective Solution for Reducing Londons Traffic Levels (Jones, 2003) Option PercentageBetter quality public transport 33%Cheaper public transport 18%

Ban cars in Central London 8%Park and ride schemes 7%Road user charges 5 Central London 5%Stricter enforcement of parking regulations 5%More bus lanes 4%Improved cycle and walking facilities 3%Safe routes to school 3%Workplace parking charging, 100 per month 2%Double parking costs all over London 2%Increased petrol taxation 1%

The results from the table above are instructive for this analysis is that better quality publictransport received the highest votes in the poll as the solution to reducing Londons trafficlevels. Yet, what the residents probably did not realize at the time (pre-implementation of theCCZ), was the fact that road user charges, as a finance option, could not only lead to betterquality public transport, but also cheaper public transport, more bus lanes and improved cycleand walking facilities, for example. We know that Transport for London did indeed use revenue


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from the CCZ to expand bus services, ultimately leading to better quality public transport for thecity (Small, 2005).

The other options (e.g. improved cycle and walking facilities) were not necessarily targeted withthe revenue from the CCZ but this was more of a political decision, if anything. The point is thatpeople wanted better quality public transport and may not have been aware that to achieve this,something progressive had to be done which initially had low political support, but gainedpopularity overtime (Small, 2005).

Hardy (2009) discusses how congestion pricing projects with significant transit impacts include adedicated funding source, not just a portion of revenue transit has been included as a keyplayer in many congestion pricing projects that are either operating or in the design/constructionstage. However, there is a clear distinction between the potential for transit (indicated by itsinvolvement) and the overall impact it has. Generally, those congestion pricing projects with a

significant impact on transit included a dedicated source of funding independent of the expectedrevenue generated (Hardy, 2009, p.67).

TransLinks position on road pricing

In a November 2010 TransLink report titled Moving Forward: Improving Metro VancouversTransportation Network, road pricing was identified as a mechanism that could significan tlycontribute to TransLinks goal of establishing sufficient, stable funding as well as having animpact on transit ridership, mode share of cycling and walking, and related reductions in GHGemissions (TransLink, 2010).

It should be noted that legislation currently allows TransLink to charge tolls only to recover thecost of a new or improved facility, such as the Golden Ears Bridge. Legislative amendmentswould be required for TransLink to implement road pricing on unimproved infrastructure or theentire road and bridge network and for those charges as a revenue source (TransLink, 2010, p.10).

Alternative B) Increase Property Taxes to raise revenue for public transit and non-motorized transportation

Property tax is an important source of funding at both the local and regional levels. This taxlargely pays for public services provided by the municipality. In Metro Vancouver, the propertytax has been one of the major funding sources for TransLink; since 2000, it has been the thirdlargest funding source behind transit fares and fuel tax (TransLink, 2010). The relative

proportion of property tax in TransLinks revenue has recently declined as a result of the 2010


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increases in fuel tax and transit fares that were included in the 2010 Funding Stabilizat ion Plan(TransLink, 2010, p. 33).

According to the 2011 Supplemental Plan, if an alternative funding source is not found,property tax rates will be increased beginning in 2012 to generate an additional $75.8 million.The property revenue split for TransLink is in the range of 54 per cent residential, 39 per centbusiness, and 7 per cent from other property types; for an average residential household thisincrease will represent an additional $61.65 per year (TransLink, 2010, p. 34). Municipalitiesin Metro Vancouver will continue to collect varying levels of property taxes, on averageapproximately 10 per cent of property taxes paid are directed to TransLink for funding theregional transportation system.

Alternative C) Increase Transit Fares to raise revenue for public transit and non-motorized transportation

In 2010, transit fares accounted for $413 million, or 36 percent of TransLinks total revenuecollected. This is a substantial amount and the organization is in a position to raise transit fare inlight of their budgetary constraints. Indeed, from 2011 to 2020, it is estimated that fourteenpercent of transit funding will come from increasing transit fare revenue that results from theridership generated by new transit investments (TransLink, 2010). Under the 2011 Base Plan,transit revenues are budgeted at $423 million in 2010 and grow to $518 million in 2013 due toincreases in both ridership and fare prices. Under this Supplemental Plan, transit revenues growto $543 million in 2013 due to ridership growth.

Transit fares appear to be a serious consideration for funding for the organization. One cautionhowever, is the fact that many income groups use transit for commuting and other purposes. Fareincreases can disproportionately burden some groups over others. There has been well-documented research on how the poor pay relatively higher transit fares per unit of service thanthe non-poor (Giuliano, 2005). Giuliano (2005) argued that the poor who use public transitwould benefit more from increased service frequency, lower fares and fewer transfers becausethey spend a much higher proportion of after tax income on transportation, among other things.

Guess (2008) discusses how the operating expenses of most public transit agencies exceedoperating revenues by a wide margin. Farebox revenues rarely cover more than 50 percent of salaries, maintenance, operating costs, and supplies: One would expect higher volumes of service to decrease the average cost/passenger as more passengers share the fixed costs (Guess, 2008, p. 16). However, as Guess elaborates, one major downside of increased transitfares is that an increase in response to higher fixed costs is not socially feasible in most cities.Rider fares cannot be set at full marginal cost, bec ause it would produce high fares inducing


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more people to use automobiles which in most countries do not pay full social costs andtherefore result in further inefficiency (Guess, 2008).

Alternative D: Reform carbon tax to earmark 50 percent of revenues from the tax toward publictransit and non-motorized transportation options

British Columbia implemented a revenue neutral carbon tax on July 1, 2008 (Hunter, 2008). Allcarbon tax revenue is recycled through tax reductions the government has a legal requirementto present an annual plan to the legislature demonstrating how all of the carbon tax revenue willbe returned to taxpayers through tax reductions. The money will not be used to fund governmentprograms. The purpose of the tax is to send a price signal to reduce the use of fossil fuels andthereby emissions. Indeed, some environmental economists think a carbon tax is one of the mosteffective and efficient instruments at our disposal for mitigating carbon emissions. Zetland(2011) says carbon taxes give clear signals of what to do, are easier to implement and generate

revenue (p.192).

BC is the only jurisdiction in North America to have successfully implemented a carbon tax. Asthe tax is unique to the province, it has enormous potential to be a source of funding for publictransportation improvements among other things. TransLink has identified the carbon tax as apotential sustainable funding strategy (TransLink, 2010). It would be used for dedicatingsupplemental increases to sustainable transportation investments, and extending the currentschedule of increases beyond 2012 and directing portions of the total tax, towards transportationinvestments (TransLink, 2010).

In recent times, there has been discussion to reform the revenue neutral carbon tax to earmark revenue for public transit financing. Bula (2009) reported that several mayors in the LowerMainland argued that the revenue, estimated at $100- to $200-million a year for the region,should be put into transit instead of being given back to taxpayers as a climate-action credit. Infinancial and economic terms, the carbon tax could be utilized to raise revenue from carbonemitting technology (e.g., automobiles) and re-allocate such monies to areas that are less carbonintensive (e.g., public transit, cycling/walking infrastructure).

Carbon taxes have only been implemented in a few jurisdictions around the world. Most of the jurisdictions are in Europe (e.g. Sweden, Norway, The Netherlands, Denmark and Finland).British Columbia is thus a unique case in the western hemisphere for successfully implementingone. However, many of the European jurisdictions such Norway use the carbon tax for directincentives effects versus indirect effects as used in BC (Baranzini et al. 2000). Direct effectstakes place through price increases in the tax which stimulate conservation measures, energyefficiency investments, fuel and product switching and changes in the economys production(Baranzini et al. 2000). This contrasts BCs revenue neutral model.


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With respect to the environmental effectiveness of the use of carbon tax fiscal revenues, twomain options may be considered: f irst, carbon tax fiscal revenues could be used to subsidiserenewable energy. In the second option, fiscal revenues may be used for investments in energysaving and research and development (Baranzini et al. 2000, p. 406). However, in order for thisto happen, the revenue must be e armarked , which means that the revenues from the carbonenergy taxes are in advance allocated to finance specific environmental programmes (e.g.environmental funds, environmental projects, public transit or research and developmentactivities) (Baranzini et al. 2000).

Alternative E) Increase parking fees to raise revenue for public transit and non-motorized transportation

The last alternative is the possibility of increasing parking fees to raise revenue for public transit.As shown in Figure 2 , 4 percent or $47 million of TransLinks 2010 budgeted revenue came

from the parking sales tax. A parking sales tax is tax paid on the sale of a parking right. TheParking Tax is calculated on the purchase price of parking rights within TransLink'stransportation service region. This includes parking rights sold by the hour, month, year or anyother basis (TransLink, 2011).

Figure 3. Parking Sales Tax Revenue Forecasts (TransLink, 2010).

Figure 4. Breakdown of Revenue Contributions amongst Major Funding Sources (TransLink, 2011)


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Figure 3 displays the projected increase in parking sales tax revenue from 2011 to 2020. Whilethere is a nominal increase annually, the overall portion of revenue from the parking sales taxwill probably not reach over 10 percent. Figure 4 shows the breakdown of revenue contributionsamongst major sources for TransLink; the percentage from parking sales has been relativelystable since year 2000. Other sources of funding such as the fuel tax and property taxes havebeen less stable.

In cities around the world, parking taxes are used creatively to finance public transit, public bikesystems and even the subsidization of transit passes for seniors (Litman, 2011). Indeed, inBarcelona, the revenue gathered from parking tariffs is being invested to support mobility needs.100 percent of the revenue goes to operate Bicing the city's public bike system. In London,parking revenue is partially used to subsidize transit passes for seniors and the disabled, who ridepublic transit for free (Litman, 2011).

In 2010, Montreal introduced a new tax on off-street parking facilities. The charges range from$4.95 per square metre for neighborhood structured parking up to $19.80 per square metre forCBD surface parking, or $75 to $300 annually for a three by five meter space (Litman, 2011).The city expects it to collect around $20 million dollars per year which is earmarked forimproving public transit (Litman, 2011). Parking taxes may not be the panacea to improvingpublic transit systems, but they can lead to economic efficiency, help meet strategic planningobjectives and social equity.

Evaluation Criteria for Finance Options

Before analyzing the objectives by alternatives, a set of criteria have been established forevaluating the finance options. There are five criteria which include environmental impact,economic efficiency, social equity, political acceptability and public transparency andacceptance. Each criterion was selected based on reviewing the literature. Each will be definedand explained.

Environmental Impact

The environmental impact criterion is based on how well the financial option can directly reduce

the GHG impact of transportation. Each option has the ability to shift/reduce demand for privatevehicle use (either through pricing or improvements in transit service) and thereby provideincentive to travellers to consider other modes of transportation that are quantitatively less GHGintensive than automobiles. The second part of this criterion is how the revenue is collected andallocated toward programs/infrastructure that encourages sustainable transportation (e.g. bicycleparking facilities, public bike share rental program, more frequent bus service etc).


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Economic Efficiency

According to Todd Litman, economic efficiency is concerned with the use of society's resourcesto achieve maximum net benefit (Litman, 2011). From an overall economic efficiencyperspective, the revenue from a transportation pricing strategy must be used to benefit society;the more beneficial the more economically efficient the program (Litman, 2011). There isno requirement, however, that the money be allocated in any particular way. In this paper,economic efficiency refers to investments made in public transit and sustainable transportationthat lead to a concomitant increase in use of such modes. Urban traffic congestion is costly forsociety, as the constant delay in traffic impedes people from getting to work and for goodsmovement in reaching final destinations. In theory, investments made in transit and non-motorized options should lead to reductions in automobile traffic; however, this all depends onhow efficient and reliable these options are in comparison to the automobile.

Social Equity

The introduction or increase in transit fare, taxes or user charges in the form of road pricing maylead to efficiency gains but may also lead to unintended consequences. There is a concern thatsome poorer people do not have sufficient discretionary income to express such a choice (suchas paying a higher price for a tolled road), so that the socially marginal journey does not equateto the econo mically marginal journey (Jones, 2003, p. 44). Public transit systems serve alldemographic groups from low-income groups to higher income populations, from youth toseniors as such, there is a diversity of economic backgrounds and thus changes in price may

impact groups differently. Giuliano (2005) has written extensively on public transit and socialequity and concludes that transit is critical to the economic well - being of a nations largestcities, and mobility is critical to the poor, the elderly, the disabled and those who cannot or willnot drive. Reliable, safe and frequent service at reasonable fares will improve the attractivenessof public transit for both transit dependents and choice riders (p. 69).

Some drivers may be willing to pay more for a tolled road or a public transit user might pay ahigher transit fee if they know the service will be improved and result in time savings. This isunderstandable as cost and time are central to travel behaviour, however, there are many groupssuch as low-income people, who may be impacted economically from a transportation financedecision such as higher transit fares, thereby affecting their quality of life and welfare. Thus, forany alternative to meet social equity, it must use revenue to improve transit and non-motorizedoptions for all groups of society, irrespective of income status.


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Political Acceptance

Elected officials are highly sensitive when it comes to public policy decisions, especiallytransportation policy decisions. In the U.S., where automobility has been a ubiquitousphenomenon since the introduction of the federal interstate highway system, any notion to makedriving more expensive can have negative perceptions from the public. As such, most electedofficials aware that drivers are votes are hesitant to support policies like road pricing or taxgas tax increases (King et al. 2007).

Other definitions of political acceptability of a policy can be determined by the voting choice of those affected by a policy; since the politicians have a perfect perception of the aggregate votingintentions and they operate under a re-elected constrain, they adopt only those policies thatguarantee an ex ante majority (Marcucci & Marini, 2003). Most importantly, for politicalacceptability, the expected utility derived by the policy will have to be greater than the utility

enjoyed before the policy is adopted (Marcucci & Marini, 2003).

The mayors of Metro Vancouver have political interests. A public policy decision can besupported by particular constituents or vehemently condemned by others. Thus, politicians mightbe cautious when it comes to endorsing policies or programs such as sustainable transportationfinance for the regional transportation authority.

Public Transparency and Acceptance

Any policy instrument will be unpopular with the public if they do not understand the purpose or

benefits of the decision being considered. In the U.S., people are generally averse to taxincreases; using the gas tax as an example, there is a lot of resistance and condemnation to anydiscussion of increasing the gas tax (Katz & Puentes, 2005). One possible explanation accordingto Katz & Puentes is that people do not understand how the tax works nor are they clear how thestate gas tax revenue is spent. The rationale for increasing parking fees, raising transit fares oreven property tax hikes to pay for public transportation and non-motorized options must be madeclear in order to garner any public support or acceptance.

Public transparency and acceptance is usually realized through citizen participation. Citizenparticipation is particularly needed to keep public transportation service responsive. In addition,despite the widespread critiques of citizen participation in the planning process, it does have theability to increase the information available to policy makers by providing local knowledge(Fainstein, 2010). Further, it makes the decision making process more democratic and open butnot necessarily more equitable (Fainstein, 2010). Guess (2008) w rites without active andcritical public pressure, transit officials often lose touch with the many citizens whose daily livesdepend on this service. They can become distant, arrogant, and dismissive of citizen needs;


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officials can take the view that citizens deserve only what they get and they are lucky to haveanything (p.21).

As mentioned earlier in this paper, there is a lot of confusion around how the gas tax works in theUnited States and how the revenue is being spent on transportation. Like the U.S. federal gas tax,whatever finance option is pursued for TransLink, there must be ample transparency and clarityso as to ensure sustainable transit ridership, trust and accountability in the public transportationsystem.

Determining Weights for the Analysis

Pages 18 and 19 provide tables that display the alternatives by objectives and the alternatives bycriteria. When comparing the alternatives against the objectives and criteria, each one will bescored out of 10; high is good, low is bad. The score for each alternative will be based on how

well it meets the objective or criteria. For example, in table 2 objectives by alternatives, roadpricing as an alternative will receive a score out of 10 based on how well it meets thegreenhouse gases aggressively reduced objective; this score will be multiplied by the assignedweight of the objective. As the greenhouse gases aggressively reduced objective has anassigned weight of 25 percent, the score will be determined by: s x w where s denotes score outof 10 and w denotes weight of 25, for example.

To determine the overall score for the column of each alternative, we use the following formula:

where O(s) the summation of the objective/criteria scores and W is the weight for eachobjective/criteria;

A weighted decision criteria table is useful for visualizing the criteria and alternatives. The tablesare used to evaluate and prioritize a list of options. The row totals are simply a summation of thescores for each alternative.


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Table 2. Objectives by Alternatives

Objective Weighting Factor (A) RP (B) IncreaseTransit Fares

(C) Co2 tax (D) PT hikes (E) Parkingfees

Total

I. Greenhouse gasemissions (GHGs)aggressivelyreduced

25% 10(x25%)2.5

5(x25%)1.25

9(x25%)2.25

5(x25%)1.25

9(x25%)2.25

38

II. Most trips are bytransit, walking andcycling

10% 9(x10%)0.9

5(x10%)0.5

10(x10%)1

7(x10%)0.7

8(x10%)0.8

39

III. Funding isstable, sufficientand influenceschoices

50% 6(x50%)3

7(x50%)3.5

8(x50%)4

9(x50%)4.5

7(x50%)3.5

37

IV. A reduction inurban trafficcongestion in theMetro Vancouverregion

15% 10(x15%)1.5

5(x15%)0.75

7(x15%)1.05

6(x15%)0.9

8(x15%)1.2

36

Total 100% 7.9 6 8.3 7.35 7.75


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Table 3. Weighted Decision Criteria Table: Criteria by Alternative

Criteria WeightingFactor

(A) RP (B) IncreaseTransit Fares

(C) Co2 tax (D) PT hikes (E) Parkingfees

Total

Environmental Impact 30% 9(x30%)2.7

5(x30%)1.50

9(x30%)2.7

6(x30%)1.8

7(x30%)2.1

36

Economic Efficiency 20% 8(x20%)1.6

9(x20%)1.8

8(x20%)1.6

9(x20%)1.8

9(x20%)1.8

43

Political Acceptability 25% 5(x25%)1.25

7(x25%)1.75

9(x25%)2.25

5(x25%)1.25

6(x25%)1.5

32

Equity 10% 5(x10%)0.5

4(x10%)0.4

9(x10%)0.9

4(x10%)0.4

6(x10%)0.6

28

Public Transparency& Acceptance

15% 6(x15%)0.9

5(x15%)0.75

7(x15%)1.05

5(x15%)0.75

5(x15%)0.75

28

Total 100% 6.95 6.2 8.5 6 6.75


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Discussion of Results

Both Tables 2 and 3 are important for visualizing the analysis. The rationale for two tables is topresent objectives by alternative first, followed by the criteria. Merging the two together wouldbe nebulous for interpretation and would lead to confusion for both the analyst and the decision-maker. The following paragraphs in this section explain the tables in more detail along with theresults.

In looking closely at Table 2 objectives by alternatives, it is evident that the funding is stable,sufficient and influences choices objective received the highest weighting factor in the table;GHGs reduction received the second highest. The decision to assign higher weights to theserespective objectives is not arbitrary by any means; it goes back to the earlier part of this analysiswhich suggested that securing a funding source as an objective can ultimately help TransLink achieve the other objectives set out in its Transport 2040 plan. Reducing GHGs is also weighed

on the higher side because it is critical given the climate change objectives of the province andregional growth strategy.

The carbon tax and road pricing alternatives received the highest scores with 8.3 and 7.9respectively. Both options did fairly well in meeting the objectives. The scoring process in thetable drew on the literature and documents from TransLink to determine which scores would beappropriate. Both options scored best on the GHGs reduction objective but not as high for thestable fundingobjective. Road pricing can be a powerful tool as evidenced by the literatureand jurisdictions that have implemented it. A substantial amount of revenue can be raised fromit, but given its uncertainty and the potential for motorists avoiding such roads, it received 6 out

of 10. If the revenue from the carbon tax was used fund transit investments, then there would bea stable amount of funding that could be used at the discretion of the organization on certainpriority projects (e.g. Frequent Transit Network 2, Evergreen Line).

Individuals who continue to emit GHGs profligately will indirectly compensate those personswishing to ease their carbon impact through less GHG intensive activities as transit andsustainable transportation facilities become more reliable, efficient and customer friendly.However, the assumption is based on stable revenue from the carbon tax which may be uncertainand volatile as people become more environmentally-friendly and thus pay lower amounts incarbon taxes overtime. If this becomes the case, then there is less stable funding for transit.

2 Frequent Transit Networks run every 15 minutes throughout the day; 7 days/week through providing frequent,reliable transit service on designated corridors. It serves all the key employment, educational, commercial, andrecreational destinations for residents and visitors (TransLink, 2011).


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Parking scored high because historically, and as evidenced by Figure 2, the revenue from parkingtaxes has been stable. It is a reliable way to generate funding as it directly prices the road user fortheir parking decision and can reduce demand for parking as price increases. Such disincentivesto park can lead to less urban congestion and more incentive to use other forms of transportationthat are more affordable and environmentally friendly. While the parking sales tax option scoredhigher relative to other options, it is projected to only bring in between $47-56 million per yearover the next ten years (TransLink, 2010). Thus, while satisfying the objectives and the fact thatit is a stable funding source, its limited revenue generation potential hinders its ability to be aviable and stand alone funding strategy for the organization. If parking fees were going toincrease more aggressively then it would have some merit, but at this point it remains unlikely.Property taxes can also be stable and hence scored high for the funding objective; however, thenext section will point out some problems.

Table 3 provides the breakdown of the criteria matched up against the alternative. In the table,

the environmental impact, economic efficiency and political acceptability criteria all received thehighest weights with 30, 20 and 25 percent respectively. Determining the weights was assistedthrough looking at the literature on transportation economics, planning, politics and theenvironment. The environmental impact received the highest weight given the emergence andimportance of sustainable transportation.

Economic efficiency is also significant as the option chosen must be relatively inexpensive toimplement and generate high returns. Finally, political acceptability is crucial in this discussion.As reported in the literature (e.g. King et al. 2007; Marcucci & Marini, 2003), the expectedutility derived by the policy option will have to be greater than the utility enjoyed before the

policy is adopted. In other words, if the option will be popular with the voters, or is thought to bepopular with voters, then it can be more politically acceptable. Ultimately, the various mayors inMetro Vancouver would need to voice their support for a funding option for TransLink especially as some options including road pricing and property tax hikes, could be unpopularwith their constituents. While public transparency and acceptance along with equity areimportant criteria, they become secondary when matched up against the larger pillars of economy, environment and politics.

Table 3 shows that the carbon tax and road pricing options score the highest based on the setcriteria. Both options could use revenue to fund sustainable transportation and public transit andboth can help alleviate GHGs in the Lower Mainland. However, in terms of the carbon tax,earmarking 50 percent of the revenue for transit would require an amendment to the carbon taxact3 which could be costly. Increases in transit fares and property taxes are not poor options;

3 The Carbon Tax Act (Bill 37, 2008) was adopted into the British Columbia Legislature on the 29th day of May,2008 and came into effect on July 1, 2008 (http://www.leg.bc.ca/38th4th/3rd_read/gov37-3.htm )
http://www.leg.bc.ca/38th4th/3rd_read/gov37-3.htmhttp://www.leg.bc.ca/38th4th/3rd_read/gov37-3.htmhttp://www.leg.bc.ca/38th4th/3rd_read/gov37-3.htmhttp://www.leg.bc.ca/38th4th/3rd_read/gov37-3.htm


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however, there may be unintended consequences with such increases as people become morebitter and reluctant to use transit and more inclined to stick to their traditional ways of gettingaround. Further, increases in transit fares will inevitably occur as inflation and wages increase;however, as transit fares account for 36 percent of TransLinks revenue share, a precipitousincrease may be unpopular and contested by transit customers.

Politics or political acceptability -- is a major criterion in public policy decisions. The carbontax option scored well on this criterion because the evidence suggests (e.g. Bula, 2009), thatmayors in the region are by and large not opposed to using the carbon tax revenue for publictransit purposes. This is critical given their political and voting power. In terms of meetingpolitical acceptance, public transparency and acceptance and equity, road pricing would verylikely be unpopular. This statement is supported by the literature and evidence from places thathave considered and implemented road pricing (e.g. London, England). However, despite theinitial unpopularity of road pricing among politicians and the public, once implemented, the

condemnation slowly starts to diminish. In London, for example, despite the challenging natureand difficult politics surrounding congestion charging, Mayor Ken Livingstone understood thepotential power of this strategy. He thought about it as not only as a way to get people to pay forthe social costs of their actions, but as a means of helping the environment by "moving peopleout of cars into subways" (Glaeser, 2011).

Analysis of Tradeoffs

The road pricing option scores well against most of the objectives. Indeed, as discussed in theliterature, road pricing can significantly reduce urban traffic congestion because it charges

drivers for the full cost of their commute. International evidence suggests that this option notonly shifts the demand for road space, but can act as compelling incentive to consider othertransport options. As shown in London, there has been a reduction in urban traffic congestionand a concomitant increase in transit ridership with more investments being made on busservices (Glaeser, 2011). Thus, with road pricing, there is well documented evidence for itsmajor impacts with alleviating congestion and GHGs and generating revenue; however, there isalso tremendous uncertainty.

The very nature of implementing it is highly contentious as politicians and the public alike maynot want it. If road pricing were to be implemented, it would likely generate a significant amountof revenue at the start as people continue with their traditional routes, but when people findalternatives route or options for travelling, then road pricing of congested routes becomes lessreliable as a funding strategy for TransLink as the revenue flows become more volatile and lesscertain. Further, it received an 8 out of 10 on the economic efficiency criterion in table 3because the administration costs of road pricing technology, billing motorists and maintainingthe technology can be expensive. While it has merits and is widely embraced by planners and


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economists alike, it may not be the most optimal funding strategy for the organization at the timebeing.

Regarding the carbon tax, it does better for most objectives and criteria than the other options. Itmay be hard to earmark 50 percent of the carbon tax revenues for transit as legislativeamendments and sufficient public education would be required. British Columbians currentlyunderstand the tax as a revenue neutral system whereby they pay for carbon emitting activitiesand receive tax cuts in return. This system makes sense to people but using the revenue for actualclimate action projects/activities such as transit is more in line with the rationale and ultimatepurpose of the carbon tax as shown by many European jurisdictions.

Table 4. Specific Pros and Cons of a Carbon Tax Unique to Lower Mainland

Pros ConsAlready exists; instead of creating a new tax, youcan re-direct funds to transportation

No relationship to kilometres driven

Strong public support in polls for tax in LowerMainland

Seen as another tax

Use for transit investments that reduce GHGs Introduced as revenue neutral; potential resistanceto earmarking 50 percent toward transit

Can be directly tied to environmental goals As less people drive, less revenue going towardtransit

Table 5. Specific Pros and Cons of Road Pricing in Lower Mainland

Pros ConsCan change travel behaviour Usually requires a governance entity to put in place

(i.e. municipality) but with 21 in the LowerMainland, it gets complicated

Sophisticated and powerful; can be measured bytime or by distance

Education and marketing for implementing roadpricing can be expensive

Can be easy to show how some of the revenue isbeing used to fund transit operations

Requires bold political leadership to get itimplemented

Reduction in urban traffic congestion Potential burden on taxpayers or road users moregenerally

Can have measurable impact but requirestransparency and public education

Upfront costs for technology can be high

Can be extremely successful if implemented by asingle agency as opposed to a collection of municipalities 4 e.g. Transport for London

Regressive as the tax might fall more heavily onpoor drivers than wealthier ones

4 This relates to the earlier discussion about transit governance. While there are over 20 municipalities in Metro

Vancouver, it would be critical if one agency or authority (TransLink) was responsible for administering a policy


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Recommendation

Taken as a whole, the carbon tax option does well in meeting the objectives of TransLinksTransport 2040 plan along with the criteria and objectives used for this analysis. Compared toother alternatives, namely road pricing, the parking sales tax, property tax hikes and increasingtransit fares, it has the potential to be a viable funding strategy for TransLink. Therefore, giventhe wide range of finance options for TransLink, and considering the appropriate criteria in thisanalysis, the analyst recommends the carbon tax as a means to help TransLink finance thetransportation network reduce GHGs, reduce urban traffic congestion, promote cycling, transitand walking trips and provide a more reliable source of funding for TransLink over the next 30years.

Conclusion

This paper provides an objective analysis of several funding options for TransLink. The analystused the objectives of TransLinks Transport 2040 plan to establish the premise and purpose of the paper. An additional theoretical objective a reduction in urban traffic congestion was addedto assist the analyst in the process. These objectives were defined, explained and assignedperformance measures. Following the objectives, the alternatives were defined and presentedbased on the literatu re and TransLinks documents. Thereafter, the criterions that were deemedto be important were created. The analysis took place through Tables 2 and 3 which was aweighted decision objective by alternative matrix and criteria by alternative matrix respectively.For Table 2, each objective was assigned a weight and the alternatives were matched up againstthe objectives to demonstrate how effective they might be. Similarly to Table 2, the criteria in

Table 3 received weights and were matched up against the alternatives.

After conducting the analysis, it became clear that the carbon tax and road pricing alternativeswere the most optimal choices. However, given the political acceptability of road pricing and thesocial equity aspects, it does not hold enough merit at this stage of the sustainable transportationfunding discussion to be considered. While the carbon tax received the highest scores, itslimitations were presented and should be noteworthy to the decision-maker. However, given theunique nature of the carbon tax (BC is the only jurisdiction in North America to havesuccessfully implemented one), it can be a sufficient, reliable and effective source of funding forthe organization. In sum, TransLink has a number of funding options it can pursue but thisanalysis recommends the carbon tax as a funding strategy that can help reduce GHGs, reduceurban traffic congestion, promote cycling, transit and walking trips and become a more reliablesource of funding for TransLink over the next 30 years.


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Multi Objective Analysis for TransLink Finance Options

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