Finance—The Critical Link
Shifting Sands
The Evolution of Surface Transportation Finance
The California Experience
Presented by
Arthur Bauer
Arthur Bauer & Associates, Inc.
UCLA Policy and Research Symposium Series
Lake Arrowhead, CA
October 19-21, 2003
Presentation Objectives
• Trace evolution of
transportation
finance in California
• Identify/interpret
the context in which
transportation
funding policy was
made
• Suggest how to
interpret today’s
policy environment
California’s Population
1900-2000
40
35
30
25
20
15
10
5
0
1900
1920
1940
1960
1980
2000
The Beginning—1900-1920
1900 Census
California’s Ten Largest Counties
• Primitive public
finance structure
• Property tax basis of
state and local
funding
• Three state bond acts
– 1909 $18M
– 1915 $14M
– 1919 $40M
• By 1923, $42M in
county bonds
available for roads
1
2
3
4
5
6
7
8
9
10
County
Population
% of
State
Pop
San Francisco
Los Angeles
Alameda
Santa Clara
Sacramento
Sonoma
Fresno
San Joaquin
San Diego
San Bernardino
342,782
170,298
130,197
60,216
45,915
38,480
37,862
35,452
35,090
27,929
23
11
9
4
3
3
3
2
2
2
924,221
1,485,053
62
Top Ten Total
State Total
The Beginning—1900-1920
• Cost overruns due to
the decision to build
4” concrete highways
• Counties paid proportional share of debt
service
• State funds were
being consumed by
highway program
Context
• 1900—780 cars
• 1910—44,120 cars
• 1920– 604,187 cars
• 1910 gross receipts tax for
state; property tax for counties
• By 1923, 8% of state general
funds for highway debt service
• In 1923, “horsepower” tax on
vehicles generated $10.4 M Total
state revenues=$46M
• $16M in county debt service for
road bonds
Building the Foundation
1920-1940
• Road financing out
of control
• Benefits of highways easily assignable to users
Registered Motor Vehicles
4
Millions
3
2
• Gas tax settled on
as an equitable and
convenient revenue
tool
1
0
1920
1930
1940
Building the Foundation
1920-1940
• 1923, 2¢ gas tax
– 1 ¢ to the state
– 1 ¢ to counties
• 1927, 1¢ gas tax
increase to the
state.
• North/South split
Billions of Gallons of Motor
Vehicle Fuel Sold
2
1
0
1920
1930
1940
Building the Foundation
1920-1940
• Cities
– 1/4 ¢ for state
highways in cities
– 1/4 ¢ for major city
streets
• 1938, Article 19 put
into the state
constitution
Summary
• Related use and
benefits
• Ensured geographic
equity
• Shared with counties
• Shared with cities
• Segregated gas tax and
motor vehicle fees from
state general fund
Financing the Freeways
1945-1965
• $’s needed to
rebuild roadway
infra-structure
depleted during
WW II
• Need to accommodate growth in
population & travel
• “Let’s get out of the
muddle”
Growth in Key Variables
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
1940
Pop
1960
Drivers
MV
Financing the Freeways
1945-1965
Related Activities
• 1947, 1.5¢ post WW II gas
tax increase
• 1944 Congress authorizes the
• 1953, 1.5¢ increase for a
total of 6¢/gal.
• 1963, 1¢ increase to
7¢/gal.
Interstate Highway System
• 1956 Federal Interstate
Highway system/ Federal
Highway Trust Fund established
• Cities and counties get
• California Freeway and
49%; state 51% of gas tax
Expressway System
revenues
• Geographic equity—county • 1962 3-C Planning Process
mandated by Congress
and district minimums
Urban California Asserts Itself
• 1962, Baker v. Carr
• 1964, Reynolds v.
Sims
350
300
• 1966, California elects
a legislature based on
“one person; one vote
principle”
250
• San Francisco’s
“freeway revolt”
100
• BART
Growth in Vehicle Miles
Traveled--1966-2000
200
150
50
0
1966 1970 1980 1990 2000
Urban California Asserts Itself
• 1968—California Clean Air
Act
• 1970—North/Split moves
to 60% South/40% North
• 1970—MTC
• 1970—CEQA
• 1971—Transportation
Development Act
• County transit sales taxes
• 1973—AB 69 Caltrans/
Regional Planning
• 1974—Article 19 opened
for rail transit
• 1976—CTC/County
Commissions/STIP
California’s Population
millions
35
25
15
5
1960 1970 1980 1990 2000
Ballot Box Policy Making
• 1978–Proposition 13
• 1981-Last gas tax imposed
by legislature
• 1984—Self-Help sales taxes
• 1990—Prop 111 doubling
of gas tax by bailout
• Re-emergence of bonds for
funding transportation
– 1988—Prop 78-failed
– 1990—Props 108/116
– 1992—Rail-failed
– 1994—Rail-failed
– 1996—Seismic Retrofit
• 1996–Proposition 218 and
2/3’s vote requirement
Overview of
Initiative Process
• 1911—76% of voters
approve initiative process
at a special election
• Between 1911 and 2000,
290 initiatives qualified
• Since 1978, 127 initiatives
qualified for the ballot
Devolution
• Orange County toll roads
• Proposition 111/Local
government loses
• Emergence of CMA’s
• SB 45 and the 75%-25%
split between state and
regions for prioritization of
projects
• Projects must be in
regional plans/flexibility
encouraged
• CTC’s ability to prioritize
limited
Federal Program
Supports Regions
• Federal statutes,
ISTEA/TEA, mirrors
California policy direction
• Flexibility
• Projects must be in RTP
• Federal air quality
regulations enter into
transportation planning and
project prioritization
Erosion of Firewalls
• General fund crises of early
1990’s and early 2000’s saw
concept of special funds eroded
• TCRP and Proposition 42 further
linked transportation funding
and general fund
• General fund/special fund
concepts become muddy
20
Summary of Gas
Tax Increases
18
1994
18¢
16
1990
14¢
14
1963
7¢
12
1983
9¢
10
8
1923
2¢
6
1927
3¢
1953
6¢
1947
4.5¢
4
2
3
99
95
91
87
83
79
75
71
67
63
59
55
51
47
43
39
35
31
27
23
0
Largest Counties:1900 & 2000
2000 Census
California’s Ten Largest Counties
1900 Census
California’s Ten Largest Counties
1
2
3
4
5
6
7
8
9
10
County
Population
% of
State
Pop
San Francisco
Los Angeles
Alameda
Santa Clara
Sacramento
Sonoma
Fresno
San Joaquin
San Diego
San Bernardino
342,782
170,298
130,197
60,216
45,915
38,480
37,862
35,452
35,090
27,929
23
11
9
4
3
3
3
2
2
2
924,221
1,485,053
62
Top Ten Total
State Total
County
1
2
3
4
5
6
7
8
9
10
Los Angeles
Orange
San Diego
San Bernardino
Santa Clara
Riverside
Alameda
Sacramento
Contra Costa
Fresno
Top Ten Total
State Total
Population
% of
State
Pop
9,519,338
2,846,289
2,813,833
1,709,434
1,682,585
1,545,387
1,443,741
1,223,499
948,816
799,407
28
8
8
5
5
5
4
4
3
2
24,532,329
33,871,648
72
Summary
• Transportation funding policy cannot be
separated from larger political issues
• Transportation funding policies meet the
investment needs of the time enacted
• Funding and institutional arrangements are
linked
• Incrementalism is a feature of the evolution
of funding policy
• Transportation objectives become less
important as funding policies are linked to
secondary objectives