Transportation Utility
Fees:
Possibilities for the
City of Milwaukee
May 11, 2007
Prepared by:
Deven Carlson
Bill Duckwitz
Karen Kurowski
Lamont Smith
Problem Statement

Milwaukee budget predicts a growing
structural deficit
•
•

Equity concerns: payments do not reflect
usage
•
•


Exacerbated by existing revenue constraints
Threatens quality of Milwaukee’s transportation
infrastructure
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?
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
Evaluation Criteria

Equity

Economic Impact

Budgetary Impact

Feasibility
• Benefit principle, Ability-to-pay principle
• Importing revenue, Market distortions
• Revenue adequacy & stability, Diversification
• Political, Legal, Administrative
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
Policy Alternatives
Status
Quo
Flat Fee
Trip
Generation
Hybrid
Fee Basis
assessed
property
value
lot area
&
property
features
estimated
annual
trips
estimated
annual
trips
&
property
features
(residential)
Data
Source
tax
assessor
tax
assessor
ITE rates &
assessor
ITE rates &
assessor
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
ed
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Benefit-Principle Ratio
Benefit-Principle Equity under
the Status Quo
3.0
2.5
2.0
1.5
1.0
0.5
0.0
Land-Use Category
Trip-generation alternative denoted by dark horizontal bar:
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Benefit-Prinicple Ratio
Benefit-Principle Equity under a
Flat-Fee TUF
15
12
9
6
3
0
Land-Use Category
Trip-generation alternative denoted by dark horizontal bar:
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Benefit-Principle Ratio
Benefit-Principle Equity under a
Hybrid TUF
3.0
2.5
2.0
1.5
1.0
0.5
0.0
Land-Use Category
Trip-generation alternative denoted by dark horizontal bar:
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
Importing Funds
7
Millions of Dollars
6
5
4
6.5
3
2
1
0
1.0
1.0
Trip
Generation
Hybrid
0
Status
Quo
Flat
Fee
Policy Alternative
Market Distortions
100
Number of
Properties
90
80
Percentage
70
Total Assessed
Property Value
(Status Quo)
60
50
40
Aggregate
Lot Area
(Flat Fee)
30
20
10
0
Residential
Commercial
Public
Property Type
Other
Total Estimated
Annual Trips
(Trip Generation
and Hybrid)
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
Comparison of Alternatives
Status
Quo
Flat Fee
Trip
Generation
Hybrid
Fee Basis
property
value
lot area
(primarily)
estimated
usage
estimated
usage
Advantage
ability-topay equity
imports
funds
benefitprinciple
equity
equity &
minimizes
distortions
Drawback
distorts
market
inequitable
somewhat
regressive
complex
policy
design
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
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
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