Potential Funding Options for Rail
The Rail Funding Task Force recommended five of options1 that it analyzed to the
Oregon Transportation Commission. The recommendations included:
 Special District. Form a special district to fund passenger rail capital projects
and operating costs. The district should include Multnomah, Clackamas,
Washington, Marion, Linn, and Lane counties, which encompass the region
served by passenger rail between Eugene and Portland. The Legislature would
create the district and set the election date for the special district to approve the
taxing authority. An average increase in property taxes compared to 2010-2011
across the six counties of 1.38 percent could raise $45 million annually.
1

Lottery Proceeds. Allocate a portion of State lottery proceeds specifically for
freight rail improvements. To meet expected freight rail needs, it is
recommended that at least $20 million annually be allocated specifically for
freight rail needs. This amount is similar to the rail investments made through
the ConnectOregon program to date, annualized over six years. These funds
could be used in a “pay-as-you-go” approach, or used as debt service on a frontloaded bonded approach that could yield $240 million up front with a 20-year
repayment period, or a combination of both. The Task Force did not make a
recommendation on how these funds would be administered, for example as part
of the ConnectOregon program or a new separate program.

Railroad Property Tax Reallocation. Reallocate current and future property
taxes that freight railroads pay in Oregon from the counties to the State for freight
rail improvements. Currently, railroad property taxes are distributed to more than
1,200 local taxing districts throughout the state that include school districts, cities,
counties, and others. To backfill diminished county revenues, a telephone
access fee (discussed below) is recommended for implementation. At the outset,
the reallocation of property taxes would result in $10 million to $15 million in
annual revenues for freight rail improvements.

Telephone Access Fee. Apply a monthly fee of between $0.17 and $0.26 be
applied to telecommunications lines and devices, including land lines and cellular
phones. Estimated revenues of $10 to $15 million from this fee should be used
to backfill county funding gaps as a result of the Railroad Property Tax
Reallocation option recommended above. Oregon’s state-local excise tax on
wireless services ranks 48th among all states at 2.27 percent (for comparison,
Washington State charges 16.04 percent).

Rail tax credit. Create an Oregon rail investment tax credit focused on
supporting major railroad projects. Projects could include major rail capacity
enhancement projects or major rail facilities that would not have been built
without the tax credit in Oregon. It is also suggested that projects under
consideration for tax credits are included in the Oregon Rail Plan. Funding for
the tax credit would come from general fund revenues, which should be capped.
Oregon Rail Funding Task Force Final Recommendations, Dec. 2011, pages 5-6
December 2, 2015
page 1
Potential Funding Options for Rail
The major, long-haul railroads make infrastructure investment decisions based
primarily on the return on investment (ROI) of a project. Maintaining and
improving network fluidity at the national level is a key focus of the railroads, and
factors into ROI. Given that Oregon is ranked 39th nationally in terms of total rail
tonnage carried, rail infrastructure projects in other states may take precedence
over Oregon projects when an investment decision is made. An Oregon rail
investment tax credit would be one way to increase the ROI of potential rail
projects and encourage major private infrastructure investments by the freight
railroads in Oregon.
There are additional funding sources2 may serve fund for passenger rail. None of these
funding sources can be implemented quickly. The concepts require additional research
and development. They might be available in the short to intermediate term (2-6 years).
They would require legislative action to authorize their use to pay passenger rail
operating expenses. These include:
 Cigarette tax / marijuana tax. While there is no nexus to either passenger rail
or to public transportation, cigarette tax revenue is nevertheless used to fund
special transportation services for senior citizens and people with disabilities. A
cigarette tax or marijuana tax increase might be one of several taxes (a multipart
package) increased to fund passenger rail, either alone or in combination with
additional funding for special transportation.
 Payroll taxes in the form of employee-paid payroll taxes. An employee-paid
payroll tax should be explored further as a source of passenger rail funding.
 Sequestering income tax revenue. Sequestration should be explored further
as a source to fund non-roadway transportation generally, including passenger
rail. This could be part of a general transportation improvement package or be
more specific along the lines of the Rail Funding Task Force proposal to
sequester railroad employee income tax money. In either case, the economic
models that to support the concept should be developed to determine the
magnitude of the funding that sequestration could raise.
 Lottery / “super” Connect Oregon. The Oregon Transportation Forum’s
proposal for a Connect Oregon set aside out of lottery money should be brought
forward again.
 A carbon tax or cap-and-trade credits. This new form of taxation might be
adopted as part of a broad-based carbon emissions reduction strategy. While a
carbon tax would not be adopted to fund passenger rail alone, the revenues
raised by a carbon tax could support passenger rail as a carbon emissions
reduction strategy.
2
Potential State and Federal Sources for Passenger Rail, Oregon Department of Transportation, Oct.
2015.
December 2, 2015
page 2