John DeCicco and Hugh Morris
August, 1998
Executive Summary
Transportation planning in the Southeastern Wisconsin region is at a crucial juncture. Today's choices will impact the quality of transportation services, their costs, and the quality of the region and its environment for a generation to come. This report reviews the cost implications of the 1992 land use plan and 1994 long range transportation plan issued by the Southeastern Wisconsin Regional Planning Commission (SEWRPC). These plans lay out infrastructure investments and operational priorities through 2010.
The recent plans take steps in the right direction through improved transit services; however, the transit funding framework is weak. The plans and funding formulas reveal a continued preference for roads, along with loose land use controls that let development happen based on short-term opportunities with little regard to regional accessibility. Past experience shows that road building offers but temporary congestion relief at best, guaranteeing greater traffic in the future while choking off choices for other options more appropriate for an urbanized area. At the same time, outlying areas in the region's counties suffer from encroachments on rural lands. Such sprawl development offers a temporary respite for some people while compounding traffic growth and burdens on county and municipal services. More effective policies are needed to better coordinate land use with transportation. Better funding for transit is crucial to residents for whom private vehicles are too costly or inaccessible, as well as to reduce congestion for those who are otherwise stuck on increasingly crowded roads.
SEWRPC's planning process was quite thorough and did explore alternative paths. One such option gave greater emphasis to transit and complemented it with transportation pricing reforms that provide incentives for more efficient mode choice and more efficient land use while creating a richer set of travel choices in the seven county area. The planning commission's plans for potential transit expansions identity what is needed to create and effective and comprehensive transit system. However, state and local authorities have not come forward with the funding needed to implement these plans.
Citizens for a Better Environment (CBE) has outlined new planning options that would build on transit corridors already identified by SEWRPC. CBE is working with the Commission to analyze a transit-oriented, "Livable Communities" plan which would lengthen the time horizon sufficiently to explore a better coordination of land use with transportation investments. This study is developing a new, long-range approach to the region's transportation and land use, entitled "Vision 2040: An Alternative Way to Grow." This approach would concentrate new development around transit stations and along major travel corridors within the region. The analysis reported here provides an economic context for the CBE study by examining the financial and social cost implications of current plans.
Examining economic issues is a key aspect of evaluating planning alternatives. Foremost arc the cost implications for taxpayers. Through local, state, and federal governments, taxes pay to build and maintain the transportation infrastructure. The economics of regional transportation s New Romanalso includes many private costs, the largest of which is now that of cars themselves. A number of other monetary burdens are associated with cars and light trucks, such as accident costs and parking. Besides such dollar transactions, external costs, such as air pollution and congestion, enter the picture. A thorough analysis of planning alternatives should attempt to tally all such relevant cost items, whether they are direct public and private expenditures, hidden costs, or difficult-to-quantify but still quite real external costs. The benefits side of the economic equation for transportation is very difficult to characterize. But for comparing plans of a regional scope, designed to equivalently accommodate the accessibility needs of a population, analyzing the cost side of the equation can help guide the public and decision makers toward less costly options.
To carry out this study, we developed a social cost analysis model oriented toward region-scale analysis. It provides a partial analysis in that it is restricted to passenger transportation; a full analysis (and worthy extension of the model) would also cover freight transportation. The present analysis also excludes transportation-linked land use costs-those that are the subject of fiscal impact analyses of development at the municipal and county levels. While not part of the transportation infrastructure per se, other community services costs, such as schools or water and sewer services, can vary depending on the density of development and its proximity or coordination with other development.
This report's key findings are listed on the adjoining page. Following this summary, the report has four major sections. First, the introduction gives an overview of the region, its transportation system and plans, and a review of relevant literature. Section 2 analyzes public spending trends on transportation in the region, based on an examination of past plans and budgets, in order to develop a overall balance sheet breaking down recent spending by level of government and mode. This part of the analysis pays particular attention to imbalances in the financial picture, particularly local road costs not covered by transportation user fees and the net outflow of transportation revenues from the region. Section 3 extends the analyses to cover all major costs associated with passenger travel, presenting a social cost snapshot. Section 4 then examines the recent plans, particularly SEWRPC's long-range plan through 2010, and then projects the cost implications, both public expenditures and the social costs, for passenger travel as expected under the current planning paradigm. The rest of this summary highlights key points from this first phase analysis of transportation costs in Southeastern Wisconsin.
The Costs of Transportation in Southeastern Wisconsin-Key Findings
Public expenditures on the regional transportation system amounted to $536 million in 1992, an average of $780 per household. Locally raised funds covered 46 percent of the spending; state and federal funds covered 39 percent and 15 percent, respectively.
Most local government transportation funding (86 percent) comes from non- transportation sources, including property taxes and shared revenues derived from state income and sales taxes. Local roads comprise the single largest portion (36 percent) of public spending on transportation in the region. Counting local roads, recent public expenditures show a 75 percent/25 percent roads/transit split.
Planned public spending on transportation in the region through 2010 has a 76 percent/24 percent roads/transit split, essentially unchanged from the current pattern. The 1994 plan entails a $222 million average annual shortfall in transportation financing; given recent state and federal proposals, transit bears a much greater risk of funding shortages than roads.
Transportation-based fees (mainly gasoline taxes) collected in the region amount to 75 percent of transportation spending, but net outflows of these fees from the region result in their covering only 61 percent of spending. Transportation revenues collected by federal and state governments exceeded their expenditures in the region by an average of 29 percent from 1987-92.
Although public expenditures on infrastructure play a major role in shaping the regional system, these public costs amount to only 11 percent of the total monetary cost of the regional system.
The total social cost of transportation in the region is estimated at $7.3 billion ($10,500 per household) in 1992, counting both public and private costs as well as hidden and external costs. Although some of these costs are uncertain, they are significant, and so it would be misleading to omit them from a transportation cost analysis.
The largest transportation cost item is the private cost to individuals of owning and operating automobiles (cars and light trucks), which averaged nearly $3600 per household in 1992. Autos account for 98 percent and transit for 2 percent of the full cost of passenger transportation in the region.
The second largest cost is that of accidents, which averaged nearly $3400 per household; insurance premiums cover only 21 percent of total accident costs when including those associated with loss of life and serious injuries. External costs associated with congestion, air pollution, and petroleum consumption amount to 17 percent of total costs.
The region's population is expected to grow 6 percent from 1991 to 2010, but regional road travel (vehicle miles traveled—VMT) is expected to grow nearly six times as fast (35 percent by 2010) under current plans. Direct, hidden, and external costs of transportation grow nearly in step with automobile use, increasing the total social cost by 27 percent over the 1992 level by 2010 and cost per capita by 20 percent.
State and local officials should revisit transportation and land use plans for the region, accounting for the funding imbalances and social costs identified here, and pursue revised plans that promote transit-oriented development and pricing reforms that could together yield a future system less dependent on automobiles and their high social costs.
Transportation Spending Trends
Overall spending amounted to $536 million in 1992 (all figures are given in 1992$). Revenues obtained from transportation sources in the region amounted to $403 million in 1992. Thus, transportation-derived revenues were equivalent to 75 percent of overall transportation expenditures. Consumers pay the difference, largely through part of general sales taxes. Moreover, as the figure suggests, not all revenues collected in the region are spent in the region.
Of total spending, local governments provided the largest portion, 46 percent; state flinds provided 39 percent, and federal funds provided 15 percent. The picture developed for 1992 is in line with statistics for 1985-92. Generally, all levels of government increased spending, even in inflation- adjusted terms, on both roads and transit. An exception is federal transit support, which declined at an average inflation-adjusted rate of 6.4 percent per year from 1987-92. In contrast, federal highway support increases averaged 3.8 percent per year from 1985-92. State aids for both roads and transit increased at average rates of 4.1 percent per year and 4.4 percent per year, respectively. Local government road spending showed a slight inflation-adjusted upward trend of 0.8 percent per year, averaging $276 million from 1986-93; an average of 27 percent of this spending was offset by state aids. Thus, general revenues devoted to roads by local governments averaged about $200 million per year.
Total local transportation spending in 1992, excluding transit fares, is equal to $195 million for roads plus $16 million for transit, a total of $211 million. This spending draws on local general revenues, including property taxes and state shared revenues derived from non-transportation sources, which therefore cover 39 percent of the region's transportation spending. Local general revenues, not directly linked to transportation when collected, tie with state transportation aids as the largest sources of support for transportation in the region. Adding the $34 million in transit user fees brings the total of locally derived revenues spent on transportation to $245 million, for the 46 percent total local share noted above.
Financial Outflows from the Region
The region's situation in 1992 illustrates a recent pattern in which federal and state road user fees collected in the region exceed federal and state transportation expenditures in the region. In 1992, federal user fees (mainly the gas tax) amounted to $122 million, of which $82 million (67 percent) was returned for federal transportation programs in the region. The State of Wisconsin collected $247 million in transportation user fees, compared to state spending of $209 million (85 percent) in the region. Over the 1987-92, both federal and state transportation user fee collections exceeded federal and state transportation spending in the region by an average of 29 percent, for a cumulative net outflow of $420 million over the six-year period. This phenomenon is common for urbanized areas in the United States, since most driving and therefore most fuel tax collections occur in metropolitan areas, while extensive portions of state and federal highway systems run through less developed areas. Since regional interconnectedness is now largely accomplished while urbanized regions struggle with congestion, inadequate transit service, and often strained local budgets, it may be time to revisit the extent to which urban areas subsidize roads throughout the countryside.
Current Social Costs of Transportation
In the broader context of total social costs, public spending on the region's transportation infrastructure and related services is but a small portion of the overall cost of the system. The estimated total annual cost is $7.3 billion regionwide; averaged over the region's 690,000 households, this total works out to $10,500 per household. Not all costs are monetary, and of the monetary costs, not all are directly paid. In interpreting these results, it is important to note the uncertainties inherent in any such analysis. Items like public spending are quite exact, since they are drawn from budget tables. More uncertainty is involved in monetary costs based on averages, such those of regionwide car ownership. Admittedly much greater uncertainty is involved in estimating external Costs, such as those associated with accidents, congestion, and air pollution. But none of these costs are zero. Even though some of the "point" estimates entail substantial uncertainty, they are significantly greater than zero. Therefore, an analysis that omits them would be more misleading than an analysis that includes them, duly qualified by a reminder of the uncertainties.
Monetary costs-those of roads, the transit system, private vehicles, their fuel use, and portions of other cost categories~account for 65 percent of the total social cost. Of these monetary costs, 73 percent are directly paid, meaning paid by users (drivers, bus riders, etc.) in a way linked closely enough to inform decisions about transportation. Thus, only 47 percent of total costs are directly paid, and the largest portion of unpaid social costs are those associated with automobile use. This finding is consistent with other recent transportation cost studies. Coupled with the fact that local roads are largely financed by general revenues, these results indicate how extensively automobile use is subsidized, both directly (through use of property taxes and other general revenues) and indirectly (through hidden and external costs).
The $536 million in public costs associated with transportation infrastructure amount to only 11 percent of the monetary cost associated with transportation in the Southeastern Wisconsin region, and only 7 percent of the $7.3 billion total social cost. The largest item-34 percent of the total~is what private individuals pay to own, maintain, and operate their automobiles (both cars and personal light trucks). Nearly as large-32 percent of the total-are the comprehensive costs of automobile accidents in the region. Although drivers pay for insurance, premiums cover only part of the costs associated with accidents. The larger part of the toll is the non-monetary cost associated with lost quality of life, including fatalities and serious injuries. Parking costs are also only partly paid directly; some are included among road expenditures, but many are hidden or only indirectly paid. We estimate the annual average cost of parking at $966 per household, or about 9 percent of the total cost picture. Congestion, air pollution, and a number of other costs are externalities, that is, costs caused by an action but not borne by the individual responsible for it. The external Costs associated with air pollution and petroleum supply amount to 11 percent of the total cost. Congestion accounts for 6 percent. Broken down by mode, cars and light trucks account for 98 percent and transit buses account for 2 percent of the total social cost.
A conclusion of this analysis is that the regional transportation system fails to pay its own way in terms of cost. The largest portion of the effective subsidy, both direct and indirect, accrues to automobile users. The difference between total monetary costs and direct payments is $1.2 billion, or $1,800 per household in 1992. Given the one million private vehicles consuming nearly 600 million gallons of gasoline in the region, this difference works out to $1200 per car per year or $2.00 per gallon. The indirectly paid costs (which include costs of local roads, non-insurance-covered monetary accident costs, and indirectly paid parking costs) thus underwrite a higher level of driving that might be chosen if costs were directly borne a level of driving that is economically inefficient as well as humanly and environmentally damaging.
Where the Region is Headed
Based on an intermediate growth scenario used as the basis for SEWRPC's regional plan, the population of the seven county area is expected to increase 6 percent between 1990 and 2010. Expected growth is 12 percent in regional employment and 15 percent in number of households. Given socioeconomic and geographic trends reflecting an ongoing shrinkage in average household size and steady jobs growth, along with land use based on low- to medium-density development poorly coordinated with transit, the current plans will result in continued automobile dependence. Even without accounting for the additional traffic likely to be induced because of road expansions, under current plans a 35 percent VMT increase is forecast for 2010 compared to the 1991 level. This VMT growth is more than double the growth in number of households and nearly six times the rate of population growth. Therefore, auto-related costs will increase. Given that past projections have understated VMT growth and that induced auto travel will follow from road building, future VMT and associated costs may be higher than projected and congestion relief is likely to be less than promised by the plan.
SEWRPC's 1994 plan contains a set of road, transit, and transportation system management measures to be pursued between now and 2010, entailing $4.9 billion in capital spending and average annual spending is projected of $522 million. Allocations under the plan yield a 75 percent/25 percent roads/transit split for the capital spending and a 66 percent/34 percent roads/transit split on an average annual basis. This plan only covers regional" roads; we estimate an average annual cost of $220 million for local roads managed by cities, towns, and counties. Counting local roads, estimated annual average spending would have a 76 percent/24 percent roads transit split, essentially the same as in 1992. Other than farebox revenues, we estimate that an annual average of $261 million of local revenues, net of expected state and federal aids, will be needed for transportation by 2010 (84 percent of which is the $220 million for local roads). Altogether, public expenditures by all levels of government for both roads and transit in the region would need to average $780 million per year by 2010, a 46 percent increase over the 1992 level.
To cover these expenditures, SEWRPC estimated annual average available funds of $300 million based on current revenue collection levels and allocations. This value is $222 million short of the projected average cost of the regional plan (excluding local roads). Proposed changes in state programs are slated to provide some additional revenues, particularly for roads. Wisconsin 5 "Translinks 21" plan proposed raising the gasoline tax and other user fees to provide more funding for transportation programs throughout the state, including additional road funding of $108 million for the Southeastern region. However, recent legislatures have not been inclined to raise the gasoline tax. Even if the funds were available, the state plan would allocate $95 million (88 percent) of these additional funds to state highways-more than needed to cover that portion of the shortfall. But county roads and especially transit would be left with a large revenue gaps.
The plans identify proposed increases in state transit funding that could yield an annual average of $39 million more for transit and also assumes a $40 million increase in federal funds. Compared to the projected transit funding shortfall of $96 million, this combined $79 million still leaves $17 million to be made up by local sources in the region. Thus, the funding shortfalls anticipated by SEWRPC are not modally balanced. The risk of inadequate transit funding is considerably greater than the risk to roads.
Social Cost Trends
Turning to the social cost picture, the region's total transportation cost is expected to rise to $9.2 billion in 2010, a 27 percent increase over the $7.3 billion estimate for 1992. Driven by rising automobile use and a continuing rise in the real (inflation-adjusted) cost of auto ownership, private costs of owning and operating cars and light trucks lead the increase. Transit system spending would double, but remain a small share (about 1 percent) of the total cost picture (too small to be shown separately from the other public costs in the figure). Other items contributing to the overall rise in transportation costs are mainly those associated with auto use, including road and parking costs, accident costs, and the petroleum-related external costs of greenhouse gas emissions and oil supply. Declines are projected for criteria air pollution and congestion (although, as noted above, such declines may not be as great if induced demand were taken into account). The cost items having an increasing share of the total are public costs of the road and transit system plus that largest item, the privately borne costs of owning and operating cars and light trucks.
In developing its recent regional plan, SEWRPC considered an alternative providing improved transit services and higher fuel taxes needed to provide adequate funding. The Commission's analysis found a better benefit/cost ratio and lower environmental damage than for the plan subsequently adopted. Raising users fees such as the gasoline tax was considered politically very unlikely. However, ways to achieve such better transportation pricing by reducing other taxes were not explicitly considered. Such tax shifting, e.g., by lowering property taxes or reducing state income taxes, could be accomplished at zero net cost burden to the region's residents. However, the resulting increase in transportation efficiency would yield lower costs overall. Moreover, such user fees could address the funding shortfall identified above, particularly for transit. In this case, it is critical that such transportation pricing and funding reforms be designed so that new revenues are allocated where they are most needed, rather than perpetuating the current pattern of net outflow from the region and a disproportionate share of state spending in the region being devoted to state highways. Such an approach, coupled with less road expansion and more concerted measures for coordinating land use and transportation investments, promises lower overall costs for the region than the auto-dependent plans still being followed by the region.
86 pp., 1998, $17.00, T982
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