1. Finance—The Critical Link Shifting Sands The Evolution of Surface Transportation Finance The California Experience UCLA Policy and Research Symposium Series Lake Arrowhead, CA October 19-21, 2003 Presented by Arthur Bauer Arthur Bauer & Associates, Inc.

2. 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

3. The Beginning—1900-1920 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 1900 Census California’s Ten Largest Counties CountyPopulation% of State Pop 1 2 3 4 5 6 7 8 9 10 San Francisco Los Angeles Alameda Santa Clara Sacramento Sonoma Fresno San Joaquin San Diego San Bernardino Top Ten Total State Total 342,782 170,298 130,197 60,216 45,915 38,480 37,862 35,452 35,090 27,929 924,221 1,485,053 23 11 9 4 3 2 62

4. The Beginning—1900-1920 Cost overruns due to the decision to build 4” concrete highways Counties paid propor- tional 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

5. Building the Foundation 1920-1940 Road financing out of control Benefits of high- ways easily assign- able to users Gas tax settled on as an equitable and convenient revenue tool Registered Motor Vehicles Millions

6. 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

7. 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

8. Financing the Freeways 1945-1965 $’s needed to rebuild roadway infra-structure depleted during WW II Need to accom- modate growth in population & travel “Let’s get out of the muddle” Growth in Key Variables

9. Financing the Freeways 1945-1965 1947, 1.5¢ post WW II gas tax increase 1953, 1.5¢ increase for a total of 6¢/gal. 1963, 1¢ increase to 7¢/gal. Cities and counties get 49%; state 51% of gas tax revenues Geographic equity—county and district minimums Related Activities 1944 Congress authorizes the Interstate Highway System 1956 Federal Interstate Highway system/ Federal Highway Trust Fund established California Freeway and Expressway System 1962 3-C Planning Process mandated by Congress

10. Urban California Asserts Itself 1962, Baker v. Carr 1964, Reynolds v. Sims 1966, California elects a legislature based on “one person; one vote principle” San Francisco’s “freeway revolt” BART Growth in Vehicle Miles Traveled--1966-2000

11. 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

12. 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

13. 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

14. 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

15. 1923 2¢ 1927 3¢ 1947 4.5¢ 1953 6 ¢ 1963 7 ¢ 1983 9 ¢ 1990 14 ¢ 1994 18 ¢ Summary of Gas Tax Increases

16. Largest Counties:1900 & 2000 1900 Census California’s Ten Largest Counties CountyPopulation% of State Pop 1 2 3 4 5 6 7 8 9 10 San Francisco Los Angeles Alameda Santa Clara Sacramento Sonoma Fresno San Joaquin San Diego San Bernardino Top Ten Total State Total 342,782 170,298 130,197 60,216 45,915 38,480 37,862 35,452 35,090 27,929 924,221 1,485,053 23 11 9 4 3 2 62 2000 Census California’s Ten Largest Counties CountyPopulation% of State Pop 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 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 24,532,329 33,871,648 28 8 5 4 3 2 72

17. 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