1. Transportation Utility Fees: Possibilities for the City of Milwaukee May 11, 2007 Prepared by: Deven Carlson Bill Duckwitz Karen Kurowski Lamont Smith

2. Problem Statement Milwaukee budget predicts a growing structural deficit Exacerbated by existing revenue constraints Threatens quality of Milwaukee’s transportation infrastructure Equity concerns: payments do not reflect usage 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?

3. 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

4. Evaluation Criteria Equity Benefit principle, Ability-to-pay principle Economic Impact Importing revenue, Market distortions Budgetary Impact Revenue adequacy & stability, Diversification Feasibility Political, Legal, Administrative

5. 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

6. Policy Alternatives Status Quo Flat Fee Trip Generation Hybrid Fee Basis assessed property value lot area & property features estimated annual trips & property features (residential) Data Source tax assessor ITE rates & assessor

7. 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

8. Benefit-Principle Equity under the Status Quo

9. Benefit-Principle Equity under a Flat-Fee TUF

10. Benefit-Principle Equity under a Hybrid TUF

11. 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

12. Importing Funds

13. Market Distortions

14. 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

15. Comparison of Alternatives Status Quo Flat Fee Trip Generation Hybrid Fee Basis property value lot area (primarily) estimated usage Advantage ability-to- pay equity imports funds benefit- principle equity equity & minimizes distortions Drawback distorts market inequitable somewhat regressive complex policy design

16. 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

17. 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

18. 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