How can we fund our transportation investments equitably? New study from SVCF and Strategic Economics tackles region’s transportation crisis

The Bay Area's transportation crisis

Bay Area residents are in a quandary: Housing prices are skyrocketing, forcing residents to move further away from their jobs and into more affordable neighborhoods, which then leads to a transportation crisis in the region – cars flood freeways during peak hours, congesting traffic and extending commute times to more than 60 minutes for many drivers. Public transit is an option, but is far from perfect.

We clearly need solutions. The good news is that there are alternative revenue sources – other than sales tax – that are available to fund our region’s transportation infrastructure. This summer, Silicon Valley Community Foundation commissioned an independent research study prepared by Strategic Economics to analyze the potential of several alternative funding mechanisms for transportation, focusing on revenue sources that could mitigate any regressive impacts on low-income households or businesses providing middle wage jobs, meaning low-income households and businesses would not pay a higher percentage of income in proportion to higher income households and businesses. An advisory committee comprised by the Metropolitan Transportation Commission, Seamless Bay Area, Urban Habitat and Working Partnerships USA provided guidance in the overall process.

We need funding because although the Bay Area region's transit systems have some of the highest ridership numbers in the country, they face a host of issues. Transit providers are fragmented along county lines, resulting in uncoordinated schedules, inconsistent fares and poor service. The public transit system is not only inefficient for commuters, but fails those most reliant on it:  low income people, youth, seniors, and individuals with disabilities. The region’s highway infrastructure has also deepened segregation along racial lines, which historically followed routing of auto-oriented arterials through neighborhoods of predominantly communities of color, while draining resources away from local transit. Everyone is impacted—some far more than others.

A ballot measure to fund transportation investments

With the passage of recent significant state level legislation for affordable housing, the Bay Area has seen successes in housing advancements and is on track to building an “equity-driven metropolis.” Part of this also includes addressing the region’s transportation agenda.  A November 2020 regional transportation funding measure could raise as much as $100 billion over the next 30 or more years to address the region’s transportation challenges. If the regional transportation measure is approved by voters, California can continue to advance policies that center on the needs of its most impacted communities.

Research to analyze alternative funding

Currently, a sales tax levy is being considered as the primary vehicle to increase revenue streams that would fund the transportation improvements. However, this would negatively impact low-to-moderate income residents; an increase in sales tax inherently captures a higher percentage of income from lower income households than higher income households, and would impose taxation on mainly household—not business— purchases.  In California, households contribute over 60 percent of total sales tax revenues.

The non-sales-tax funding mechanisms detailed in the Strategic Economics study funded by SVCF vary in their capacity to generate revenue, but the findings are promising. The most important finding is that even after creating exemptions for low-income households or other vulnerable groups, the collective revenue streams from several of these alternative sources—such as personal income tax, business parking levy, a parcel tax and/or a corporate head tax—are comparable to the revenue generation estimates from a high-yield sales tax. Additionally, these alternative sources might even lead to other benefits such as reduced automobile commuting and reduced greenhouse gas emissions.

The study findings argue in favor of a much more considered approach to defining the purposes of the transportation funding legislation and selecting its revenue sources.

Next Steps

In order for this process to move forward, the state legislature must pass Senate Bill 278, authored by State Senator Jim Beall, in early 2020 to authorize the Metropolitan Transportation Commission (MTC) to place the measure on the November 2020 ballot. The bill would need a two-thirds vote in the legislature to pass. Once the legislature authorizes the measure, MTC would engage in an abbreviated public process throughout the spring of 2020, before placing the measure on the November ballot. The ballot measure, which would also need a two-thirds vote at the polls, would specify where the money would come from (the revenue sources) and what it would be spent on (the investment plan).

We have already learned some important lessons from our past experiences, such as the 2018 Measure W win in San Mateo County that resulted in $2.4 billion in new investments to relieve traffic congestion and improve transportation options for historically underserved residents. Although the measure increased the sales tax rate, the campaign included successful grassroots engagement and fostered bottom-up ideas that shifted the dominant priorities in the county, like setting aside 50% of the measure for “County Public Transportation Systems”, with an emphasis on “maintaining and enhancing bus, paratransit, and other mobility services to better serve vulnerable, underserved, youth, low-income, and transit-dependent populations throughout the County.”

There are many questions before us as we begin to embark on the next steps:

  • How do we hold ourselves accountable to and establish priorities in the interests of our most impacted groups?
  • Do we cement the status quo in our transportation investments, or do we display courage and challenge our assumptions about who pays and who benefits?
  • What will it take to pass a successful regional transportation measure in 2020?
  • How do we align stakeholders around these core equity imperatives and expand the limits of what’s possible?

The regional transportation measure in 2020 is a unique opportunity to evaluate these considerations and advance our shared agenda of equity and prosperity. Read about the detailed analyses and findings in the report.