Double taxation on city streets

For the anti-toll whiners patriots, and even those who use it to try to get more hits, here’s a story for you.

There’s this guy. His name is Joe Urbanite. He owns a car, which he drives sometimes. He used to walk and bike a lot, but now due to medical problems, can’t bike at all and can only rarely walk. When he drives his car, he usually goes a mile or two to the grocery store on Red River, or downtown via Guadalupe for a show to the main library, or up Speedway to the pool at Shipe Park, or across town on 38th/35th Street to get to his inlaws’ house. Joe’s wife also uses the car a lot to go to the frou-frou grocery stores like Whole Foods (Lamar, 6th) and Central Market (38th). Joe might also use the car later today to go to the hardware store (29th near Guadalupe) to get some wiring supplies. Even when Joe’s going far enough where Mopac or I-35 might be an option, he usually tends to stay away from those highways because he’s found out it’s a bit quicker to stick to surface streets than going through those awful frontage road traffic signals.

Those roads range from very big to merely minor arterials; but we’re not talking about residential streets here. All those roads were paid for out of Joe Urbanite’s property and sales taxes (usually but not always in the form of bonds). And remember, Joe lives in a property which is valued very high per acre compared to Bob Suburbanite, so he’s paying proportionally more in property taxes.

Joe Urbanite goes up Guadalupe to the gas station to fill ‘er up. He notices that the state of Texas has assessed a “gasoline tax” on his fuel. Wow! Neat! Does this money go to pay for the roads Joe used? If so, man, that’s an awesome user fee; barely even a tax at all.

But no. The gas tax in the state of Texas is constitutionally prohibited from being spent on anything but state highways and schools. That means that if it doesn’t have one of them nifty route shields with a number on it, it ain’t getting squat. What about the federal gas tax? In theory, it could be spent on roads outside the state highway system, but it rarely is – most of that money gets dumped right back into big highway projects.

In summary: Joe pays the entire cost to build and maintain the roads he uses out of sales and property taxes. (Compared to Bob Suburbanite, far fewer roads in his area get any state gas tax money). Joe also pays as much in gasoline taxes per-gallon as does Bob Suburbanite, but that gas tax really only goes to build roads for Bob.

So tell me, anti-toll whiners patriots: how, exactly, is Joe Urbanite not double-taxed? And how is this example not much worse than toll roads?

Toll Roads Help Central Austin, Part IV

The city is talking about amending the agreements with TXDOT about right-of-way participation for some local highways which are now, obviously, being rebranded as toll roads. This applies only to US 183 (east of I-35), US 290W, and SH 71 (east of I-35).

Note carefully the following facts:

  1. The city of Austin was on the hook for tens of millions of dollars for these roads, if they were to be built as freeways. The chance that this money would be extracted from Austin is 100%.
  2. The money for these contributions from the city to the state was authorized by the City Council in past cost-sharing agreements with TXDOT, which would require that bonds be floated like these examples in which voters authorized the city to borrow money for other recent highways.
  3. That borrowed money must be repaid by taxpayers in the form of property taxes, sales taxes, and other sources of revenue (mainly utility kickbacks). There is no contribution from gas taxes to the City of Austin budget. None.

What this means, in effect, is that the people in Central Austin who are disproportionately taxed on their properties (due to higher land values, not necessarily higher incomes) are paying these bills, and those are the people who drive the LEAST. Residents of the more sprawling parts of Austin are somewhere in the middle (pay less than Central Austin, get some benefit), and the real winners are people living in Dripping Springs, Bastrop, etc who pay nearly nothing and get most of the benefit of these particular roadways.
Now that the roads are being re-floated as tollways, the city is free (pending this agreement) to use this money (again, property and sales tax and utility dollars, NOT gas taxes) within the city limits of Austin for the needs of actual Austin taxpayers. And the people who most benefit from the roadways will actually have to pay for them.

What a communist idea.

Summary: toll roads are a winner for residents of Austin.

Double Taxation Isn’t Restricted To Roads

The anti-toll zealots, and in particular, Sal Costello like to whine and moan that tolling freeway expansions which are (mostly) paid for with gas tax money is “double taxation”. Left to the reader is the obvious implication that “double taxation” is a bad thing, and is new.

As you might have guessed, I’m here to tell you otherwise. First, a simple example.

Last weekend I drove down to Zilker Park on Sunday morning to play volleyball. (For reasons of time, I wasn’t able to bike, although I do that sometimes too). At the entrance to the loop which meanders through the river side of the park, there was a booth (A TOLLBOOTH!) set up, at which I paid 3 big bucks for the privilege of parking my car at the park.

BUT WAIT! Zilker Park was ALREADY PAID FOR by my property and sales tax dollars! How can this be? This is (organ music) DOUBLE TAXATION!

The fact is that suburbanites whining about toll roads have had it pretty good for a long time. They’ve had their road infrastructure subsidized by the center-city, they pay far less comparatively in property taxes, and they impose most of the negative externalities of driving on us center-city residents. Nobody in Circle C has to worry about an elevated freeway monster wrecking some of their neighbor’s houses and ruining everybody else’s outdoor activities.

Yes, they (but mostly us center-city folks) paid taxes to build these roads already. So toll roads, as designed in this case, are, in fact, (organ music) double taxation.

True libertarians (which many in this anti-toll coalition claim to be) would recognize toll roads as a baby step towards road pricing, which is the evil capitalist concept that the scarcity in road space ought to be managed by charging people to drive on it. These suburban republicans who like to call themselves libertarians instead advocate taxing everybody who drives (and a healthy chunk from those who don’t drive too) to build a freeway where the cost of driving is low, but there’s less incentive for each driver to explore alternate options to single-occupant commuting, so the road ends up crowded, just like, I don’t know, every single highway we build.

Just as in Zilker Park – if parking were free, every single space would be full, and the ring road would be a nonstop parade of cars futilely seeking space. At $3/car, however, there’s at least a small incentive for those whose utility is marginal to seek other solutions to the problem. (I might ride my bike; two of my friends might carpool; a third person might take the bus; somebody else might use the park during the week instead of the weekend; etc.)
So in summary: suburban Republicans like Sal Costello prefer the Soviet economic model – very low prices (subsidies from entire society), scarcity “managed” via long lines.

I hope this helped you understand the concept of double taxation and why we should all be against it.

Your pal,
Mike Dahmus Age 33

Toll Roads Help Central Austin

Sal Costello is pissed that TXDOT has bribed the City of Austin with rebates on previously spent right-of-way money if they agree not to oppose these roads’ tolling.

As I’ve noted in draft form (I now hopefully have the motivation to go back and finish those posts – as I do, see the bottom of this post for links), huge chunks of bond money approved between 1997 and 2000 by City of Austin and Travis County voters were designated for “local participation” in projects like SH130, SH45, Loop1, US183, SH71, and US290 freeway and tollway extensions and expansions. This “local participation” boiled down to (in most cases) 10% of right-of-way costs + utility relocation. Doesn’t sound like much, but it added up to tens of millions of dollars each time.
What’s the rub? The city and county don’t get any money from gasoline taxes. These bonds will be repaid using city and county funds, which effectively means property and sales taxes (or in the city’s case, utility slush funds paid back by electric customers).

Note: You pay this bill no matter how much or how little you drive; no matter how efficient or inefficient your car; no matter whether you take the bus, ride your bike, or walk.

And guess who pays the most, proportionally, in property taxes? Here’s a hint: My small lot in central Austin is valued far higher than the comparatively vast Steiner Ranch lot of one of my cow orkers; more than the huge lot of one of my friends on “The Mountain”; heck, more than Sal Costello’s lot in Circle C. Most of the costs associated with city and county spending are related more to the size of the area covered rather than population density, by the way. And Sal’s getting far more lane-miles and far wider streets for his $0.50 than I am for my $1.35.

Accepting this rebate from TXDOT helps Central Austin. Of course, it requires Sal and his Circle C buddies to start paying more of their fair share instead of being subsidized by the central city (we’ll still subsidize you with our gasoline taxes when we do drive, but the property and sales tax subsidization will drop dramatically). So you can understand why the southwest and northwest Austinites are so ticked off, even if they hide behind the baloney claims of “double taxation” (I paid to park at Zilker Park last weekend; was I “double taxed”?)

Responsible City Council members should ignore this caterwauling and do what’s best for the fiscal interest of the city – which means tolling roads used disproportionately by people who either don’t pay any city taxes (because they live outside city limits) or pay relatively little. If you want less sprawl and a healthy center city, please make your voice heard.

Past highway spending in bond elections (added as I finish them over the day):

You’d better be hedging

Some fairly respectable analysts are beginning to join “kooks” like Kunstler, although in a far less inflammatory way, in predicting that high oil prices are not only here to stay, but likely to get quite higher. The latest “Occasional Report” from CIBC World Markets lays out the case. Older “Occasional Reports” are also highly recommended, as they seem to cut through a lot of baloney and show how and where higher energy costs will hurt (without going flat-out lunatic like the idiots who think every N% increase in gas prices means an N% increase n the price of everything delivered by truck, for instance).

I’ve been hedging higher energy prices for a long time now – we paid a hefty premium for our house in central Austin, and part of the reason was that we could, much more easily than your average suburbanite anyways, drastically reduce our driving and/or switch to jobs better served by public transportation. (my current office is served about as well as any out here in the ‘burbs, which is to say that I can take the bus each day by spending only about 40 extra minutes – as sad as that is, it makes me the winner here by far). We also bought a Prius in February of 2004 (after waiting five months) – again, a hedge; if we do end up having to drive a lot, at least it won’t kill us. Well, as it turns out, we’re only driving about 10,000 miles a year combined anyways, but every little bit helps.

The only problem is that hedges like this are largely a loss-amelioration strategy – they don’t gain us anything unless inflation makes wages go up. The same group above thinks it won’t this time, unlike in the 1970s, so the best we’re really able to do is attempt to be a bit less screwed than the average suburbanite will be.

This hedging logic (whether you believe in local kook Roger Baker’s Kunstler-like rants or not) should also apply to public infrastructure spending. I happen to believe that building the toll roads is a way to do this – the ‘hedge’ being that since the roads are going to be built either way (an assertion the environmentalists disgree with), it’s better to have them paid back with tolls rather than with property and gas taxes (even if the tolls come up short, the impact on central-city residents is still less than with the typical free highway payment mechanism – remember, you still pay gas taxes while driving around central Austin, but none of that money goes to those roads – in fact, urban areas all over the country are screwed by the gas tax’s bias towards suburban and particularly exurban areas). In other words, paying for the new toll roads with gas taxes simply makes things better for people at the far edges of Leander, and far worse for people living in Central Austin.

A better hedge, of course, would be a gradual overall increase in gasoline taxes with a mandatory minimum payback for major urban areas similar to what the Feds do with ‘donor states’. But with the average suburbanite convinced that they’re undertaxed rather than subsidized, it’s simply never going to happen. Toll roads are, in this sense, the best hedge we can manage at this point in time.

For those interested – ways to hedge on energy costs which are easier if you live in an urban neighborhood than out in one of the soulless sprawlburbs:

  • I can bike to work (up to 5 days a week) – right now I average once a week; mainly due to scheduling difficulties, but we could change this if we had to.
  • I can take the bus to work – at a 40 minute or so penalty per day (which as mentioned above puts me ahead of pretty much anybody else here)
  • I can get a job downtown (easier said than done) and reduce the transit penalty to near-zero
  • We’re within a (long) walk of 5 grocery stores – right now this means we have a very short drive; we only occasionally walk, but at least we CAN walk if it becomes expensive enough to drive
  • We can walk to a battery of other shopping and dining choices (we do this quite frequently now)
  • In an era of higher fuel prices, the places we shop are going to be less impacted than the strip-mall businesses, due to efficiencies of scale (cheaper to deliver to 5 grocery stores that are very close together than 5 that are very far apart)
  • Our house is small – less air conditioning and heating costs
  • Our house is old enough that it was designed before air conditioning – meaning we have enough windows for good ventilation most of the year

For these hedge privileges, however, we pay through the nose:

  • The house price is far higher, per square foot, than in the ‘burbs — this is not purely because of location, but also because post-WWII zoning laws have artificially restricted the supply of walkable urban neighborhoods. Most of the homes on our street are illegal under current zoning code for various bogus reasons.
  • Our city, county, and schools tax mainly through property taxes, which are a double whammy – not only are we appraised proportionally higher, but the property tax itself is often used in ways which subsidize suburban development – providing city services is far more expensive per acre in Anderson Mill than it is in Central Austin, but the Central Austinites pay orders of magnitude more property taxes.
  • Those property (and also sales) taxes are often grabbed by the state and spent in ways which not only subsidize the suburbs, but hurt central cities – things like requiring local ‘donations’ in order to expand freeways. (The 1998 and 2000 bond elections floated tens of millions of dollars in bonds which were used to pay for right-of-way and other costs for roads like the far north extension of Mopac, SH45, SH130, etc – none of which provide any use for central Austin at all, yet central Austin is where most of that tax money comes from – and when a project IS proposed which affects central Austin, it ends up being a destructive force like the ridiculous proposal by TXDOT to double-deck Mopac).

Cars’ FRR is often zero

Say you’re riding the #3 bus up Burnet Road. You pay 50 cents to get on the bus. That’s your “fare”. As it turns out, if you consider all the money taken in and all the money spent out by Capital Metro, and divide the difference equally per trip, it actually costs the taxpayers a couple of bucks for your ride. (The #3 bus, because ridership is high, ends up subsidizing some other routes, but we’re taking a simplistic view here). Your “farebox recovery ratio” is something like 20%.

Now say you’re driving your Ford Explorer down Lamar Blvd. As I’ve been recently discussing in the transportation funding topic, no gas tax money is spent on roads like this in Austin (basically major roads that don’t have a route shield on them).
Your “fare” for this trip is thus $0.00 (the road doesn’t have tollbooths, of course). In other words, the only cost you pay directly at the time (“user fee”) is the gas tax, but as noted, neither this road nor other major roads of this type in the city of Austin can be funded by gas tax dollars.

The cost of providing you with your rejuvenated driving surface was substantially more than zero (12.6 million dollars, including utility work), and all that cost was most recently paid by city of Austin taxpayers via property and sales taxes (bond election in ’98). And don’t fool yourself – most of the cost for projects like this isn’t for pedestrians, cyclists, or bus riders. We’d have a much smaller and much cheaper transportation network if nobody drove — the fact is that most of the money we spend on roads like this is directly attributable to people driving their cars, alone.

Your FRR on this trip is 0%. That’s right, a big fat zero. The only time Capital Metro gets this bad is on Ozone Action Days. So, libertarians, perhaps you shouldn’t throw stones from your suburban glass houses.

What about highways, you ask? Well, it’s true the majority of funds required to build state highways do, in fact, come from the gas tax. There are other, less direct, costs of these roadways which are borne by society at large, but even when considering just direct construction and maintenance cost, you still don’t get off claiming that you’re paying the bills. A substantial portion (largest line-items, as a matter of fact) of both the 1998 and 2000 bond elections for Austin and Travis County’s 2000 package were to pay “local contributions” towards right-of-way for new and expanded state highways. IE: even on a brand-new highway theoretically built with gas taxes, the property-owners and goods-buyers are still subsidizing you, whether they drive a lot, a little, or not at all.

Capital Metro, Empty Buses, and Farebox Recovery Ratio

The local asshats are at it again, slamming Capital Metro for supposedly running empty buses.
See here and here and here for reasons why suburbanites always think buses are empty (they’re wrong – most Capital Metro buses are carrying a substantial number of passengers).

As regards farebox recovery (in short, the amount of cost covered by passenger fare), the asshats are ‘right’ – Capital Metro’s number is low. As I used to keep telling them when they’d come for their quarterly report to our commission, if you run programs like the free rides on Ozone Action Days and the free rides for UT students at night (E-bus) and don’t account for them separately, you leave yourself open for getting hammered on an extremely low farebox recovery ratio. And by “account for them separately” I don’t mean “after the local libertarians get the media to claim you’re wasting your money”; I mean “go as far as transferring 10% of your funds to the Clean Air Force and them have them contract with you for the Ozone Action Day rides just like you do with UT for the UT Shuttle”.

Of course they didn’t listen. Capital Metro operates in the same center-city echo-chamber that most of the bicycle advocates I work with live in. My role on the UTC, while it lasted, was largely an effort to smash out of that box and get them to realize that there’s a world out there past the intersection of 183 and Mopac, and it’s got more voters in it every day.

By the way, the “farebox recovery ratio” for the private automobile is about as low as Capital Metro’s artificially low number given above. As the last few days have hopefully shown, especially as you get close to the center-city, most major roads aren’t paid for out of the gas tax (or tolls) – they’re paid for with bonds which have to be floated every few years by the city and county and are repaid with property and sales taxes. Ironically, much of the strongest opposition to the local toll road plan comes from the same group hammering Capital Metro here. Guess what, folks? A toll paid when you drive on a particular road brings you UP to the level that the transit passenger is ALREADY AT. Gas taxes don’t even come close to paying your bills.

The “Exit Test”: Suburb vs. City: Major Roads, from I-35

The “Exit Test”:

Another way to show the discrepancy in road funding in our area is to look at freeway intersections. (In this case, our definition of “major road” is a road which is mentioned in a marked exit from the freeway – in some places due to the frontage-road-centric design of highways here, multiple major roads have the same exit).

Using a current list of exits, let’s look at Round Rock through Austin. To make things even more fair for the suburbanites, and not coincidentally to make it simpler for my transcription, I’m only going to use the part of Austin north of the upper/lower-deck split (which leaves out the densest part of Austin where 100% of the exits are for locally-funded roadways).
Round Rock:

  • Exit 256: FM 1431 (state-system)
  • Exit 254: Business Route IH-35 (state-system) and FM 3406 (state-system)
  • Exit 253A: “frontage road”
  • Exit 253: US 79 (state-system)
  • Exit 252B: RM 620 (state-system)
  • Exit 252A: McNeil Rd (local-system: Round Rock)
  • Exit 251: Business Route IH-35 (state-system)
  • Exit 250: FM 1325 (state-system)

Out of 7 exits with a road mentioned, only one is for a roadway which is locally funded; while 6 are for state-funded roadways.
Now, the exits between Round Rock and the city limits of Austin:

  • Exit 248: Grand Avenue Parkway (local-system: Travis County and Pflugerville)
  • Exit 247: FM 1825 (state-system)

Finally, the exits which are for roads which cross I-35 within the city limits of Austin:

  • Exit 246: Dessau Rd and Howard Lane (both local-system: Travis County and Austin)
  • Exit 245: FM 734 Parmer Lane (state-system) and Yager Lane (local-system: mostly Austin)
  • Exit 243: Braker Lane (local-system: Austin)
  • Exit 241: Rutherford Lane (local-system: Austin) and Rundberg Lane (local-system: Austin)
  • Exit 240AB: US 183 (state-system)
  • Exit 239: St Johns Ave (local-system: Austin)
  • Exit 238B: US 290 (state-system), FM 2222 (state-system)
  • Exit 238: 51st St. and others: all local-system
  • Exit 237: Airport Blvd (local-system west of I-35, state-system east of I-35 as Loop 111) and 38½ Street (local-system)

Out of 9 exits listed here, 8 are for roadways which are locally funded, and 4 are for roadways which receive state funding. (Obviously some exits are for both).
A reminder again: I used the part of Austin which has the MOST state-funded roadways in it (since I stopped short of the upper/lower-deck split two miles north of downtown where the arterials come fast and furious and NONE of them get state funding).
Resources used in this article:

The “HEB test”

What is the “HEB test”?

In central Austin, most people drive (or even, gasp, WALK!) from their home to the closest major grocery store (i.e. non-convenience store) without driving one inch on a roadway which is part of the state highway system because most major roads in central Austin are city-funded streetsnot so in Round Rock or other bedrom communities; the vast majority there would not only choose to but MUST head out to FM 620 or 1825 or 685 or even I-35 to shop for anything of consequence.

For instance, from my house north of UT, these major grocery stores are the ones we shop at more than once a year. We drive to EVERY SINGLE ONE OF THEM without using any part of the state highway system (yes, we shop at all of these, in order of frequency). (We sometimes walk to a couple of these, and have biked to one):

  • Central Market (38th/Lamar)
  • HEB at Hancock Center
  • Randall’s on 35th
  • Whole Foods (6th/Lamar)
  • Fresh Plus on Duval/43rd
  • Randall’s at Exposition across from Casis
  • Randall’s at Exposition/Lake Austin
  • Wheatsville Co-op (Guadalupe/30th)

Try the same test sometime in your neighborhood. When applied over a set of neighborhoods in a geographic area, I think the “HEB test” is a good indicator of how much (or how little) of your major street network is funded by the state. (Remember! Roads which don’t have a route shield on them, like FM 1325 or US 183, are not parts of the state highway system, and thus are ineligible for all state gas tax money and most federal gas tax money!)

This test is a useful proxy for the claim (made by me and others knowledgeable about urban planning) that gasoline taxes effectively subsidize the suburbs – the typical dweller of the suburbs spends a much higher percentage of his “drive” on roads which actually get money back from the gas tax than does the corresponding center-city resident.

Many More Major Roads In The Suburbs DO Get Gas Tax Money

Same exercise as the last entry of this type. I couldn’t get the scale exactly right – this section of Round Rock / Pflugerville is actually quite a bit larger than the corresponding section of Central Austin. (There’s a “zoomed in” PDF of central Austin which I used for the original source – if I zoom in with a similar scale to this section of Round Rock, the lines are so thick as to be unusable).

Arterials which are part of the state highway system and thus get gas tax money:

  • IH-35
  • Parmer Lane (FM 734)
  • RM 620
  • SH 45
  • FM 1825
  • US 79
  • FM 1431 (olive green in far upper left corner)
  • FM 685 (north-south road colored olive green lower right corner)

(I can’t list all the roads on here that aren’t part of the state highway system because I don’t know many of their names – some of them don’t even currently exist – they are planned to be built sometime in the future by Round Rock and Williamson County).
Note that a much higher proportion of major roads in the southern Round Rock area are maintained by the state. In fact, it is unlikely that a resident of a neighborhood in this area will be able to pass the “HEB test”.