Gas Tax Funds Calif. Transportation Infrastructure

Santa Cruz Metro among local programs receiving funding

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For the first time since the 2008 financial crisis, the Santa Cruz Metropolitan Transit Department (SCMTD) is breaking even.

SCMTD’s budget will be supplemented by California Senate Bill (SB) 1 and Santa Cruz County Measure D, passed in November 2016.

Illustration by Lizzy Choi

SB 1 fuel taxes went into effect statewide on Nov. 1, raising gas and diesel prices throughout California by $0.12 and $0.20 per gallon respectively. The taxes are estimated to generate $5.2 billion annually for the next 10 years. Further funding for SCMTD comes from a $25-$175 registration fee, depending on vehicle value, and a $100 per year fee for electric cars. Registration fees come into effect on Jan. 1, 2018.

About $1.7 million of the funding will come from the diesel tax, $700,000 from registration fees and $250,000 from the gas tax, said Tom Hiltner, the grants and legislative analyst for SCMTD.

“When we were planning the 2016 budget we realized that we would entirely deplete our reserves by the end of fiscal year [2017] if we didn’t do something different,” Hiltner said.

SCMTD receives the bulk of its funding from local and state sales tax revenue. During recessions consumers spend less, resulting in less funding for programs dependent on sales tax revenue.

SCMTD used capital reserves, money saved for large purchases such as buses, to fund operating costs when state revenue fell short, Hiltner said. Diverting funds for operational costs made it unaffordable to replace old buses.

Currently, 60 of SCMTD’s 100 buses are 19 years old, averaging around 700,000 miles, said Barrow Emerson, planning and development manager for SCMTD. The recommended life of a metro bus is 12 years or 500,000 miles. The older buses are safe to drive but are more prone to breakdowns and need more maintenance compared to new buses, Emerson said.

To accompany direct SB 1 funding, SCMTD applied for a Federal Transit Association (FTA) grant, which will match the its $3 million allocation for a total of $6 million in funding, mandated to be used for capital purchases. SCMTD will be notified by the end of the year whether it received the grant.

SCMTD intends to use the $6 million to purchase nine new buses for its fleet. The new buses will run on either compressed natural gas (CNG) or electric power and will replace the oldest in the fleet.

Illustration by Lizzy Choi

Lack of funding on a local level stems from statewide need for policy change. California has not raised fuel taxes for over 20 years. Over that time, fuel efficiency in cars increased by about 25 percent, saving drivers money on fuel to drive the same distance. That savings, however, is tax revenue lost for the state.

“The gas tax has not been raised in a long time and we’ve been getting further and further behind in maintaining our street-related infrastructure and having funds to improve it,” said assistant director of the Santa Cruz Public Works Department Christophe Schneiter. “This is a very welcome change for the city and those of us who are tasked with maintaining and improving our multimodal street system.”

The growing gap between fuel efficiency and corresponding tax rates created about $130 billion in estimated repair costs to fix California’s transportation infrastructure. Now, by design of SB 1, the financial burden of maintaining infrastructure and transportation services falls on drivers.

“Any increase in fuel prices decreases driving,” said UC Santa Cruz assistant professor of environmental studies Adam Millard-Ball, who specializes in sustainable transportation and environmental economics. “It’s not going to affect everyone but there are people who are on the margin of ‘Am I going to drive [or] am I going to take the bus?’”

The new tax brings more revenue to the state as those who can afford to pay more for fuel continue to drive. SB 1 funds maintenance on the roads people drive on and provides services to people who cannot afford the tax.

The FTA grant, which will match SCMTD’s $3 million in funding from SB 1, mandates the funding be used only for capital purchases, as opposed to operational costs. New capital, such as the buses SCMTD plans to purchase, will reduce maintenance costs and increase fuel efficiency. New CNG buses get around 5 mpg, while diesel-powered buses, such as the older ones in SCMTD’s fleet, average 3-4 mpg. New electric buses have few moving parts and use even less fuel.

“It’s part of the carrot and the stick,” Millard-Ball said. “The stick is that it’s more expensive to drive, but the carrot is that other options — public transportation, biking, walking — will become more attractive.”