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SOURCESFOR THE JULY 2018 ISSUE OF UPDATE:Wisconsin Policy ForumFederal Highway AdministrationBoston Metropolitan Area Planning CouncilWis. Legislative Fiscal BureauRacine Taxpayers Association
Foxconn the hope of Racine’s financial future?
Politicians, unable to lower taxes and make regulatory activities conducive to economic growth, have come to rest on a Taiwanese corporation to bring back jobs and economic recovery to this area.
In the mean time, locally, Racine’s unfunded retirement benefit liability looms in the future as a budget problem. Racine already has a budget rate twice the rate of Mt. Pleasant and Caledonia and three times that of Sturtevant. Further increases in Racine’s rate does not make it a viable place for businesses to come in and start up operations.
And the Mayor wants Racine to engage in environmental activities that have not been vetted for economic feasibility or even environmentally effective. Those actions beg for accurate studies of their validity.
How should local governments respond to declining transit ridership?
Bus ridership has decreased for most large transit systems in Wisconsin in recent years, following a national trend. So far, local governments have found ways to make up for lost fare revenue and avoid service reductions, though that may become more difficult if the trend continues. Research shows ridership declines worsen as transit services are cut.
Conventional wisdom has long held that transit systems lose riders when they cut service and gain riders when they add service.
But the latest ridership data from Wisconsin's five largest transit systems . appear to contradict at least part of that orthodoxy. Between 2014 and 2017, each system increased service overall as measured by total vehicle miles traveled, yet ridership declined among four of the five.
Wisconsin's losses were part of a national decline in mass transit ridership, but in many communities they were greater than the national average.
According to the Federal Transit Administration, transit ridership peaked nationally in 2014 at roughly 10.7 billion total trips before dropping to around 10.0 billion trips in 2017, a 6.4% decline. Bus ridership on Green Bay Metro, Madison Metro Transit, the Milwaukee County Transit System, and Racine's Belle Urban Systems all dropped at least twice as fast as the national average. Kenosha Area Transit was the only system to gain riders, for reasons that are unclear.
What causes ridership decline?
What forces may be driving decreased transit ridership? The strengthened economy, relatively low gas prices, and the rise of ride-hailing services are seen as possible factors nationally.
According to the Bureau of Labor Statistics, Wisconsin's seasonally adjusted unemployment rate fell from 6.1 % in January 2014 to 3.1 % in January 2018. As a result, some transit riders who are newly employed or earning higher wages may have purchased vehicles or chosen to drive more often. Wisconsin DOT data show the number of vehicles registered in the state increased from 5.6 million in 2013 to 6.0 million in 2017.
Federal Highway Administration data also show driving is on the rise again in the U.S. The total number of miles driven nationally was virtually the same in 2013 as in 2005 but increased 7.4% between 2013 and 2017.
Relatively low gas prices may be another factor. According to the U.S. Energy Information Administration, the average price of gasoline has increased over the last two years but remains substantially lower than in 2014.
Ride-hailing services like Uber and Lyft, which have grown dramatically since the recession, may also play a role. While transit systems and ride-hailing companies have formed partnerships in some places to boost usage, multiple national studies suggest that ride-hailing also is competing with transit in many places. For example, a recent survey by the Metropolitan Area Planning Council in Boston found that 42% of the region's ride-hailing trips would have been replaced by transit if ride-hailing was not available.
Impact on revenues
Lower ridership puts pressure on local governments to raise fares, find other revenue sources, or cut services. Between 2014 and 2016, the last year for which data is available, all five of Wisconsin's largest transit systems lost fare revenue, as shown on page two.
Increased local funding, primarily through property taxes, appears to be one way transit systems have avoided service cuts and actually increased service. Between 2014 and 2016, four of the five largest transit systems in Wisconsin increased local revenue for transit, including a nearly 50% increase for the Milwaukee County Transit System. Fares have increased in some communities as well.
Less service still = fewer riders
If ridership is down, why not cut services? Both past experience and research suggest cutting services likely would create a downward spiral.
Between 2000 and 2010, the Milwaukee County Transit System cut routes and service frequency. As a result, the transit system's total ser-vice (vehicle miles traveled) drop-ped 21.2%, from 22.2 million miles to 17.5 million. While other factors may·have contributed, ridership decreased 29.4%, from 52.9 million rides to 37.5 million.
Academic research also has found similar links. A recent study of the 25 largest transit systems in the U.S. and Canada found service levels and car ownership are the strongest determinants of transit ridership.
_ Economic ups and downs often result in fluctuations in transit ridership. While increasing transit service may not always lead to increased ridership, service cuts often bring about ridership declines.
It is surprising and encouraging that four of the state's five largest transit systems were able to add local revenue and all five increased service levels as fare revenues declined in recent years. Whether these trends will continue is uncertain, but the stakes are high given that service cuts may further reduce ridership.
Local governments turn to "wheel taxes" as other revenues lag
Inrecent years, Wisconsin has seen a sudden increase in local governments.establishing new vehicle registration fees. A local vehicle registration fee-otherwise known as a "wheel tax "-is an annual charge in addition to the state $75 registration fee for most vehicles. State law requires local governments to use the funding for local transportation costs.
For more than a half-century, Wisconsin law has given municipalities and counties the option to impose a vehicle registration fee, also known as a "wheel tax."
Until 2011, only four communities had such a tax in place. By the end of 20 17, however, the list of communities that had adopted the tax had grown to 27; from 2011 to 2017, wheel tax revenues nearly tripled from $7.1 million to $20.7 million.
Although wheel taxes remain comparatively rare-only a small fraction of the state's 72 counties and 600 cities and villages have one-their sudden growth raises a question: Why have so many local governments in Wisconsin turned to this previously little-used device? While individual reasons may vary, a look at state and local transportation funding as well as a survey of local road conditions offers some clues.
State road aids grow slowly
Local governments are responsible for maintaining local roads in Wisconsin, funded by a mix of state aids and local revenues. The two major state funding sources are General Transportation Aids (GTAs) and the Local Road Improvement Program (LRIP).
Limited revenues, bumpier rides
The vast majority of GTA and LRIP funding comes from the state's fuel tax and vehicle registration fees. Revenues from both sources have generally been flat in recent years. The gas tax has not been raised since 2006, and overall fuel consumption has declined. At the same time, the state hasn't raised vehicle registration fees since 2008, except for electric and hybrid vehicles this year.
Legislative efforts to raise transportation revenues significantly — either through an increase in the gas tax, state vehicle registration fees, or other_sources-all failed last year._State Transportation Secretary Dave Ross recently told our annual meeting "there is no interest whatsoever" in raising the gas tax, vehicle registration fees, or other state or local revenue sources.
Meanwhile, local governments in Wisconsin have few local revenue options other than the property tax, which has been tightly restricted since 2011. Though local governments are allowed to raise property tax levies only for new construction, there are exemptions for debt service and a few other circumstances.
One of the consequences of the tighter revenues appears to be less spending on local streets and roads. When we surveyed officials from nearly 500 cities and villages for our League of Wisconsin Municipalities report, The State of Wisconsin Cities and Villages 2017, many said they had shifted their spending priorities away from street maintenance to police and fire services since the start of the 2007-09 recession.
Wheel taxes accelerate
Against this backdrop, the appeal of the wheel tax becomes clearer. There appears no clear pattern among the local governments that have adopted the tax, which include the state's two largest counties (Milwaukee and Dane) as well as some of its smallest (Green, Lincoln, and Iowa); some of the largest cities (Milwaukee, Appleton), as well as some of the smallest municipalities (City of Lodi, Town of Arena).
Like other local revenues, the state still imposes some restrictions on the wheel tax, requiring that it be spent only on transportation. Although this plight appear to limit its usefulness, the new tax can be used to offset other revenues, such as property taxes or state aids.
As wheel taxes become more common, policy makers may want to consider whether they are the ideal tax source to support local roads. It may be argued that by taxing vehicle owners, the wheel tax links the costs of local roads to users. Conversely, some might argue that road users also include commuters and visitors and a consumption tax (such as a sales tax) might be more appropriate. Such a debate cannot occur because state law does not permit municipalities to levy sales taxes, and most counties already have implemented the optional 0.5% sales tax.
As more local governments consider the wheel tax, some state officials have already suggested additional limits on it may be needed. .In the meantime, however, its use may grow as long as local revenues are limited and demand for local road maintenance and improvements expands.