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Item 5DCity of Southlake, Texas MEMORANDUM October 21, 2003 TO: Billy Campbell, City Manager FROM: Ben Thatcher, Administrative Intern SUBJECT: Resolution No. 03 -074, Encouraging inclusion of transportation funding in the scope of the Texas Legislature's study of possible tax reform Action Requested: City Council approval of Resolution No. 03 -074, encouraging inclusion of transportation funding in the scope of the Texas Legislature's study of possible tax reform. Background Information: The State tax code is scheduled to be examined by the Legislature in spring 2004 with an emphasis on public school finance. The North Texas Commission Board of Directors, along with other municipalities, is asking the Legislature to expand there focus to transportation funding as well. According to studies prepared by the North Texas Commission, the Legislature has been allocating 63% of state highway user fee revenues to fund general government services wholly unrelated to transportation. In the interim, highway safety and urban mobility needs have become too large to handle with the current biennial appropriated funds. Financial Considerations: N/A Citizen Input/ Board Review: N/A Legal Review: N/A Alternatives: Approve, amend or deny proposed resolution. Supporting Documents: Resolution No. 03 -074. Texas Transportation — Funding & Revenue Staff Recommendation: Approve Resolution No. 03 -074 RESOLUTION NO. 03 -074 WHEREAS, additional funding is urgently needed for investment in transportation infrastructure to reduce urban roadway congestion, to improve highway safety, and to provide statewide connectivity in Texas' transportation system; and WHEREAS, revenue generated from current -level state highway user fees and taxes can provide the additional funding urgently needed for investment in transportation infrastructure; and WHEREAS, the Legislature appropriated to the state highway fund less than $2.9 billion of the $6.9 billion revenue Texas collected from state highway user fees and taxes in fiscal year 2002; and WHEREAS, the 78 Texas Legislature requested that the Congress return to Texas for needed transportation funding 95% of federal highway user fee revenue collected in Texas, while the Legislature itself allocates only 37% of state highway user fee revenue to fund transportation; and WHEREAS, good public policy dictates that revenue from user fees and taxes be allocated to support the public's use of the services and facilities from which the fee /tax revenue flows; and WHEREAS, select committees of the Texas Legislature are now studying possible tax reform in anticipation of a possible Spring 2004 called session of the Legislature; and WHEREAS, broadening the Legislature's tax reform agenda to include replacement revenue for general government services now funded from highway user fee and tax revenues would be sound public policy enabling the Legislature to allocate highway user fee and tax revenue to fund needed transportation improvements. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF SOUTHLAKE, TEXAS: SECTION 1. That the Governor, Lieutenant Governor, and Speaker of the House are respectfully urged to expand the scope of the Legislature's current study of possible tax reform to include replacement revenue for general government services now funded from highway user fee and tax revenues in order that the Legislature may allocate annual highway user fee and tax revenue to fund needed transportation improvements. SECTION 2. That a copy of this resolution be distributed to state executives and legislators. SECTION 3. That this resolution shall become effective immediately upon its passage and approval. PASSED AND APPROVED BY THE CITY COUNCIL OF THE CITY OF SOUTHLAKE ON THIS DAY OF , 2003. Andy Wambsganss, Mayor ATTEST: Lori Farwell City Secretary Texas Transportation Funding & Revenue Those familiar with Texas' surface transportation system concur that there is a funding shortage to address needs, whether your interest is urban congestion, connectivity, system reliability or safety. Additional annual investment is needed to maintain and rebuild our aging infrastructure and to accommodate growth in population, travel, and heavier vehicles engaged in commerce and international trade. Funding to support the higher level of investment needed requires identifying substantial, new revenue for transportation. Some new revenue may come from increased use of tolls, moving the point of collection of motor fuels tax from the distributor level to the terminal rack, and/or an increased return of federal resources to Texas, but an honest, realistic analysis reveals that the bulk of the new revenue Texas needs for transportation must come from some combination of two sources: • Existing transportation - related revenues now allocated to other uses and • Tax or fee increases. As to the level of funding need: Both the House Committee on Transportation and the Senate Committee on State Affairs filed interim reports to the 7e Texas Legislature stating that TxDQT has resources to fund only approximately one third of its identified highway project needs. Comptroller Strayhorn's January 2003 issue of Window on Stag Government, GG 23 Use Innovative Financing Techniques to Build Texas Roads, confirms this finding and states that Texas' need for new roads greatly exceeds its ability to pay for them. The Comptroller's report also notes that more Texans are finding themselves stuck in traffic for longer periods. Drawing from Texas Transportation Institute (TTI) data, she reports that San Antonio, Dallas -Fort. Worth and Austin rank among the top six cities in the nation for highest average annual delays due to traffic. The average annual delay for a road traveler in Dallas -Fort Worth climbed from 47 hours in 1994 to 74 hours in 2000; in San Antonio, from 11 hours in 1994 to 43 hours in 2000; and in .Austin, from 31 hours in 1994 to 61 hours in 2000. Data from TTI's 2002 Urban Mobility Report illustrate Texas' rising roadway congestion trend over the last decade. Measure 1991 -2000 Rate of Increase AUSTIN DFW HOUSTON SA Travel Time Index 108% 74 %fl 52% 229% Annual Delay 221% 136% 132 % 272% Hours of Congestion 44% 25% 17% 120% Percent of Congested Travel 77% 48% 23 %q 174 % Congested Lane Miles 53 % 43 % 15 %Q 96% Annual Lane -miles Needed 7 % 31% 70% 30% Congestion Cost 321% 198% 1 193 % 375% -2- Measure in 000s AUSTIN DFVV HOUSTON SAN ANTONIO 1991 2000 1991 2000 1991 2000 1991 2000 Travel Time Index 1.13 1.27 1.19 1.33 1.25 1.38 1 07 1.23 Annual Delay (Person - Hours) 6,420 20,640 59,710 141,125 52,200 120,945 6,850 25,505 Hours of Congestion 5.0 7.2 5.6 7.0 6.0 7.0 10 6.6 Percent of Congested Travel 35 62 40 59 53 65 19 52 Congested Lane Miles 38 58 35 50 48 55 23 45 Annual Lane -miles Needed 58 62 232 305 114 194 56 73 Congestion Cost ($million) 95 400 885 1 2,640 1 780 2,285 100 475 The Comptroller's report states that Texas' transportation needs clearly exceed the ability of the state's traditional pay -as- you -go funding methods to support highway projects and that at least 38 of the 50 states use debt financing. She further notes that TTI estimates the total cost of traffic congestion in Texas cities at $5.2 billion in 2000. As indicated in the (to be) attached list of major unfunded capacity projects, the cost of addressing the urban congestion problem in Texas will exceed $25 billion over the next ten years. Annual debt service on a $25 billion bond issue would be approximately $2.5 billion- - less than half the annual cost of the congestion. Fixing the problem makes economic sense. As to revenue sources to fund the transportation needs: The two possibilities are (i) to use all existing transportation - related revenues for transportation or (ii) to continue the current diversion of such revenues and to increase substantially the rate of transportation fees and taxes. Doubling the current state tax on motor fuels, from 20 cents to 40 cents, would provide less additional revenue for transportation than would allocating; all existing transportation - related revenues for transportation. The latter however would produce huge funding shortages for other state government services. Texas ranks relatively high in the amount of highway user fees diverted to non - transportation uses - -third out of the 50 states according to the interim report of the Senate Committee on State Affairs. The significant diversions of transportation - related revenues in Texas include: ■ $2.769 billion from the Motor Vehicle Sales and Use Tax to General ■ Revenue Fund 001 (the GR Fund) ■ $695 million from the Motor Fuels Tax to the Available School Fund ■ $160 million from the Motor Vehicle Rental Tax to the GR Fund ■ $140 million from the Vehicle Registration Fee to the GR Fund (1992 "switch" of county funding) ■ $114 million from the Driver License Fee to the GR Fund ■ $70 million from the State Highway Fund to support non - transportation- related DPS services such as Capitol security [$370 million total to DPS] • $70 million from the Motor Vehicle Inspection Fee to the GR Fund ■ $50 million from the Driver Record Information Fee to the GR Fund ■ $27 million from the Motor Vehicle Certificates Fee to the GR Fund ■ $16.4 million from the Oversize /Overweight Permit Fee to the GR Fund As to the relative tax burden on Texans: ■ U.S. motorists are under -taxed relative to the rest of the industrialized world .... if the tax on motor fuels in Texas were raised 50 -cents per gallon (from 38.3 to 883 cents), the price of motor fuel and the tax thereon would still be less than half that of most other countries Motor Fuel Price - Global Perspective (Dollars per Gallon, January 2000) COUNTRY GASOLINE DIESEL United Kingdom $5.13 $4.77 Sweden $4.22 $3.51 France $4.01 $3.05 Germany $3.78 $2.90 Japan $3.65 $2.89 Canada $2.04 $1.68 United States $1.47 $1.36 Motor Fuel Tax - Global Perspective (Cents per Gallon, June 2001) COUNTRY GASOLINE DIESEL United Kingdom 316 318 Netherlands 275 166 France 258 177 Germany 256 183 Italy 242 182 Belgium 235 147 Japan 193 121 United States -Texas 38 44 ■ The State tax on motor fuels in Texas is $.20 per gallon; 28 states have a higher rate than Texas; some states (e.g_, Florida) allow for a motor fuel tax add -on by local option and levy a portion of the fuel tax on a percentage basis Motor Fuel Tax in U.S - Excluding Federal Tax (Highway Statistics 2000) United States GASOLINE DIESEL High rate $0.32 $0.31 Mean rate $011 $0.21 Median rate $0.21 $0.22 Low rate $0.08 $0.08 ■ Texas has a relatively low state tax burden • State tax revenue per $10001 of personal income is 70.9% of the 50 -state average • State tax revenue per capita is 70.4% of the 50-state average • Of the 15 most populous states, Texas ranks dead last in these two indicators of relative state tax revenue -4- State Tax Revenue -15 most populous states - Calendar Year 1999 Source: US Census Bureau, State Government Finances ('Washington, DC, 1999); appears as Table 35 in the Texas LBB's Fiscal Size -up 2002 -03. Current Level Transportation Revenues and Expenditures: State Highway Fund Revenue - Fiscal Year ending 08/31/02 Tax Revenue $2 As Percent of Motor Fuel Tax Per $1,000 Tax Revenue State - local Tax $ 781,100,000 Personal Income Per Capita 1997 -98 Michigan $78.84 $2,215.84 73.1% California 73.15 2,184.96 69.0 North Carolina 71.43 1,886.90 71.2 Washington 70.55 2,143.29 68.1 Massachusetts 67.15 2,385.65 66.2 Pennsylvania 62.89 1,800.96 61.3 New York 62.74 2,126.81 47.1 Indiana 62.63 1,638.27 62.5 Ohio 59.44 1,614.93 56.3 Georgia 58.56 1,600.08 58.0 New Jersey 58.37 2,078.54 53.6 Florida 56.69 1,574.89 591 Virginia 56.47 1,68236 59.1 Illinois 56.17 1,748.90 55.9 Texas 47.74 1,280.95 52.2 50 -state Average $67.30 $1,819.13 641% Texas as % of Average 70.9% 70.4% 81.4% Source: US Census Bureau, State Government Finances ('Washington, DC, 1999); appears as Table 35 in the Texas LBB's Fiscal Size -up 2002 -03. Current Level Transportation Revenues and Expenditures: State Highway Fund Revenue - Fiscal Year ending 08/31/02 Federal Reimbursements $2 40% Motor Fuel Tax $2,078,100,000 36% Vehicle Registration Fee $ 781,100,000 14% Other Reimbursement $ 370,700,000 06% Sales Tax on Lubricants, Title Fees, etc. $ 210,400,000 04% $5,759,100,000 100% State Highway Fund Disbursements - Fiscal Year ending 08/31/02 Highway Research, R/W, Design & Construction $3,511,200,000 63% Hilghway Maintenance $ 988,700,000 18% Administration, Support, Safety, Aviation, Pub Transp $ 648,600,000 12% Department of Public Safety $ 375,800,000 07% $5,524,300,000 106% Revenue Metrics: State Highway Fund 006 revenue metrics: o $140 million annual revenue from one -cent tax on sale of motor fuel $1.04 million to State Highway Fund $ 35 million to Available School Fund $ 1 million to Comptroller - 5 - o $151 million annual revenue from 5 -cent increase in tax on diesel fuel ■ $111 million to State Highway Fund ■ $ 37 million to Available School Fund ■ $ 1.5 million to Comptroller o $74 million from $5 increase in vehicle registration fee for all vehicles o $25 million from $5 increase in vehicle registration fee for trucks 100% of Tax Revenue Annual Revenue Stream Bond Issue Amount Annual Debt Service Amount Remainder for Pay -As- YOU -Go $.02/gal motor fuels tax $280 million $1.4 billion $140 million $140 million $.101gal motor fuels tax $1.4 billion $7.0 billion $700 million $700 million $.20/gal motor fuels tax $2.8 billion $14 billion $1.4 billion $1.4 billion 75 % of Tax Revenue Rhode Island $.02/gal motor fuels tax $210 million $1.05 billion $105 million $105 million $.10 /gal motor fuels tax $1.015 billion $5.25 billion $525 million $525 million $.20/gal motor fuels tax $$2.1 billion $10.5 billion $1.05 billion $1.075 billion 2 % motor vehicle sales tax 1 $887 million 1 $4.435 billion 1 $443.5 million 1 $443.5 million State & Local Motor Fuel Tax Rates (Dollars per Gallon, 2000) State Gas State Diesel 1. Connecticut .320 Florida .3140 New York .293 Pennsylvania .3080 Oregon 290 Oregon .29070 Rhode Island .2901 Rhode Island 29070 5. Hawaii .288 Hawaii 2880 Wisconsin .273 New York .2795 Montana .270 Montana .2775 Florida .264 Nevada .2775 Pennsylvania .259 Wisconsin .2730 10. West Virginia .2535 Arizona .2700 Idaho .250 West Virginia .2535 Nevada 2475 Idaho .2500 Nebraska 245 Vermont .2500 Utah .245 Nebraska .2450 15. North Carolina .242 Utah .2450 Maryland .235 Maryland 2425 Washington .230 North Carolina .2410 Delaware .230 Washington .2300 Maine .220 Maine .2300 20. Illinois .220 Kansas .2300 Ohio .2203 Iowa .2250 South Dakota .220 Delaware .2200 Colorado .220 Illinois .2200 Arkansas .215 Ohio .2200 25. North Dakota .210 South Dakota .22003 Kansas .210 Arkansas .2150 Massachusetts .210 North Dakota .2100 Tennessee .210 Massachusetts .2100 Iowa .200 Colorado .2050 30. Louisiana .200 Louisiana .2000 Minnesota 200 Minnesota .2000 -6- Texas .200 Texas .2000 Vermont .200 NawHmmpshirc.1HSD New Hampshire. 185 New Mexico .1950 35. Michigan .190 A|obmnmm .1900 New Mexico .185 Connecticut .1800 Mississippi .184 Tennessee �1800 Arizona 180 California �1800 Alabama '180 Missouri .1700 40. California .180 Virginia .1800 Virginia 175 South Carolina .1600 Missouri 178 Wyoming .1600 Oklahoma �170 Indiana .1800 Kentucky .194 Michigan .1500 45. South Carolina .190 Mississippi .1440 Wyoming 160 Oklahoma .1400 Indiana .150 New Jersey .1350 New Jersey .105 Kentucky .1340 Georgia .105 Georgia .1050 50. /\|omko .DBO Alaska .0800