Transportation Utility Fees

Ewing, Reid, Government Finance Review

A study of 10 local governments' experiences with TUF ordinances spotlights those features that courts have upheld as representative of a fee rather than a tax.

Historically, cities and counties paid for roads with taxes and special assessments. Since the mid-1980s, localities in certain states also have imposed transportation impact fees. Even while tapping all these sources, many localities find their road needs outpacing their revenues. Property tax hikes are death politically, and transportation impact fees can be used only to meet the needs of new development. Local governments must come up with the funds to operate and maintain the new roads built with impact fees and to eliminate congested conditions on existing roads. These are precisely the uses of funds for which transportation utility fees (TUFs) are intended.

In jurisdictions with TUFs, roads are treated as a public utility, and developed properties are charged a fee for service in much the same way they are charged for water, sewer, trash collection and, increasingly, stormwater utility services. Like other utility fees, TUFs are imposed on a jurisdiction-wide basis and continue in perpetuity, financing ongoing operations.

In June 1992, Port Orange, Florida, became the 10th U.S. city (and the first east of the Mississippi River) to adopt a TUF. Initially, TUF funds will replace a 0.287-mill subsidy from the city's general fund and eliminate a shortfall in the city's road maintenance budget. Eventually, funds will be used to pave dirt roads, construct bike paths, and reconstruct and widen deficient city streets.

This article discusses legal and practical issues faced by Port Orange and others adopting TUFs. Findings and conclusions are based, in part, on a survey of localities with TUF ordinances. A nationwide search in late 1991 uncovered nine such places outside Florida. Exhibit 1 delineates the key characteristics of those TUF ordinances.

Main Advantage of a TUF

Use of a TUF to fund road maintenance has one compelling advantage over the common alternative of reliance on property tax receipts from the general fund. With a property tax, a significant percentage of traffic generators pay nothing due to their tax-exempt status. In contrast, with a TUF, every local traffic generator pays to support the local road system. Some inequity creeps into a transportation utility fee schedule because road use usually is estimated rather than measured and because estimates are based on averages for entire classes of property. Still, this shortcoming may be less problematic than the exemption of entire classes of developed property from any financial contribution to road maintenance. In Port Orange, the amount of tax-exempt property getting a free ride was a sore point with local officials.

Tax or User Fee?

In Florida as in most states, localities may levy taxes only if specifically authorized by state law, whereas they have blanket authority to charge user fees. The object in structuring a TUF, therefore, is to make it as much like a user fee and as little like a tax as possible. A TUF imposed by Fort Collins, Colorado, was upheld by the supreme court of that state when it was determined to …

Questia, a part of Gale, Cengage Learning. www.questia.com
Publication information: Article title: Transportation Utility Fees. Contributors: Ewing, Reid - Author. Magazine title: Government Finance Review. Volume: 10. Issue: 3 Publication date: June 1994. Page number: 13+. © 1999 Government Finance Officers Association. COPYRIGHT 1994 Gale Group.

This material is protected by copyright and, with the exception of fair use, may not be further copied, distributed or transmitted in any form or by any means.