Ohio won’t save GCRTA, so let’s tax parking to fund transit instead

rta healthline buses

RTA HealthLine buses in downtown Cleveland (courtesy of Cleveland.com).

One of the biggest stories in Northeast Ohio right now is the Greater Cleveland RTA’s budget shortfall. It’s probably because of the company I keep, but my Facebook and Twitter feeds have been inundated with posts, comments, and tweets about every new update and public meeting for the past several weeks.

It’s a big story. GCRTA has reported that, in order to balance its books, it needs to cut expenses by $7 million this year. CEO Joe Calabrese and his staff have proposed a suite of route cuts and fare increases to plug this hole. Options include raising the base fare from to $2.50 per ride from $2.25 currently, increasing paratransit fares to $3.50 from $2.25, and curtailing or eliminating bus service along 18 routes. Alternatively, the agency could maintain existing service and increase the normal fare to $2.75 per trip.

Rather than just approving some combination of these options, the GCRTA Board of Directors tabled this discussion at its December 2015 meeting, opting to hold a series of 15 public meetings around the county. The last of these hearings occurred on Wednesday, and the ball is now back in the Board’s hands.

If I had to wager, I would guess they’ll raise fares by $0.50 to minimize the service cuts. Keep in mind that Cleveland has already cut annual bus revenue miles by nearly 40% since 2006, the single largest decrease in the country, according to Jake Anbinder of the Transit Center. Given the nearly overwhelming opposition to some of these service cuts, making it that much harder to get around town seems pretty untenable.

In addition to hosting this litany of hearings, Mr. Calabrese testified before the Cleveland City Council Transportation on Wednesday. He came to distill the agency’s challenges, justify its plans, and hear feedback from the Committee members. For the most part, the tenor from the Council members was pretty standard – they all agreed GCRTA is in a tight spot, they opposed service cuts in their wards, and they pilloried the State of Ohio for not doing its part.

Enough ink has been spilled – including by me – on the sad state of public transit funding in this state, so I won’t belabor the issue. Suffice it to say, as I once did, that I’m not sure it would be possible for Ohio’s elected officials to care less about public transit if they tried. Hell, even if Ohio devoted every one of the $7.3 million it kicks in for public transit to GCRTA, that would barely be enough to paper over its budget hole. The state needs to fund transit, full stop.

We can’t depend on Ohio to fund transit

But, while I don’t like cutting service on the 81 to the Lakeview Terraces or raising paratransit fares, I found myself agreeing most with Councilman Zach Reed. It was strange. I rarely see eye-to-eye with Councilman Reed on transportation issues, but his comments were dead on. He called on local officials to disabuse themselves of the notion that Ohio is suddenly going to find religion on transit funding.

Instead, Councilman Reed broached a subject that most local officials have sidestepped – we need to increase local funding for transit. Currently, GCRTA gets around 60% of its funding from a 1% county sales tax assessed in 1970. But this tax generates far less revenue today than it did in 1970; population loss costs the agency nearly $68 million in funding each year. That could close this budget hole nearly 10 times over.

gcrta sales tax revenue

Sales tax revenue by year (courtesy of GCRTA).

Additionally, Councilman Reed was the only person to note another key detail – federal and state transit dollars come with strings attached, including the local match requirement. Local governments need to cough up 20% of the cost of a project in order to spend federal transit dollars. This issue has increasingly become a hurdle. According to ODOT’s transit needs study (see page 46 of PDF), the state is sitting on more than $21 million in transit funding that it cannot disperse due to a lack of local matching funds. We need more transit spending for Cuyahoga County from Cuyahoga County; there’s no way around it.

Granted, continually increasing taxes on a shrinking population to fill budget gaps is a recipe for disaster. But not all taxes are created equal. There are certain levers that officials can pull to help rectify social harms and raise funds at the same time. And since sprawl is among Cleveland’s most pressing issues, taxing land uses that promote it can be beneficial. So let’s tax parking to fund transit.

Cleveland already has a parking tax, but…

First, I’ll note that Cleveland already taxes parking.* In 1995, City Council approved an 8% sales tax on commercial parking transactions in the city. This tax raises roughly $10-11 million per year for the City’s coffers. Or it, would if Council hadn’t passed this tax as part of its plan to finance a new Browns stadium. Cleveland doesn’t actually see a dime of this money, as it just goes to pay off debt from bonds issued for FirstEnergy Stadium. Argle bargle.

The easy way to raise funds for transit would be to simply raise this existing tax. Compared to other cities with this sort of tax, Cleveland’s is relatively low. New York City, Miami, and Los Angeles impose taxes of 18.5%, 20%, and 25%, respectively. Pittsburgh, which has impressively progressive transportation policies, imposes a 50% tax. Cleveland could, say, double its tax to 16% – raising $10 million per year for transit – and remain on par with other cities.

Unfortunately, despite its ubiquity, this tax is flawed. Because it’s assessed on reported transactions, parking lot operators have an incentive to underreport their sales, something that has occurred in Cleveland. Additionally, it can have the unintended consequence of reducing the supply of paid parking and increasing the supply of free parking in city centers.

According to a study (PDF) from the Victoria Transport Policy Institute (VTPI), “it makes urban centers relatively less competitive compared with suburban locations where parking is unpriced. In this way, commercial parking taxes can increase total parking subsidies and sprawl.” Not only are we wasting the revenues from our parking tax to subsidize a football stadium, the tax itself may be contributing to urban sprawl. Argle bargle.

Taxing parking lots by surface area instead

What other options exist? A number of cities outside of the US – chiefly in Australia and Canada – take a different approach. They levy a tax on the total area of surface parking lots or on the total number of parking spaces. In this way, the tax generates a double dividend; it produces tax revenue while also driving down the demand for parking and reducing congestion.

Following the advice of a study from Eran Feitelson and Orit Rotem, I propose that we implement a tax on the surface area of private parking lots. But this tax would be imposed based on the square footage of each lot at ground level; this would ensure that a surface parking lot like those blighting the Warehouse District would have the same tax burden as a 4-level parking deck with a comparable surface area on each level. Not only would this create revenue and cut into parking demand, it would also push developers towards parking decks, as the effective tax per parking spot falls with each additional level added.

Moreover, the supply of free parking in the region would decrease, as developers would now have a greater motivation to recoup tax expenditures by charging. There is a legitimate risk that hiking up parking taxes could push people away from downtown or other districts within Cleveland. Accordingly, this policy should be implemented at the county level. Doing so would increase the cost of developing in suburban and exurban areas, relative to the city center, because the latter has an existing supply of parking decks and underground lots.

Because this would be applied countywide, it would be essentially a commuter tax imposed on both county residents and those people who live outside but enter the county to work, go to school, shop, see a sporting event, etc. This would help to address the types of equity concerns we face when dealing with similar taxes, like the Sin Tax.

Coincidentally, ODOT actually explored the idea of levying an annual tax on parking spaces to fund transit all the way back in 1993. The agency estimated (see page 20 of PDF) that this sort of tax could generate $187.3 million per year. If we adjust for inflation, that would be equal to $307 million in 2016 dollars. If we conservatively assume that a tax in Cuyahoga County could generate 10% of this revenue, that would still equal roughly $30 million per year.

Excess parking is a scourge for urban areas. It consumes valuable land, encourages driving and sprawl, contributes to air pollution and climate change, increases surface runoff, and harms water quality. On a good day, GCRTA struggles to compete and keep its budget balanced. Parking makes this challenge that much harder. So let’s try to remedy our incentives and tax parking to fund transit.

 

*Credit to Cleveland real estate lawyer and part-time blogger Christian Carson, whose 2014 post helped put me onto this idea.

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