Archive for August 24th, 2012
Translink’s Fuel Tax problem – Part 2
In yesterday’s post I referred to a discussion that I had hoped to have with a member of Translink’s staff on the impact of lower than expected fuel tax revenues. I am pleased to say that this morning I spoke to Sarah Ross, the Senior Manager, Strategy and Plan Development. Rather than add to an already rather long blog post, I decided to make this a separate post. Comments are already published there, though not much that has been raised is affected by what we spoke about.
The materials in the presentation have not yet been to the Board, but was for a senior staff level discussion. The major concern is that the program presented in the Moving Forward Plan cannot now be implemented.
That had assumed that in addition to the 2c increase in gas tax, there would be additional funds from an increase in property taxes pending agreement of a new revenue source. Subsequently the Mayor’s Council withdrew the increase in property tax due to lack of commitment for the new revenue source from the province. At the same time the Translink Commissioner denied some of the proposed fare increase. It was not anticipated then that volumes of fuel sales would fall
“Motor Fuel Tax Revenues
“Under the 2012 Supplemental Plan, there will be an increase of $0.02 per litre in motor fuel taxes in Metro Vancouver beginning in April 2012. The 2012 part-year impact is $33 million, and the annual impact is $45 million by 2014. Total fuel tax is projected to grow to $417 million by 2021.” (Moving Forward p47)
While the fuel tax increase took place, revenues are not meeting target due in part to the fall in sales volume, but also because of the actions of the Mayors and the Commissioner.
What that means is that while the Evergreen Line capital plan can proceed, a number of other improvements are not going to happen. The most obvious one being the lack of funds for the promised rapid bus service over the new Port Mann Bridge when it opens later this year (and let us be clear, that promise was made by the Minister of Transport).
One of the things that has to be understood is that while we have lots of data on fuel sales (and fare revenue, ridership and property tax) this is not the complete picture that we need. As discussed yesterday, there are a number of possible explanations for the drop in fuel sales, but the one that is really needed is how much of that is due to people driving less. It is expected that this is probably more important than cross border shopping for gas, but we cannot tell that now. The good news on that front is the Trip Diary Survey undertaken in the fall of 2011 will start producing data next month. Add to that the screenline survey that takes place at the same (automated vehicle counts across the region) and we will begin to get a picture of the longer term trends in travel. There are more people in the region but vehicle ownership is falling in some parts of it (vehicle registration data). The composition of the fleet changes slowly (around a 16 year turn over) but overall fuel efficiency is improving.
Falling gas sales have also been noticed by US transit agencies – earlier than here – and they are even more reliant on gas tax than we are. The economy there took a bigger hit in 2008 and is slower to recover. Unemployment there is stubbornly high (and underreported). It is also important to stress that fuel prices have significantly changed – far more than gas taxes. For a long time economists thought that gas sales were inelastic, as so many people had little choice in the short term to change their behaviour in the face of rising prices. We are now seeing that behaviour is changing – for example households with more than one vehicle will chose to use the more efficient one for more trips.
The trend in behaviour change is clearer here than in the rest of province. “People in Prince George cannot cross border shop, and have fewer alternatives to driving” noted Sarah. Last year transit ridership increased by 7% – much more than in previous years, and this in a year when service was not increased, merely reallocated. There is no newer information on transit share of the overall market (“mode split” in the jargon) but is probably greater than the 12.6% seen in 2008. The 6% drop in fuel sales that occurred last year was not expected: the Base Plan has assumed an increase of 3%. Next month consultations will start on how much of the Moving Forward Plan can be delivered. My forecast of that is “not much”.
Translink has been aggressively pursuing efficiencies. The 2011 Service Optimization saw buses taken from low ridership routes and transferred to routes with “latent demand” (what the rest of us know as pass ups). Originally conceived as a one off exercise, it now will become a regular program, and its reach will extend from simply moving service around within a service area (for instance, moving bus service around within Langley) to movement from the lower service level parts of the region to those where demand for transit is already high. This can be expected to be politically much more difficult, as there is already the perception that some municipalities are paying for services delivered elsewhere. I think that most of the “low hanging fruit” in productivity gains has already been plucked. While Sarah said that the aim is to minimize customer impact, next year is going to see both a fare increase and service reductions at the same time. Those service reductions will hit hardest in places were service is already at lower levels than the denser parts of the region. The January fare increase is going to effect cash fares, which have not changed since 2008, which are used most by the poor (who cannot afford passes) and casual riders – those with the greatest choice of alternatives.
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Motor Fuel Tax
Motor fuel taxes achieve multiple benefits, as they raise revenues for transportation and also encourage future shifts to more sustainable modes of travel. This is a relatively stable revenue source in the near term; however, its effectiveness at reducing auto travel results in declining revenues over the long-term. As such, motor fuel taxes are less reliable as a long-term funding source. In 2011, motor fuel taxes make up approximately 27 per cent of TransLink’s overall revenue.
Moving Forward page 13
Recent increases in motor fuel prices have been greater than the increase in fuel tax in this region. The “relatively stable revenue source” has proved to be much less reliable than thought. Unfortunately this has also happened at the same time as arguments over other revenue sources have become more heated and less productive. While the City of Vancouver has been able to boast how driving is falling – especially in the downtown core – in other parts of the region there has always been less choice. Those are also the places closest to the border. Improved fuel efficiency, better trip management, working from home, more use of the internet for commerce all play some role, though without data it is simply speculative to assess their importance. What we do know is that sooner than anticipated the new Port Mann Bridge is going to open and without tolls initially – and with lower tolls until all lanes can be opened. The widening of Highway #1 is the bigger part of that plan (“The Gateway”) as is the South Fraser Perimeter Road – also now under construction. Billions of dollars poured into automobility in the most car dependant part of the region, where transit service is more likely to be cut than improved.
This is not just contrary to the regional growth strategy, it defies common sense. Use of the internal combustion engine for personal transportation is not just one the biggest sources of greenhouse gas emissions, it also the largest cause of premature death – not just from vehicle collisions (bad enough) but from the sedentary lifestyle that produces the deadly combination of obesity, type 2 diabetes and heart disease. The impact of those two factors alone accounts for much of the expected increase in health care costs of our aging population – increasing the percentage of adults who cannot (or should not) drive. In the part of the region where transportation choices are worst, choice will continue to decline. And this is a result of provincial government policies, and is supported by federal policy.
The consequences of very short term political thinking in BC and Metro Vancouver are producing less sustainable outcomes at greater cost. The shift from income taxes to sales taxes (such as gas tax) is profoundly regressive. People find themselves with declining disposable incomes as the range and amounts of fees and charges for essential public services increases (EI, CPP, MSP, bridge tolls, transit fares, school fees). It is not surprising that they take action where they can to reduce or mitigate the impact of those fees. Cross border shopping is not new in Canada. It is an entirely predictable outcome of a rising dollar, more concessions on what can be brought back duty free and the increasing difference in prices of all things – not just fuel. It does not help that the simple data that would enable more informed decisions to be made is often not collected, or is out of date by the time it is available – usually in the name of cutting public expenditures.
Next month sees a new round of consultations about transit – and how to pay for it. But the broader context which I have outlined above will not be addressed in that process. Once again we will see the unproductive collision of irresistible forces with immovable objects. And until we start to elect governments at all levels that are committed to change rather than business as usual, that will continue to be the pattern.
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