Posts Tagged ‘gas tax’
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.
Translink’s Fuel Tax Problem
I was going to put EXCLUSIVE in large capitals in the title – but I have no reason to want to claim this information as my own. It is, after all, public domain or ought to be.
Last week, when I attended the SFU evening lecture (“Kiwi Urbanism”) I talked to Bob Paddon who is now Executive Vice President, Strategic Planning & Public Affairs at Translink. He was there to do a brief introduction, as Translink had made the contribution that made the evening possible. I started making notes as he spoke to me before the proceedings started. The discussion was prompted by me asking if the Evergreen Line funding was indeed “locked in” as the province has been saying. He assured me that it was, but then he went on to say that Translink is noticing an increasing gap in its revenue expectations. There has been quite a lot of information recently about how people are driving less in general. Much of the supporting information that I have seen has come from US sources – where the economy is taking much longer to recover from the recession and unemployment remains stubbornly high. While Canada has been somewhat better off, people are getting increasingly anxious as their disposable income has been static or declining. Gas prices in Vancouver have been a very high levels – although much of the local impact was attributed to a fire at the Cherry Point refinery and that capacity has since been restored. Not only are people driving less, but they have been getting more fuel efficient vehicles. To some extent, the reduction in driving can also be attributed to the opening of the Canada Line. I would like to be able to point to other major transit service improvements: apparently ridership is at least holding up under the present circumstances.
Bob later sent me a presentation, that examines the data on fuel sales that Translink has been looking at. He said that he would also provide me with a contact in the planning department with whom I could discuss this document, but so far I have not been able to have that discussion. Since a week has passed since I heard about this issue, I have decided to publish anyway, and stick to my own interpretation of what is a somewhat complex issue.
First, some context. In very rough order of magnitude Translink gets about half its revenue from taxes – and about half of that has been coming from fuel tax. The last Annual Report put it this way
Fifteen cents per litre fuel tax is applied to gasoline and diesel fuel sales in the transportation service region, with gasoline sales being 83 per cent of total revenue. Revenues are $12.5 million (3.9 per cent) unfavourable to budget. Total sales volumes in TransLink’s region have declined from the previous year by 5.3 per cent.
Over the last year the monthly revenue received from the Province has shown significant volatility. As a result of the carbon tax legislation changes made in 2009, the taxation process for fuel tax revenue has changed, which makes it difficult to forecast and compare trends. Another significant challenge of the revised process is the timing and magnitude of credits/refunds, which could go back four years. Discussions are underway with Consumer Taxation to examine the revenue capture and reporting systems. Further analysis will continue in 2012.
TransLink region experienced a decrease of 5.9 percent in 2011 fuel sales volume. High prices of fuel and a strong Canadian dollar would have contributed to the decline in fuel sales volume, which likely migrated to Fraser Valley Regional District and Whatcom County.
You can easily check yourself what gas prices are like by going to Gasbuddy.com. That is where I got the following information – and of course the volatility of gas prices means that the actual amounts will be changing continually, but this morning while gas prices in Vancouver were around $1.27 per litre, in Abbotsford they were $1.25. Since gasoline there does not carry the 15c/l that it does in Vancouver, you can see that some retailers are doing very well. Just over the border the average price (converted to litres, and assuming the dollar is at par) is $1.05. Bellingham is slightly lower at $1.0435 and Point Roberts (just one report and a bit out of date) was at $1.1492.
There have been reports recently of increased border crossings due to new higher duty free allowances – but that of course applies to overnight and longer trips. A savings of 20c per litre is obviously attractive, and people with high consumption vehicles are finding it worthwhile to buy large gerry cans to fill up at the same time as they fill their tanks. (The story about someone filling up garbage bags with gasoline turns out to have been a misunderstanding).
The following graph is one I concocted from the 2011 Translink Annual Report
This is perhaps not very beautiful as a graphic, but then it is the first time I have had to do anything like this for a number of years. It does show that Translink did get additional revenue as a result of the increase in gas tax, but as a share of the total, gas tax has been declining. From around 30% in 2007 to 26% last year.
The information in presentation that Bob sent me attempts to understand this and project its impact forwards. You can download the whole thing (TL Fuel Research – Rev Mgmt Comm – July 31) if you wish. I am just cutting and pasting the graphics
This shows that while there has always been volatility in reported sales volumes this became much more pronounced when reporting requirements changed due to the introduction of the carbon tax.
This graph shows gasoline sales only (not diesel) and also indicates an increasing divergence between Ministry data and that of the industry (Kent is a consulting company that collects fuel sales data).
This year fuel sales have been declining generally
The “leakage” trend is not as clear – but note that there is no data for the cross border shoppers
Declining demand may be more prevalent this year (note that the data now refers to absolute volumes, not percentages as above)
The really big change is the decline in diesel sales
The presentation can only speculate about why this might have occurred.
- Reduction in trucking activity in Metro Vancouver?
- Purchases in the Fraser Valley?
- Fuel switch in heavy-duty vehicles?
For example, garbage trucks in Vancouver have recently been converted to use natural gas instead of diesel.
There will continue to be research into these trends. The last slide of the presentation shows the intended structure of the work
The problem, of course, is that extrapolating from previous trends is a bit like steering a ship by studying its wake. There is nothing in the presentation about mode share – nor does that appear in the annual report. The broader transportation survey that might help address that issue only happens once every five years, and of course the census data on journey to work – which was one of the few very good indicators – is no longer collected with the scrapping of the long form.
There is something happening here. People are not driving as much – some of that is due to better trip chaining, switching to walking and cycling, use of new media (no one goes to the video store any more now that they can download movies, most banking is done on line too). One of the drivers is not just that gas prices climbed but the expectation is that they are not going to get any cheaper. Cutting spending at the pump is one of the few areas where individuals can actually influence the outcome of their own personal budgeting. The decline in gas sales has been going on for a long time, as the reduction in the number of gas stations makes apparent. The decision to implement tougher corporate average fuel economy standards for vehicles also means that recent technological improvements have been directed more at fuel efficiency than performance.
There always has been some “leakage” across the border – and out into the valley. But the Gasbuddy information seems to support my own view that much of the difference between gas pricing on ether side of the Langley/Abbotsford line has been swallowed up by the gas companies. The decision to go to the US means that people are planning ahead to make a trip just to get gas and put up with sometimes long waits – and much engine idling. Clearly those who are going down are not just buying milk. I can clearly recall warnings that we used to issue when discussing the potential for greater gas revenue, that the wider the gap between gas prices in South Surrey and Blaine, the greater the revenue loss would be. Of course we had no real data then either – just lots of anecdotal “evidence”.
What Bob Paddon was saying to me last week was that this needs to be incorporated in future assessments of Translink’s finances: they are currently off $30m a year in their fuel revenue expectations. Which in a $1.2bn budget is not a disaster, but obviously has to be replaced somehow. In general the organization has done all it can to find efficiencies – as demanded by the Province and the Transit Commissioner – but as this trend seems likely to continue, future cuts will have to come at the expense of service, as there are no longer the opportunities for savings that have already been achieved.
2c for your thoughts UPDATED
When the news radio called me about the Mayor’s “decision” to ask for 2c on the gas tax to pay for the region’s share of the Evergreen Line, I did not think I had much to say about it. After all, it was merely a recommendation – and would have to survive the summer and some public consultation. I recognize that the summer is a slow news time, but the amount of coverage this proposal is now getting is surprising me, though not the level of the “debate” so far. Perhaps the least expected contribution came from BC’s answer to Sarah Palin.
“When British Columbians say that they’re not really excited about paying more gas taxes, I get that. Because my focus as Premier is how do we make life more affordable for people rather than less affordable,” she said.
The Mayors were given very little leeway: they have to come up with a payment from this region’s taxpayers since the province and the feds have both already committed at their level. Since the current levels of taxes collected by Translink are only enough to keep on a current levels, the only way to raise $400m had to be an increase in currently permitted taxes. There is no time left in the funding agreement to come up with a new source so it either had to be property taxes or the gas tax, and the Mayors had made clear from the outset the very cogent reasons why property tax was not going to be the way they did it. Indeed, quite why our Premier thinks that the people of this region will like to see their property taxes raised is not exactly clear either. There is a $400m hit to our pockets and the only question is what is the most sensible way to do that. Property tax increases are no more “affordable” than gas tax increases.
As Geoff Meggs points out this also shows some lack of co-ordination inside Christy’s cabinet. Doesn’t she talk to her Ministers? Or is she deliberately trying to weaken Lekstrom?
The Sun gets itself into an interesting position “Transit taxes odious but necessary for growth of our city”. The link says that it is a “story” but there is no by line and it reads like an editorial. They sum up
“In the past, the province has stepped in and vetoed transit fundraising plans, including an earlier vehicle levy and a proposed parking stall tax. We hope that doesn’t happen this time.”
But Christy does seem to be ready to repeat the steps taken by the last caretaker premier, Ujjal Dosanjh – who went down to a stunning defeat in his last provincial election despite his last minute, and probably illegal, rejection of the vehicle levy.
For those of you who are of a mind to stick to the “no new taxes” mantra just take a read of what happened in California when they slashed their car tax. It is becoming very clear that the right wing belief that leaving money in tax payers’ pockets is the right thing to do in any set of circumstances is just that: a belief. Some people believe in Santa Claus too. Faith is holding on to a belief despite all evidence to the contrary. I have always been very much impressed by the American constitution’s requirement of a complete separation between church and state. What I cannot fathom is the right wing’s ignorance of why that is so important.
Added July 13
Blair Lekstrom is now saying that “he has the full support of Premier Christy Clark in agreeing to Metro Vancouver mayors’ plan for a two-cent gas tax increase for TransLink.”
“I stand behind what I’ve committed to,” Lekstrom said Wednesday, adding he has spoken with the premier and ensured they’re both on the same page.
“Nobody likes new taxes – I would concur with that.”
But he said the mayors can count on the province legislating the fuel tax increase this fall – as he promised – provided mayors formally vote for it in a pending financial supplement after public consultation and review by the TransLink commissioner.
“I will not waver one inch,” Lekstrom said. “This has gone on far longer than I think the public wanted.”
Clark has also penned a letter to mayors pledging her support, he confirmed.
Paul R. Landry: The TransLink tax merry-go-round
The head of the truckers’ association has a longish opinion piece in the Straight. It is not exactly helpful. The province has, predictably, rejected out of hand the suggestion from the Mayors, “business, labour, and environment leaders” to use $450m from the carbon tax to support Translink’s proposed ten year plan. The problems Translink faces are, after all, almost entirely of the province’s making. The province decided to build the Canada Line – and resorted to legislation to remove local control when the GVTA Board had the temerity to demur. But of course they were right – because they had learned from the SkyTrain experience that these very expensive grade separated rapid transit schemes cost so much that other needs – mainly lots more buses for the rest of the region – go unmet.
The province has also committed billions to road expansions – widening Highway #1, replacing the Port Mann and Pitt River Bridges, building the South Fraser Perimeter Road and so on. What the province refuses to do – and has done consistently, and no matter which party is in power – it regard transit provision in the lower mainland as in any way different to the rest of the province. Not that there is any other conurbation of 2m people anywhere else in BC.
Here is where Landry loses the plot
“Much of the burden will be borne by the 70-percent-plus residents who are road users, many of whom have no option but to use their car.”
Well exactly. the reason they have no option is that there is inadequate transit in much of the region – and it has been that way for years. That is what the GVTA was supposed to tackle – but was denied the financial ability to do so by the outgoing NDP provincial government. The problem now is the same only more so. In ten years, population growth, increasing decentralistion of employment and lack of investment in rapid transit in most of the region has made matters worse. Transit mode share has hardly changed – except at SFU and UBC thanks to UPass, which Translink simply cannot afford to extend to other post secondary institutions. And isn’t the Gateway program designed to meet the needs of Landry’s members? It certainly doesn’t do much for anyone else .
The outgoing Transport Minister was always very clear – he was quite happy to spend money building roads even if the P3 projects he favoured weren’t feasible. But he was not going to allow provincial money to be spent on increased transit supply unless both the region and the federal government each carried a third of the burden. Shirley Bond seems to be singing the same tune.
There is very little to indicate that the over 35 percent of TransLink funding likely to be collected from road users will result in any change from the historic average of four to five percent invested in roads and bridges.
And why should there be? We do not allocate the tax from tobacco to simply treating smoking related diseases. We do not impose a tax on sugar to pay for diabetes treatment – though that might not be a bad idea. And we only tax carbon as a way to reduce other taxes.
At one time Landry himself acknowledged that the more people gave up their cars and used transit, the better traffic conditions would be for his members. In nearly every city in the civilised world it has long been recognized that designing cities for cars does not work. Cities are for people – and until the middle of the twentieth century worked quite well, since most people did not insist on driving a car everywhere. Recent urban history shows that trying to accommodate cars is self defeating – traffic expands to fill the space available. Moving – and storing – cars is dreadfully wasteful of space. If all you had to do to be succesful was to build roads and parking lots then Detroit would be the most successful city in the world. Talk to most people about traffic and they will point to Los Angeles as the place they would least like to have to commute in.
Importantly, the plan does not include strategies to reduce operating costs by, for example, involving the private sector in transit operations or maintenance.
This is simply a red rag to a bull. We had a four month transit strike over this issue. Which, by the way, Translink won. It established that it does have the right to contract out services – but in order to preserve labour peace has committed to the present arrangements. HandyDART, some of West Coast Express – and shortly the Canada Line – are the only parts of the system that are contracted out. Whether or not extending this practice could actually cut costs matters not at all. The CAW will not let it happen.
This time around the province hopes that Translink will be able to force through an increase in taxation in the region that they hope will be blamed on Translink. And this sort of article will help that. The provincial politicians also know that it is four years before they have to go to the electorate again – and as the recent poll showed you can fool enough of the people enough of the time. Whether or not Translink gets it ten year plan the province has washed its hands of the problem will be busy taking credit for the short term congestion relief its road building program will provide at the next election. The fact that the present strategy is short sighted and unsustainable will not matter to voters then, but it will do eventually. I think it is unlikely that given the present economic climate, and the probability that things do not seem to be getting better any time soon, that Translink will get endorsement of its revenue raising proposals. Some kind of half measure is likely: the compromise that dissatisfies everyone equally.
Gasoline taxes denounced
Maureen Bader is an idiot. I saw her on the CBC News last night and choked on my thin crust vegetarian pizza.
Her thesis is that gasoline “is the new tobacco”. Actually that idea has some traction. But not the way she thinks. Government raises taxes on tobacco for two reasons. As a deterrent and as a way to pay for the damage that tobacco causes. There is a direct link between tobacco and health care costs. Just as there is a direct link between vehicle kilometres travelled and heart disease, obesity and type two diabetes. Of course that has nothing to do with the fuel used. It would apply to someone who drove everywhere in a ZEV instead of walking and cycling. Car use is also strongly linked to childhood asthmas, and other air pollution related diseases. As well as death and injury due to collisions (they should not be referred to as “accidents” as nearly all are avoidable). And if you look at smoking rates, they have declined, and smokers are now social pariahs. Just as SUV drivers are becoming.
She says
“More and more scientists are coming on record and saying that man-made global warming is probably not the cause of the global warming that we have been experiencing over the past few years.”
Which is almost worthy of George Bush. I hope the reporter is not guilty of misquoting. I challenge her to name one scientist who has said this in a peer reviewed journal. Yes there are climate changes due to natural causes like sun spots. But the long term correlation between anthropogenic CO2 and temperature increase – and the causative mechanism – are not easily dismissed except by those with an axe to grind.
She sneered at governments’ funding of public transit.
“Taxpayers have got to ask themselves: ‘Do we really need to have a $14-billion Cadillac transit plan when all the government is really expecting to see is maybe a five-per-cent increase in transit use?’ People here want to use their cars.
I might even agree with her on the $14bn “plan (which isn’t) but if she means an increase of 5 percentage points in mode share (not a 5% increase in ridership) I think that would be very good indeed. Because that is much better value for money out of our existing infrastructure. A 3m wide lane on a freeway moves about 2,500 people per hour. A 3 metre wide transit right of way can easily move 25,000 people per hour and more. In a place pushed for space, which is better value for your tax dollars? And cars need up to 5 or 6 available parking spaces – which mostly sit empty. And cars spend most of their time parked, not being used and depreciating. Not exactly a good use of resources.
But the idea that governments should cut gas taxes because people want to use their cars is bizarre. How do you pay for all that road construction and maintenance without gas taxes? Not to mention the ER capacity to deal with the victims of collisions.
And I have left the best until last – but it tops the Province’s story
gas taxes should be directed to encourage the car culture, not fund public transit
Please keep your comments to under 250 words
We do not pay much in gas tax here
The graphic below comes from the Economist and shows that, gas prices aside, and although we like to complain about how much tax we have to pay on top of that compared to nearly everyone – except the Americans – we get off pretty lightly
Although the selection is small I agree it is mostly places like us. Iranians pay hardly anything – but they are not on this graph
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