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What I learned from the PBOT Financial Task Force report

Posted by on February 7th, 2013 at 4:33 pm

Cover of PBOT Financial Task Force report.
Download it here (PDF) –

In December of last year, the Portland Bureau of Transportation (PBOT) published a Financial Task Force (FTF) Report. The 22-page document (PDF) gives an overview of the bureau’s budget, outlines its vulnerabilities, and most importantly, gives recommendations for new revenue streams. The report should serve as an important resource in upcoming discussions about our transportation priorities. PBOT turned in their 2013-14 budget to City Hall on Monday and with cuts looming, the City Auditor questioning PBOT’s management — and a new mayor in town who has made it crystal clear he intends to take the bureau in a different direction — now seems like a great time to educate ourselves about PBOT’s finances.

The FTF report is the result of a directive from City Council given during last year’s budgeting process. With no end in sight to painful cuts and no new revenue ideas on the table, City Council tasked PBOT to put together a task force to develop a factual basis for future decisions. The task force that was ultimately formed and that signed off on the report includes 14 people from a variety of backgrounds. There are business leaders, representatives of government agencies (ODOT, TriMet, and so on), civil engineers, legal professionals, and others.

“… we also conclude that the structure of transportation funding is antiquated, unstable and in need of an overhaul.”
— From the report

Outgoing director Tom Miller said recently about the report that, “When council chooses to update our bureau’s revenue model, the analysis and recommendations of our task force will serve as a cornerstone for council’s deliberation and ultimate action.”

The main premise of the report is that current funding models are outdated (or “antiquated” to use their word). That refers a narrative many of you are already familiar with: We have a gas tax that has not kept up with inflation, while the cost of materials used to pave and maintain roads have skyrocketed. Meanwhile, people are driving less and gas mileage is improving (so people are buying fewer gallons of gas). And the gas tax is just one reason why PBOT is in a pinch (we’ll get to more below). The bottom line is, as stated in an introductory letter from the Financial Task Force in the report, “PBOT lacks sufficient funding to meet its mission.”

Another important part of the story that can’t be repeated enough is that Portland’s policy goals — to reduce emissions and get more people to walk, bike, and take transit — are in direct conflict with funding models that rely on people buying gas and paying for auto parking. Here’s how the report puts it:

“The Portland Plan calls for 70 of commuters to either take transit, bike, walk, telecommute or carpool by 2035. Achieving this goal without changes to the existing revenue structure would have devastating consequences for transportation funding.”

NW Broadway and Couch-4

One of the things that stood out for me in the report was how unpredictable the PBOT budget is. Only 4% of their budget comes from the City’s General Fund (based on the current budget year). The rest comes from a dizzying array of fees, bonds, grants, taxes, and so on. And those sources are unstable and unpredictable to say the least. Also, unlike utility bureaus like water and electricity, who operate with money from rates that are adjusting annually by City Council, nearly all the money PBOT relies on is largely out of their control — it’s left to the whim of politics and public behavior.

From the report:

“City Council controls four of the six transportation revenue sources. The city’s two most financially significant sources are controlled by the federal and state governments based on complicated distribution formulas.”

Here’s a chart from the report showing the breakdown of PBOT revenue sources (based on the current budget year):

As you can see, about one-third of PBOT’s revenue sources are from what’s generally referred to as “gas tax revenue” (this includes gas tax revenue from the County, the state, the feds, a weight-mile tax (on trucks), and an assortment of motor vehicle related fees). This 30% of revenue is tricky to predict because it’s based on complicated funding formulas and projections that are constantly being revised. Also, gas tax revenue is entirely out of PBOT’s control and the more successful the City is in encouraging people to drive less, the fewer dollars that source provides.

From the report:

“When [parking revenue is] combined with state highway fund revenue, 54 percent of the PBOT revenue is dependent upon the use of motor vehicles.”

Oregon raised its gas tax by $0.06 in 2011. Based in large part by projected revenues from the gas tax (and increased vehicle registration fees), PBOT committed itself to funding two major projects — Portland-Milwaukie light rail and the Sellwood Bridge. The Financial Task Force states that while neither of those projects is a PBOT responsibility, “Half of the city’s new revenue from the $0.06 gas tax increase will be committed to these new projects” (in the current five-year forecast).

Then, addressing a key criticism of the agency made by the recent PBOT financial audit, the report states:

“In honoring each [funding] request [from TriMet and Multnomah County], however, the city dramatically limited its ability to invest in its own street network as maintenance obligations and investment opportunities to advance critical freight and multimodal goals continue to grow.”

After gas tax revenue, the next largest source of funding — 23% — comes from parking meters and SmartPark garages. Since gas tax revenue cannot (by law) be spent on transit, the FTF report points out that parking revenue is prized for its flexibility. It can essentially be spent on anything PBOT and/or City Council deems worthy. However, since parking revenue is so discretionary, and it can be used to fund transit operations and maintenance, the FTF report points out a sobering reality:

“When the streetcar’s central city loop is expected to be completed in 2015, the annual streetcar operations cost is estimated to be $11.4 million. With state highway fund revenues unavailable to use in streetcar operations, the importance of parking revenue grows.”

Another 17% comes from services provided by PBOT to other City agencies (such as the bioswale curb extensions they install for the Bureau of Environmental Services’ “green streets” program). This revenue source is at the whim of the budgets in other agencies and is therefore considered quite unpredictable.

Add to that 4% of the budget from the City’s General Fund and 8% in various fees (like permits to use the right of way and System Development Charges) and you’ve got around 52% of the PBOT budget that is controlled directly by City Council (and the political horse-trading that comes with it). Council sets parking fees, they sign-off on intra-agency agreements (like the one with BES), they decide what PBOT expenses to fund through the General Fund, and they set fee amounts and decide which projects should be funded with them.

The remaining 17% of PBOT’s revenue comes from federal, state, and regional grants.

There is a tendency for the local media (and even the City Auditor) to blame PBOT directly for all sorts of funding-related decistions; but it seems unfair once you realize who holds the purse strings.

As for what to do about the woeful state of PBOT funding, the FTF report makes several recommendations for new revenue options.

The number one option they recommend are the sale of “general obligation bonds.” According to the report, the City’s Office of Management & Finance has already done the math:

“… a $25 average annual property tax increase could be used to support 20-year general obligation bonds that could provide approximately $108 million if applied to all properties citywide.”

The task force also recommends a street maintenance fee, an overhaul of parking fees (to a performance pricing model), a commercial parking tax, and they support statewide options like the vehicle miles traveled tax (being worked on by ODOT) and tolling. All of these are feasible and common sense ideas. It’d be a shame to put them off any longer.

Transportation is highly politicized in this town and I don’t see that changing any time soon. In fact, I have a hunch it will only become moreso in the months to come. The FTF report is a resource I hope contributes a factual and contextual framework to the debate.

Download the Financial Task Force Report here (PDF).

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  • 9watts February 7, 2013 at 4:43 pm

    Jonathan – very helpful overview. Thank you!

    (1) When people stop driving then our costs to maintain our transport infrastructure will also plummet. It isn’t quite so simple as laid out above.

    (2) How does debt service figure into this picture? Or is that just something ODOT is spending an increasing share of public funds on?

    (3) Raise the gas tax A LOT. Why is that not being proposed? It is the elephant in the room.

    (4) Maybe it is finally time to quit (reevaluate) the crazy expensive projects (proposed or underway) Street Car, Rose Quarter bloat, etc. and prioritize around projects that yield good benefits per dollar (I’m sure we all can think of a few).

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    • Jonathan Maus (Publisher/Editor) February 7, 2013 at 4:46 pm

      (2) How does debt service figure into this picture? Or is that just something ODOT is spending an increasing share of public funds on?

      From the report:

      in 2011 ODOT reported that all of its state highway fund revenues are now essentially committed to debt service, the cost of running the agency and maintaining highways, leaving virtually no state funding for capital projects.

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      • 9watts February 7, 2013 at 4:54 pm

        Hm. Maybe the CRC isn’t such a good idea after all?

        Thanks for clarifying that. I think this is huge and would love to understand better how this came to be and what can be done to back out of this situation.
        Just think if we compared how hamstrung ODOT is because of interest payments to Beth Slovic’s view of bike infrastructure costs as the culprit. Not that I think we need money for capital projects of the variety that ODOT keeps thinking up, but sending the money out of town/out of the state to some bank is hardly prudent when there’s work to be done.

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  • 9watts February 7, 2013 at 5:05 pm

    Who knew? In this article from three years ago the $$ from HB 2001 going toward bike infrastructure and the $$ from HB 2001 going toward debt service related to parking meter replacement costs is roughly equivalent: about $2M each.

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  • 9watts February 7, 2013 at 6:32 pm

    This is a weird report. The authors do not seem to have an overall concept when it comes to recommendations and are pretty credulous when it comes to Matt Garrett’s utterances.
    From p. 5 of the report, quoting Matt Garrett: “Nationwide gasoline use peaked in 2006 – before the recession and high gas prices reduced driving – and many experts project it will stay flat into the future as fuel efficiency increases and non-gasoline vehicles gain market share.”

    Garrett’s wrong. Gasoline sales are declining because people are driving less not because of shifts in vehicle preference or technological change-those are tiny blips, as the Sightline Institute’s report on this phenomenon made clear. http://www.sightline.org/research/shifting-into-reverse/ Of course, as ODOT Cheese Garrett can’t admit that because then he might have to also admit that all those projections of rising VMT on which their capital expansion projects rest are also flawed.

    “Fewer miles driven have a direct negative impact on the PBOT budget…” (p. 6)
    Also not true. For this to be true gas taxes & related user fees would have to pay for the full infrastructure cost of driving, but as we saw here recently, in Oregon gas taxes and other user fees only contribute about 36% toward the costs imposed by driving so every mile not driven should save PBOT money, lots of money.

    “Increasing the gas tax to align revenue with need for transportation services appears to be politically untenable.” (p. 6)

    This is just asserted. Nowhere is any evidence presented to support this claim. Of course if we keep saying it over and over and over eventually we’ll all eventually start to believe it to be true.
    While they spend no time at all on raising the gas tax they have no problem recommending full cost recovery for parking fees and leaf collection fees. They never explain why they treat these so differently.

    Notwithstanding their claims that the Street Maintenance Fee is: “Equitable; all property owners pay regardless of how they travel.” the authors’ fondness for a General Obligation bond and a Street Maintenance Fee as alternative sources of revenue don’t hold a candle to raising the gas tax as far as equity goes. Property owners who would pay both do not wear out our streets; car drivers and studded tires and trucks and buses do. If instead of going after property owners, we raised revenue directly from those who are wearing out our transport infrastructure (gas tax is a great example) we accomplish two things: discourage driving the extra mile and raise funds commensurate with the deterioration of the infrastructure.

    The authors are enamored of the supposed stability of these fees, the fact that unlike a gas tax they are insulated from, say, a decline in driving. But what they willfully ignore is that without all the driving we also would have vastly lower costs, certainly no need to keep expanding our freeways, and less need for the revenue in general they are so interested in. They’ve somehow missed some fairly basic relationships that most other countries have absorbed decades ago. Tax what places a burden on the infrastructure; discourage those activities and use the funds to encourage those that have a future. How hard can it be?

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    • Paul Cone February 7, 2013 at 7:11 pm

      You make no mention of the fact that a portion of the GTR goes to non-motorized transportation improvements, such as those for pedestrians and bicyclists, and encouragements towards using those alternative modes. Care to guess what’s going to get cut more proportionally this next budget year? A Street Maintenance Fee could make up for some of that?

      But really, that’s just a herring, because the big thing here is all the money that’s going for projects that aren’t really those “basics” that Mayor Hales has said he is going to be taking us back to.

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      • Chris I February 8, 2013 at 6:13 am

        A portion of the budget goes to non-car expenditures. The GTR and other user fees only cover about 2/3 of the total budget. So if a car requires a 30% subsidy, and a bike creates 5% of the wear/tear a car does (generous assumption), which mode should be preferred by PBOT?

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  • seeshellbike February 8, 2013 at 7:29 am

    So we have developed the new eastside streetcar without any designated funding source for operation and maintenance? Is this also true for the streetcar in general?

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  • Terry D February 8, 2013 at 8:11 am

    It would be good to include a “tiered model” when a street fee is put in place. By “Tiered” I mean: Have the monthly amount be tied in some way to how the individual’s property taxes are assessed in relation to the real market value.

    This sounds confusing, but a HUGE problem in property taxes collection is the way they are assessed. The properties were assessed in the 1990’s as a baseline and are only allowed to increase constitutionally by 3% a year without any regard to true market value, so there is significant discrepancy now between similar houses in different neighborhoods and is particularly stark with infill. In many inner “hot and trendy” neighborhoods that have seen an explosion in property value over the past generation, the tax assessed values are artificially low…yet they have the nicest infrastructure. At the same time in more outer neighborhoods that were not in that bad of shape when originally assessed, or are new infill, are paying much more in property taxes…sometimes by a factor of three……for a similarly sized house/ property….yet they have terrible infrastructure. This has created a lot of bad feelings and is inherently unfair, but not fixable without a statewide constitutional amendment.

    Bringing it back to the new street fee, those paying closest to true market value their property can pay $5 a month, those with significant discrepancy can pay $10, and those who are getting a STEAL on their property taxes can pay $15. There can even be some “low income abatement program” to protect elderly fixed income residents who have lived in their homes for decades…..Our household probably would fall into the middle category, but we are liberals who do not mind paying our FAIR share.

    This way those in new homes in outer neighborhoods or in-fill would feel like there is at least a little more fairness, even if this would only go a little way to equalizing things. It would be a little tricky to set up, but could bring in significantly more money until a permanent fix can be made at the statewide level on property taxes fairness. This also may be much more palatable to home owners who currently feel burned by the property tax system…..and those in old houses getting a steal….how can they defend themselves? Once the property tax system is fixed, the monthly fee would drop to the normal level……by then congestion pricing for tolling and parking can be instituted throughout the city where appropriate.

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    • 9watts February 8, 2013 at 8:17 am

      You make a good point about the unevenness of current property tax rates, but I fail to see why grafting ever more complex algorithms onto this already flawed assessment serves any of the purposes under discussion when we have simpler, cheaper, tested methods of raising funds that also serve a pedagogic purpose which no amount of tweaking will ever accomplish with property taxes.

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      • Terry D February 8, 2013 at 1:00 pm

        I agree with you completely about a long term fix, but that can not be done with current constitutional caps. Until that is fixed, we could try to equalize things out a little bit with the street fee….which could be passed quickly. All the property tax info is currently available on line.

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  • Oregon Mamacita February 8, 2013 at 8:20 am

    The decline in driving due to bike commuters is tiny. This anti-car BS will get us nowhere. Face it, cars will get smaller and cleaner. Bike Portland readers need to understand that they are a minority, and that there is going to be a backlash from people who don’t appreciate the “nanny state” mentality.

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    • 9watts February 8, 2013 at 9:04 am

      I’m not sure what you mean by anti-car-BS Can you explain?

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    • peejay February 8, 2013 at 9:45 am

      FYI: use of expressions like “nanny state” gets the commenter community to ignore you. Unless you’re the return of Vance, in which case, we’ll still ignore you.

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    • Chainwhipped February 8, 2013 at 10:39 am

      “Anti-Car B.S.” The world is bigger than you and your car, sweetie.

      Or rather, our collective cars. Your wild assumption about cyclists is very entertaining, given how many of us own cars and pay all the fees and taxes that go with owning and driving our cars, same as you.

      The smart money says that driving will still be legal 30 years from now – even in Portland. It doesn’t seem to matter how many people are hurt or killed by motor traffic, or how insane it is to park a car in Downtown Portland, or how absurd it is to throw $6k – $10k per year down the toilet to own a car. We will drive, and when we do we’ll somehow think it makes sense that we’re allowed to leave a 2,000 lb. chunk of personal property unattended in a public space for free.

      However, there are many people who simply can’t drive, and many more who shouldn’t.

      Anyone under 16 cannot drive.
      Many disabled citizens cannot drive.
      Many Seniors can’t drive.
      Anyone who has killed someone with a motor vehicle shouldn’t drive.
      While we’re at it, anybody caught driving double the speed limit is a definitive danger to the people and shouldn’t be allowed to pilot anything motorized for the rest of their lives.

      When so many people cannot or should not drive cars, how are they expected to get around?

      No matter how responsible we think we are as drivers, eventually each and every one of us reaches an age (if we’re lucky) when our eyes and our reflexes are so diminished that we will be unable to safely drive our cars.

      If we continue to direct transportation funding so heavily at a transportation mode that so many people cannot access, it will bite us all in the tookus. I wonder what it’s like to be 80 years old trying to cross Powell at 4pm on a Tuesday . . .

      PBOT is the Portland Bureau Of Transportation, not the Portland Bureau Of Cars.

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  • Andyc of Linnton February 8, 2013 at 11:33 am

    Very illuminating and informative, thanks for the insight.

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  • IanC February 8, 2013 at 2:45 pm

    This is why I love reading this blog. I appreciate the focus on very important local issues and a comment section full of intelligent responses and very light on the Trolls.

    From what I gather, road infrastructure, in all of its varied forms, is very expensive to build and the maintenance cost just keep going up as material (asphalt = scarce oil) costs just go up. These long-term costs barely get mentioned

    The streetcar is another example of unintended long-term consequences. A very expensive jewel in Portland’s eco-crown.

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  • David Hanna February 9, 2013 at 6:48 pm

    Get rid of prevailing wage requirements for construction projects. All tax payers are over taxed. Increases in taxes or new taxes will never create in the projected revenue. If you want to have enough money to really irove transportation infrastructure you must reduce the cost of creating and maintaining it. The only practical way of doing this is to eliminate the prevailing wage requirement in construction and maintenance projects.

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    • 9watts February 11, 2013 at 10:53 am

      That’s is an interesting take you have on the problem. The Germans wouldn’t agree with “The only practical way of doing this…” They have higher wages, typically, better health care and … a real gas tax that pays for everything related to transport infrastructure, or about 10x better infrastructure than we seem able to afford.

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