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Denver Regrets Not Using Revenue Ranges for Transportation Sales Tax

1 min readBy: Joseph Bishop-Henchman

One of the most common local sales taxes in the United States is that one for transportation funding. I grew up in San Diego County, where we have “TransNet“—a 0.5% sales taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. divvied up between freeways, local roads, and mass transit. The sales taxA sales tax is levied on retail sales of goods and services and, ideally, should apply to all final consumption with few exemptions. Many governments exempt goods like groceries; base broadening, such as including groceries, could keep rates lower. A sales tax should exempt business-to-business transactions which, when taxed, cause tax pyramiding. pays for few projects by itself but rather provides a little bit of funding to every project, in part to leverage state and federal matching funds. In 2004, 67% of San Diego voters approved an extension of TransNet to 2048.

In some areas, these transportation sales taxes are big pieces of the pie. Los Angeles has a total of 1.5% in transportation sales taxes, consisting of 0.5% approved in Proposition A (1980), 0.5% approved in Proposition C (1990), and 0.5 approved last year in Measure R. Together the taxes collect over $1 billion a year.

Denver, Colorado also has 0.4% “FasTracks” tax to fund the expansion of the city’s rail system. But with sales tax revenue dipping, officials are discussing an effort to double the tax:

RTD says it should have built in more time for environmental studies of FasTracks corridors, created a program-wide contingency fund for the massive project and provided a range of “best-case and worst-case cash flows” from anticipated tax collections rather than using exact revenue figures.

These are among the findings of a “lessons learned” analysis the Regional Transportation District has prepared on the financially troubled FasTracks program, which is $2.3 billion short of what is needed to complete construction by 2017.

It might be too-little-too-late for Denver, but RTD’s ideas on how best to project revenues should be taken to heart by other government agenices.