TUF in the Golden State: Can Transportation Utility Fees Support CA Transit?

A transportation utility fee (TUF) is based on the principle that transportation is a utility like water and electricity; therefore, transport users should pay for using transportation infrastructure and services like they pay water and electricity charges. To invest in transit services that attract and retain greater ridership, local governments have started to explore TUFs as a possible revenue source to fund transit, primarily collected as a monthly charge on customers' utility bills or property tax bills. New Mineta Transportation Institute (MTI) research, Transportation Utility Fee to Fund Transit in California, examines the legal environment for TUFs, the fee calculation methodology, the eligible uses, and other critical details about how these fees work—including the feasibility of employing TUFs in California to support public transit and meet the state's GHG emissions reduction goals.

Through a literature review, in-depth case studies of TUF programs, analyses of TUF-related court cases and California’s legal statutes, and expert interviews, this study found that:

• Close to 100 local governments across the US have adopted or are in the midst of adopting TUF or similar programs, but very few are using TUFs to fund transit.
• Regardless of the feasibility of employing a TUF in California as a fee, a special fee, an assessment, a general tax, or a special tax (or a parcel tax, which is a variant of the special tax), the legality of the revenue tool will likely be tested in courts.
• Each option has its pros and cons, but employing TUF as a special/parcel tax might be the most defensible legally. It will also allow TUF to be used jurisdiction-wide and by special districts as well.

Across the US, there are political and legal barriers to implementing a TUF, including in California, which has very restrictive statutory and constitutional requirements for a revenue source to qualify as a fee, imposing a new tax, and raising tax rates. Ultimately, TUFs provide an opportunity to conceptualize transit from a user-centric and broader mobility perspective and may prove to be a useful, practical cog in the complex transit finance wheel.

TUFs present transportation as a level-of-service-based utility that people pay for, just like other merit goods benefitting society, such as education and health care, which maximize social welfare, but—unless subsidized—are likely to be undersupplied. If TUFs are used to finance public transit, services can continue at current levels and maybe even be expanded and empower California to not only support safe, accessible, equitable transportation but also meet GHG emission reduction goals and fight climate change.

ABOUT THE MINETA TRANSPORTATION INSTITUTE

At the Mineta Transportation Institute (MTI) at San Jose State University (SJSU) our mission is to increase mobility for all by improving the safety, efficiency, accessibility, and convenience of our nations’ transportation system. Through research, education, workforce development and technology transfer, we help create a connected world. Founded in 1991, MTI is funded through the US Departments of Transportation and Homeland Security, the California Department of Transportation, and public and private grants, including those made available by the Road Repair and Accountability Act of 2017 (SB1). MTI is affiliated with SJSU’s Lucas College and Graduate School of Business.

ABOUT THE AUTHORS

Dr. Shishir Mathur is an MTI Research Associate and a Professor of Urban and Regional Planning at San Jose State University. He served as Associate Dean of Research (College of Social Sciences) during 2016-2019 and the Director of the Certificate in Real Estate Development during 2016-2020. Dr. Mathur has advised several international and national organizations, including the United Nations Human Settlements Programme and the Federal Transit Administration. Ralph Robinson is an Associate Planner with Good City Company. He completed his Master’s in Urban Planning at San José State University (SJSU), where he was recognized with an American Planning Association (APA) Outstanding Planning Student Award and a department service award.

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