An increasing number of Wisconsin municipalities are considering a new source of funding for their transportation systems: transportation utilities. Our experts put together this list of FAQ’s to help you better understand the buzz surrounding this new utility and decide if it’s the right fit for your community.
transportation utlity faqs
What is a transportation utility?
A transportation utility is a municipal utility (like water and sewer) used to fund transportation infrastructure needs, including capital, operation, and maintenance costs.
What is a Transportation Utility Fee?
A transportation utility fee (TUF) is a user-based charge meant to augment other revenue sources and fund the maintenance and operation of a municipality’s transportation system. A transportation system includes streets, streetlights, traffic signals, signage, curb, gutter, snow plowing, and other related items.
Why would a municipality create a transportation utility?
Municipalities are caught between a rock and a hard place when it comes to financing important infrastructure projects. It’s a constant challenge to secure the financial resources necessary to fund and maintain municipal transportation systems, and tax levy limits bar municipalities from increasing taxes to generate revenue. However, Wisconsin law does permit the creation of utilities to fund specific municipal services. A transportation utility could provide enough resources to fully fund municipal transportation work.
When is the best time to create a transportation utility?
Soon! In 2013, the Wisconsin State Legislature recognized the rising popularity of storm water utilities and quickly moved to impose restrictions, ultimately passing a law that counts storm water utility fees against a municipality’s levy limit. Fortunately, municipalities with existing storm water utilities were grandfathered in. The current state legislature could enact similar restrictions on transportation utilities this budget cycle. Municipalities should move quickly and take advantage of this window to create a transportation utility without needing to do a referendum.
Download Transportation Utilities FAQ PDF:
How does a municipality create a transportation utility?
By passing an ordinance. Municipalities must do their due diligence by creating a fair transportation utility fee structure, credit policy, and appeals process. A consultant can help you effectively navigate this undertaking.
Are these utilities legal?
The League of Municipalities recently issued a legal opinion in support of transportation utilities. Since they’re relatively new, these utilities may face a legal challenge, but they will likely survive, just like storm water utilities did a few years ago.
Is a transportation utility fee (TUF) a tax?
No. A tax is collected to fund general government services, whereas a fee is collected from the beneficiaries of a particular service. In this case, TUFs are collected for the sole purpose of funding essential transportation infrastructure. TUFs are charged to property owners in proportion to the level of which their property benefits or uses the system.
do all properties in the municipality have to pay the tuf?
No. The municipality can create exceptions, i.e., for undeveloped properties. However, municipalities should charge TUFs to tax-exempt properties to help further distinguish the fee from a tax.
Can you explain how to develop a tuf in more detail?
Using data from the Institute of Transportation Engineers’ Trip Generation Manual, municipalities can determine the average number of trips per property based on property size and land use (for example, residential, manufacturing, school, etc.). The transportation system costs not covered by the tax levy can be allocated to each property in proportion to the number of trips the property generates.
How is the fee collected?
Just like other utility fees, municipalities should bill TUFs to property owners each month or quarter.
How much will the tuf be?
This depends on how much of the transportation system’s costs are funded by the transportation utility as opposed to the general fund. We recommend funding transportation needs from both sources.
will a TUF impact our general transportation aid (GTA) from the state?
Probably. The revenue from a TUF would impact the share-of-cost calculation that is used to determine the GTA for many municipalities. However, the relationship is not 1:1, and municipalities will not sacrifice a dollar in GTA for every dollar collected from a TUF. The formula used to calculate a municipality’s GTA will result in a much smaller ratio. We recommend completing a study to fully understand the financial impact of a transportation utility fee in your community.
Is this new fee a toll?
No. Tolls are physically collected from each driver for each individual trip. Transportation utility fees (TUFs) are calculated based on the estimated annual number of trips to and from each property, and they are collected like any other utility fee in a monthly or quarterly bill.
How does a TUF impact special assessments?
Some municipalities have replaced the revenue collected from special assessments with TUFs, as many residents prefer to pay the relatively small transportation utility fee each year rather than a large special assessment. However, municipalities can continue to collect special assessments as they see fit, and use the TUF to fund other transportation work.
Why wouldn’t a municipality use a wheel tax?
Because they are far less fair than a TUF. The state collects wheel taxes on a municipality’s behalf when residents pay their annual vehicle registration fee. Individuals and business without vehicles do not have to pay the tax but still benefit tremendously from the municipality’s streets. A TUF is charged to property owners based on how much their property benefits from the transportation system.
Wheel taxes are also unlikely to raise enough revenue to fully fund a municipality’s transportation needs. What’s more, the Department of Transportation takes a portion of a municipality’s fee in exchange for administering the tax.
LEARN MORE
Still not sure whether or not a transportation utility is right for your community? Please reach out to our experts today for 30 minute discovery call to learn more.
About the Author
Bridgot A. Gysbers
Economic Consultant
Bridgot recently joined the R/M team as a Financial Consultant. She has a diverse background in utility regulation, including 16 years of experience in municipal and investor-owned utility regulation in energy, gas, water, and sewer utilities. Bridgot developed the revenue requirement for a majority of the water rate cases regulated in Wisconsin and served as the lead auditor for several of the most complex investor-owned cases involving electric, gas, and water utilities. At R/M, Bridgot works to find financial and management solutions for public utilities.
