Taxes and fees recommended as solution to Pennsylvania’s $450 million transit problem

Transit in Pennsylvania is speeding toward a funding chasm, but a group of government and business leaders have fixes in mind.

Increase income or sales taxes. Impose congestion pricing. Add fees for Uber and Lyft. Or give counties the ability to raise funds for transportation directly. Some of these alone or several combined could generate the $350 million to $450 million a year public transit needs.

These ideas were among almost four dozen proposals offered Monday by a panel of state officials and business leaders tasked almost a year ago to identify ways to create reliable transportation funding. The group, called the Southeast Partnership for Mobility, is agnostic on which proposals are the most feasible, but by outlining the pros and cons, their report stands to be the first word in a coming legislative funding debate.

“I don’t think the current budget for the commonwealth has $450 million that we can shift over to transit,” said Mike Carroll, the top Democrat on the Pennsylvania House Transportation Committee.

A major source of transit funding — $450 million a year from the Pennsylvania Turnpike — is threatened by a lawsuit pending in federal court challenging the funding mechanism’s constitutionality.

In any case, that funding is unsustainable, officials said, due to the debt the Turnpike Commission incurs to make those payments and legislation that would shift the funding responsibility in 2022. The turnpike’s debt load is up to $13 billion, driving the costs of tolls up 6 percent every year.

Meanwhile, the state estimates that even if the $450 million were sustainable, it isn’t enough. Transportation Secretary Leslie Richards estimated the state needs $650 million a year for capital expenses to properly invest in transit.

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The report issued Monday argues that the state can’t afford to wait to act.

“The do-nothing option ... will constrain growth in the city, that will constrain growth in the suburbs,” said Paul Levy, head of the Center City District and a member of the panel that assembled the report.

It weighs the pros and cons of 18 state funding options. They include increasing the state income tax, taxing car ownership, fees for ride-share companies, and a tax based on how many miles a person travels in a personal vehicle, an option that has been part of the discussion nationwide as a replacement for gas taxes as the primary means for funding transportation.

The report also looked at 25 local taxes and fees that could contribute funds to transportation. Counties could be given leave to set aside a portion of property taxes from all new development for transportation, or raise taxes on cigarettes or liquor. Zoning changes could convert public land to private development. Or SEPTA’s fares could be increased by 20 percent. SEPTA relies on local funding from the five counties it serves for about 11 percent of its capital funding, which is about six times less than the local contributions in New York City, Chicago, Dallas, and Houston.

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The report estimated the revenue each approach might raise. It’s likely that some combination of these options will be needed to resolve the funding crisis. Raising taxes or fees, though, is a hard sell in Harrisburg, and many of the options proposed require state legislative action.

“Whenever you’re having a conversation that involves hundreds of millions of dollars," Carroll, of Avoca, said, “that is always a complicated conversation in the state capital.”

Compared with other states, Pennsylvania has an above-average tax burden. The state ranked 15th nationally for state and local tax burden, according to an analysis by the Tax Foundation. In 2012, the most recent year of data available, the analysis found that each Pennsylvanian paid $4,589 in state and local taxes, or 10.2 percent of total state income.

The state’s gas tax — the highest in the nation at 77.1 cents per gallon — generated $3.74 billion in the most recent fiscal year and is levied to pay for transportation projects and funds about half of road improvement costs in the state, but can’t be used for transit.

A ruling against the Turnpike Commission in the federal lawsuit could dry up a major source of transit funding overnight. It was brought on behalf of truckers who argue that the excessive cost of tolls is inhibiting interstate commerce

Even a no-decision in that case could cause a crisis. The Turnpike Commission has missed its last three payments to the state because of the possibility of the suit’s success and could miss a fourth payment at the end of this month. The state has been able to make up the difference for much of that money in the last year, but if the suit remains unresolved by the start of the new fiscal year July 1, the state will no longer be able to offer aid.

The Philadelphia region would be hit particularly hard. SEPTA receives about $232 million of the turnpike funding, and about 70 percent of all state funding for transportation. Not only would new projects grind to a halt, but within a year, SEPTA would lose the ability to pay for basic maintenance, SEPTA has said.

The Republican committee chairs from the House and Senate Transportation Committees didn’t respond to calls for comment on the report, but Martina White, the Philadelphia Republican who chairs the House public transportation subcommittee, did issue a statement Tuesday.

“I believe we must value taxpayer dollars while ensuring that necessary investments in our transportation infrastructure are made," she said, "so Pennsylvania can become more economically competitive and create good paying jobs for Pennsylvania workers.”

The Southeast Partnership of Mobility included representatives from the major business interests in the Philadelphia region, including Brandywine Realty Trust, Independence Blue Cross, Comcast, and the University of Pennsylvania, and met four times over 10 months to outline a vision for the region’s transportation and consider funding solutions. Because of two state funding bills in the last 12 years, SEPTA has experienced a period of growth that officials say has played a role in the city’s revitalization.

“This is an investment in growth in the Southeastern region that will have benefits to the state as a whole," said Levy.

SEPTA officials note that the majority of the city’s population growth from 2010 to 2017 happened along the Market-Frankford and Broad Street Lines. Southeast Pennsylvania’s five counties, which represent 5 percent of the state’s land, generate 41 percent of its economic output and 36 percent of the general-fund revenue. Yet SEPTA’s capital budget of about $700 million is dwarfed by that of transit agencies in other metropolises like Chicago, Washington, and Boston.

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The group identified key projects for SEPTA and the Pennsylvania Turnpike, which would likely be funded with a combination of local, state, and federal money.

For SEPTA:

For the Turnpike:

Recent data show both Regional Rail and the subways have reported increased ridership in 2018. At the rate of growth in Philadelphia, train service could be overwhelmed with riders in a matter of years, SEPTA officials said. The four projects collectively would generate $17.1 billion in tax revenue, an Econsult report concluded, and create almost 150,000 jobs.

Staff writer Laura McCrystal contributed to this report.