Transportation Utility Study
ARTICLE 1: WHAT IS A TRANSPORATION UTILITY
What is a Transportation Utility?
A Transportation Utility is a municipal utility (like water and sewer) used to fund transportation related needs, including capital, operation, and maintenance costs. This utility would help pay for street repairs and reconstruction, as well as sidewalks. A Transportation Utility would apply to all properties within the City.
What is a Transportation Utility Fee (TUF)?
A Transportation Utility Fee is a user-based charge designed to help fund the City’s transportation needs. This would be billed out quarterly, similar to the City’s water and sewer bills.
Why would the City create a Transportation Utility?
The City has a large system of streets and roads. Maintaining and replacing them as they deteriorate is a significant cost. There are many streets that need repair and replacement, and the current property taxes do not provide enough funding to cover these costs. The City tried to enact a Premiere Resort Area Tax (PRAT), but the PRAT failed to pass in the State Legislature and is not an option at this point.
Why else would the City want to create a Transportation Utility?
Funding road and street repairs with tax dollars distributes the cost of this work by property value. Funding road and street repairs with a Transportation Utility distributes the cost by who uses the streets and roads the most and is the fairest method for street funding that is available.
Could the City spend the Transportation Utility Fee revenue on anything it wanted to?
No. The City can only spend this funding on transportation expenses like road repair and road drainage work such as storm sewer and ditching.
Would the money be spent on public transportation?
Couldn’t the City just leave its funding for the transportation infrastructure the same?
Yes, but the City has limited funds, and can only rehabilitate limited roadways today. If this were to continue, the roadways on which the community relies will continue to deteriorate, increasing vehicle repair costs for residents and businesses, lowering property values, and making the community less attractive for visitors and prospective businesses and industries.
How would the City decide how much each property owner pays for a Transportation Utility Fee?
There would be two parts to the fee. The much smaller part, called the Base Fee, would be used to pay the cost of running the utility – for instance, handling Transportation Utility billing and appeals. This part would be divided evenly among the customers, so everyone would pay the same Base Fee.
The larger part, called the Usage Fee, would be in proportion to how much the property benefits from the transportation infrastructure the City has. All developed properties would pay a Usage Fee based on their estimated trip generation. A property that generates many trips, like a gas station or fast-food restaurant, would pay a larger Usage Fee than one that sees fewer daily average trips, like a church or a bar.
How much would a residence pay?
The City is looking to raise $500,000 per year through a Transportation Utility to more adequately fund the City’s transportation needs. To raise these funds, the estimated monthly charge for a single-family residence is about $5.50. The Base Fee estimate is about $0.30, and the Usage Fee estimate is $5.20.
The City will hold a public information meeting to provide more detail on the Transportation Utility on January 19th, 2022 at 5:30 PM.
The next article will explain the basis of the Transportation Utility Fees, especially for nonresidential properties. The third article will compare Transportation Utility Fees to other funding options.
ARTICLE 2: HOW ARE TRANSPORTATION UTILITY FEES DETERMINED?
The prior article on Transportation Utilities explained the basics of a Transportation Utility. This article further explains how Transportation Utility Fees are determined, especially for nonresidential properties.
A Transportation Utility Fee is split into two parts – a Base Fee and a Usage Fee. Every customer would pay the same amount for the Base Fee, which would cover the cost to run the utility. The Usage Fee, the larger portion of the Transportation Utility Fee that would help the City fund its transportation needs, is based on the estimated number of trips a property generates. A property that generates more trips generates more usage on the roads, and would have a higher Usage Fee, resulting in a higher Transportation Utility Fee.
The trips a property generates is based off the type of property and typically the size of the building(s) on that property. A residential property or apartment unit will typically have 1 household, and each of these properties is charged the same base Usage Fee, regardless of the size of the house, apartment, or property.
For non-residential properties, each property is classified by the type of property (school, bank, gas station, etc.) to determine how many trips that property will generate, based on extensive traffic studies and manuals. Then the size of the building is considered. For example, a large office building that is twice as big as a small office building could be expected to generate twice as many trips.
Very low traffic properties include churches and industries. These locations may have very large parking lots, but people typically only come and go once a day or once a week. On the other hand, properties such as gas stations and fast-food restaurants see many vehicles come and go during the day. These properties generate traffic that creates more wear and tear on streets that serve them, and they are thus assigned a higher proportion of the costs because of the higher trip generation.
The goal of a Transportation Utility is to fairly distribute costs based on usage of City roads. In some cases, a non-residential property may generate significantly more or less trips then is typical for the property type. In these limited cases, a property owner will be able to appeal for a review of their property.
The City will be holding a public information meeting to provide more detail on the Transportation Utility on January 19th, 2022 at 5:30 PM.
The next article will compare Transportation Utility Fees to other funding options.
ARTICLE 3: WHAT OTHER FUNDING OPTIONS ARE AVAILABLE?
The prior two articles on Transportation Utilities explained why the City is considering creating one and how the fees would be set up. This article explains funding alternatives to Transportation Utility Fees, and why the City is considering using a Transportation Utility instead of Assessments or a Wheel Tax.
State and Federal Funding?
The City does take advantage of State and Federal funding as much as it can, through grants, State funds, and ARPA funding, and it will continue to do so. However, State and Federal money is not enough to meet the City’s needs, only certain types of projects are eligible for this money, it will typically only fund a portion of project costs, and State and Federal funds are not always reliable from year to year.
Premier Resort Area Tax (PRAT)
The City had worked to enact a Premier Resort Area Tax to help pay for City projects. Voters in Tomahawk overwhelmingly approved a PRAT referendum in 2019. However, the City needed the state legislature’s approval to enact a PRAT. Unfortunately, the state legislature was not willing to do so, and it appears as though that will not change anytime soon.
Special Assessments
Special Assessments distribute costs for a project by each property owner along the project. Some or all of the costs for roadwork, curb and gutter, sidewalk and storm sewer can be assessed to the property owners. Each owner pays in proportion to how much of their property borders the street being replaced. For example, if a property had 80 feet fronting the street being replaced, and the cost per foot was $100, that property would face a special assessment of $8,000.
Wheel Tax
A wheel tax offers local governments the opportunity to create a local, annual vehicle registration fee. While they are simple to administer, they face two huge drawbacks: 1) they place almost the entire burden on residents 2) they cannot raise the amount of money the City needs without being extraordinarily high.
Increased Property Taxes or Additional Debt
The City could raise taxes through a referendum or take on more debt to pay for roads. However, the costs would be distributed to property owners by property value, which does not directly relate to road usage. For debt funding, there are additional borrowing and interest costs for debt, increasing the cost by 20-40%. The City has been using debt to fund road projects in recent years, but there is a limit to how much debt the City can take on, and even with debt funding the City is significantly behind on road repair work, which can be seen with the condition of many of the City’s roads.
Comparing the Funding Methods
|
Funding Method |
Additional Cost for Road Projects |
Cost per Resident |
Cost Allocation Fairness |
Cost Distribution by Customer Class |
|
Special Assessments |
Moderate |
None – Annually High – every 20-40 years |
Moderate – by road improvement |
Spread among all classes, including tax-exempt |
|
Wheel Tax |
Low |
High |
Low – by vehicle registered |
Almost all on residential |
|
More Debt |
High |
Low – but moderate with increased taxes |
Low – by property value |
Spread among all classes except tax-exempt |
|
More Property Taxes |
Low |
Moderate |
Low – by property value |
Spread among all classes except tax-exempt |
|
Transportation Utility Fees |
Low |
Low |
High – by road usage |
Spread among all classes, including tax-exempt |
- Comparison based on how transportation funding methods, projects, and costs are typically experienced in Wisconsin
While there is no perfect funding solution, a Transportation Utility stands out as a strong option to help pay for the roads the community needs. The City will hold a public information meeting to go into more detail on the Transportation Utility on January 19th, 2022 at 5:30 PM.