In 2002, states transferred $12 .7 billion to local governments for surface transportation. Of that, states intended $11.8 billion for highway purposes, $99 million for mass transit and $821 million for other local purposes. Local governments collected $2.1 billion in local motor-fuel taxes and motor vehicle receipts. Local governments collected $1.7 billion in toll revenues.10
Local government participation in addressing transportation priorities is increasingly important. Such participation may involve greater cost sharing on projects desired by the local community, but doing so requires that the state authorize funding options for local governments to meet expanded obligations. Local option taxes often are an effective way to meet growing needs.
Local option transportation taxes fund a variety of transportation-related purposes in 46 states.11 These taxes allow citizens in a local region to address pressing local needs that cannot be met with existing resources. A vote of affected citizens generally is required to proceed. At least 10 states authorize local option gasoline taxes, including Alabama, Alaska, Florida, Hawaii, Illinois, Mississippi, Nevada, Oregon, Virginia and Washington.12 In five states with such authority-California, Montana, New Mexico, South Dakota and Tennessee-no local governments have adopted such a tax.13 In Pinellas County, Fla., the county commission voted in March 2006 to assess an extra penny on each gallon of gas to pay for the installation of intelligent systems on heavily congested roads to create better traffic flow, including electronic message boards and smart traffic signals that adjust to the flow of traffic. The tax runs through 2026 and total gas tax in the county now totals 45.7 cents.14
Local governments in at least 34 states assess vehicle license and registration taxes.15 Thirty-three states authorize local option sales taxes for transportation capital projects, while 20 allow local taxes for transit.16 In California, local sales taxes approved by voters for transportation purposes raise $2.6 billion annually.17
In 15 states, local income or payroll taxes generate a limited amount of transportation funding.18 Other local option taxes include lodging taxes, severance taxes and development impact fees.19 Other local revenue sources for transportation are parking fees, street utility fees, property taxes and local improvement districts. Local governments also issue revenue bonds and general obligation bonds to pay for transportation projects.
Locally generated transportation revenues are an important source for both local and state transportation projects. Local payments to state government generated more than 4 percent of the state's total transportation revenue over six years in Alaska, Arizona, California, Nebraska and Wisconsin.20