Transportation Utility FAQs
Q: What is a transportation utility?
A: A transportation utility is a utility just like your water, sanitary sewer, or storm sewer utilities. Instead of funding the underground pipe infrastructure that water, sanitary sewer, or storm sewer utility does, the transportation utility is meant to fund the maintenance and replacement of surface infrastructures, such as street pavement, curb & gutter, sidewalks, trails, traffic signals, signs, pavement markings, lighting, and other related costs to keep up City transportation infrastructure. The transportation utility also can fund the cost of City staff to take care of the streets (apart from some exceptions such as snow plowing) like design improvements and inspection of infrastructure construction projects.
Q: Is the transportation utility a tax?
A: No, there are important distinctions between a utility (including a transportation utility) and a tax. A tax is collected to fund general government services and could be used for essentially anything the government does. A utility or fee is collected for a dedicated purpose (in this case to fund infrastructure maintenance) and cannot be spent on other things. Adoption of a transportation utility does not count toward the City’s property tax limits.
Q: What does a transportation utility cost? How much funding would the transportation utility generate?
A: The transportation utility is calculated based on two parts: the base access charge and the per trip charge.
The base access charge is calculated the same for every parcel in the City. It is meant to account for the basic service benefit that streets, sidewalks, and trails provide to every parcel in the City, such as the providing the availability for law enforcement, emergency medical services, fire protection, garbage service, mail service, and any member of the public to get to a particular property from the rest of the transportation network. It also covers the administration, billing, and equipment costs for the utility. You can think of this similarly to a meter or availability charge on your water bill: you pay a certain amount for your contribution toward the water treatment plants, wells, and pipes that get the water from the ground to your house.
The per trip charge is charged differently to each type of property based on the type of land use on the property. The per trip charge is based on the Institute of Transportation Engineers Trip Generation Manual, which is a nationally respected publication that compiles traffic generation studies all over the country for all sorts of different types of properties. You can think of this similarly to the usage charge on your water bill: you pay for the amount of water you actually use.
The exact base access and per trip charges would need to be determined by the City Council, but for reference, a single-family residential could expect to be charged about $170 per year assuming a $120/year base access charge and a ½ cent per trip charge (these are the rates presented to City Council in July 2021). The per trip charge creates an increase for commercial and retail businesses because they generate more traffic than a residential property does. The City can provide estimates of charges for any property as requested.
Assuming a $120/year base access charge and ½ cent per trip charge, the amount of funding generated would be a little less than $1 million annually.
Q: Do tax-exempt properties pay the transportation utility?
A: Generally yes, although the City can create exceptions during the creation of the utility. The League of Wisconsin Municipalities recommends that transportation utilities be charged to tax-exempt properties to distinguish the utility from appearing to be a tax.
Q: How does someone pay the transportation utility?
A: The transportation utility would be paid quarterly on the same bill that you currently pay your water, sanitary sewer, and stormwater utility charges.
Q: Why consider this utility instead of the alternatives?
A: The transportation utility is arguably fairer because it attempts to charge the highest costs to the biggest users of the transportation system (much like how if you use a lot of water you get charged more than someone who doesn’t use as much water). Alternatives to the transportation utility include issuing more debt to be paid for through higher property taxes (bonding) and charging adjacent properties during maintenance and reconstruction projects (special assessments).
Compared to bonding, the transportation utility charges more up-front but saves money long-term because the City would not pay interest on the bonds. The transportation utility also does not affect the City’s ability to bond for other projects, buildings, etc. that the community may desire in the future. The State of Wisconsin also has strict caps on the amount of property taxes that a community can levy, and generally, communities cannot fully fund infrastructure maintenance activities within the property tax limits allowed by the state.
The advantage of the transportation utility over special assessments is that the utility spreads the cost out over the entire community and is paid in smaller amounts annually compared to significant one-time costs (plus interest) for special assessments. Special assessments can be thousands of dollars at a time for street reconstruction, repaving, or sidewalk replacement projects for single-family residential properties and small businesses, which is very difficult for income-limited households and businesses to afford. The City currently does use special assessments for certain street and sidewalk maintenance projects. Generally, this adds up to about 10% of a mill & overlay or street reconstruction project and 50% of a sidewalk replacement project. If the City adopts a transportation utility, City staff is suggesting to eliminate most or all special assessments. If no extra funding (transportation utility or otherwise) is adopted, special assessments would likely need to increase to cover the additional cost of the needed street maintenance.
The City has also been successful in obtaining grant funding for some projects, most recently for the reconstruction of Vine Street between 9th Street and Wisconsin Street in 2019. The City will still be looking for grant funding wherever possible; however, outside grant funding is not a reliable source for project funding, particularly for streets that are not major streets. Outside grants are very competitive, difficult to obtain, and oftentimes come with expensive strings attached. The only reliable funding sources for the City’s infrastructure maintenance needs are the ones that the City controls.
Q: What if I recently paid a special assessment for a street project?
A: There are some ways around this. Either the property that has recently paid the special assessment can be given a grace period to not pay the transportation utility or a discounted rate could be given to those properties for a period of time. The City Council will ultimately need to determine if and how to accommodate those with recent payments of special assessments.
Q: What about large trucks using the roadways? Can they be charged more since they damage the roads more?
A: Yes, large trucks can be charged more than regular passenger vehicles, and the City will likely use some sort of factor to account for truck traffic from industrial and commercial properties.
Q: Do other communities have transportation utilities?
A: At the time of this document, four other Wisconsin communities have a transportation utility in place (the City of Neenah, the Village of Pewaukee, the Village of Kimberly, and the Town of Buchanan). Dozens of others are seriously considering adopting a transportation utility. Those communities range from as small as 700 people (the City of Montreal) to many thousands of people (such as the City of Janesville). One other community (the Village of Weston) previously had adopted a transportation utility but has since rescinded the utility.
Q: What are the downsides of a transportation utility?
A: The main downsides of a transportation utility are (1) that it takes a lot of effort to start-up and (2) the transportation utility will likely charge high-traffic businesses - such as gas stations, big box stores, and fast-food restaurants – more than other alternatives, including special assessments.
Q: Would the transportation utility fully replace the way we currently pay for infrastructure projects?
A: The answer to this question depends on the rates that the City Council ultimately decides on (assuming the transportation utility is adopted) as well as the annual budget adopted by the City Council for infrastructure projects. It is likely that the transportation utility will not completely replace property tax/bonding funding that the City currently contributes, but it is likely that the transportation utility would fully replace the amount the City currently collects in special assessments. At this time, assuming the adoption of a transportation utility and wheel tax, the City anticipates that infrastructure funding will be paid for by some combination of transportation utility, wheel tax, and bonding. Again, this will depend on the final decision made by the City Council.