Looking to LA: Could a Rail Transit Tax Transform Cincinnati?

America’s anti-tax zealots assert that local taxes are prime motivators in the relocation of people and businesses from one part of the country to another. By their reasoning, the Cincinnati region should be flooded with newcomers, as Cincinnatians enjoy lower rates of taxation than the citizens of nearly any major American metropolitan area.

Case in point is Los Angeles, where LA County voters have approved three separate .5% sales taxes since 1980 to support public transportation and road improvements above and beyond what is budgeted by Caltrans, California’s DOT. This 1.5% combined sales tax funds an enormous bus system and construction of a rail transit network that will soon surpass 100 route miles. Meanwhile in low-tax Cincinnati, we operate a threadbare bus system which in its entirety carries just one-third the daily ridership of Los Angeles’ Red Line subway.

The 23rd Street Station is part of the Expo Line Phase 1 segment which opened earlier this year. Construction work progresses on the Phase 2 segment, and will be completed by 2015. Photograph by Jake Mecklenborg for UrbanCincy.

The revival of rail transit in Los Angeles is an important lesson to Cincinnati: if new rail transit lines can be successful in the city where the world’s largest streetcar system was scrapped and replaced by the world’s largest expressway system, it can certainly be successful here. Moreover, if a city can attract millions of newcomers while taxing them at a higher rate than the places where they originated, the anti-tax argument prevalent in the Cincinnati area is revealed to be a fraud.

Propositions A, C, and Measure R
Public transportation in Los Angeles County is funded by three .5% sales taxes approved in 1980, 1990, and 2008.

Although these three taxes total 1.5%, only .85% can fund rail transit construction projects. Of that sum, .1% is restricted to commuter rail, and only .25% can fund subway tunnel construction. This bizarre stipulation came into effect when the electorate approved the Act of 1998, which prohibited the use of Proposition A funds for subway construction. This act is still effect, but after passage of Measure R in 2008, construction of subway tunnels could resume.

Of the three taxes, Measure R is the most important as it pertains to Cincinnati’s current situation. The additional funds made available by Measure R allowed Los Angeles to accelerate its construction schedule – since 2008 two new light rail lines have opened, the south branch of the Gold Line and the all-new Expo Line. An extension of the Expo Line to Santa Monica is currently under construction, the all-new Crenshaw line broke ground in June 2012, and the long-awaited extension of the Wilshire Boulevard. subway might begin in 2013.

An Expo Line train waits at a recently opened station. Photograph by Jake Mecklenborg for UrbanCincy.

Future Transit and Quality-of-Life Ballot Issues for Cincinnati
Most metropolitan areas around the country are now introducing taxes larger than the half-cent sales tax MetroMoves proposal voted on in Hamilton County in 2002. Such a tax would have generated an estimated $60 million annually split equally between improved bus service and rail construction and operation.

Should Cincinnati use Los Angeles as a model, the $120 million generated by a one-cent tax could fund much more, much faster than the 2002 MetroMoves plan which would have required 30 years to build out the system envisioned.

What’s more, with excess revenue, the FTA federal match process could be bypassed and Cincinnati could break ground quickly on the sort of construction appropriate for our city. Specifically, subway tunnels that might not win federal matching funds could become a reality in just a few years instead of enduring the decades-long struggles seen recently in New York City, Seattle, and elsewhere.

  • Zachary Schunn

    While I support the pro-rail sentiment, I must say the “we are low-tax” argument needs some clarification here.

    Obviously, comparing sales tax rates of Cincy to high-tax LA, or to any other metropolitan city for that matter, is not the full story… you must also consider earnings tax rates, corporate taxes, property taxes, etc. For example, the average property tax rate in LA County was 0.59% in 2009; in Hamilton County it was 1.53%.

    Second, I rarely see the argument that Cincy is losing citizens to LA, Chicago, NY, and other large cities because we are “high tax.” We are losing people to these cities because they offer better amenities (including better public transportation), larger events, and most importantly a higher number of creative-class jobs.

    Cincy as a region is GAINING citizens, but it is gaining them mainly in Warren County and Butler County, where the sales taxes are practically the same but property taxes are significantly lower, and–in many townships–there are no earnings taxes. For some of us it is worth paying these taxes to enjoy the amenities of living in the city, but for others it is not.

    Regarding increasing taxes to support new rail projects, I totally hope it happens but I worry about taking the sales tax approach, which must be approved by all Hamilton County voters and not just those in Cincinnati. Given the dramatic difference in voting patterns between those inside and outside the city, it’ll make a new Metro Moves initiative a tough battle.

    For now, using smaller city-wide projects like the streetcar to build regional public support may prove a very, very successful model.

    • What about a city-only tax? Have the city pay to help its own transit through a sales tax increase, as nice as it would be to have a regional system, I doubt the region would want to support it….

    • Zachary, you are correct in that the combination of taxes is much more complicated. For example, Cincinnati has a 2.1% earnings tax, New York City has a 3.6% earnings tax, but California does not permit its cities to levy earnings taxes. But which services are provided by city, county, and state varies from state to state, and how each state allocates state funds for local purposes differs as well. Neil people occaisionally talk about the city building a city-funded system that ends at city limits, but at the very least Cincinnati would definitely want to partner with Norwood. I don’t know if a property tax or earnings tax is the smarter way to fund it. And without the county being a part of it, we can expect them to continue trying to undermine Cincinnati’s projects.

    • The war of attrition between Cincinnati and the other local govn’ts in the area is really THE issue. Cincinnati just has to fight this war the best it can. Whatever Cincinnati does it must prepare to do entirely alone. Only once the county and other municipalities see that their actions aren’t working and that Cincinnati has built something that they want a piece of will they even consider any sort of cooperation. It is ironic, but we have to abandon regionalism in the short term to have any hope of making it work in the longer term.

    • It would be nice if there was an opt in arrangement that could eventually spread to the whole county. Given how nasty and heel in the ground the opposition is I think this is all that could work until such time as, well people actually see how nice it is.

    • I agree with Neil that an opt-in system is the only way to accomplish regionalism in our area. Transportation could be a great unifying force.

      My proposal for a transition is to decrease the city income tax by the amount that Metro uses (Jake said it’s 0.3% of the 2.1% that the city currently collects), then levy a sales tax of XX% only in the city limits to replace the revenue from the 0.3% lost so that Metro keeps being funded, and then include an opt-in provision that allows any other city to join the system by also levying the same XX%. The XX% could only be changed by a popular vote of the citizens within the cities/townships that have opted-in. Another possible way to entice others to opt-in would be that a percentage of the XX% that is collected stays within that municipality (similar to what was described about 1% of CA’s state sales tax going directly to the localities).

      One beauty of such a system would be that it could work across state lines too. Who’s to say that our best allies aren’t Covington and Newport as the first ones to opt-in? It would be the equivalent of a county sales tax if everyone opted-in within Hamilton county, but could also grow to the whole region and who knows even Dayton eventually.

      One political sticking point would be that lowering the CoC income tax rate to 1.8% would undermine Norwood, Covington and other cities’ income tax rates and stir the pot of local politics pitting one against another. In the short term that might be hard to overcome, but it could also attract more business to the CoC from outside the region(how many cities have a rate that low?) and maybe consolidate smaller governments and standardize income tax rates in the long run.

    • Let me also suggest that if big business gets behind a regional transit network that would cross state lines, it actually makes raising money for such a campaign easier because radio and especially television advertisements aren’t “wasted” on population that is not part of the issue. So say a TV ad costs $50,000 to create and run X number of times on TV — if it’s a countywide or — gasp — multi-county ballot issue like BART or MARTA, the full value of that ad is realized. Meanwhile a Cincinnati-only ballot issue costs the same amount to get on TV.

    • I’ve thought about this a little more and also wanted to add that an opt-in approach will only work if the smaller cities/townships that opt-in feel that they will have a real voice in controlling the regional system. In the past the board of such “regional” agencies tend to be weighted heavily towards the CoC or the county keeping all the political capital in the new entity, and disincentivizes the smaller ones from joining. It’s the classic big states vs little states debate from when the USA formed Congress. The little states want a Senate, the big states want a HoR. A two house system is probably a little too complicated for local gov’t, but I believe I’ve read about Portland’s system being run by a large board with each neighborhood having a seat. The CoC could be divided based on the 52 that they currently claim to start (probably with some neighborhoods being combined from the start) and then entering cities/townships should be divided accordingly (ex. green township into 5-7, delhi to 2-3, woodlawn to 1, and some like Arlington Heights need to pair up with someone else for a seat). Hopefully over time and as the number grows they can combine/pair up/adjust the sizes and shapes of the districts in order to get them to have similar population sizes (With a big emphasis on making it difficult to do, such as a public vote, so as to prevent gerrymandering at all costs).

    • I still think that Cincinnati has to negotiate from a position of strength to make this happen. Cincinnati has to have the unquestionably most importatn centers of activity to leverage its position. cincinnati has to offer what no one else does. cincinnati has the advantage of not having regional competition for its downtown the way Atlanta, St. Louis or Kansas City do. We need to work to keep it that way before we worry about regionalism.

    • By the shear number of neighborhoods that make up the city (which would all be represented under this system) the city starts out from a considerable position of strength but the structure allows for other neighborhoods to come in as equals to the existing neighborhoods. There isn’t any guarantee that all the city neighborhoods would act as one, but ultimately they would have the most say. It would be up to the existing neighborhoods in the system to negotiate how many new neighborhoods a place like Green Township gets in order to not dilute the existing seats. For example it would be key to not allow small Arlington Heights to come in as an equal to Woodlawn or NCH.

      And I got news for you, there is considerable regional competition from the likes of Norwood, Blue Ash, West Chester, Mason and Covington/Newport. Maybe not as concentrated as those other cities, but it’s there. You could also throw in Dayton. Office rents are higher along 71 near Kenwood than Downtown.

      We need to set the example for collaboration and openness towards collectively growing the region as a whole rather than continuing to compete for a bigger slice of the same pie. By creating a regional transportation agency that allows buy-in from all the surrounding communities we’ll keep ourselves at the center of our own region rather than watch it drift northward.

    • I got news foryou, Downtown St. Louis, Kansas City and Atlanta have far MORE competition in their metros than downtown Cincinnati does in its metro. “collaboration and openess” will just result in suburban interests trying to lure businesses from cincinnati. The only reason they aren’t more successful is because they don’t have as much to offer. That is my point. Let’s work to keep it that way.

    • Cincinnati definitely needs to retain what’s unique about it and continue to build on it in order to attract more people. However I don’t share your fear that collaboration and openness in the region will lead to Cincinnati being depleted of it’s businesses to the suburbs. Vacancies left downtown will be opportunities for entirely new businesses. I think it’s a better situation for the region to have multiple places with things to offer while retaining downtown Cincinnati as the best in class. Grow the size of the pie, not just our slice of it. We must remember that it’s not an either/or situation; we can do both: work towards growing the region as a whole, while continuing to retain and grow our top tier status within it.

    • Zachary Schunn

      Is there precedent for this? Sales taxes are typically levied at the county level.

      Re-structuring the income tax would make more sense, but again I don’t think the voter support is there.

    • COTA in Columbus and Cleveland’s RTA are funded by county sales taxes. Metro is unusual by being funded by a city earnings tax. It was always expected back in 1973 when the city earnings tax was raised to create Metro that it would be a temporary situation and that the county would eventually take over. If Cincinnati did not fund metro through its earnings tax, it could be reduced to 1.8% and be significantly lower than Covington’s 2.5% and Norwood’s 2%. Neither of those cities fund public transportation with their earnings taxes.

    • Zachary Schunn

      I guess my question was, is there precedent for a public transit system being funded by a city-only sales tax. At least in Ohio sales taxes are levied at the state and county levels. Cincinnati being the first city in Ohio to implement a city-only tax could put it at a disadvantage, as well as making for an administrative headache.

      I’m totally on-board with restructuring Metro’s funding and the city earnings tax. First, it’s absurd that the city is the primary source of funds for a system that spans 4 counties and numerous other townships and municipalities. Second, I’d like to see the earnings tax made more progressive. It makes no sense to me in taxing someone making $10k/yr and someone making $100k/yr at the same 2.1% rate, when their ability to pay is extremely different.

    • New York City has a graduated earnings tax. It is (I’m going by memory) 2.6% for earnings below $60,000 and 3.6% for earnings above $60,000. It is withheld and paid through though state income taxes, unlike Cincinnati’s earnings tax which does not travel through the state tax system first.

    • I’m not sure how much benefit there would be to a city-only tax/system. It could generate money for extensions of the Cincinnati Streetcar system, but it will not do much to build a light rail network that only goes to the city limits.

    • But those beyond Cincinnati are actively working against any such plans. It’s city only or nothing, I’m afraid.

    • Ben Wissel

      “the average property tax rate in LA County was 0.59% in 2009; in Hamilton County it was 1.53%”

      Aren’t property values at least three times higher in LA making the average tax amount much higher?

    • Zachary Schunn

      Depends upon where and what, but generally yes property values are considerably higher on the east and west coasts than in the Midwest. As are income values and retail sales.

      Which points to a basic dilemma… how can local govts. fund the same amount per capita when the per capita tax revenue is so much lower?

    • It’s all relative. While the raw tax earnings are higher, so is the cost of doing business. As you both stated, land is more expensive and so is labor. So while Midwestern cities like Cincinnati may generate less revenue in terms of raw dollars, it is also much cheaper to build stuff here.

    • Zachary Schunn

      True, though I’d be curious to see on average what the differences are. For example, the cost of building a rail line may differ 10% between states, but if tax revenues differ by 50% it can’t make up for those differences (just as an example)…

  • Todd Warnken

    We need all local counties to contribute to a true regional system that would merge METRO, TANK and create commuter rail. Unfortunately I don’t think that will ever happen.

    • You’re right. It won’t. So cincinnati has to pursue its own individual interests and let the rest come to Cincinnati once they want a piece of the action. We must abandon all hope of regionalism until we can build a more solid base for Cincinnati so we can negociate from a better position in the future. Many suburbanites , not just brinkman or finney, would gladly see Cincinnati destroyed in a Detroit-style collapse. Suggestions of regionalism are preposterous unders such circumstances.

  • Wanderer

    One possibly relevant example–Atlanta, where a proposed one cent transportation sales tax (split pretty much evenly between transit and roads) failed region-wide, but passed in the city of Atlanta.

  • Looks like Los Angeles County voters will soon decide whether to extend Measure R for an additional 30 years (to the year 2069): http://www.thetransportpolitic.com/2012/09/03/los-angeles-asks-its-voters-to-extend-transit-tax-far-into-the-future/