6. HIGHWAY FUNDING Introduction Local Funding Sources Property Tax Revenues valuation County Transportation Excise Tax
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1 6. HIGHWAY FUNDING Introduction This chapter discusses local, state and federal highway funding sources. Local Funding Sources Property Tax Revenues Once the Board of Supervisors has established a roadway, it may levy a real and personal property tax, not exceeding twenty-five cents per one hundred dollars of property valuation, for road purposes. In counties having an assessed valuation of two hundred million dollars or over, a tax not to exceed twenty-five cents per one hundred dollars of assessed valuation may be levied in lieu of the above noted tax rate. County Transportation Excise Tax Counties may levy a transportation excise tax if approved by voters for a term of not more than twenty years. (A.R.S ). There are variations in the plans based on the population of the county (the three categories are: counties over 1.2 million population, counties between 400,000 and 1.2 million persons, and counties under 400,000 persons). In the largest population categories, the funds may be used for the design, right-of-way purchase or construction of controlled access highways which are included in the regional transportation plan of the county and which are accepted into the state highway system. A certain amount of funds collected from this tax are earmarked for the planning, preliminary engineering and design necessary to develop a regional public transportation system plan. Other planning obligations include the listing of transportation corridors by priority in the regional transportation plan. The regional transportation plan may also provide a suggested construction schedule for the corridors. Another aspect of this tax is that bonds may be issued against the anticipated revenue from this tax, if required. A regional public transportation authority must be established. This authority administers the public transportation fund and establishes and operates a regional bus system. A.R.S , 5103,5104 gives the authority the legal status of an improvement district. For information on improvement districts (see Chapter 19). For counties with a population between 400,000 and 1.2 million, the transportation excise tax may also be used for the design, right-of-way purchase, construction, standard and reduced clearance grade separation, extension and widening of arterial streets and highways included in the regional transportation plan, in addition to the use of funds for the construction of controlled access highways and related grade separations which are included in the regional transportation plan. Therefore, medium-sized counties have a greater flexibility in the type of roadways that can be improved. Arizona Counties Highway Manual 6-1 Revised 2004
2 As in counties over 1.2 million population, a regional public transportation authority must be established. Also, the county, through their regional planning agency (Figure 6-1), shall list transportation corridors by priority in the regional transportation plan. This plan must be updated annually. In counties with a population less than 400,000 persons, A.R.S describes the revenue distribution procedure: [BT: A.R.S , does not currently exist.] "The net revenues collected under this section shall be distributed to the individual county and to the individual cities and towns in the county in the manner determined by the county Board of Supervisors prior to the election and described in the publicity pamphlet for the election. The revenues distributed to each jurisdiction may only be used in a manner consistent with the use of revenues distributed from the Arizona Highway User Revenue Fund under " State Collected Transportation Revenues There are four types of revenues collected by the state for transportation funding. These are the motor vehicle fuel license tax, the vehicle license tax, the use fuel tax and the local Transportation Assistance Fund. These revenue sources are described as follows: a) Motor Vehicle Fuel License Tax Distributors pay a license tax of 18 cents per gallon of motor fuel that is possessed, refined, manufactured, produced, blended, or compounded in this state or imported by the distributor. The tax primarily goes into the Arizona Highway User Revenue Fund (except a small percentage of the tax on watercraft fuels is for ADOT administrative expenses in this area). b) Vehicle License Tax In the 1998 legislative session A.R.S was amended. Motor vehicle owners now pay a tax rate of $3.35 on each $ of automobile assessed value. During the first 12 months of the life of the vehicle, the value is 60 percent of the manufacturers base retail price. During each succeeding 12 month period the owner pays $3.45 per $100 of value. The value of the vehicle is percent less than the value for the preceding 12 month period. The minimum tax is $10.00 per year. The allocation of the tax is percent to the Arizona Highway User Revenue Fund and the remainder as follows: 5.73 percent State Highway Fund percent to the county general fund 4.91 percent to counties for same use as HURF funds percent general fund - state (for school financial assistance) percent incorporated cities and towns Arizona Counties Highway Manual 6-2 Revised 2004
3 Figure 6-1 Councils of Government Arizona Counties Highway Manual 6-3 Revised 2004
4 c) Use Fuel Tax Vendors, restricted vendors, or users, pay a license tax for each gallon of motor vehicle fuel used in the propulsion of a motor vehicle on highways in the state. This tax is placed in the Highway User Revenue Fund (HURF). d) Local Transportation Assistance Fund This fund primarily consists of monies deposited from the state lottery fund, per A.R.S These funds are distributed to any incorporated city or town that requests it. The funds are distributed to the city or town requesting funds in the proportion that the population of the city and town bears to the total population of cities and towns applying for funds. Distribution of the Highway User Revenue Fund The majority of the taxes described in the previous section are deposited to the Highway User Revenue Fund. Of this A.R.S allocates $1 million to the economic strength project fund pursuant to Starting with the fiscal year, per , the Department of Public Safety will receive $10 million (down from $12.5 million in 98-99).The formula for distribution of the remaining fund monies is summarized as follows (A.R.S ): 1. To the State highway fund, fifty and one-half percent. 2. To the counties, nineteen percent. 3. To the incorporated cities and towns, twenty-seven and one-half percent 4. To incorporated cities with a population of three hundred thousand or more persons, three percent A.R.S outlines the formula for monthly distribution of HURF revenues. The reader is urged to consult is referred to A.R.S to 6547 for a more detailed discussion of funding distribution and requirements. Federal Aid Highway Program Federal funding for highways flows through the Department of Transportation. Information can be obtained by calling the ADOT Local Government Section at This manual includes (Figure 6-2 ) a general process for the distribution and monitoring of federal funds. The most important program is that which provides federal aid for construction projects. The following pages, taken from the Five-Year Transportation Facilities Construction Program provided by ADOT, outlines the process that can be expected. More complete information on these steps may be found in the Local Government Services Project Development Guide provided by ADOT. Arizona Counties Highway Manual 6-4 Revised 2004
5 Special Purpose Programs This section describes federal programs that are not tied to a specific type of roadway system. These programs are aimed at solving problems common to all roadway systems. Bridge Replacement and Rehabilitation Program This program provides funds for the rehabilitation as well as replacement of deficient bridges. Funds may be applied to projects on all highway bridges on public roads, regardless of whether they are on or off a federal-aid system. (Between 15 and 35 percent of the regularly apportioned funds must be spent on off-system bridges.) The federal matching share is 80 percent of the eligible costs. Highway Safety Program Improved highway safety is the goal of several individual programs. One of these is the State and Community Highway Safety Program. The FHWA and the National Highway Traffic Safety Administration share responsibility for the program, and both provide states with federal funds for administering it. Aimed at making the driver, vehicle, and roadway safer, activities include driver education and licensing, periodic motor vehicle inspection, provision of emergency medical services, identification of accident locations, encouragement of safety belt usage, and improved highway design, construction, and maintenance practices. Rail-Highway Crossings Program This program is aimed at eliminating hazards at railroad-highway crossings both on and off the federal-aid system. Funds for the program may be used for warning devices; such as, signs, flashing lights, or gates, or for any type of work which reduces or eliminates the potential conflict between trains and highway vehicles. However, at least half the apportioned funds must be used for installation of protective devices at railway-highway crossings. The federal share is 90 percent. Emergency Relief Program Emergency funds are available through this program to repair roads and bridges damaged by natural disasters or catastrophic failures from external causes. Eligible facilities may be on the federal-aid highway system including the Interstate System, or federal roads. Normally each state is limited to receiving a maximum of $30 million per disaster. Demonstration Programs The Congress often designates funds for use only on site-specific projects. They are called demonstration projects because the authorizing language generally indicates that the purpose of the project is to demonstrate a technique or approach that could possibly be applied in similar projects elsewhere in the country. Arizona Counties Highway Manual 6-5 Revised 2004
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9 County Designation of Federal Aid Secondary Highways Although present federal aide does not use the designation "secondary" the state statutes have not been repealed. The information below is included for reference: A.R.S discusses how to designate county federal aid secondary highways. This statute is quoted as follows: A. Upon petition of the Board of Supervisors of a county, the board shall, if it decides that the public convenience is served and the designation will not interfere with the completion and upkeep of the present county highway system, submit to the federal highway administration a request that the road be placed on the county federal aid secondary system. B. Federal-aid secondary county highways shall be ordered constructed, improved, repaired and maintained by the county with the department acting as agent for the counties for the receipt of federal-aid funds. C. The costs of construction, improvement, repair and maintenance of federal-aid secondary state highways shall be borne by the department. D. Matching funds for any county federal aid secondary project shall be the responsibility of the county and matching funds for state federal-aid secondary projects shall be the responsibility of the department. E. Any rural road in the state may be designated a federal-aid secondary road by approval of board with the concurrence of Federal Highway Administration. F. "Secondary roads" as used in this section means roads having secondary order of significance to primary roads which connect centers of population." A. On petition of the board of supervisors of a county and if the board decides that the public convenience is served and the designation will not interfere with the completion and upkeep of the present county highway system, the board may request that the federal highway administration place a road on the county federal aid secondary system. B. Federal aid secondary county highways shall be constructed, improved, repaired and maintained by the county with the department acting as an agent for the counties for the receipt of federal aid monies. C. The department shall pay costs of construction, improvement, repair and maintenance of federal aid secondary state highways. D. Matching monies for county federal aid secondary projects are the responsibility of the county, and matching monies for state federal aid secondary projects are the responsibility of the department. AZ County Highways Manual 6-9 Revised 2004
10 E. Any rural road in this state may be designated a federal aid secondary road by approval of the board with the concurrence of the Federal Highway Administration. F. For the purposes of this section, "secondary roads" means roads having secondary order of significance to primary roads that connect centers of population. Special Road Districts Special road districts are formed if approved by an election by qualified electors of the proposed district. In a district, a special road tax can be levied on all real property and mobile homes within the district, for the purposes of construction, maintenance, and repair of roads, driveways, highways, and bridges within the district. This tax shall not exceed (except by a special election approval process) 75 cents per $100 of assessed valuation of the real property and mobile homes in the district. This money is kept in a special fund designated for the road district. A special election may be called to determine whether bonds should be issued, if necessary. Trustees are designated, by election, who have the following duties, as designated by A.R.S : 1. Have exclusive charge and control of the establishment, maintenance and repair of roads, driveways and bridges within the district, other than county and state highways, and to that end may, in the name of the district, hold and convey property for the use and benefit of the district. 1. Have charge and control of the establishment, maintenance and repair of roads, driveways and bridges within the district, other than county and state highways, and to that end may, in the name of the district, hold and convey property for the use and benefit of the district. 2. Sue and be sued. 3. Make contracts, employ labor and purchase material for the construction, maintenance and repair of roads, driveways, highways and bridges within the district and keep such highways and bridges within the district free from obstructions. 4. Control the funds of the district, which shall be paid out only on written order containing an itemized statement of the charge for which the order is drawn, and signed by at least two members of the board of trustees." 5. Promulgate standards for building and paving roads, which have the effect of law." AZ County Highways Manual 6-10 Revised 2004
11 6. Levy and collect civil penalties from persons who build or pave roads that are not in compliance with standards established by the trustees." The effect of the special road tax upon collection of general county tax within the district is described as follows in A.R.S : The levy and collection of the special road taxes within the district shall not exempt the property within the district from the levy and collection of the general county road tax by the Board of Supervisors, but the board shall appropriate annually to the use of the special road district an amount which in their judgment is equitable and just, not less than forty nor more than sixty-five percent of the amount of road tax levied and collected within the special road district." Districts are dissolved by election; however, a district shall not be dissolved until all outstanding bonds and interest have been paid in full. Toll Roads A.R.S defines a toll road as follows: "Toll road" includes trails for passage of saddle and pack animals and foot passengers, as well as roads designed for passage of vehicles, where the trails have been built in mountainous or precipitous places or in other places where building of roads for passage of vehicles would be impracticable. "Toll road" includes trails for the passage of saddle and pack animals and foot passengers, as well as roads designed for the passage of vehicles, if the trails have been built in mountainous or precipitous places or in other places where the building of roads for the passage of vehicles would be impracticable. In order to construct a toll road, the following basic procedure is required by statute A.R.S : o o o o A notice must be published in a newspaper once a week for six successive weeks, defining aspects of the toll road and the timing for the application of the facility. Submit an application to the Board of Supervisors including an engineer's plat, proposed construction plans, and cost estimates. The board shall hold a public hearing on the application. The board may then grant or reject the application. The board fixes and regulates the rate of toll. AZ County Highways Manual 6-11 Revised 2004
12 A. A person who desires to construct a toll road, bridge or ferry within one or more counties shall publish a notice in a newspaper that is published in each county, once each week for six successive weeks. B. On the day specified in the notice, written application shall be made to the respective boards of supervisors of the counties for authority to take the necessary land and construct the road described in the notice. The application shall be in triplicate, and each copy shall be accompanied by: 1. An engineer's plat of the route of the proposed road showing the proposed centerline and right-of-way lines and giving engineer's stations and ties to legal subdivision lines of the regions traversed. 2. Proposed construction plans and details. 3. Estimates of cost. C. When the application is filed with the clerk of the board of supervisors, the clerk shall: 1. Immediately set the application for a hearing before the board of supervisors at least fifteen but not more than thirty days after the application is filed. 2. Forward a copy of the application, accompanying papers, instruments and documents and notice of the date of the hearing by certified mail to the highway commission. 3. Publish notice of the hearing one time at least ten days before the day of the hearing in the same newspaper in which notice of the application was published. D. At the hearing, all persons interested may appear and be heard. The board of supervisors may take testimony and adjourn the hearing. A.R.S states that no application shall be granted if the highway commission files with the board a written statement that the proposed toll road will interfere with a state highway or state route existing or contemplated, or when the proposed toll road will interfere with a county highway, existing or contemplated. No franchise for a toll road shall be granted for a term exceeding ten years, subject to one extension period not exceeding ten years. Upon expiration of the franchise, the ownership is vested with the county or counties in which it is located. AZ County Highways Manual 6 Revised 2004
13 REFERENCES 1. America on the Move, The Story of the Federal Aid Highway Program, Federal Highway Administration, Washington, D.C., September, Deteriorating Highways & Lagging Revenues: A Need to Reassess the Federal Highway Program, General Accounting Office (GAO), Washington, D.C., 1981, vp. 2. Preserving the Nations Investment in the Interstate Highway System. General Accounting Office, Washington, D.C., Financing Federal-Aid Highways, U.S. Department of Transportation, Washington, D.C., September, Financing Federal-Aid Highways, U.S. Department of Transportation, Washington, D.C., September, Highway Cost Allocation Study Plan, U.S. Department of Transportation, Washington, D.C., Rao, K., "Managing State Highway Finance," NCHRP Synthesis-100, Washington, D.C.: Transportation Research Board, Winfrey, R., Economic Analysis for Highways, Intl. Textbook, Scranton, Pennsylvania, AZ County Highways Manual 6-13 Revised 2004
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