Vehicle levy, tolls, and battery-electric car tax pondered for TransLink revenues: study

It is increasingly apparent that new types of significant revenue sources are needed to prevent TransLink from falling into its forecasted forthcoming fiscal cliff.

Due to growing costs and continued lower demand-driven revenues from fares and the gas tax, Metro Vancouver’s public transit authority will struggle with maintaining existing service levels starting in 2026 after government operating subsidies end.

TransLink is forecasting a cumulative shortfall of $4.7 billion between 2026 and 2033, starting with about $600 million for the 2026 fiscal year.

This only accounts for maintaining the status quo — it does not include new and improved service levels or constructing new multi-billion dollar transportation infrastructure.

TransLink has a $21-billion, 10-year strategy starting in 2025 to double overall bus service levels across the region, launch its first Bus Rapid Transit (BRT) routes, pursue the UBC SkyTrain extension, and SFU Burnaby Mountain Gondola.

If the expansion plans are fully implemented, these capital costs to improve infrastructure and provide more service will also increase TransLink’s annual operating budget by $1.2 billion starting in 2035.

According to transportation planning consultancy firm Leading Mobility’s new comprehensive report, which analyzed the financial constraints of eight major public transit systems in Canada, there is “low confidence” that these plans can be executed and operated without new major revenue tools.

The report identified three potential new revenue sources for TransLink, including two ideas that had previously been seriously considered.

One of the revenue ideas is to implement a new vehicle levy — a new annual fee/tax across metro Vancouver on all vehicles.

A vehicle levy was set to be implemented in the 2000s, but TransLink ultimately did not proceed due to opposition from the provincial government and municipal leaders. This is one of the easiest and quickest options for TransLink to create a new revenue source, as it could simply be collected through ICBC without having to create new systems and infrastructure, enabling low administration and operating costs. TransLink also already has legislated authority to enact such a levy, whereas the two other ideas would require seeking provincial permission.

According to the report, 33 US states and 27 US local jurisdictions also use vehicle registration fees and levies to fund transportation upgrades.

Montreal also has an annual vehicle levy that directly funds the ARTM public transit authority. The 2023 levy rate of $45.00 per vehicle was projected to raise about $63 million for ARTM, with the revenue projected to increase to $125 million in 2024 from the rate hike to $59 per vehicle.

If the same $59 levy rate were applied to vehicles in Metro Vancouver, it could generate at least over $80 million per year for TransLink.

The second idea is to implement mobility pricing, such as tolls or fees based on mileage/vehicle kilometres travelled. The researchers pointed out how tolls in the British capital city fund 33% of Transport for London’s £3 billion (C$5.3 billion) annual operating budget, while the new tolls in Lower Manhattan in New York City beginning late June 2024 are expected to generate US$1 billion (C$1.4 billion) for the public transit authority, based on crossing fees of up to US$23 per day.

TransLink extensively studied and performed public consultation on mobility pricing between 2017 and 2018, but the Mayors’ Council has yet to act on its recommendations. This option also requires provincial approval.

TransLink’s mobility pricing study projected regional tolls at congestion points — especially major bridges and tunnels — could raise between $1.1 billion and $1.5 billion annually, while a multi-zone distance-based charge system could generate $1 billion to $1.6 billion each year. It was estimated that the average household will pay between $5 and $8 per day or $1,800 to $2,700 per year, assuming they do not change their behaviour.

Any of these forms of mobility pricing would be partly offset by the abolition of TransLink’s existing gas tax.

It is expected that regional tolls could reduce regional congestion by up to 25% and improve travel time reliability by up to 20%.

In Fall 2020, City of Vancouver staff proposed implementing municipal tolls/congestion pricing for vehicles entering the Metro Core — the combined area of the downtown Vancouver peninsula and Central Broadway corridor. At the time, the municipal government estimated it would generate between $50 million and $80 million in annual net revenue after covering the one-time capital costs of $250 million and annual operating costs.

However, none of the City of Vancouver’s municipal tolling scheme revenues would go back to TransLink to directly support the operation of the regional public transit system.

In November 2022, shortly after the municipal election, the ABC Vancouver governing party directed City of Vancouver staff to cancel any plans for tolls and put a halt to any further planning. Prior to this move, the City was aiming to initiate congestion pricing by 2025/2026, even though it would require provincial approval.

During the last fiscal year before the provincial government’s 2017 decision to abolish tolls on the Port Mann Bridge and Golden Ears Bridge, toll revenues were projected to reach about $150 million per year for the Port Mann Bridge alone. In 2024, TransLink is expected to receive about $68 million from the provincial government in toll revenue replacement subsidies for the Golden Ears Bridge, which is owned and operated by the public transit authority.

As for the third revenue source idea of implementing a new battery-electric vehicle charging tax, it was analyzed but ultimately not recommended by the report’s authors. It would be similar to TransLink’s existing gas tax, but it would be highly complex and very expensive to implement. There would be questions on whether such a tax would be applied to only public charging stations or would also apply to private residential dwellings. Furthermore, such a scheme would require both the legislated approval of the provincial government and the separate BC Utilities Commission, which would establish the approved tax rate.

TransLink’s revenues from the gas tax are now on a downward trend from both the efficient fuel economy of new vehicles and the accelerating transition towards battery-electric vehicles, with governments legislating that 100% of new light-duty car sales be battery-electric models by 2035. In a previous interview with Daily Hive Urbanized, TransLink CEO Kevin Quinn says the public transit authority believes gas tax revenues peaked in 2022.

TransLink’s operating budget in 2023 reached $2.2 billion — comparable to the City of Toronto’s Toronto Transit Commission’s (TTC) budget of $2.3 billion and the $3.1 billion budget of Montreal’s ARTM, which is a provincially-legislated regional entity similar to TransLink. The next largest public transit authority budget is $706 million by Ottawa’s OC Transpo.

In 2023, fares were TransLink’s single largest operating revenue source (29%), followed by property tax (22%), gas tax (18%), parking tax (4%), and the remaining (26%) from other sources, including other levels of government, especially pandemic operating subsidies.

In contrast, 43% of the TTC’s revenues come from fares and ancillary sources, followed by 40% from property taxes, 15% from pandemic operating subsidies funded by the City of Toronto, and 2% from reserves.

ARTM’s sources are 31% municipal contributions, 26% fares, 14% ARTM support, 6% pandemic operating subsidies, 5% vehicle levies and gas tax, 5% capital project grants, 1% the new privately operated REM metro network, and 1% other sources.

It should be noted that TransLink’s umbrella also includes supporting the Major Road Network — which helps ensure municipal governments do not downgrade regionally important arterial and collector roads into a local road standard — and operating and maintaining select major bridges, including the Golden Ears Bridge, Knight Street Bridge, and existing Pattullo Bridge.

TransLink’s ridership in 2023 recovered to annual boarding totals that were last recorded between 2016 and 2017. Metro Vancouver has experienced some of the highest ridership recovery patterns amongst major public transit systems in Canada and the United States, with SkyTrain ridership now rivalling the real totals of much longer metro rail systems in far more populated urban regions.

However, fare revenue remains down because passengers are buying cheaper single-trip fares for the fewer trips they now take due to semi-remote office work, as opposed to the more expensive monthly passes.

Over the longer run, ridership is expected to fully recover from Metro Vancouver’s growing population and new transit-oriented development densification patterns.