This report presents research into the funding categories and other characteristics of active Local Option Sales Taxes (LOSTs) throughout California, with specific focus on the extent to which they make resources available for public transit and the political context that makes it so. LOSTs have grown increasingly popular as a funding mechanism for transportation in California in the context of declining funding from other sources.We find that while LOSTs are increasingly common in California, they vary widely with regards to how they fund transit. In general, LOSTs in rural areas of the state fund transit less, with some of our conversations revealing a preference for additional funds in those areas but others asserting that between LOST funding and other resources such as Transportation Development Act (TDA) funds, rural transit has adequate resources, at least to provide the current level of service. In attempting to characterize which resources are available to transit from each LOST, we also looked closely at local return funds—funds passed on to cities and other local jurisdictions to spend as they see fit, often within some sort of eligibility constraint. Depending on the LOST measure, these funds can either make up a small component or most of the funding program. While our research did reveal that in many cases these funds could be put towards transit, or at least transit-supportive infrastructure such as bus lanes and shelters, we find no evidence of local jurisdictions doing so. Our findings suggest that this is due to local officials and voters seeing road maintenance as the top priority, coupled in some cases with a lack of familiarity with how to support effective public transit.

This is the second study of voter-approved transportation sales taxes in Los Angeles County performed by the UCLA Institute of Transportation Studies with support from the Haynes Foundation. The earlier study examined the history of the four half cent sales taxes enacted by voters in Los Angeles County between 1980 and 2016. The current study looked in depth at four issues raised but not addressed in the first one. We report on the extent to which the “local return” provisions of the four measures fund transportation programs and projects in the cities and unincorporated areas of the county. We also explored tradeoffs between accountability to the voters through audits and taxpayer advisory committees in comparison with the county’s flexibility to change program elements through amendments when conditions change. Accountability to the voters was enhanced in the later sales tax measures but amendment procedures have been used to respond to changing needs in the county. We examined lawsuits brought against Metro regarding implementation of the sales taxes and found that there have been rather few. The COVID-19 pandemic struck while the study was underway and in response the report also explores the impacts of the pandemic on transportation sales tax revenues and program expenditures. The transportation sales taxes through the end of year 2020 have been the most important and resilient LA Metro funding sources during the pandemic. Sales tax revenue declined but far less than did federal and state sources of finance and revenues from fares paid by passengers.

The COVID-19 pandemic dramatically affected transportation systems, including the ability of localities to pay for them. We explore the effects of the pandemic and the associated economic turbulence on local option sales taxes (LOSTs), an increasingly common revenue source for transportation in California and across the U.S. LOSTs have many advantages over alternative finance instruments, and they can raise prodigious amounts of revenue. However, LOST funding relies on consumer spending. During times of economic weakness, spending and therefore LOST revenues will lag. This is precisely the pattern we observe in California counties during the initial months of the pandemic. Fortunately for local transportation budgets, LOST revenues recovered after the initial economic shock of COVID-19, albeit at a lower level than they likely would have otherwise. LOST revenue trends during the pandemic were affected by national and regional economic conditions and government policy as well. This public health crisis illustrates both the pitfalls and resilience of LOSTs during economic downturns and recoveries. The lessons from the pandemic’s effects on LOSTs will be useful for policymakers and analysts in preparing for inevitable future economic fluctuations.