The Landscape of California’s Local Option Sales Taxes

Abstract

In California, funding for our transportation systems has shifted in recent years. The gas tax, once a strong funding source, became weak, leading many counties to introduce local option sales tax (LOST) measures to increase transportation funding. These measures are regressive in nature and can be difficult to pass, as they must be approved by a voter supermajority. Some counties do not have a LOST in place, while others have multiple or permanent measures with no sunset date. As a result, funding streams differ across California’s 58 counties. Further, many LOSTs include local return programs, which give a portion of collected revenues back to cities for their own use, whether for street projects or transit; these also vary from measure to measure. Previous work details the importance, significance, and equity concerns that arise from LOSTs; however, how funding streams flow from these local revenue sources to transit operators remains unclear. This research project addresses the following: What are the funding formulas or methods at the county level for those that have LOSTs? How much of a role do local return programs have in funding formulas? How flexible are these funding sources? For counties that do not have LOSTs, what other funding sources can they use (e.g. grants)? What equity issues arise with these various funding streams, and how can a better understanding of them further equity-focused advocacy and analysis?