Local officials turn to ‘transportation utility’ charges for roads; court challenges stand in their way

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With inflation only making the perennial problem of paying for road projects worse, local governments in Wisconsin are turning to a new means of raising revenue.

But, in a couple of cases at least, the so-called transportation-utility fees they’ve adopted are in danger from court challenges of being doomed almost from the start. Transportation-utility fees rely on various proxies to estimate how many vehicles use a given property and then charge the property owner a corresponding amount.

The village of Pewaukee, for instance, adopted a system in 2021 that charges property owners a base fee of $15.74 a year along with per-trip rate. For owners of single-family homes, the two fees come to $27.84 a year. For owners of restaurants, shops and commercial properties, the amounts go up depending on how much their businesses rely on vehicular transportation.

In Neenah, local officials took a slightly different tack. Their transportation-utility fee simply looks at how much impervious surface there is on a given property. This, according to local officials, provides “an indication of the level of development on a property and more broadly viewed as an indicator of the impact of a property on the transportation system.”

Whatever system they rely on, transportation-utility fees are viewed as legally questionable by various groups throughout the state. A recent report by the Wisconsin Policy Forum notes that a pair of lawsuits have been filed challenging the utility fees adopted by

Pewaukee and the village of Buchanan. The stakes are high.

“Appellate court rulings invalidating these fees are likely to chill future discussions of more municipalities adopting them,” according to the policy forum’s report. “Conversely, a judicial green light would likely trigger more communities to consider them.”

Five transportation-utility fees have been adopted since 2018

That local governments would even consider adopting such legally questionable fees is itself evidence of how hard up many of them are for road money. Many of the transportation-utility fees in place in Wisconsin are of recent vintage; at least five have been adopted since 2018.

The same years have also seen many local governments turn to so-called wheel taxes to raise additional road revenue. But wheel taxes, though simple to administer, fall equally on all vehicle owners regardless of their ability to pay. Vehicle-registration fees, in contrast, tend to be more complex but not so great a burden for people of lesser means.

Outside wheel taxes and vehicle-registration fees, local governments have few options to raise additional money for roads. State law sets strict limits on how much they can raise property taxes. And transportation aid from state government has remained stagnant for years, although it is up this budgetary cycle.

With inflation pushing up the cost of materials and labor, the struggle to pay for both maintenance and new projects has become only harder. Many local government officials had hoped to receive a big boost from the $1.2 trillion federal infrastructure bill; but with inflation running around 9%, rising prices threaten to take a bite even out of that spending bonanza.

Supporters of transportation-utility fees note their similarity to other utility fees local governments have adopted to pay for services related to water and sewers. But opponents, including Wisconsin Manufacturers & Commerce and Wisconsin Taxpayers Inc., contend the fees are essentially new taxes that have been adopted in violation of the state’s limits on property-tax increases.

Wisconsin Taxpayers Inc., being represented by the Wisconsin Institute for Law and Liberty, has found success at the circuit level in its initial action against the village of Buchanan’s fee. More court challenges are sure to follow.