Allegheny County's controversial 10 percent alcohol tax, established in January as a dedicated stream of funding for mass transit, is commonplace -- and necessary -- in counties across the country, say county officials and municipal finance experts.

The local tax pushed through by Allegheny County Chief Executive Dan Onorato has drawn a strong negative reaction from bar and restaurant owners, who last week started a petition drive to put the tax up for public referendum in November. But dedicated transit taxes -- whether based on alcohol or sales taxes -- are a way of life in most urban areas, which usually have a drink tax even if it's not dedicated to mass transit.

Mr. Onorato, 47, in his second term as county chief executive, contends that he is trying to do here what county governments in metropolitan areas like Chicago, Cleveland, Portland, San Diego, Denver, Dallas, Atlanta and Seattle, among others, have been doing for years.

What is more, he argues, many of those places not only have drink and car rental taxes, but they also have other revenue sources-- including personal income, business, and cigarette taxes at their disposal-- in addition to the property tax revenue, which is the only revenue stream he has had available for years.

It's a Pennsylvania problem, said David Miller, associate dean of the Graduate School of Public and International Affairs at the University of Pittsburgh. Because the role of county governments has changed over the last 30 years, many states diversified the tax-revenue base accessible by their counties, but Pennsylvania lagged behind, he said.

"More and more counties, especially those around cities like Pittsburgh, are becoming urban governments as they take on more and more urban services," he said.

"Traditionally, counties were more of a rural government entity when they were created, but many of them now behave like cities. The problem counties like Allegheny are running into is that they operate like cities, but still rely on the old, traditional funding method of using only property taxes."

Last year, Mr. Onorato asked the state Legislature for more revenue-producing options so the county wouldn't have to continue relying only on property taxes. The General Assembly authorized the alcohol tax and a $2-a-day car rental tax, both of which were approved by County Council.

Diversification important

The bar and restaurant owners contend the tax singles out their businesses and will generate far more money than the $30 million the county needs to subsidize the Port Authority. Mr. Onorato argues that property taxes -- which he has vowed not to increase -- would have to go up 25 percent if the drink tax is repealed.

Mr. Miller and county leaders across the country say Mr. Onorato was right to push for a more diversified revenue stream for the county.

Mr. Miller, a professor of public policy, urban financing and regional growth, said he commends Mr. Onorato "for making the logical and inevitable step to dedicated transit funding, because Allegheny County must embrace a new funding culture."

Much of Allegheny County and the Port Authority's current fiscal problems can be attributed to the slow pace of change in funding, Mr. Miller said.

"For example, our Port Authority in the 1990s boasted of the fact that it had one of the highest rates of federal and state government funding. Obviously that was very myopic, because instead of looking to dedicated funding sources for transit, we continued relying on state and federal monies, which dried up and now we have to go through this painful transition," he added.

Ron Sims, chief executive of Seattle's King County, not only agrees, but he too commended Mr. Onorato, and implored him to stand his ground on the levies he implemented because "in this day and age, public investment in mass transit is vital for regional growth."

"You must have dedicated transit funding," he said. "We now live in a very competitive world. Counties and cities that realize mass transit is important enough to create a separate revenue source will win because they can build and sustain easy and accessible transit systems. Those that don't realize this will lose."

With a $4.9 billion annual budget, Mr. Sims, who presides over the country's 13th largest county, said King County voters not only came to that realization years ago by approving a sales tax dedicated to Seattle's Metro Transit system, they increased the tax for the third time in 2006 by one-tenth of 1 percent.

Because of that increase, Mr. Sims said, King County rolled out its Transit Now initiative, which will expand the Metro Transit system by 15 to 20 percent over the next 10 years. The tax increase will cost median-income families in King County $25 in the first year, and that is expected to grow to $35 in the 10th year.

"This is very important for our economic growth right now," he said. "Given the cost of gas, we are seeing more and more companies that are looking to our transit system as a measure of how and where they can expand. They need to know that we're running an efficient and financially healthy transit system."

Competing for business

Though no straight comparison can be made between metropolitan Seattle and King County and greater Pittsburgh and Allegheny County, Mr. Sims noted that in a cutthroat business environment, companies like Starbucks, Microsoft, Boeing and Amazon.com, among others, want to see bold leadership from local governments in the areas where they have long-term interests.

"Seattle didn't become Seattle overnight," Mr. Sims said. "We have strong competition from places like Vancouver, and [San Francisco's] Bay Area. All the counties around us have been pouring money into their transit systems using dedicated taxes. We had to do something to compete and we were successful because we understood that a well-funded and efficient public transit system is always a huge selling point for business."

The county charges a real estate transfer tax, an alcohol tax and a car rental tax.

John Eaves, chairman of the Fulton County Board of Commissioners in metropolitan Atlanta, agrees that an efficient transit sytem is a selling point.

The 1979 agreement among the city of Atlanta and Fulton and Dekalb counties to create the Metro Atlanta Rapid Transit Authority or MARTA, and to fund it using a dedicated 1 percent sales tax since, is partly why Atlanta has grown as a business and financial markets hub, Mr. Eaves said.

"Generally, nobody likes taxes, but I hope people in Pittsburgh realize what [Mr. Onorato] is trying to do. He is right about making this transition to dedicated transit funding," Mr. Eaves said, noting that since its implementation, the 1 percent sales tax has generated about $6 billion for MARTA.

The region recently signed a contract to extend the sales tax that funds that transit system to the year 2047.

"We're looking to expand MARTA with the $20 billion we expect to generate from the sales tax. There is no doubt that creating MARTA with its own funding stream contributed to the economic boom we experienced in the last 30 years," Mr. Eaves said.

Fulton also has alcohol, car rental and real estate transfer taxes.

But if dedicated funding is the way for local county governments to enhance their transit systems, it is by no means the magic bullet for counties that are struggling with tight finances, hoping that a new and separate revenue source for transit will save them, said Dennis Madden, county manager in Cleveland's Cuyahoga County.

In the Cleveland area, county voters approved a 1 percent sales tax to fund the Greater Cleveland Regional Transit Authority when it was created in 1975. But in tight economic times, Mr. Madden said, what might start out as a well-intentioned attempt to fund transit may in fact be a back door way of trying to subsidize fiscal shortfalls in tight budgets.

"The problem is that maybe you're going to need that drink tax revenue for other services," Mr. Madden said. In Cuyahoga County, the 1 percent sales tax generates about $171 million annually, he added, yet the transit system has suffered much the same fiscal problems that hit the city and the county in recent years.

The county also charges alcohol, cigarette and a commercial activity tax on business and a hotel-motel tax for general county purposes.

"We have had dedicated transit funding for years, but that hasn't helped us much," he said. "We're still struggling financially, and our [fiscal] future doesn't look great."