What if your city’s budget depended on you running a red light?
In towns across America, that’s not far from the truth. Traffic tickets, parking fines, and enforcement have quietly morphed into a $16 billion Frankenstein monster.
This week, we’re diving deep into the traffic-industrial complex: how we got here, why it’s so hard to unwind, and what might finally bring it all crashing down.
(Spoiler: It’s not legislation or politics. It’s robots.)
I co-wrote this issue with my friend MoneyLemma, who has a unique style I really like. (And a Substack you should check out!)
Let’s roll 👇
MoneyLemma is a hedge fund analyst who writes about the overlap between your money and your world. Posts delve into pressing, unanswered questions, such as: Why is the TI-83 calculator is still a thing? and Did 17th century Caribbean pirates make more than modern NFL players? His most recent issue for Alts was Is America at Peak Vending Machine?
Table of Contents
Small violations are big business
Have you ever wondered why the punishment for speeding is a fine, but the punishment for tax evasion is prison?
Why does loitering get you arrested, but idling — which is basically loitering with a car — just hits you in the wallet?
Sometimes, it seems like we have two criminal justice systems: one for humans, and another for vehicles.
So let’s follow the money.
Each year, fines and forfeitures make up $16 billion for state and local governments — and the majority comes from traffic violations.
Cities have become addicted to fine revenue
While this accounts for less than 1% of total public revenue on average, the number is misleading. Over 600 US jurisdictions, primarily in the south and southeastern US, rely on fines and fees for more than 10% of their revenue.
In Chicago, traffic tickets make up 7% of city revenue. And in Henderson, Louisiana — a town of just 2,000 people — officials collected $1.7 million in speeding tickets in 2019. That’s $850 per resident, in a place where the average per capita income is just $39,000.
It gets worse: Traffic violations often fund the very departments that issue them — usually police departments. That’s a massive conflict of interest.
But the economic problems of traffic tickets pale in comparison to the social ones.
Traffic tickets serve as a regressive tax, they are systemically racist, and they’re dangerous.
But worst of all, they’re showing to be ineffective.
Most of the reduction in traffic deaths over the past few decades has come not from ticketing, but from technological and design improvements.
(The one exception is DWI enforcement — one of the few traffic violations that’s actually punishable with prison time.)
“There is little evidence that automated traffic enforcement is an effective tool at either improving traffic safety [or] limiting violent interactions between law enforcement and drivers during minor traffic stops”
– Fines and Fees Justice Center
As currently designed, America’s traffic system is so indefensible even Johnnie Cochrane wouldn’t take it on as a client.
Surely this isn’t what our founding fathers intended.
How did we get here?
A brief history of the traffic-industrial complex
In the beginning there were no rules.
The first automobile was invented by Carl Benz in 1886, but it was so expensive that even by the turn of the 20th century, there was just 1 car per 10,000 people. (Today that number is 8,900x higher)
In other words, there were so few cars that rules weren’t needed.
And so a young Jay Gatsby might have been seen in his yellow Rolls-Royce, flappers dangling off the fender, careening around the bend of a treacherous mountain road, all without any worry of prosecution.
That all changed with the introduction of Ford’s mass-produced Model T.
In 1909, its first year of production, Ford sold about 10,000 Model Ts at a cost of $825 (roughly $25,000 in today’s dollars).
By 1921, the company was selling over a million cars a year, with prices dropping to just $300 apiece (about $5,000 today).
Naturally, as car ownership soared, so did car-related problems.
Governments began introducing road rules — but this created a new issue: almost overnight, everyone in America became a criminal.
Historian Sarah Seo explains (in this awesome podcast):
“An average town like Berkeley, California had about half a dozen officers on their force. They didn’t have a lot of power to proactively investigate and go after crime, and…mainly focused on the margins of society, like drunk people and vagrants. That was the state of policing before cars.
After cars, police grew to dozens, even hundreds. They got a lot more discretionary power, and for the very first time they started enforcing the law against respectable citizen drivers.
Because people were killing each other in their cars, there were so many traffic accidents. [As the traffic code became bigger] everybody became a misdemeanor offender, and it was a huge problem.”
The solution to this problem, and the answer to the question that opens this post, was to punish traffic offenders with small fines.
That’s why traffic infractions don’t “count” as criminal offenses! If they did, we’d need to build a jail big enough to house the entire country.
But enforcing these fines meant growing police departments — which cost money. Conveniently, fines themselves provided the funding. So the system started to feed itself.
The real turning point — the moment the modern traffic-industrial complex kicked into high gear — came in the 1960s and ‘70s.
Faced with rising oil prices and mounting traffic fatalities, the federal government introduced sweeping reforms aimed at making roads safer and cars more efficient:
- The Federal Motor Vehicle Safety Standard (FMVSS)
- The National Highway Safety Act
- The National Maximum Speed Limit Provision
With these came a new mandate: Local communities had to start policing traffic themselves (or risk losing funding.)
To this day, the National Highway Traffic Safety Administration (NHTSA) sends $600 million annually to states, who then funnel it down to local governments.
And that’s where the incentives get twisted.
As you can imagine, the incentives of this economic system have supercharged traffic violations.
But paying local governments to issue traffic tickets is like paying the Grinch to steal Christmas. They’re already keeping all the revenue from fines. There’s no need for more economic incentives, they come built-in!
From Easy Rider to Fast & Furious
The technological, economic, and legal changes we’ve explored didn’t just reshape policy — they reshaped our culture.
To Americans, cars have always symbolized freedom. But the type of freedom they symbolize has evolved.
Until the 1970s, cars tapped into the endless frontier mentality — a symbol of pure, unbridled possibility. This was the era of On the Road, by Jack Kerouac, Easy Rider starring Jack Nicholson, or even George Lucas’ American Grafitti.
In these stories, the car wasn’t just transportation — it was transcendence. It was youth. It was freedom.
But as regulation and enforcement of the rules of the road mounted, the car went from symbolizing a youthful, innocent freedom to outlaw freedom.
More recent car movies like The Fast and the Furious, Gone in Sixty Seconds, and The Italian Job focus on criminal protagonists.
The meaning of this cultural shift is best explained by former Secretary of Tranpsortation head John Volpe, one of the masterminds behind the modern road transport system.
In an open letter to Motor Trend Magazine readers in 1973, Volpe wrote:
“When you get on a public road, you surrender your private life and autonomous rights.”
Today this statement seems obvious. But to 1970s America this was a radical statement. The road didn’t mean surrendering your liberty, it meant seizing it!
That’s how, if we trace traffic violations to its roots, we get a fascinating unfolding.
A new technology (the mass-produced automobile) led to a structural change in our legal system (traffic laws, professionalization of police) which led to structural change in our economic system (road fines as government revenue) which led to cultural changes (the nature of freedom).
The fine-funded bureaucracy
The history of traffic tickets is a case study in how sensible policies can evolve into senseless systems.
It’s becoming difficult to defend the traffic-industrial complex in its current form. It’s an illegitimate mechanism that allows supposedly democratic governments to extort from their own citizens.
The system is not transparent, and not particularly fair, it incentivizes excessive and unnecessary traffic enforcement (like speed traps and ticket quotas) and stands in stark contrast to models like Sweden’s, where fines are based on the offender’s income.
The political institutions responsible for traffic enforcement are deeply reliant on the system as it exists. There are tens, possibly hundreds of thousands of civil servants in America whose salaries are funded by fine revenue.
Reforming this won’t be easy. But one good place to start would be to reduce the portion of federal highway grants tied to traffic enforcement metrics — and instead link those funds to actual outcomes, (like reduced traffic fatalities.)
Chicago’s infamous parking meter sell-off
In 2008, the City of Chicago made what is widely considered one of the most ill-conceived, lopsided public-private deals in modern history.
Faced with a huge budget shortfall, Mayor Richard M. Daley decided to sell the rights to operate its parking meters to a group of private investors led by Morgan Stanley.
The deal netted the city a quick $1.2 billion, but it came with a 75-year contract and, most importantly, zero flexibility.
Chicago lost control over its 36,000 parking meters until the year 2083. By 2023, the investors had already earned back their investment, 60 years ahead of schedule (!)
Oh, and Chicago even has to reimburse the investors any time the city shuts down street parking for festivals, repairs, or bike lanes.
Morgan Stanley’s stake was later chopped up and partially sold off to foreign investors, including the Abu Dhabi Investment Authority (ADIA), and German financial services company Allianz SE.
A deep investigation by ProPublica revealed that this privatized parking regime has worsened debt for the city’s poorest residents, especially in majority-black neighborhoods where parking tickets are aggressively enforced.
What began as a fast cash grab has become a decades-long drain on the city’s finances and autonomy.
Chicago’s story is a cautionary tale for every municipality tempted to sell revenue streams/public infrastructure.
But ironically, this deal may not end up being as bad as it appears…
Driverless cars could break the ticket machine
The arrival of autonomous vehicles (AVs) will almost certainly reduce traffic violations and revenue.
In fact, they could offer a future where parking systems may no longer be viable at all.
After all, AVs are designed to obey the law, eliminating lucrative infractions like speeding and running stop signs.
Many futurists envision a world where AVs simply drop passengers off downtown, and park themselves at night in less congested, exurban lots. If this tech utopian vision comes to life, parking ticket revenue is likely to plummet.
A report from the Brookings Institution says that AVs will both reduce government revenues generated from tickets and towing, and save taxpayer dollars by improving safety and mitigating inefficiencies in transportation systems.
Another report by the Urbanism Next Center at the University of Oregon found that local governments may experience “significant financial consequences associated with driverless cars, affecting taxes, parking fees, and incident management costs.”
To adapt, cities may need to explore alternative revenue models, such as implementing fees for AV pick-up and drop-off zones, or taxing miles traveled — also known as a Vehicle Miles Traveled tax (VMT).
Oregon’s OReGO program is one great example. This pioneering initiative aims to create a more equitable method for funding road maintenance and infrastructure as vehicles become more fuel-efficient and electric.
Without proactive measures, the rise of autonomous vehicles could spell disaster for municipalities that have become reliant on the parking/traffic violation revenue “crack pipe”.
Change is always difficult. But if a crash in fine revenue leads to a conversation about how public services are funded, I’m, all for it. 🅿️
That’s it for today!
Disclosures
- This issue was co-written by MoneyLemma and Stefan von Imhof, with editing done by Stefan.
- This issue was sponsored by Hometap
- Alt Assets, Inc has no current holdings in any companies mentioned in this issue.
