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Sales tax on vehicle leasing would save the day

Governor's budget would plug the transit shortfall

Gov. Tim Pawlenty’s budget came just in time for regional transit advocates and customers of bus, rail and special transportation services in the metro area.

Despite passage of the transportation amendment last fall, declining revenues from the Motor Vehicle Sales Tax (MVST) had left a hole in the budget for regional bus operations (Metro Transit and suburban transit providers) of $13.5 million for the 2008-09 biennium. The governor’s budget would plug that hole by dedicating revenue from the sales tax on leased vehicles to highways and transit.

November’s ballot amendment dedicates 100 percent of MVST revenues to highways and transit, phased in over five years. The governor’s proposed budget builds on that foundation and would further dedicate sales taxes paid on leased vehicles to transportation, redirecting existing general fund revenue. This change would add $67 million more for highways and transit investments in 2008-09 and grow to $90 million in 2010-11.

Region sees big transit ridership gains

“If the additional funding isn’t provided, the Council would be faced with cutting existing transit service by more than four percent at a time when demand for transit is growing,” said Council Chair Peter Bell. “Cuts in service would have a devastating effect, putting more cars on the road, limiting mobility options, worsening congestion and further degrading the environment.”

Metro Transit experienced a six percent ridership increase in 2006, boosting ridership to nearly 74 million rides—the highest in more than two decades. Suburban transit providers experienced a ridership increase in 2006 of 11 percent.

The governor’s budget also fills funding gaps for operating Hiawatha light rail and Metro Mobility, a transportation service for people with disabilities.

A one-time, three-year federal grant to operate Hiawatha will expire this year. In addition, rail operating costs are increasing. The resulting shortfall of $7 million would require service reductions of 32 percent, which, in turn, would reduce ridership by 20 percent or 1.6 million rides a year.  The governor’s budget anticipates Hennepin County will assume half the cost of the shortfall, or $3.5 million.

Governor’s plan helps Metro Mobility, Northstar

Metro Mobility faces a shortfall of nine percent or $6.2 million for the biennium. The service experiences cost increases of about 5 percent a year, due to ridership increases and other cost increases, including fuel. Because of federal Americans with Disabilities Act requirements and last year’s state law mandating the service area, the Council has limited ability to meet budget constraints by reducing service.

Finally, the governor’s budget includes a portion of the start-up costs for Northstar Commuter Rail. The Northstar Corridor runs from the Big Lake area to downtown Minneapolis along Highway 10 and is one of the fastest growing areas in the state.

“Things will be a bit tight for transit until MVST revenues are fully phased in and 100-percent dedicated to transit and transportation, and until MVST performs better in terms of revenue,” said Bell. “So we’re very pleased with the governor’s recommendation, which would allow the Council to continue current levels of service without service reductions, fare increases and losses in ridership.”