Falling Motor Vehicle Sales Tax revenues mean big shortfall for transit

The December revenue forecast contained bad news not only for state government, but also for regional transit. Once again, state officials reduced their projection of the revenues that transit can expect from the Motor Vehicle Sales Tax (MVST).

The new forecast indicates that MVST revenues will fall $11 million short of earlier projections for the current fiscal year and another $23 million for the next two-year budget period, which begins July 1, 2009.

The projected decline means that we face a total budget shortfall of $72 million through the next biennium just to maintain existing transit service and fund committed service expansions, such as the startup of the Northstar commuter rail line. To put this number into perspective consider this: the 25-cent transit fare increase we implemented Oct. 1 is expected to raise about $7.2 million a year.

This shortfall affects not only Metro Transit, but also Metro Mobility, suburban providers and the region’s community-based transit programs.

Frankly, we are confronted with a structural imbalance between the revenues available to grow our transit system, and those available to operate it.

Under the 2008 transportation funding bill passed by the Legislature, five metro counties imposed a new quarter-cent sales tax to help fund the planning, construction and operation of “transitways” – such as light rail, commuter rail and bus rapid transit.

However, under the law, the money may not be used to help operate regular route bus service. (The bill did include a one-time appropriation of $31 million for transit operations in the current biennium.)

Many people thought our transit funding problems were solved in 2006, when the voters approved a constitutional amendment dedicating 100 percent of MVST revenues to transportation. When fully implemented in 2012, 60 percent of the revenues will go to highways and 40 percent to transit (36 percent for the metro area and 4 percent for Greater Minnesota).

Thus far, however, the amendment is turning out to be simply a bigger slice of a rapidly shrinking pie. Understandably, in the current economic climate, many people are deferring major purchases such as new cars.

In the current fiscal year, regional transit is now projected to receive $112.5 million in MVST revenues, nearly $12 million less than it did in 2003. MVST has proven to be a much less reliable funding source than the property tax it replaced.

The Council is not eager to raise bus fares or reduce service. First, we recognize that about a third of our riders do not own or cannot operate a car – and depend on transit to get to vital destinations. Second, if we are forced to cut existing transit service, the federal government is unlikely to help fund major new transit improvements such as the proposed Central Corridor LRT line.

The Metropolitan Council is strongly committed to growing our transit system and maintaining regional balance.  We look forward to working with the governor and Legislature to resolve our budget challenges.

Peter Bell

December 2008