> Planning+Development > 2009 State of the Region

2009 State of the Region Address

Peter Bell, Metropolitan Council Chair
Feb. 2, 2009 - Maplewood

Members of the Metropolitan Council and honored guests…

Thank you for joining us on this crisp winter morning to spend some time reflecting on the progress we have made in our region, the challenges we face and our plans for the future. It’s a pleasure to be here today in Maplewood and make use of the city’s fine Community Center.

I would like to begin by paying tribute to three outstanding Council members who stepped down in the last year – Mary Hill Smith, Russ Susag and Brian McDaniel. All three contributed greatly to the work of the Council.

I’d also like to formally welcome Polly Bowles and Bob McFarlin, who were appointed to replace Russ and Mary. Polly and Bob, would you stand and be recognized… And the rest of my Council colleagues, please stand and be recognized…

A challenging but productive year

It was Friedrich Nietzsche, the German philosopher, who first said: “What doesn’t kill you only makes you stronger.” After some of the challenges of the last year – particularly on the Central Corridor project – I almost feel ready for the Olympic weight-lifting competition.

Nonetheless, 2008 was an enormously productive year for the Metropolitan Council and our region. We made great progress toward realizing our vision of improved transit in the Twin Cities metropolitan area. Among the significant milestones:

• We moved forward with construction of the region’s first commuter rail line in the Northstar Corridor, beginning work on the stations and taking delivery of our five locomotives. The 40-mile line between Big Lake and downtown Minneapolis will begin passenger service by the end of this year. It will provide a fast, new, convenient, stress-free commuting option in one of the region’s fastest growing and most congested corridors.
• We neared completion of preliminary engineering and applied for federal approval to enter final design on our second light-rail transit line in the Central Corridor. The 11-mile line between our two downtowns will connect with the Hiawatha LRT line near the Metrodome. It will terminate near the Twins new ballpark at a new intermodal station, which also will serve the Northstar line. If all goes well, we will start construction on Central in 2010 and begin passenger service by the end of 2014.
• With the help of a $133 million federal UPA grant, we accelerated work on bus rapid transit service in the I-35W and Cedar Avenue corridors. The project will include priced lanes on I-35W between Burnsville Parkway and downtown Minneapolis, 26 new buses, 2,600 new park-and-ride spaces, and new dedicated double bus lanes on Marquette and Second Avenues in downtown Minneapolis.
• We also updated our 2030 Transportation Policy Plan. This plan offers a strategy that is realistic, innovative and focused on leveraging available dollars for maximum benefit. It also emphasizes the need to optimize all available transportation modes and coordinate them for maximum effect.

When we unveiled the first draft of the Transportation Policy Plan, we heard from many folks who felt that it shortchanged the East Metro area. We attempted to address these concerns in the final version of the plan.

We now have in place, or under development, six rail and bus “transitways” – shown on the map with solid red lines. They are the Hiawatha and Central Corridor LRT lines, the I-394 HOT lane, the Northstar commuter rail line, and the I-35W and Cedar Avenue BRT lines.

Our plan now identifies eight corridors that should continue to be studied as potential transitways – LRT, BRT or commuter rail. They are shown on the map as the candy-cane lines. In the East Metro area, they include the I-94, Highway 36, Red Rock and Rush Line corridors.

Our plan also identifies nine major arterials that should be studied for BRT facilities, including four in the East Metro area – Snelling, East Seventh, Robert and West Seventh streets.

As many of you are aware, our goal is to increase transit ridership 50% by 2020 and double it by 2030, slowing the growth in traffic congestion and improving mobility for everyone.

In 2008, Metro Transit ridership reached nearly 82 million, a 27-year high – and our suburban providers realized similarly healthy gains. I am very proud that since I became Council chair in 2003, Metro Transit ridership has grown by 18% and the number of park-and-ride spaces has increased by more than 50%.

Growing Greener

As indicated in our 2008 Annual Report – which we are distributing today – one of the Council’s top priorities has been to be a good environmental steward in everything we do.

• We have taken delivery of 67 hybrid electric buses, the first of 172 we plan to add to our Metro Transit fleet over the next few years. These hybrid buses deliver 22% better fuel mileage and produce 90% fewer emissions than the buses they replace.
• We are fueling all of our standard buses with ultra-low sulfur fuel containing higher biodiesel blends than any fleet in the state. While biodiesel can cause problems in cold weather, we have successfully used fuel that is more than 20% biodiesel in the summer months.
• Our Environmental Services Division has reduced the amount of phosphorus in our treated wastewater by more than half, and it is well on its way toward its goal of reducing fossil fuel consumption by 15%.
• In December, our eight regional treatment plants completed their 23rd consecutive month of perfect compliance with their clean water discharge permits – no small feat!
• We also have partnered with the University of Minnesota on research into the feasibility of growing algae in our wastewater to create a new, renewable fuel.

 

I also would like to highlight several special projects of mine. Late last year, we moved forward with the creation of a Regional Parks Foundation to seek support from private sources and accelerate the acquisition of land for our regional parks system.

The Council’s 2030 Regional Parks Plan calls for expanding our current regional park system from 53,000 acres to nearly 70,000 acres and increasing our network of regional trails from 177 miles to 877 miles. It is essential that we begin acquiring these last, best natural areas while they are still available and affordable.

Many of our state’s most valued parks and natural areas were created and preserved through a combination of public and private investment. From our annual residents’ survey, we know that one of the things our residents prize the most is our region’s abundant parks and natural areas.

The Regional Parks Foundation will provide those who value our parks and trails with the opportunity to help expand our system and leave an important legacy for future generations.

Last year, we also joined with the Minnesota Housing Finance Agency and the Family Housing Fund to create a new revolving loan fund to assist communities in meeting their affordable housing needs. It will provide loans to help communities acquire land and hold it for future affordable housing projects – much like the Council’s RALF program helps communities acquire land for highway right-of-way.

We estimate that metro area communities will need 51,000 new affordable units by 2020 to meet the region’s needs. Our new LAAND program will make it easier for a few communities to address these needs.

Planning for our growth

Those of you involved in local government also know that 2008 was the year of the “comp plan.” December 31st was the deadline for 189 cities and counties in the metropolitan area to submit their updated plans for Council review.

As many of you know, under the Metropolitan Land Planning Act, local governments are required to prepare local comprehensive plans that are consistent with the Council’s 2030 Regional Development Framework and our plans for expanding four regional systems – transportation, aviation, water resources, and regional parks.

In 2005, the Council sent customized system statements to each community, explaining how it will be affected by the Council’s long-range plans for these four regional systems. The Council also held a series of workshops for local officials, made available several new planning tools and responded to numerous questions from local officials.

In addition, nearly 100 communities took advantage of the opportunity to have their plans informally reviewed in advance of their formal submittal. This allowed our staff to flag any required elements that might have been missing or inconsistent with regional plans.

I am pleased to report that by December 31st, 105 communities had submitted their plans and another 66 had made formal requests for extensions. This represents a significant improvement from the last time around, when just 45 communities made the deadline and many were several years late.

When all of the plans are aggregated, it will tell us much about where our region and our communities are headed.

We take the comp planning process very seriously, and we greatly appreciate all of the hard work put in at the local level. This process provides our region with the tools we need to accommodate our projected growth, provide needed infrastructure in a cost-effective manner, protect vital natural areas and preserve our region’s prized quality of life.

As we look at recent development patterns, we see several encouraging trends:

• Our 2030 Regional Development Framework set a goal of encouraging 27% of the new residential growth in the central cities and developed suburbs, where roads, sewers and costly infrastructure already exist. For the first seven years of this decade, we are slightly ahead of our target – at 30%.
• Minneapolis and St. Paul have seen significant redevelopment in their downtown and riverfront areas, and they are among the few Frost Belt cities that have registered population gains since 1980.
• We also have found that the consumption of land in our region has slowed in this decade. Land was consumed at a rate of 7,500 acres a year between 2000 and 2005. That’s compared with 9,200 acres per year in the 1990s.

These trends suggest that we are making real progress toward achieving orderly, economical development and the cost-effective use of regional infrastructure, as directed by the Legislature.

Our residents like it here

In our annual residents’ survey – which we are releasing today – 96% of our residents said they believe the Twin Cities area is a better place to live than other metropolitan areas … something we all can be proud of. As I indicated earlier, the thing they prize most is our abundant access to parks, trails and the natural environment; 39% of our residents rank this as our region’s most attractive feature.

I am also proud to report that the Met Council received its highest approval rating since we began conducting this survey; 47% rated the Council’s performance as “good” or “very good,” while only 16% rated it as “poor” or “very poor.”

The Twin Cities metro area remains a growing and prosperous region with many assets.  Between 2000 and 2007, our population grew by 207,000 people, or 8%.  It appears that the population of our region will come very close to reaching the 3 million mark by 2010, as the Council had forecast earlier in the decade.

Among the 25 largest metropolitan areas, we rank:

• 1st in work force participation
• 2nd in home ownership
• 4th in the percentage of adults with a college education, and
• 6th in per capita income.

 

Last year, for the second consecutive year, the Wall Street Journal’s website, MarketWatch, ranked the Twin Cities as the best metro area in the nation in which to do business – ahead of Boston, Denver and Washington. 

MarketWatch credited our region with having a well-trained workforce, a good educational system and a friendly business climate where many home-grown companies have thrived.

Tough times for many

Of course, most of the economic news has been far from good.  Like the rest of the nation, our region is gripped by the most serious recession in our lifetime.  A longer and deeper recession than previously expected is now under way, and is likely to continue into next year.

A few key indicators tell the story:

• Unemployment has jumped to 6.2%, the highest level since the current methodology was adopted in 1990.  Still, this is lower than the national unemployment rate of 7.1% (not seasonally adjusted).
• Job growth has been virtually flat for most of this decade, with the current recession wiping out earlier gains. The hardest hit sectors include the construction, manufacturing and information industries.
• Housing production has plummeted.  We estimate that about 4,800 residential building permits were issued in 2008, less than a fourth of the number issued during the peak years earlier in this decade.
• The foreclosure crisis has been felt in our region, which has contributed to a decline in housing market values.  Housing prices here have dropped 22% from the peak in September 2006, which is only slightly better than the 25% drop for a 20-city composite index.

 

It is important to remember that behind these statistics are real people – people who have lost jobs, homes, retirement savings and more. We need to do what we can to help and support them – not only through government, but through our churches, food shelves, social service agencies and community groups.

As we look ahead, there are several positive economic signs:

Despite our region’s lack of job growth, our Gross Metropolitan Product per capita continues to rise. Through the first six years of this decade, it’s up 6.5% in constant dollars. That’s an indication of increased productivity.

It also appears that our region is starting to absorb the surplus housing inventory produced earlier in decade. In the fourth quarter of 2008, sales closings exceeded housing starts by a greater proportion than one year ago. Some experts believe the housing market in our region will turn around sooner than in other parts of the country.

Finally, if you’re in the market to buy a home, your timing couldn’t be better. With mortgage rates and home prices falling, the housing affordability index for our region has increased by more than 36% in the last year to a new high.

Daunting challenges for government

For those of us in government, the recession means daunting budget challenges. In the November budget forecast, state finance officials warned of a whopping $4.8 billion state budget shortfall for the coming biennium.

As Governor Pawlenty has said, “Minnesotans are innovative and resilient, and we will solve this problem.” The huge budget shortfall challenges everyone in government to reform, prioritize and streamline the way we do business.

Over the last six years, the Metropolitan Council has placed high priority on prudent fiscal management – reducing FTEs, restructuring services to improve productivity, reducing administrative overhead, investing in new technology and holding our property tax levy flat.

However, we have a major continuing challenge – obtaining sufficient funds to maintain and expand transit operations in our region.

Transit relies on two problematic sources for upwards of 60% of our funding:

• The state general fund, where we have to compete with many other worthy programs in good times and bad, and
• The Motor Vehicle Sales Tax, which has proven to be decidedly unreliable.

 

The November budget forecast brought the news that revenues from the Motor Vehicle Sales Tax – or MVST – once again are expected to fall short of projections. This is not a new problem for transit. The latest budget forecast marks the 9th consecutive MVST forecast reduction since 2003.

The latest budget forecast shows MVST revenues dropping by $11 million for the current fiscal year and $23.3 million for the 2010-11 biennium.

We recently were able to reduce our projected budget shortfall, thanks to lower-than-expected fuel and inflationary costs. Still, we face a shortfall of $45 million in the coming biennium just to maintain current and committed transit service. This includes the operating costs for new BRT service on I-35W and Cedar Avenue, as well as our share of operating costs for the Northstar commuter rail line.

To put this $45 million shortfall into perspective, the 25-cent transit fare increase we implemented October 1 is expected to raise about $7 million a year.

This shortfall affects not only Metro Transit, but also Metro Mobility, suburban providers and the region’s community-based transit programs. And the problem will likely grow worse when state finance officials issue their updated budget forecast in February.

Imbalances in transit funding

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, metro counties were authorized to impose 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.

The bill did include a one-time appropriation of $31 million for transit operations in the current biennium. However, under the law, additional tax revenues may not be used to help maintain or expand regular-route bus service – which will always be the backbone of our region’s transit system.

In our new 2030 Transportation Policy Plan, we say we believe we will have sufficient capital dollars over the next two decades from our various funding sources to build:

• Three more LRT lines, in addition to Hiawatha and Central;
• One more commuter rail line;
• Four more highway BRT lines; and
• Nine arterial BRT lines.

 

However, we simply lack the dollars to operate all of this additional service, much less expand our regular-route bus system.

Many people thought our transit funding problems were solved in 2006, when the voters approved a constitutional amendment dedicating 100% of MVST revenues to transportation. When fully implemented in 2012, 60% of the revenues will go to highways and 40% to transit – 36% for the metro area and 4% 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 million in MVST revenues. That’s nearly $12 million less than we received in 2003. MVST has not produced the additional resources we had anticipated to grow our system. And it has proven to be a much less stable 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 work, school and other vital destinations.
• Second, if we are forced to cut existing transit service, the federal government is unlikely to help fund major new capital investments such as the proposed Central Corridor LRT line.

 

Given the budget challenges we face, my No. 1, 2 and 3 priorities will be using any federal transit stimulus dollars for operating costs rather than capital costs. It makes no economic sense to build what you can’t afford to operate. Nor does it help the economy to hire a construction worker if it means laying off a bus driver.

Internally, we also will aggressively pursue new ways to stretch our limited resources. One option under consideration is temporarily shifting some of the dollars we use for Livable Communities grants to help maintain transit service.

Frankly, with the slowdown in development activity, there has been less demand for Livable Communities grants. Hopefully, when the economy rebounds and the need for these grants increases, MVST revenues needed for transit will rebound, too.

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

Expanding the regional dialogue

In conclusion, I would like to talk briefly about one final effort my Council colleagues and I undertook in 2008.

During the second half of the year, we held a series of 13 “District Dialogues” around the region and invited hundreds of local officials – state legislators, mayors, city council members and county commissioners.

The meetings provided us with an opportunity to talk about the Council’s priorities and hear about local concerns on a wide range of issues – from highways and transit to planning and parks.

Nearly 400 local officials attended our meetings and the feedback has been overwhelmingly positive. They seemed to genuinely appreciate that we would take the time to come to them – in locations ranging from Columbus in the north to Prior Lake in the south … from Forest Lake in the east to Waconia in the west.

Frankly, I gained a new appreciation for the size of our region!

We plan to repeat these meetings later this year after the legislative session. While we have many bright Council members and staff, we’re smart enough to recognize that we don’t have all the answers.

In the spirit of our District Dialogues, I would like to open up the discussion this morning and hear from you. What are your questions and your concerns.