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Transit use up; transit funding down

As go car sales, so goes money for transit. And, with the economic downturn, funding for transit operations in the Twin Cities region just took another nosedive even as transit use is on the rise.

MN Motor Vehicle Sales Tax (MVST) Revenues
	Total State MVST Revenues, Millions $	Metro Region Transit Share, %	Metro Region Transit Share, Millions $
Actual
SFY 2002	613.9
SFY 2003	605.6	20.5%	124.1
SFY 2004	593.8	21.5%	127.7
SFY 2005	556.7	21.5%	119.7
SFY 2006	537.8	21.5%	115.6
SFY 2007	532.3	21.5%	114.4
SFY 2008	512.7	24%	123.0
Feb 2009 Forecast
SFY 2009	408.9	27.75%	113.5
SFY 2010	395.9	30.00%	118.7
SFY 2011	444.7	33.75%	150.1
SFY 2012	459.8	36.00%	165.5
SFY 2013	476.9	36.00%	171.7

The latest state revenue forecast on March 3 revealed yet another decline in proceeds from the Motor Vehicle Sales Tax (MVST), which provides more than 30% of transit operations funding in the metro area.

For regional transit, including Metro Transit, Metro Mobility, suburban transit services and Northstar Commuter Rail, it will mean $18 million less in projected revenue for the 2010-11 biennium, and a projected shortfall that now grows to $62.5 million for the two-year period that starts in mid-2009.

Economy, plummeting car sales spell trouble

“We knew the news wouldn’t be good,” said Metropolitan Council Chair Peter Bell. “But I don’t know that anyone predicted the depth and breadth of the current economic collapse.

“Car sales have plummeted and the latest forecast marks the 10th in a row in which we’ve experienced an MVST decline,” he said. “The question is, how long before the tide changes?  We can make some short-term adjustments; but in the longer term, it’s not sustainable. Something will have to give.”

The Metropolitan Council, which owns and operates Metro Transit and Metro Mobility, and will start up Northstar later this year, is contemplating a number of options to close the funding gap. They include using some of the federal stimulus money for transit operations, tapping reserves, digging even deeper for efficiencies, diverting some funds from other Council programs and, as a last resort, increasing fares or reducing service.

Meanwhile, some wonder how it came to this.

Taking transit operations off the property tax

In 2002, the Legislature took funding for transit operations off the property tax and, instead, funded transit with a share of the growing MVST receipts. MVST, after all, had been performing well for years.

In 2006, many thought transit funding problems were over for good when voters approved an amendment to the State Constitution dedicating 100% of MVST revenues to transportation. In the five years between 2008 and 2012, the metro share of MVST revenues for transit will grow from 21.5% to 36%.

With the decline in total MVST receipts, however, it amounts to a larger slice of a shrinking pie.  In fact, MVST receipts for regional transit are expected to shrink from $127.7 million in FY2004 to $113.5 million in FY2009. Total state MVST revenues were $613.9 million in FY2002, but are projected to be just $395.8 million in FY2010.

“MVST has not produced the resources we had anticipated to grow our system,” said Bell. “It has proven to be a much less reliable funding source than the property tax it replaced. That’s not to say it won’t produce in the future. The question is, when?”

Raising fares – ‘The last thing we want to do’

Meanwhile, transit ridership across the country is on the rise. Over the last four years, Metro Transit ridership went up 17.4% to nearly 82 million rides, a 27-year high.

“The last thing we want to do, given the economic times and growing demand, is cut service or raise fares,” said Bell. “Ironically, other transit systems in the country are being forced to do exactly that. We’re hoping not to go there.”