Biting the Hand That Feeds You: Transit and the Motor Vehicle Sales Tax

The state of public transit budgets in Minnesota is looking worse and worse every year, even though over the past decade more and more people are parking their cars and riding public transit. The addition of the Hiawatha and Northstar rail transit lines to the Twin Cities has increased the profile of transit services in the area. As a result more and more Minnesotans are considering public transit as a viable transportation option. This has especially been true in suburban communities where transit providers such as SouthWest Transit, Minnesota Valley Transit, and Maple Grove Transit have experienced a significant increase in ridership over the past decade. With all the success that public transit has enjoyed in Minnesota as of late you would think that the state legislature would place public transit on the top its "things that need to be fully funded" list. And really, it did...sorta.

In 2000 the state legislature passed a law that dedicated 30% of the revenue generated by a 6.5% sales tax levied on the sale of new and used automobiles to transportation. In 2006 the state legislature proposed a constitutional amendment that would be voted on by the public via a public referendum. The referendum that proposed to dedicate all of the Motor Vehicle Sales Tax (MVST) to transportation, with 60% going towards highways and 40% going towards public transit funding, passed. The logic of the public was sound enough. If people are going to buy and operate cars on Minnesota roads, they ought to help pay for the roads and for the services that help people get around on the roads. The state assumed it solved the problem of finding a funding source for public transit for good. According to the Minnesota Department of Transportation, in the last decade of the 20th century revenue generated from the MVST increased at an average annual rate of 6.8%. So nothing to worry about, right?...

Not so surprisingly, it turns out that the MVST lives and dies by the success of the auto industry. Well, as we all are aware, the first decade of the 21 century has not been so friendly to the auto industry. Rising gas prices, a recession in 2001, and a bigger recession in 2009 shifted the auto industry into reverse. People started buying fewer cars and the ones they are buying are smaller, cheaper, and more fuel efficient. So, all of these factors put together leads to, yep, you guessed it, less MVST revenue. According to MnDOT, since 2002 MVST revenue has decreased at an average annual rate of 2.6%.

While on the other hand, because of the poor economy more and more people are choosing to ride public transit. Which means transit providers in Minnesota are caught between a rock and a hard place. They can help improve our environment by taking people out of their cars and putting them on convenient buses and trains, but by doing so they are essentially ensuring that they will not have an adequate funding source in the future. So thanks to the Minnesota State Legislature (and Minnesota voters), if transit providers want to operate a successful service they are going to have to bite the hand that feeds them.

This article, written by the Metropolitan Council, explains further how Minnesota's public transit formula is broken.