Friday, May 7, 2010

Transit Funding in the Twin Cities

State and local governments are facing an historic budget crunch that is affecting all governmental expenditures. This is especially true in the field of public transit. Transit service has been cut nationwide during the current recession.

Metro Transit is the main transit provider for the Twin Cities Metropolitan region. In 2008, Metro Transit spent $229 million on bus operating costs, almost $30 million on light rail, $32 million on Metro Mobility, and $1.3 million for vanpools (2009 Met Council Performance Evaluation). Regionally, $272 million was spent on bus operating costs and $345 million was spent on the entire transit system in 2008. Of the $272 million spent on bus operating costs, 69 percent was spent on urban local buses.

Comparison to other Metros

From 2005-2008, transit costs rose 18 percent in the Twin Cities and 23 percent in the 11 peer regions (2009 Met Council Performance Evaluation). Moreover, the Twin Cities region spends less money on transit per capita than the average for the peer regions. The Twin Cities’ 19.9 miles of transit per capita is slightly below the peer region average of 20.7. For the Midwest region, Milwaukee and St. Louis both had fewer miles per capita than Minneapolis-St. Paul at 19.8 and 17 respectively. Similarly, in operating funding per capita, the Twin Cities are ranked below the peer cities’ average. The Twin Cities spends $145 per capita while the peer city average is $168 (2009 Met Council Performance Evaluation).

Funding for Transit

Metro transit gets a mixture of funds from the states, motor vehicle sales tax, transit fares, and federal grants. Nationwide, 33 percent of transit funding comes from local sources for transit. If one were to include fares and other sources, 67 percent of funding for transit is from local sources (TCRP 129). Also, transit agencies get 33 percent of their revenue from the farebox. The Twin Cities however only gets 29 percent of its funding from the farebox (2009 Met Council Performance Evaluation).

Suggestions for future funding

The region should move away from the perverse incentives of funding transit through motor vehicle sales tax. With this in place, transit funding is subject to the volatility of motor vehicle sales. During the current recession and with the price of gas skyrocketing, car sales dropped drastically leading to less revenue for transit (2030 Transportation Policy Plan). Minnesota would be best served initially by raising the gas tax or at least indexing it to inflation. Without this measure, the gas tax revenue declines in real dollars. For transit, the simplest source of new revenue would be from the general fund. Additional income can come from the state by increasing the income tax on the wealthy as this is the most equitable form taxation currently available. In addition, peak hour tolling or congestion pricing could be implemented with revenue partially funding transit operations.

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