Governor’s transit-tax proposal draws bipartisan skepticism

by T.W. Budig

ECM Capitol reporter

Not everyone is resting easy with Democratic Gov. Mark Dayton’s proposal for a quarter-cent regional sales tax for transit.

“I know there’s a fine line between thinking big and being chumps,” Rep. Matt Dean, R-Dellwood, said in a House committee of perceived inequities in transit.

 House Transportation Policy Committee Chairman Ron Erhardt, DFL-Edina, wonders whether transportation supporters will have enough time to build public support for a transportation initiative this session. (Photo by T.W. Budig)

House Transportation Policy Committee Chairman Ron Erhardt, DFL-Edina, wonders whether transportation supporters will have enough time to build public support for a transportation initiative this session. (Photo by T.W. Budig)

Dayton, as part of his proposed 2014-15 state budget, wants a mandatory, quarter-cent local sales tax in the seven-county metro area to speed up completion of transit projects — an outcome yielding over time up to $10 billion in direct benefits on a $4.4 billion investment, the Itasca Foundation recently concluded.

“Sustained economic development and job growth must be supported by a sustainable and reliable transit financing strategy,” Metropolitan Council Chair Susan Haigh said in a statement.

Coupled with a sales tax expansion, Dayton’s transit proposal is projected to capture an additional $350 million in transit revenue over the upcoming biennium, according to the Met Council.

The proposal would result in a one percent annual expansion of the metro bus system, provide dollars to cover the remaining $118 million in state contributions towards Southwest Light Rail construction and cover the operational costs for the proposed 15-mile line, and fund 21 new bus and transitways over the next 20 years, according to the Met Council.

“I think people can probably relate to this,” said House Transportation Policy Committee Chairman Ron Erhardt, DFL-Edina.

“(But) it’s going to be tough to build up momentum in the short time we have,” he said.

The governor’s transit sales tax proposal is silent in terms of governance.

“How that’s (sale tax revenue) collected, the governance of that — that’s for the Legislature to discuss,” House Transportation Finance Committee Chairman Frank Hornstein, DFL-Minneapolis, said.

“I don’t think the governor’s laid out anything real specific,” said Hornstein, a transit sales tax supporter who views the initiative as “getting us pretty close to where we need to go.”

The idea of a regional sales tax dedicated to transportation isn’t new.

Currently, five counties, Anoka, Dakota, Hennepin, Ramsey and Washington, have a quarter-cent sales tax and $20 motor vehicle sales tax for transportation funding.

Revenues, by law, must be used for studies, to buy property, fund capital projects and operating assistance for transit projects.

In effect, if the latest sales tax proposal is successful, these counties would have a half-cent transit sales tax.

About $97 million was raised in 2011 on the transit sales tax, according to the Department of Revenue.

Two metro counties, Carver and Scott, elected not to collect the transit taxes.

The Counties Transit Improvement Board (CTIB) oversees the current county-driven sales tax transit pot.

Through grants awarded between 2008 and 2012, CTIB will provide nearly $500 million to light rail transit, bus rapid transit, and community rail projects across the metro, according to the CTIB.

But besides ripples in the House — Dean and St. Paul Democrat Rep. Tim Mahoney, depict the east metro as a distant step-child in transit compared to the western metro, and Rep. Mary Liz Holberg, R-Lakeville, former House transportation finance committee chairwoman, was “shocked” the governor’s sale tax proposal omits highways and bridges — CTIB members, too, have questions.

Dakota County Commissioner Thomas Egan, who serves on a CTIB subcommittee that reviews grant applications, is also concerned transit funding favors parts of the metro over others.

A number of officials from the southern and eastern metro feel the same, Egan said.

“And we’re really quite concerned,” he said of the perceived lack of “geographic equity” in transit.

Egan, while praising efforts at speedily developing Cedar Avenue Bus Rapid Transit in Dakota County, said the county would need to wait many years for future transit projects.

Yes, I-35 bus rapid transit development benefits the county, he said.

But the funding amounts are “paltry” in comparison to other transit projects.

Other county commissions expressed concerns.

Anoka County Board Chairwoman Rhonda Sivarajah also wonders about transit sales tax governance.

“It almost looks like a money grab out of the suburbs for things going to Minneapolis,” she said.

Scott County Board Chairman Tom Wolf argued the county already serves as a “donor” county for the metro.

That is, it sends out more tax dollars than it gets back.

“It’s just so pronounced here,” he said.

While business groups have appeared at Capitol hearings in support of transit development — a key to attracting young people is the ready access to laptops and social media transit provides, one chamber official said — the TwinWest Chamber of Commerce, strong backers of Southwest Light Rail, has not taken a position on the transit sales tax, said an official.

The Minnesota Chamber of Commerce is committed to revenue neutrality and finding efficiencies before turning to new revenue, said a Chamber spokesman.

It can support a regional sales tax meeting certain criteria.

But Dayton’s current proposal does not meet these, Jim Pumarlo, Chamber director of communications, said.

Erhardt, speaking after a recent joint House transportation hearing, said they knew years ago that speedily building out the transit system meant a bigger payback.

“I think things have fallen by the wayside,” he said of selling the idea of a robust transportation system to the public.

That the governor is proposing an array of tax increases serves as a “roadblock” for gaining additional transportation funding, Erhardt said.

He expects a gas tax increase proposal to come forward this session.

Currently, the sales tax in Anoka, Dakota, Ramsey, and Washington counties, is about 7.12 percent, with Hennepin County’s at 7.27 percent.

Dayton, in his sale tax expansion proposal, wants to reduce the state sales tax from 6.87 percent to 5.5 percent by expanding it to more goods and services.

But the proposal has had a cool reception at the State Capitol.

T.W. Budig can be reached at tim.budig@ecm-inc.com.

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