Metro members of the National Federation of Independent Business (NFIB) strongly oppose the Southwest Corridor light-rail line. We also oppose an expansion of the sales tax in the metro area to finish its construction and then fund its annual subsidy, projected to be at least $30 million per year.
As members of NFIB, we do not speak for all owners of small- and medium-sized businesses across Minnesota — but we are the largest business group, with 11,000 members statewide. Small businesses employ more people than all of Minnesota’s Fortune 500 companies combined. The small-business community has a vested interest in a highly mobile, vibrant region where our employees and customers — and the goods and freight we move — can all get where they need to go. But we want to offer another perspective on how to achieve that goal, from the wider business community (“State’s businesses and workers need transit, and we need it now,” May 6).
First, let’s consider the metro-area sales tax the Legislature is considering raising to pay for the proposed expansion of transit. Gov. Mark Dayton’s Metropolitan Council has asked for an increase of half a cent to “rapidly expand” light rail and other transit projects. That would take the metro sales tax from a quarter of a cent ($.025) to three-quarters of a cent ($.075). Does not sound like much, does it? Yet it is projected to raise $2.8 billion over 10 years, or about $280 million a year.
According to the Tax Foundation, Minnesota already has the nation’s 17th-highest combined state and local sales tax at 7.27 percent (6.875 percent plus the average local sales tax). If we raise the sales tax half a cent in the seven-county metro area, the combined metro average climbs to 7.57 percent. The Minneapolis sales tax rate would increase to an alarming 8.275 percent, while the St. Paul sales tax rate would increase to 8.125 percent.
Our customers are very sensitive to any increase in the sales tax, and our retail and supplier members are already at a competitive disadvantage with online sellers. An alarming 8.275 percent sales tax in Minneapolis exacerbates this problem. Unlike many larger businesses, most of our sales take place right here in the metro area — not out of state or overseas. Our profit margins are often razor thin, and we compete on price — easily affected by things like the sales tax.
Next, while we agree that mobility is key to the state’s economic health and that it requires long-term thinking and funding, mass transit has to be cost-effective. Let’s look at the $1.79 billion Southwest Corridor project. What do we get for almost $2 billion of our tax dollars? A 14.5-mile line that will serve less than 1 percent of the state’s population.
The next project, called Bottineau, is preliminarily estimated to cost another $1.5 billion.
How much increased and/or improved bus service can we provide with $900 million, which is the state and local share for the Southwest project? By any standard, a lot.
Neither rail project is designed to recover even half of its operating costs from the fare box. Worse yet, there are no mandatory turnstiles. You walk on at your leisure and maybe are checked for a ticket. What recourse do law enforcement officers have when issuing a citation to a young person who has little money? We clearly lose revenue by not even having proper security — further diminishing public confidence in the management of the light-rail system.
Laying track and buying train cars is just the start of the expense; these capital-intensive systems have to be properly maintained and then replaced about every 35 years. Operational and capital costs are much higher for trains than bus transit.
Why would we pay more to move fewer people? If the goal is mobility, the light-rail projects fail any cost-benefit analysis. That is why we favor an expansion of our roads to accommodate growth as well as a much more flexible and affordable bus transit system.
Did you know that you can add a mile of new lanes to an existing highway for about $10 million a mile, whereas building a mile of light rail costs on average $100 million?
Our country is on the verge of a 21st-century transportation revolution with Uber/Lyft/Turo, ride sharing and electric self-driving cars that promise to reduce lane size and congestion. Why tie up capital in old, fixed technology like trains when personal mobility is about to take off in a whole new direction? Millennials are already driving that revolution.
We support the current House proposal that funds roads with bonding and existing revenue. Thirty-three states spend general revenue on roads, a core state function. Minnesota does not. The House plan provides plenty of revenue, especially through new general obligation bonding for critical transportation needs, something that should have been done years ago.
Mike Hickey is state director of the National Federation of Independent Business. Steve Becher, president of CSP Holding Co. Inc., Apple Valley, and Jim Arneson, president of Professional Instruments Co., St. Louis Park, are members of NFIB’s Leadership Council.