Half-cent sales tax is last-ditch plan to secure light rail funding

Legislators and regional transportation officials are increasingly eyeing a new metro area sales tax as a way to break up a bitter political deadlock over transit funding at the State Capitol.

The Metropolitan Council is rapidly running out of options to come up with $135 million needed to lock in critical federal funding for Southwest Light Rail Transit. GOP House Speaker Kurt Daudt's refusal to put state dollars toward the project has left few viable alternatives with only four days left in the session.

Gov. Mark Dayton, DFL legislators, local mayors and business groups are making a last-ditch effort to raise a half-cent sales tax in the seven-county metro region to expand a transit system that must accommodate 750,000 new residents who are expected here in 25 years.

"We think this is a long-term, sustainable solution," said Adam Duininck, chairman of the Metropolitan Council, which manages the transit system with an average weekday ridership of about 275,000.

Opponents say sales taxes, particularly in Minneapolis, are already too burdensome and put retailers at a disadvantage in a global marketplace.

"People are really having problems with online competition. And the higher this goes, the worse it gets," said Mike Hickey, state director of the National Federation of Independent Business, which has about 5,500 members in the metro and is closely aligned with House Republicans. "People are coming into their stores, pricing things, and sometimes are so blatant they order on their phone right from our members' shop," he said.

If the increase is approved, the Minneapolis sales tax would rise to 8.275 percent, with rates well above 10 percent for liquor, hotels, restaurants and entertainment.

St. Paul's sales tax would also go north of 8 percent.

Daudt, R-Crown, said earlier this week that the transit issue should be set aside as legislators seek to address a $6 billion shortfall for roads and bridges over the next decade. He reserved his sharpest opposition for the proposed light-rail line from Minneapolis to Eden Prairie, at one point saying he was trying to kill the project.

House Republicans generally loathe light rail and rarely assent to higher taxes, even if it will have limited effect on the rural Minnesotans who make up much of the GOP base. Fewer than half the 73 GOP House members represent the seven-county metro area, which is why the coalition of metro business groups, labor unions, nonprofits and DFL legislators hope they can sway enough of them to get a deal this weekend.

Although much of the attention of the transit fight has focused on the rail line, Duininck points out that the tax would raise $280 million per year, dwarfing the one-time infusion needed for the new light-rail line.

The $135 million for light rail from Minneapolis to Eden Prairie would help leverage about $900 million in federal money. Advocates fear that the federal dollars could go to another urban area if Minnesota fails to act by the end of session.

Duininck said his pitch to skeptical lawmakers is that the $280 million per year would allow Metro Transit to untether itself from state government to the tune of $50 million per year it currently receives from the general fund. The money would also go to a more GOP-favored mode — buses, including 17 new bus rapid transit lines, 47 new conventional bus lines, and the expansion of another 76.

Relieving traffic won't require taking 20 percent of cars off the road, Duininck said. Just 2 to 5 percent would clear congestion so everyone else can move more easily.

Hennepin, Ramsey, Anoka, Washington and Dakota counties already levy a quarter-cent sales tax for transit development, which goes to the Counties Transit Improvement Board. The new proposal also imposes a half-cent sales tax for consumers in Carver and Scott counties for transit.

Hickey and skeptical Republican legislators say light rail is an inefficient way to relieve traffic.

"It would create a blueprint for significant expansion of very expensive light rail that needs huge subsidies, and it's the wrong direction to go on transportation funding," he said.

Duininck supports his argument by pointing to better-than-expected Green Line ridership, millions of dollars in private development near the line and data showing taxpayers get a better deal on light rail than they are being led to believe.

He said the "fare box recovery" — the amount recovered by fares to pay operating costs — is 40 percent for light rail, compared with 15 to 20 percent for express buses.

Duininck has gained powerful allies, including CEOs, mayors and City Council members, all writing e-mails and opinion pieces to push the Legislature to act.

And if lawmakers don't act?

"It would be irresponsible of us not to be thinking about what the repercussions of that would be," Duininck said. "But we really don't have a 'Plan B' for financing or funding."

J. Patrick Coolican • 651-925-5042