Flush with riders, transit is short on money and options

The dark joke in transit circles is that if you don't want fares to go up again, you should buy a car and then keep riding the bus.

Revenue from the sales tax on motor vehicles, which provides about 38 percent of the funding for Metro Transit's bus operations, has plummeted as car sales slumped. State government, already plagued by a shortfall in the billions, isn't in a great position to help ease a transit funding deficit estimated at $11 million for the current year and at $60 million for the next two-year budget period.

One remedy -- raising fares by as much as 50 cents in 2009 -- isn't leaving anybody laughing. And it would fill only part of the gap.

Such an increase, which has already received preliminary approval by the Metropolitan Council, would come on top of the 25-cent hike of a few months ago and could be coupled with service cuts at a time when buses around the region are packed.

This "perfect storm" of increased ridership, sagging revenues and volatile fuel prices is happening nationally, said Virginia Miller of the American Public Transportation Association in Washington. In some cities, she said, transit funding comes from a tax on mortgage transfers, hardly a reliable source during the housing meltdown. Other cities use revenue from sales taxes, which also decline during a recession.

At Metro Transit, the main operator in the metro area, ridership is at its highest levels since 1981, but in the past few months the growth in riders has slowed considerably. The year-over-year ridership increase was nearly 8 percent for the first nine months of the year. In October, the increase fell to 3 percent, and in November it was down to 0.4 percent.

The fare increase that took effect Oct. 1 -- non-rush-hour rides went from $1.50 to $1.75 -- played a role, said Gibbons, as did the big drop in gas prices and a rise in unemployment. "About 75 percent of the people who use our services are going to and from work," he said. "Less work, fewer rides."

To cope with the budget crunch, service cuts are on the table, said Steve Dornfeld, a Met Council spokesman, but "given the way our ridership has been growing, that is absolutely our last choice, our least desired option."

In a statement last month outlining the funding challenges, Met Council Chairman Peter Bell noted that a third of transit customers don't own cars or have the ability to drive.

"The other thing is that if we are forced to reduce service, that could harm our chances of winning funding for the Central Corridor light-rail project," Dornfeld said, "because if we can't operate the transit service we have right now, the feds will be less inclined to fund any more." That 11-mile line from downtown Minneapolis to downtown St. Paul is projected to cost about $915 million, with half the money coming from the Federal Transit Administration.

Relying on car sales taxes

The Legislature and governor hold the keys, Dornfeld said.

The motor vehicle sales tax has "virtually collapsed," said state Sen. Scott Dibble, a Minneapolis DFLer who is on the Senate Transportation Committee. Recurring funding shortfalls have him concerned about the system's viability, and he noted that raising fares by a total of 75 cents in less than a year would amount to a 50 percent increase in non-rush-hour fares.

Fares cover about 30 percent of transit operating costs in the Twin Cities. Finding more money is "a tall order," Dibble said, but "this is not the time to pull in our horns on transit services. ... People need ways to get where they're going in a time that's economically difficult."

Operating funding was shifted from a regional property tax to the Motor Vehicle Sales Tax in the 2001 tax bill, Dibble said. Some property taxes are still levied for transit, but only for capital expenses.

It seemed like a good idea at the time because property-tax revenues weren't growing much in the core communities that Metro Transit serves, said Bob Gibbons, a spokesman for the agency. "Before we switched over ... it was a rocket ship. It was going to be the answer," he said.

But vehicle sales tax revenue "has fallen short of predictions consistently since they substituted it for the property tax," Dornfeld said, adding that the Legislature has made some appropriations to fill the gap.

This past year, legislators came up with $31 million by diverting the first revenues of a new transit sales tax being levied in Hennepin, Anoka, Ramsey, Dakota and Washington counties. But that tax was created to develop and operate transitways -- light-rail lines or special bus lanes or busways -- and is not legally available for regular Metro Transit operations after the one-time plug.

That provision was part of a massive transportation bill that Gov. Tim Pawlenty vetoed and the Legislature enacted with a historic and acrimonious override that may hint at battles to come in this year's session.

Comments accepted, but...

When it approved the recent 25-cent increase in the cost of a bus ride, the Metropolitan Council included a provision that any of its fares "may be increased by up to an additional fifty cents at any time after January 1, 2009," as long as public input is received beforehand.

The most recent comment period proved to be little more than an opportunity to vent. Of the 429 comments, 325 opposed changes to the fare structure, but the new structure was approved almost entirely as proposed. The one element that the council did reject would have started the more expensive "peak period" fares at 5:30 a.m. instead of 6 a.m.

"We felt this was an area where we were able to exercise some flexibility," Bell said at the time. Four of the public comments opposed the "peak period" change.

Jim Foti • 612-673-4491