Road, transit outlook not so rosy now

12/07/2006

A drop in car sales in the state translates into less sales tax revenue and thus less money for transportation upgrades -- $275 million per year instead of $300 million.


Laurie Blake,
Star Tribune
Last update: December 07, 2006 – 8:01 AM


A decline in vehicle sales may threaten the full lineup of new bus routes, rail lines and park-and-ride lots promised by state transportation officials.


Transit officials say the projected decline in vehicle sales tax receipts means they'll likely have to scale back new spending unless the governor and legislators provide other funds.


The lowered forecasts for vehicle sales tax revenue comes a month after Minnesotans approved a constitutional amendment requiring that all that revenue be spent on roads and transit. Today, just over half of the revenues collected on the 6.5 percent vehicle tax is spent for transportation; the rest goes into the state's general fund.


Starting in 2008, the amended Constitution will begin phasing in a larger percentage of the vehicle sales tax for transportation. In 2012, the entire amount will go to roads and transit.


At that point, proponents expected a bump up in transportation spending of $300 million per year. But now, with the vehicle sales slowdown, the revised figure is $275 million per year.


In the short term, the lower tax revenue means transit systems in the metro area next year will get $8 million, or 7 percent, less than expected.


The new revenue forecast from the vehicle sales tax "significantly changes what we can do," Amy Vennewitz, a fiscal planner for the Met Council, said regarding transit improvements. "What we said last spring is [now] not possible."


In January, Gov. Tim Pawlenty will release his budget and reveal his intentions toward transportation. State Rep. Frank Hornstein, DFL-Minneapolis, incoming chairman of the House transportation and transit policy subcommittee, said he expects the Legislature to consider a broad transportation bill that would provide more money for both roads and transit.


Because the car market is saturated (Minnesota already has more registered vehicles than drivers) and because sales of the higher-priced sport utility vehicles are slowing, the state Department of Revenue predicts that the vehicle sales tax will bring in less-than-predicted amounts.


Specifically, it now expects the sales tax to generate $36 million less than previously forecast for fiscal 2007, $52 million less than expected in fiscal 2008 and nearly $58 million less in fiscal 2009.


Before the November election, the Met Council, which oversees Metro Transit and other regional transit development, said the projected monies would help fund the Northstar commuter rail line, the Central Corridor light rail that is to link Minneapolis and St. Paul, three busways, 30 new bus routes, plus 13 new and 11 expanded park-and-ride lots. The expansion was aiming to double ridership by 2020.


Now the council is revisiting the budget to determine where expansion plans could be pared if state leaders do not supplement the funding, Vennewitz said.


Transit officials worry that voters will not understand why bus service is still potentially pinched.


"I think our riders will be confused, because they just passed what appeared to be more funding," said Beverley Miller, director of the Minnesota Valley Transit Authority, which serves the south suburbs.


Unless legislators plug the gap for next year, Minnesota Valley will face making service cuts in July, Miller said.


Mike Opatz, Maple Grove's transit administrator, said riders want to know where the new buses are now that the amendment was approved.


Maple Grove transit buses and park-and-ride lots are nearly full and Opatz is disappointed over the anticipated drop in revenue.


"We are getting all the pie, but the pie is smaller," he said. "So in the long run, that probably means ... less expansion than we had hoped. Just think how much worse this would be if the amendment did not pass."


From a high of $625 million collected in 2002, revenue from the motor vehicle sales tax has trended downward. For that reason, advocates of the constitutional amendment warned that it would not close a gap in transportation funding of more than $1 billion a year.