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The battle over transit funding that’s brewing at the Capitol this year has its roots in the 2008 transportation bill that ultimately saw the Legislature override Gov. Tim Pawlenty’s veto.

Transit: To tax or to bond?

Rep. Alice Hausman, left, DFL-St. Paul, has criticized a metro-area sales tax hike to pay for transit. Rep. Mike Beard, R-Shakopee, right, opposes pulling Scott County into the transit tax. (staff photos: Peter Bartz-Gallagher)

Push for light rail, rapid bus service reignites regional tensions at Capitol

The battle over transit funding that’s brewing at the Capitol this year has its roots in the 2008 transportation bill that ultimately saw the Legislature override Gov. Tim Pawlenty’s veto.

That bill allowed the seven counties in the Twin Cities metro area to opt for local sales tax increases and dedicate the proceeds to transit projects. Given the perennial battle at the Capitol between metro and greater Minnesota over transportation funding, the local-option sales tax was an important step toward enabling metro area officials to secure funding for transit projects without needing to win over rural legislators at the Capitol.

That localized strategy is alive once again in the 2013 legislative session. Gov. Mark Dayton has proposed in his 2014-2015 budget to add another quarter cent sales tax increase onto the quarter cent hike permitted in the 2008 transportation bill.

The Dayton administration and some metro legislators are looking for a more certain source of transit revenue as metro business lobbying organizations and the Metropolitan Council make a push to accelerate the building of light-rail and bus-rapid-transit projects throughout the region.

“Our current transit funding is unstable and unpredictable,” said Metropolitan Council Chair Susan Haigh on Monday in her State of the Region address.

Dayton’s sales tax increase would pump an additional $250 million a year into the transit pipeline.

Business lobby wants transit action

While business lobbying groups aren’t putting their stamp of approval on a particular funding source for the accelerated build-out of the transit system, they have already visited House and Senate committees this session to make their case for putting transit projects on the fast track. They’ve presented an Itasca Project study that projects billions of dollars in return on investment if projects like the Southwest Corridor, Bottineau Boulevard Transitway and the Gateway Corridor east of St. Paul are completed by 2030. Matt Kramer, the executive director of the St. Paul Area Chamber of Commerce, said the return on investment decreases as the construction timeframe for the projects grows longer.

“It is simply not sustainable to think that if we build a 10-mile line every 10 years, all of a sudden, by the time we get to the third line, we’ll be making capital investments for repairing the first line,” Kramer told the House Capital Investment Committee on Monday.

Kramer is backed by business partners in Minneapolis and the western suburbs, as well as DFL legislators from the metro area. Senate Transportation Chair Scott Dibble, DFL-Minneapolis, favors securing the sort of revenue that can expedite transit projects.

“We have to do that,” Dibble said. “To do one at a time, end on end, and finally build all of the system out [over the course of several decades] — why even bother? We’ve fallen so far behind the rest of the country.”

Dibble said he supports a combination of regional sales taxes and bonding for transit projects.
“Transit in the metropolitan area is not a local, metropolitan issue. It has statewide significance,” Dibble said. “The place we go to share the effort that benefits us broadly is the general fund. So the question of principle is an important one: who pays, who benefits and how we support each other.”
As Dibble’s comments suggest, the question of regional equity is at the heart of the discussion among metropolitan-area legislators over the sales tax. Legislators like Dibble and House Transportation Finance Committee Chair Frank Hornstein, DFL-Minneapolis, argue that a mix of local sales taxes and statewide bonding money is needed to build Twin Cities transit projects.

But House Capital Investment Chair Alice Hausman, DFL-St. Paul, has criticized Dayton’s metro-area sales tax hike, asking why the metro area should tax itself to pay for transit at the same time it produces more than half of the statewide taxes that support the state’s general fund.

“To me, the great thing about the bonding bill and even the general fund is it’s a way of saying we’re all in this together,” Hausman said. “We all pay taxes and we all reap the economic benefits of careful investment. I just think [the local sales tax option] sends a wrong message about our state and who we are. I’m the only one making this argument, so I’m probably going to lose, but it just strikes me that there is a downside.”

The downside for greater Minnesota, Hausman said, is they will lose support from metro legislators if the money that goes to pay for metro infrastructure is derived from non-statewide sources.

No opt-out provision in Dayton plan

The local sales tax proposal for transit could make it easier to craft a bonding bill this year, because it would be an alternative funding source for projects that would otherwise need bonding money.

“That helps out the governor,” said one lobbyist. “He can do more projects in his bonding bill if he doesn’t have to accommodate Southwest [Light Rail corridor]. But I think there will be other legislators who are sympathetic to Alice who say, ‘Wait a minute, two-thirds of the sales and income taxes are generated in the metropolitan area, and it shouldn’t all be going to greater Minnesota projects.’ ”

One difference between the metro sales tax in 2008 for transit and the one in Dayton’s budget, is that none of the seven core metro counties would be able to opt out of the current proposal. Of the seven counties that were allowed in 2008 to raise their sales taxes, two outer suburbs, Carver and Scott, did choose to opt out.

Also, the 2008 sales tax money is handled by the Counties Transit Improvement Board (CTIB), which is made up of county commissioners. Although Dayton’s transit sales tax proposal hasn’t been introduced yet, many believe the Metropolitan Council, whose members are all appointed by Dayton, will collect and spend the money. But others note that numerous legislators are reluctant to distribute the money to an unelected board.

Rep. Mike Beard, R-Shakopee, the lead Republic on the House Transportation Finance Committee and a representative of one of the opt-out counties, said he’s flatly opposed to being pulled into the transit tax. “He’s going to jam us with a half percent [local sales tax increase] and it’s going to go to CTIB to be spent on their projects and operating costs,” Beard said. “They’ve got the votes and they can do whatever they want. But we would consider that a very hostile act.”

While legislators like Beard from the opt-out counties have opposed Dayton’s sales tax, local officials in Carver and Scott counties appear to be warming to the idea. A Star Tribune story last Sunday suggested an emerging willingness among local officials like Shakopee Mayor Brad Tabke to enter a regional taxing system to start moving ahead on transit projects. Bill Schreiber, a lobbyist who represents CTIB, told Capitol Report the opt-out counties are finding the regional pacts to be a necessary way to move forward on transit projects.

“They aren’t financially a contributor,” Schreiber said, “and therefore it’s difficult for them to advance projects. CTIB isn’t going to pay for it. The Metropolitan Council hasn’t had money for advancing the system. They feel like they are in no man’s land and … there’s a lot of interest in transit.”

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