Twin Cities seven-county sales tax for transit

I talked about the sales tax on gas before.

MoveMN, the local infrastructure lobby, has a  second major proposal. This one is for transit funding in the Twin Cities metropolitan area. They propose:

Increase the Twin Cities seven-county sales tax ($342 million)

The current ¼ cent metro sales tax has helped build the new Green Line (Central Corridor) and Red Line (BRT from Apple Valley to Mall of America), and fund half the cost of operating the region’s transitways. The sales tax is not enough to build the transit system the region needs to foster long-term economic development. Move MN proposed increasing the current sales tax by ¾ cent, applying the sales tax in all seven counties and using a small portion (10 percent) of the tax to fund safe and accessible bike and pedestrian connections in the metro. The seven-county sales tax for transit would become a full one cent.

The additional transit funding would essentially complete the current Metropolitan Council transit plan within 15 years, including expanding bus service hours and coverage creating faster commutes for Metro Transit and suburban transit bus systems, as well as a wider network of bikeway and pedestrian connections.

The Sales Tax

Ideally transit would be paid for by user fees. But given roads are not, this would result in there being very little transit, since fares would be very high, and users driven away. Still, these could be higher.

So if you can’t use user fees, what’s the next best solution? Land value capture. This is nowhere to be seen. Why not? Concentrated losses for concentrated benefits.

And if you can’t use land value capture, what’s next best? An employer tax perhaps, since low transit fares subsidize workers (as well as non-workers) and allow firms to offer lower wages than they would if transit fares were full cost. Concentrated losses for concentrated benefits.

And if you can’t tax users and  can’t tax land and can’t tax employers, maybe you can tax competing modes. After all, everyone on the road wants everyone else on the road to use transit. This is more viable for suburban-downtown serving transit routes, but that certainly describes the Twin Cities region’s proposed transitways.

And if you can’t do any of the above, then general funds might be appropriate. Especially since transit has a social function for moving people who have few choices. This gives us diffuse losses for concentrated benefits, and is so politically more palatable.

But if you want to use general funds, surely you would want to have a tax that wasn’t regressive, like a progressive income tax rather than a sales tax.

USC Professor Lisa Schweitzer says (about Toronto and LA, but it applies here as well)

California-based urban planning expert Lisa Schweitzer
Ms. Schweitzer, who has studied the politics of sales taxes in the context of L.A.’s transportation infrastructure, said as with any funding measure, there is a “tradeoff.” Cities such as Los Angeles and Toronto can raise substantial sums through sales taxes, which are more politically palatable than some other revenue generators, she noted. “They’re easy to collect, they’re easy for people to pay; you don’t have to deal with the taxman, you just pay at point of purchase,” Ms. Schweitzer said. A major concern, however, is volatility. “They go up and down based on the business cycle and they run parallel with the business cycle, so when retail sales plummet, the take that you get from retail sales taxes also goes down,” Ms. Schweitzer said. “That can be a problem for transit agencies that are dependent on these sales taxes.”

Again, we are now at a high point in the economic cycle (6th year of expansion), so it looks like sales taxes are a great idea from a revenue perspective, but when the next economic collapse comes, oh, about 1 or 2 years into the next Clinton/Bush administration, and revenue tanks, just when we should be building infrastructure for macro-economic stimulus, we can’t. This is not as unstable as the sales tax on gas, but it is hardly a bedrock on which we should fund the system. (Perhaps if we are selling bonds backed by sales tax revenue, that worry can be diminished, but bonds are more risky and thus costly than pay-as-you-go, see the idea of interest rates).

The 10%

Now, let’s say you have this new pot of money. The MoveMN folks bought off the all-powerful bike lobby (who seem to be on-board with this proposal, as card-carrying members of MoveMN)  with a 10% share for a “safe and accessible bike and pedestrian connections in the metro. ”

So though biking and walking has a higher mode share than transit, it only gets 1/10 of the total funds. Someone is not negotiating well. [Hint – it’s the completely unorganized pedestrians.]

Obviously pedestrian and bicycle infrastructure is relatively inexpensive, so from one perspective it doesn’t “need” as much. But from an efficiency point-of-view, since it is so inexpensive, walking and biking should have a much higher return on investment.

Whatever really has the highest rate of return should be the highest priority for investing a new pot of money. The problem is establishing this, since there is so much economic development Voodoo floating around that no one believes.

If your aim were to maximize the number of people using modes other than auto for a given trip, you would take your pot and spend it on relatively inexpensive separated cycletracks and improving the local urban environment to increase walking  and then local arterial BRT before you spend it on high-capital, high-risk projects with low rates of return.